Your bank is asset-sensitive (i.e. has more RSA than RSL) in the short run (0 to 5 years) but liability-sensitive in the long run (5 to 10 years).

a) If the yield curve is humped as, are you concerned about any interest rate risk exposure for your bank? Explain.

b) If the yield curve is upward sloped all the way to year 10 as then how (if any) would your bank be exposed to interest rate risk in the short run? in the long run?

c) If you ever decide to use a swap agreement to hedge the risk identified will you be a fixed-rate payer or receiver in the swap?

Answer rating: 100% (QA)

Answer Explanation a i Interest rate risk is the risk of adverse movement in the interest rate in which bank has exposure ii Here in shortterm bank is ... View the full answer