> notionally hedged against interest-rate duration risk
WTF does that mean?
WTF does that mean?
>notionally hedged against
on paper, SVB had protection from...
>...interest-rate duration risk
the danger that rising interest rates would mean it lost money on long term bonds at the historic (low) rate...
>...by this hold-to-maturity strategy,
using a common financial technique that valued the assets in question at their final value, not their current market value...
>that strategy put those assets outside the circle of those available to meet unexpected withdrawals
however, doing so meant those bonds weren't available if they needed immediate cash
But of course, that ended up not being true, now was it? So it was only 'notionally' hedged, not truly hedged.
However, for _these_ bonds, and so much of it, to be declared "held to maturity" is a mistake. There's always wiggleroom in how accountants add up the numbers. They messed up on this part.
Should you look at the opportunity costs for lost potential gains in this scenario -- yeah. Does it "lose money" -- no, not unless you are forced to sell before maturity.
lost earnings are a wish for what could have been, not lost in reality.