Which of the following is NOT an external method of interest rate risk management?
A) Using an interest rate swap
B) Using financial futures
C) Using an off-balance-sheet strategy, such as a forward rate agreement
D) Having fixed-interest assets financed by fixed-interest liabilities and equity

Question

Quizplus · Accepted Answer

Having fixed-interest assets financed by fixed-interest liabilities and equity is an internal method of interest rate risk management, as it involves managing the mismatch between assets and liabilities within the company's own balance sheet. The other options (using interest rate swap, financial futures, and off-balance-sheet strategies like forward rate agreements) are all external methods, as they involve hedging against interest rate risk using financial instruments outside the company's own balance sheet.

Which of the Following Is NOT an External Method of Interest