Accounting for interest rate risk: Matching Fed assets to liabilities

Hugo De Vere, Srini Ramaswamy and Sam Schulhofer-Wohl

Dallas Fed Economics from Federal Reserve Bank of Dallas

Abstract: The Fed has floating-rate liabilities as well as long-lived, zero-interest liabilities. A barbell of floating-rate and long-duration assets would best offset the interest rate risk from these liabilities. Investing in a more diversified mix of durations, while matching the average duration of assets, could be more practical than the barbell approach but would leave a substantial portion of interest rate risk unhedged.

Keywords: assets; banking and finance; Federal Reserve; monetary policy (search for similar items in EconPapers)
Date: 2025-08-07
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