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

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

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Answer #1

1)GAP analysis is the space between that where an organization is and where it wants to be future.

It means it is used to examine the current performance with the desired/expected performance set by the company.

2)DURATION GAP is a method used to quantify the interest rate risk involving potential changes in the assets and liabilities that are affected by the interest rate fluctuations of overall intervals. Duration of each asset or liability defines an interval.

It is mainly used by banks and financial institutions for analyzing the risk of providing loans to the borrower.

THEREFORE, FOCUS OF GAP IS MORE INCLUSIVE THAN DURATION OF GAP. BECAUSE THE FOCUS OF GAP INCLUDES THE ANALYSIS OF DURATION OF GAP, IT MEANS FOR ANALYZING THE PERFORMANCE OF COMPANY WE MUST CALCULATE THE DURATION OF ASSETS AND LIABILITIES.

CONCLUSION: FOCUS OF GAP IS MORE INCLUSIVE THAN DURATION OF GAP

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