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ERIC Number: EJ1064089
Record Type: Journal
Publication Date: 2014
Pages: 18
Abstractor: As Provided
Reference Count: N/A
ISSN: EISSN-1941-3432
Using Derivatives to Hedge Interest Rate Risk: A Student Exercise
Donaldson, Jeff; Flagg, Donald
Research in Higher Education Journal, v24 Aug 2014
In a world of fluctuating asset prices, many firms find the need to hedge in order to avoid or reduce losses. From a gold miner selling gold derivatives to airlines buying oil futures to protect against rising fuel costs, hedging is common practice across many different industries. In this paper, we provide students with a simplified example of a bank hedging against interest rate risk. We provide an exercise that allows students to analyze the interest risk of a bank, calculate how to hedge that risk, and examine the impacts of hedging under different scenarios.
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Publication Type: Journal Articles; Reports - Descriptive; Numerical/Quantitative Data
Education Level: Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A