Due to Convexity Problems,banks Are Actually Better Off Using the Simpler

question 18

True/False

Due to convexity problems,banks are actually better off using the simpler repricing model to manage interest rate risk rather than the duration model.

---

Definitions:

Preferred Stock

A security that entitles the holder to payment of fixed dividends and that has priority over common stock in the distribution of assets on the corporation’s dissolution.

Common Stock

A type of equity security that represents ownership in a corporation, with holders usually having a right to vote on corporate matters.

Payment Of Dividends

The distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Managerial Employees

Employees who are responsible for directing and controlling the operations of a business or its subdivisions.