Course · Act I: Rates Move · Act I case study
Interest rate risk: a bank run case
Case: a bank full of safe Treasuries meets rising rates. Mark held-to-maturity and available-for-sale bonds to market, find the real equity, and see why a run ends it.
Key terms
- Held to maturity
- Bonds a bank promises to keep to the end. Carried at cost; price drops only in a footnote.
- Available for sale
- Bonds that can be sold any time. Carried at market; losses come out of equity through AOCI.
- Unrealized loss
- A fall in a holding’s market value that has not been locked in by a sale.
- Bank run
- Depositors withdrawing at once because they fear the bank cannot pay them all.
- Deposit insurance (FDIC)
- US insurance on bank deposits, up to $250,000 per depositor, per bank, per ownership category.
“The Run” is part of the full course: 8 puzzles on interest rate risk: a bank run case. Gullwing and Osprey are fictional banks; the Treasury yields and Fed rates are real. Try this act’s free chapter, “A Loan You Can Sell”, first.
“The Run” is in Act I: Rates Move. 8 puzzles, unlimited retries.
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