The difference between interest-sensitive assets and interest-sensitive liabilities is termed the:
A) interest-sensitivity index.
B) rate-risk index.
C) gap.
D) duration.

Question

Quizplus · Accepted Answer

The difference between interest-sensitive assets and interest-sensitive liabilities is termed the gap. The gap indicates the extent to which a financial institution is exposed to interest rate risk. Option A is incorrect as interest-sensitivity index is not a common term used in finance. Option B is incorrect as the term rate-risk index is also not a common term used in finance. Option D is incorrect as duration is a measure of the sensitivity of an asset or liability's price or valuation to changes in interest rates.

The Difference Between Interest-Sensitive Assets and Interest-Sensitive Liabilities Is Termed