One way that banks can reduce the duration of their asset portfolios is through the use of

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Adjustable-rate mortgages (ARMs) allow banks to adjust the interest rates on loans in response to changes in market interest rates, thus reducing the duration of their asset portfolios by aligning the interest rates of their assets more closely with current market rates. This helps in managing interest rate risk. Fixed-rate mortgages, certificates of deposit, and short-term borrowing do not inherently adjust to market interest rates in a way that reduces the asset portfolio duration.

One Way That Banks Can Reduce the Duration of Their