Question

Focus of GAP and Duration Gap and which is more inclusive.

Focus of GAP and Duration Gap and which is more inclusive.

Homework Answers

Answer #1

Income Gap or GAP Analysis measures how the net income of a financial institute will change in reaction to market interest rate change. It is basically interest rate sensitivity of the net income. It depends on the determination of assets and liabilities of the financial institute which will be affected by interest rate change and the quantification of the effect due to the interest rate change.

Duration GAP analysis on the other hand measures the interest rate sensitivity of the Market value of the net worth of the Financial institute. First the duration of the assets and liabilities of the financial institute are determined and then the effect of interest rate change over the net worth is calculated.

Duration GAP analysis should be more inclusive as it considers the average lifetime of the stream of payments of a financial instrument .

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Focus of GAP and Duration Gap and which is more inclusive.
Focus of GAP and Duration Gap and which is more inclusive.
Explain a recessionary expenditures gap. Explain an inflationary expenditures gap. Which is more likely to occur...
Explain a recessionary expenditures gap. Explain an inflationary expenditures gap. Which is more likely to occur during a negative GDP gap and which is more likely to be associated with a positive GDP gap?
What is the duration gap for an investor with a year horizon who invests in a...
What is the duration gap for an investor with a year horizon who invests in a bond with a duration of 10?
Now that you have the GAP or the research focus, you (researcher) can begin to be...
Now that you have the GAP or the research focus, you (researcher) can begin to be more specific as to what pieces of the knowledge base points towards the hole, as well as what theory(ies) best describe the behaviours around the hole. It is not possible to determine theory or specific literature to review sans the GAP.
11- What is the duration gap for an investor with a year horizon who invests in...
11- What is the duration gap for an investor with a year horizon who invests in a bond with a duration of 10? 2 0 -2 None of answers 13- A fixedbond has a Macaulay Duration of 10. Which of the following could possibly be the band's Modified Duration? 12 None of answers 11 7 14- A income portfolio is invested equally among three zero coupon bonds with maturities of 3 years, years, and 10 years. What is the estimated...
What is the Duration Gap for the bank balance sheet shown below? Assets Amount Duration Liabilities...
What is the Duration Gap for the bank balance sheet shown below? Assets Amount Duration Liabilities and Equity Amount Duration Cash 80 0.00 Non-interest deposits 150 0.00 Securities 300 4.00 NOW checking 150 1.50 Loans, net 570 5.00 MMDA 300 0.25 Fed funds sold 0 CDs 170 2.00 Non-earning assets 50 Fed Funds purchased 150 0.00 $1,000 Equity 80 $1,000 A. 4.05 years B. 3.41 years C. 0.70 years D. 3.35 years E. 5.25 years
In the context of duration gap management (or asset/liability management), explain the difference one would expect...
In the context of duration gap management (or asset/liability management), explain the difference one would expect to see in the duration of the assets of a life insurance company as opposed to a commercial bank, assuming both institutions want to immunize their exposure to interest rate risk.
Which of these 2 styles is more likely to focus on Task Oriented Leadership, and on...
Which of these 2 styles is more likely to focus on Task Oriented Leadership, and on micromanagement (detailed supervision by the leader) of employee activities? Which style is more likely to emphasize the delegation of task scheduling, design, and approaches to completing projects to the employees?
Should we be more concerned by the gap in wealth between nations, or the growing gap...
Should we be more concerned by the gap in wealth between nations, or the growing gap within many nations?
Which of these styles transactional and transformational is more likely to focus on Task Oriented Leadership,...
Which of these styles transactional and transformational is more likely to focus on Task Oriented Leadership, and on micromanagement (detailed supervision by the leader) of employee activities? Which style is more likely to emphasize the delegation of task scheduling, design, and approaches to completing projects to the employees
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT