Briefly explain one internal hedging technique that financial institution may use to manage interest rate risk Why might it be impossible to eliminate the risk completely Define each of the following hedging techniques and explain how each is used to minimize interest rate risk a) Global cash netting b) Embedded options in debt c) Forward Rate Agreements d) Zero Coupon Swaps

Question: Briefly explain one internal hedging technique that financial institution may use to manage interest rate risk. Why might it be impossible to eliminate the risk

Briefly explain one internal hedging technique that financial institution may use to manage interest rate risk. Why might it be impossible to eliminate the risk completely?
Define each of the following hedging techniques and explain how each is used to minimize interest rate risk

a) Global cash netting

b) Embedded options in debt

c) Forward Rate Agreements

d) Zero-Coupon Swaps

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