By exactly matching the duration of assets and liabilities, an institution
A)can eliminate its credit risk
B)can eliminate its interest rate risk
C)forgoes profitable asset transformation service
D)only b and c
E)all of the above

Question

Quizplus · Accepted Answer

By exactly matching the duration of assets and liabilities, an institution can eliminate its interest rate risk but it would have to forgo profitable asset transformation services. However, it would not eliminate its credit risk.

By Exactly Matching the Duration of Assets and Liabilities, an Institution