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

Christoph Memmel

No 2010,14, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank

Abstract: 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.

Keywords: Interest rate risk; term transformation; interest income; change in present value (search for similar items in EconPapers)
JEL-codes: G11 G21 (search for similar items in EconPapers)
Date: 2010
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