Author : Lorenzo Bretscher
Publisher :
ISBN 13 :
Total Pages : 58 pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Interest Rate Risk Management in Uncertain Times by : Lorenzo Bretscher
Download or read book Interest Rate Risk Management in Uncertain Times written by Lorenzo Bretscher and published by . This book was released on 2017 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We revisit the evidence on real effects of uncertainty shocks in the context of interest rate uncertainty, which can be hedged in the swap market. We document that adverse movements in interest rate uncertainty predict significant slowdowns in real activity, at the aggregate and at the firm-level. We develop a dynamic model of corporate investment and risk management to examine how firms cope with interest rate uncertainty and test it using a rich dataset on corporate swap usage. Our results suggest that interest rate uncertainty depresses financially constrained firms' investment in spite of hedging opportunities, as for these firms risk management through swaps is, effectively, risky.