Search Results
Working Paper
An Asset-Liability Management Approach to the Federal Reserve Balance Sheet
The Federal Reserve’s liabilities include a mix of floating-rate instruments, such as reserves, and long-duration, non-interest-bearing instruments, such as currency. We investigate the implications of an asset-liability management approach to choosing assets to back these liabilities, with a focus on matching the duration of assets and liabilities. We study the net income volatility and mark-to-market volatility of several different asset maturity ladders using a Monte Carlo simulation of future interest rate paths. Short-duration ladders minimize net income volatility when paired with ...