Because of its simplicity,smaller depository institutions still use this model as their primary measure of interest rate risk.
A)The repricing model.
B)The maturity model.
C)The duration model.
D)The convexity model.

Question

Quizplus · Accepted Answer

The repricing model is a simplistic and easy-to-understand measure of interest rate risk that is commonly used by smaller depository institutions. This model measures the gap between the amount of interest-sensitive assets and interest-sensitive liabilities, and by doing so, assesses how changes in interest rates might impact the institution's net interest income. While other models like the duration and convexity models offer more precise measurements of interest rate risk, the simplicity and ease of use of the repricing model continue to make it a popular choice for smaller institutions.

Because of Its Simplicity,smaller Depository Institutions Still Use This Model