How might you use swaps to reduce your risk

Reference no: EM131304389

Suppose that you manage a bank that has made many loans at a fixed interest rate. You are worried that inflation might rise and the value of the loans will decline.

a. Why would an increase in inflation cause the value of your fixed-rate loans to decline?

b. How might you use swaps to reduce your risk?

Reference no: EM131304389

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