Silicon Valley Bank (SVB) recently failed due to its exposure to increased interest rates. SVB was financed
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Question:
a) Did SVB have a positive or negative duration gap?
b) Explain how a mismatch of maturity of its assets and liabilities led to huge losses.
c) Explain how SVB could have used futures contracts to hedge its interest rate risk.
d) Explain how SVB could have used a swap contract to hedge its interest rate risk.
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ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
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