An asset/liability management model of a Federal Intermediate Credit Bank

Ann Marie Hackert

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Federal Intermediate Credit Banks (FICBs) provide short and intermediate term credit to agricultural producers. The asset/liability management technique used to eliminate interest rate risk exposure at the institutions consists of variable rate loan pricing;The asset and liability activities of an individual bank are modeled using portfolio theory and the technique of quadratic programming. A series of efficient frontiers is generated indicating the risk minimizing combination of asset and liability activities;The issue of interest rate risk management is also examined with a duration model measuring the pattern of interest rate changes between the asset and liability side of the balance sheet. Asset and liability durations are calculated and the duration gap reviewed.

Date: 1987-01-01
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