If a financial institution has equated the dollar effects of interest rate risk on its assets with the dollar effects on its liabilities,it has engaged in:
A)a long futures hedge.
B)a short futures hedge.
C)a protected swap.
D)hedging by matching.
E)hedging by swapping.

Question

Quizplus · Accepted Answer

The financial institution has engaged in hedging by matching, which means they have attempted to match the dollar effect of interest rate risk on their assets with the dollar effect on their liabilities. This is a form of passive interest rate risk management.

If a Financial Institution Has Equated the Dollar Effects of Interest