1 Matching
Matching is where liabilities and assets with a common interest rate are matched.
For example subsidiary A of a company might be investing in the money markets at LIBOR and subsidiary B is borrowing through the same markets. If LIBOR increases, subsidiary B’s borrowing cost increases and subsidiary A’s returns increases.
This method is most widely used by financial institutions such as banks, who find it easier to match the magnitudes and characteristics of their assets and liabilities than commercial or industrial companies.

2 Smoothing
Smoothing is where a company keeps a balance between its fixed and floating rate borrowing. A rise in interest rates will make the floating rate loan more expensive but this will be compensated for by the less expensive fixed rate loan. However, the company may incur increased transaction and arrangement costs which will reduce the company’s competitive advantages.
Large companies with large amounts of borrowing may try to maintain a balance between fixed rate and floating rate debt.