Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap for several maturity subintervals times the change in the interest rate is called
A)basic gap analysis.
B)the maturity bucket approach to gap analysis.
C)the segmented maturity approach to gap analysis.
D)the segmented maturity approach to interest-exposure analysis.

Question

Quizplus · Accepted Answer

The maturity bucket approach to gap analysis involves dividing a bank's assets and liabilities into different maturity buckets and then measuring the sensitivity of the bank's profits to changes in interest rates by multiplying the gap (the difference between the interest-sensitive assets and liabilities) for each maturity bucket by the change in the interest rate. This approach provides a more detailed analysis of interest rate risk compared to basic gap analysis, which does not segment assets and liabilities by maturity.

Measuring the Sensitivity of Bank Profits to Changes in Interest