medium · FRM Part 2 Current Issues
SVB's management removed interest rate hedges in 2022. According to the Economic Value of Equity (EVE) perspective, what was the immediate result of this action on the bank's duration gap?
- The duration gap narrowed, reducing sensitivity to rate hikes
- The duration gap became negative, meaning the bank would profit from rate hikes
- The duration gap became zero, achieving perfect immunization
- The duration gap widened, increasing the bank's vulnerability to rising rates
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