Rewards in Risk/Reward Trade-offs
September 12, 2018
Since market rates have been increasing, more focus is being put on balance sheet optimization. It’s important to remember that many types of analyses, such as NEV and NII volatility, focus on the risks when viewed in a rising rate environment. It’s important to understand the risks, but not in a vacuum. Remember to view the risks in relation to the effect on income today, which is the reward. Read our blog, Don’t Just Focus on Interest Rate Risk – Yield Matters, for a way to view yield relative to risk. The subject matter may even be more timely today than it was when we originally wrote it.