A bank pays a floating rate of interest on deposits (i.e. liabilities) and earns a fixed rate of interest on loans (i.e. assets). This mismatch between assets and liabilities can cause tremendous difficulties.

Explain what type of a swap this bank could use and why? Do you agree with the points made in the videos? Justify your answer 

https://www.youtube.com/watch?v=uVq384nqWqg

Answer rating: 100% (QA)

The bank could use an interest rate swap to mitigate the risk caused by the mismatch between its flo... View the full answer