A euro zone-based bank that is asset-sensitive to market interest rate changes might reduce interest rate risk by:
A) entering into a pay fixed I receive variable standard interest rate swap
B) entering into a receive fixed I pay variable standard interest rate swap
C) entering into a pay fixed / receive variable amortizing interest rate swap
D) entering into a GBP/USD FX swap

Question

Quizplus · Accepted Answer

Entering into a receive fixed I pay variable standard interest rate swap will allow the bank to receive a fixed interest rate and pay a variable interest rate, which would reduce its exposure to changes in market interest rates. The bank would receive a fixed interest rate that would offset any decrease in the value of its assets due to falling market interest rates.

A Euro Zone-Based Bank That Is Asset-Sensitive to Market Interest