A bank with a duration gap of zero is immunized against changes in the value of net worth due to changes in interest rates in the market.

Question

Quizplus · Accepted Answer

A bank with a duration gap of zero means that the duration of its assets is equal to the duration of its liabilities. This ensures that any changes in interest rates will have an equal impact on both the assets and liabilities, resulting in no net effect on the bank's overall net worth. Therefore, the bank is immunized against changes in the value of net worth due to changes in interest rates in the market.

A Bank with a Duration Gap of Zero Is Immunized