Hedging securities and Silicon Valley Bank idiosyncrasies

Research output: Contribution to journalArticlepeer-review


Hedging requires adequacy and timing. This paper finds that banks did not systematically ignore balance-sheet risks like Silicon Valley Bank (SVB), and instead exercised risk management by asymmetrically increasing hedging activity when security losses increase and scaling back hedging activity as security losses reverse. Banks also hedge against bank runs when risk increases due to a combination of security losses and funding risks from unsecured deposits. Findings suggest SVB's mistakes are idiosyncratic. Results suggest that nonstress test banks target balance-sheet risks when hedging, stabilizing themselves from interest rate shocks transmitted through fixed-income securities. Scrutiny of rules-based outliers like SVB is preferable to increased regulatory burden for all nonstress test banks.

Original languageEnglish (US)
Pages (from-to)653-672
Number of pages20
JournalJournal of Futures Markets
Issue number4
StatePublished - Apr 2024
Externally publishedYes


  • Silicon Valley Bank
  • available for sale
  • fixed income
  • hedging
  • held to maturity
  • interest rate derivatives
  • interest rate risk
  • securities
  • transmission
  • treasuries

ASJC Scopus subject areas

  • Accounting
  • General Business, Management and Accounting
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Hedging securities and Silicon Valley Bank idiosyncrasies'. Together they form a unique fingerprint.

Cite this