An asset/liability management model of a Federal Intermediate Credit Bank

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1987
Authors
Hackert, Ann
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Michael Boehlje
Arne Hallam
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Abstract

Federal Intermediate Credit Banks (FICBs) provide short and intermediate term credit to agricultural producers. The asset/liability management technique used to eliminate interest rate risk exposure at the institutions consists of variable rate loan pricing;The asset and liability activities of an individual bank are modeled using portfolio theory and the technique of quadratic programming. A series of efficient frontiers is generated indicating the risk minimizing combination of asset and liability activities;The issue of interest rate risk management is also examined with a duration model measuring the pattern of interest rate changes between the asset and liability side of the balance sheet. Asset and liability durations are calculated and the duration gap reviewed.

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Thu Jan 01 00:00:00 UTC 1987