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  • There Are Two Reasons That 75 Percent of U.S. Banks Didn’t Hedge Their Interest Rate Risk as the Fed Hiked Rates at the Fastest Pace in 40 Years

There Are Two Reasons That 75 Percent of U.S. Banks Didn’t Hedge Their Interest Rate Risk as the Fed Hiked Rates at the Fastest Pace in 40 Years

October 10, 2023

by Pam Martens and Russ Martens Wall Street on Parade

An academic study released in April found that during the fastest pace of Fed interest rate hikes in 40 years, the majority of U.S. banks failed to hedge their interest rate risk.

The study on hedging is titled: Limited Hedging and Gambling for Resurrection by U.S. Banks During the 2022 Monetary Tightening? Its authors are Erica Jiang, Assistant Professor of Finance and Business Economics at USC Marshall School of Business; Gregor Matvos, Chair in Finance at the Kellogg School of Management, Northwestern University; Tomasz Piskorski, Professor of Real Estate in the Finance Division at Columbia Business School; and Amit Seru, Professor of Finance at Stanford Graduate School of Business.

Among the key findings of the study are the following: