How correlated are changes in banks' net interest income and in their present value?

We use portfolios of passive investment strategies to replicate the interest risk of banks' banking books. The following empirical statements are derived: (i) Changes in banks' present value and in their net interest income are highly correlated, irrespective of the banks' portfolio composition. (ii) However, banks' portfolio composition has a huge impact on the ratio of changes in net interest income relative to changes in present value.

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Year of publication:	2010
Authors:	Memmel, Christoph
Institutions:	Deutsche Bundesbank
Subject:	Interest rate risk \| term transformation \| interest income \| change in present value

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Extent:	application/pdf
Series:	Discussion Paper Series 2: Banking and Financial Studies.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 2010,14
Classification:	G11 - Portfolio Choice ; G21 - Banks; Other Depository Institutions; Mortgages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008923007