11  Interest rate risk depends on the degree of hedging, which is at the discretion of firm management. However, because the GSEs’ portfolios are concentrated in the mortgage-backed securities market and thus are subject to rapid changes in market value, the risk profile of the GSEs can change rapidly in response to unexpected movements in interest rates.
In contrast, banks hold a more diversified mix of liabilities and assets, many of which are less sensitive to unexpected changes in interest rates, suggesting that banks as a general matter are less prone to interest rate risk.