Abstract
0 A dominant theme of commercial banking in the 1980s has been the search for off-balance sheet, feebased income to improve return on equity. As money center and large regional banks recover from the burdens of the international debt and energy loan crises, new product lines are being sought which meet those criteria. One promising line is Interest Rate Risk Management (IRRM). Commercial banks have become market makers in IRRM products such as forward rate agreements and interest rate swaps, caps, collars, and floors. These products are often versions of, and companions to, instruments that are used to manage a firm's foreign exchange risk exposure. The movement toward market making in IRRM products represents a new form of bank intermediation, a form distinct from the classic function of transforming household savings into corporate borrowings. In this new role commercial banks intermediate be-
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