When the financial institution is hedging interest-rate risk on its overall portfolio, then the hedge is a ________.
A) macro hedge
B) micro hedge
C) cross hedge
D) futures hedge

Question

Quizplus · Accepted Answer

When the financial institution is hedging interest-rate risk on its overall portfolio, it is covering its exposure to changes in interest rates across a variety of assets and liabilities. This is a broad hedge, sometimes called a macro hedge, as opposed to a specific or narrow hedge, sometimes called a micro hedge. Cross hedge and futures hedge are not appropriate terms for this type of interest-rate risk management.

When the Financial Institution Is Hedging Interest-Rate Risk on Its