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Accounting for interest rate risk: Matching Fed assets to liabilities
Abstract: The Fed has floating-rate liabilities as well as long-lived, zero-interest liabilities. A barbell of floating-rate and long-duration assets would best offset the interest rate risk from these liabilities. Investing in a more diversified mix of durations, while matching the average duration of assets, could be more practical than the barbell approach but would leave a substantial portion of interest rate risk unhedged.
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https://www.dallasfed.org/research/economics/2025/0807
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Bibliographic Information
Provider: Federal Reserve Bank of Dallas
Source: Dallas Fed Economics
Publication Date: 2025-08-07