The repricing model ignores information regarding the distribution of assets and liabilities within maturity buckets.This limitation of the model refers to
A)market value effect.
B)overaggregation.
C)runoffs and pre-payments.
D)OBS activities.
E)the spread effect.

Question

Quizplus · Accepted Answer

Overaggregation refers to the limitation of the repricing model where it ignores information regarding the distribution of assets and liabilities within maturity buckets. This means that the model treats all assets and liabilities within a particular time bucket as if they have the same characteristics, which may not be accurate. Therefore, the model may not provide an accurate picture of the risk exposure of the institution.

The Repricing Model Ignores Information Regarding the Distribution of Assets