This paper investigates the hedge ratio dynamics for large US banks with exposure to both interest rate and foreign exchange risks. Using a mean–variance framework, the paper evaluates hedging performance when interest rate and foreign exchange risks are hedged separately versus simultaneously. Optimal hedge ratios for separate and simultaneous hedging strategies are estimated using the multivariate GARCH model. The magnitude of separate hedge ratios is found to consistently overstate that of simultaneous hedge ratios for banks that engage in both domestic loan extensions and foreign exchange operations. Both in-sample and out-of-sample results indicate that a simultaneous hedging strategy outperforms a separate hedging strategy. The mean–variance efficiency test results strongly support statistical significance to this finding.