Change in interest rates on the value of the bank equity

Assignment Help Financial Management

Reference no: EM131936467

A bank has $650 million of assets with a duration of eight years and $575 million of liabilities with a duration of four year. the bank want to hedge it duration gap with a swap that has a fixed-rate payments with a duration of seven years and floating-rate payment with a duration of three years. What is the optimal amount of the swap to effectively macrohedge against the adverse effect of a change in interest rates on the value of the bank's equity?

Reference no: EM131936467

Questions Cloud

How earnings management has been viewed negatively : Explain how earnings management has been viewed negatively and provide an example.

Use the npv decision rule to evaluate project : Use the npv decision rule to evaluate this project. Negative amounts should be indicated by a minus sign.

Holding company with four main subsidiaries : Hologram Corporation is a holding company with four main subsidiaries. The percentage of its business coming from each of the subsidiaries

How much will you owe the mortgage company : Assume you have a 30 year (360 month) mortgage with an annual interest rate of 6% and monthly payments of $1,798.65. how much will you owe the mortgage company.

Change in interest rates on the value of the bank equity : What is the optimal amount of the swap to effectively macrohedge against the adverse effect of a change in interest rates on the value of the bank's equity?

Calculate the current elasticity of the straddle : Assume the Black-Scholes framework. For a 3-month 32-strike European straddle. The stock pays dividends continuously at a rate proportional to its price.

What is the net salvage value of the new equipment : What is the net salvage value of the new equipment?

What is counts unlevered beta : Counts Accounting has a beta of 1.25. The tax rate is 35%, and Counts is financed with 45% debt. What is Counts's unlevered beta?

What is the expected value of your firm stock : Assume that the average firm in your company's industry is expected to grow at a constant rate of 6% per year and the average dividend yield is 7%.

User Account

All Pages