The management of interest rate risk during the crisis: Evidence from Italian banks

Lucia Esposito, Andrea Nobili and Tiziano Ropele

Journal of Banking & Finance, 2015, vol. 59, issue C, 486-504

Abstract: We use a unique dataset to analyze how Italian banking groups managed their exposure to interest rate risk during the recent financial crisis. First of all, we document that on average the interest rate risk exposure – measured by duration gap approach – has been limited and well below the alert level enforced by regulators. Second, our econometric results indicate a relation of substitutability between banks’ on-balance-sheet interest rate risk and their use of interest rate derivatives suggesting that banks used these two instruments to curb their overall interest rate risk exposure in case of an increase in interest rates. Furthermore, we also find robust evidence of a negative correlation between banks’ interest rate risk and liquidity risk.

Keywords: Interest rate risk; Banks; Financial crisis (search for similar items in EconPapers)
JEL-codes: E43 G21 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Working Paper: The management of interest rate risk during the crisis: evidence from Italian banks (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:59:y:2015:i:c:p:486-504

DOI: 10.1016/j.jbankfin.2015.04.031

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