If the chosen maturity buckets have a time period that is too long, the repricing model may produce inaccurate results because
A)as the time to maturity increases, the price volatility increases.
B)price changes will be overestimated.
C)there may be large differentials in the time to repricing for different securities within each maturity bucket.
D)the FI will be unable to accurately measure the quantity of rate-sensitive assets.
E)the FI will be unable to accurately measure the quantity of rate-sensitive liabilities.

Question

Quizplus · Accepted Answer

Choosing maturity buckets with too long a time period can lead to inaccuracies in the repricing model because there may be significant differences in the actual time to repricing for different securities within each bucket. This variation can distort the interest rate risk measurement.

If the Chosen Maturity Buckets Have a Time Period That