What is the strength of static GAP analysis relative to duration gap analysis?
A) Static GAP analysis recognizes the time value of money of each cash flow.
B) Static GAP analysis provides a measure of the total portfolio's interest rate risk.
C) Static GAP analysis is easier to understand.
D) Static GAP analysis takes the long-run view while duration gap analysis takes a shorter-run view.
E) The static GAP measure directly correlates with the risk of the bank, i.e., a bank with twice the static GAP is twice as risky.

Question

Quizplus · Accepted Answer

Static GAP analysis is easier to understand because it focuses on the difference between rate-sensitive assets and liabilities over a specific period, without considering the time value of money or the duration of cash flows.

What Is the Strength of Static GAP Analysis Relative to Duration