The one-year re-pricing GAP is a measure of __________ risk.

Question

Quizplus · Accepted Answer

The one-year re-pricing GAP measures the exposure of a financial institution to interest rate risk. It calculates the difference between the rate-sensitive assets and rate-sensitive liabilities that will re-price or mature within one year. If the rate-sensitive liabilities exceed the rate-sensitive assets, the institution has a negative GAP and is exposed to rising interest rates. Conversely, if the rate-sensitive assets exceed the rate-sensitive liabilities, the institution has a positive GAP and is exposed to falling interest rates. Therefore, option C, interest rate risk, is the most appropriate answer.

The One-Year Re-Pricing GAP Is a Measure of __________ Risk