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6. What is the maturity gap of the bank.

6. What is the maturity gap of the bank.

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Answer #1

Maturity gap of the gap is a tool or a measure to assess the change in the value of risk sensitive assets and liabilities of the bank. Its assessment include change in the value of different dependent variables like change in the value of operating assets, liabilities, revenue etc due to change in independent variables like interest rates.

For example - the primary business of bank is to give out loans and receive deposits and its exposes to various risks like Liquidity. If its giving out a lot of long term loans and receiving short term deposits , there is a risk which the bank is exposed to and maturity gap is able to ascertain the same.

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