Download This PaperHow Correlated are Changes in Banks' Net Interest Income and in Their Present Value?
44 Pages Posted: 8 Jun 2016
Date Written: 2010
Abstract
We use portfolios of passive investment strategies to replicate the interest risk of banks' banking books. The following empirical statements are derived: (i) Changes in banks' present value and in their net interest income are highly correlated, irrespective of the banks' portfolio composition. (ii) However, banks' portfolio composition has a huge impact on the ratio of changes in net interest income relative to changes in present value.
Keywords: Interest rate risk, term transformation, interest income, change in present value
JEL Classification: G11, G21
Suggested Citation: Suggested Citation
Memmel, Christoph, How Correlated are Changes in Banks' Net Interest Income and in Their Present Value? (2010). Bundesbank Series 2 Discussion Paper No. 2010,14, Available at SSRN: https://ssrn.com/abstract=2794055 or http://dx.doi.org/10.2139/ssrn.2794055
Do you have negative results from your research you’d like to share?
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.