KeyBank And KeyCorp: Transfer Pricing And Valuation Without Swap Data
Donald van Deventer • Tue, Aug. 26
- U.S. commercial banks have used "funds transfer pricing' since the 1970s to measure GAAP business unit profits and to centralize interest rate risk.
- The interest rate swap curve has become the standard curve for this, but the curve is manipulated and a poor proxy for the true bank cost of funds.
- This post uses bond trades on KeyBank and KeyCorp to illustrate how to use the U.S. Dollar Cost of Funds Index for more accurate bank profitability and risk assessment.