Implications of GCF-based Derivatives Hedging For Bank Risk Management

Open Access
Fakelmann, Nicholas Robert
Area of Honors:
Bachelor of Science
Document Type:
Thesis Supervisors:
  • Louis Gattis Jr., Thesis Supervisor
  • James Alan Miles, Honors Advisor
  • Heber Farnsworth, Faculty Reader
  • Hedging
  • Interest Rates
  • Capital Markets
  • Finance
In the wake of the Barclays-LIBOR interest rate-rigging scandal, Federal Reserve Chairman Ben Bernanke suggested the practical use of repo rates in valuing derivatives, specifically the General Collateral Finance Repo Index. For large financial institutions, which actively hedge exposure via the money market, opportunities may exist in which GCF-based instruments can provide better strategies for hedging interest rate risk (IRR). In this thesis, I will conduct a comparative study of the GCF Repo rates with other interest rates that are suitable for hedging interest rate risk in banks. This study will examine the period of 2005 - 2013, the period for which GCF rate data is available.