Apr 9, 2019 11:00am to 12:30pm
1011 Evans Hall
Banks’ exposure to fluctuations in interest rates strongly forecasts excess Treasury bond returns. This result is consistent with optimal risk management decisions, a banking counterpart to the household Euler equation. In equilibrium, the bond risk premium compensates banks for bearing fluctuations in interest rates. When banks’ exposure to interest rate risk increases, the price of this risk...
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