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This paper describes the first thorough analysis of the interest risk of German banks on an individual bank level. We …
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We exploit a unique dataset that features both un-intermediated mortgage requests and independent responses from multiple banks to each request. We show that households typically are not prudent risk managers, but prioritize minimizing current mortgage payments over insurance against future rate...
Persistent link: https://www.econbiz.de/10012917143
We show that maturity transformation does not expose banks to significant interest rate risk|it hedges it. This is due to banks' deposit franchise. The deposit franchise gives banks substantial market power over deposits, allowing them to pay deposit rates that are low and insensitive to market...
Persistent link: https://www.econbiz.de/10012919327
bank-level data for German banks, we find evidence that a bank's exposure to interest rate risk depends on its presumed … optimization horizon. The longer the presumed optimization horizon is, the more the bank is exposed to interest rate risk in its … exposure to interest rate risk. The more a bank is exposed to the risk of a decline in the interest rate level, the higher its …
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the bank and actively position the balance sheet to maximize profit. These contemporary challenges call for ALM …
Persistent link: https://www.econbiz.de/10012583695
We implement a recently established approach to investigate interest rate risk of banks with extensive engagement in maturity transformation. Therefore, we contribute to the emerging literature contradicting modern banking theory's view on interest rate risk as inevitable consequence of banks'...
Persistent link: https://www.econbiz.de/10013215598
This paper shows the importance of interest rate risk and prepayment risk in fixed-rate mortgages in influencing banks’ securitization of mortgages. Banks with longer-maturity liabilities are more capable of taking the interest rate risk and therefore securitize fewer mortgages. In contrast,...
Persistent link: https://www.econbiz.de/10013240151