Banks duration match their assets and liabilities to manage their interest risk in their banking book. Currently, the bank's assets and liabilities both have a duration of 10. To hedge against the risk of decreasing interest rates, the bank should
I) Increase the duration of the liabilities
II) Increase the duration of the assets
III) Decrease the duration of the liabilities
IV) Decrease the duration of the assets
- I only.
- I and II.
- II and III.
- I and IV
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