A bank's periodic GAP:
A) is defined as the dollar amount of rate-sensitive assets divided by the dollar amount of rate-sensitive liabilities.
B) is defined as the dollar amount of earning assets divided by the dollar amount of total liabilities.
C) compares rate-sensitive assets with rate-sensitive liabilities across all time buckets.
D) compares rate-sensitive assets with rate-sensitive liabilities across a single time bucket.
E) compares the dollar amount of earning assets times the average liability interest rate.

Question

Quizplus · Accepted Answer

The periodic GAP compares rate-sensitive assets with rate-sensitive liabilities across a single time bucket. Choice A is the definition of the rate sensitivity ratio. Choice B does not take into account the different interest rate sensitivities of assets and liabilities. Choice C compares rate-sensitive assets and liabilities across all time buckets, which is not as useful as a single period measure. Choice E is not a recognized measure of GAP.

A Bank's Periodic GAP