The investment portfolio typically has a significant impact on an FHLBank’s total interest rate risk profile. While FHLBanks may manage the interest rate risk of its mortgage assets by combining AMA and MBS, and manage the economic value risk of the entire FHLBank through VaR metrics, it is nonetheless a sound practice to separately measure and control price sensitivity in the investment portfolio with limits for price changes given rate changes. For example, the FHLBank may limit the portfolio’s sensitivity to 10 percent when interest rates change 300 basis points. If a FHLBank has a.
