For this assignment, write a 5–10 page report focusing on the interest rate risk management of your selected firm. Regulatory agencies began to collect relevant information in the 1980s when large numbers of thrifts failed due to the interest rate risk exposure at a time when market rates were increasing both in level and volatility.
This report provides all kinds of information on your chosen bank, including summary ratios of the bank and of its peer group. You should be able to find Net Interest Income (NII) as a percentage of Total Assets (TA). You may notice that sometimes Total Earning Assets (TEA) is used as a denominator instead of Total Assets (TA).
Once you have obtained the data on Net Interest Margin (NIM), write an analysis discussing the interest rate sensitivity for your bank relative to the peer group based on the NIM across three time periods. Take the following questions into consideration:
Based on the analysis of the interest rate risk for this company, and asset-liability management techniques, as covered in course readings and research, what strategies and recommendations can you offer for hedging against credit risk and interest rate risk? Provide support for your position from relevant sources.
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