4 ms·
Buying the 10 year and hedging all risks down to the two years is equivalent to just buying the two year. I think most other banks tried to get interest revenu
by vgatherps 3y ago
Buying the 10 year and hedging all risks down to the two years is equivalent to just buying the two year.
I think most other banks tried to get interest revenue from something other than going turbo long long-term treasuries? Or just accepted lower profit?
- mathattack 3y agoCould also hedge with swaps or swaptions or mortgage pass throughs. Banks who are very long mortgages frequently short passthroughs. They take enough risk off the table to not have the risk exposure of a hedge fund. https://en.m.wikipedia.org/wiki/Mortgage-backed_security https://en.m.wikipedia.org/wiki/Mortgage-backed_security