The repricing gap does not accurately measure FI interest rate risk exposure because
A)FIs cannot accurately predict the magnitude change in future interest rates.
B)FIs cannot accurately predict the direction of change in future interest rates.
C)accounting systems are not accurate enough to allow the calculation of precise gap measures.
D)it does not recognize timing differences in cash flows within the same maturity grouping.
E)equity is omitted.

Question

Quizplus · Accepted Answer

The repricing gap focuses on maturities rather than cash flows and therefore does not recognize timing differences in cash flows within the same maturity grouping. This can lead to inaccuracies in measuring FI interest rate risk exposure.

The Repricing Gap Does Not Accurately Measure FI Interest Rate