1. 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?
2. 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

Answer rating: 100% (QA)

Answer One internal hedging technique that financial institutions may use to manage interest rate risk is duration matching Duration matching involves ... View the full answer