## Rate-sensitive assets gap analysis

Asset sensitivity refers to a balance sheet structure where there is an asset liability mismatch and the assets re-price or reset faster than liabilities. This means that interest rates on liabilities are locked down for longer periods of time when compared to assets. RATE-SENSITIVE Assets: $20million Liabilities: $50million FIXED-RATE Assets: $80million Liabilities: $50million If interest rates rise by 5 percentage points, say, from 10 to 15%, bank profits (measured using gap analysis) will A) decline by $0.5 million. B) decline by $1.5 million. C) decline by $2.5 million. D) increase by $1.5 million. Banks have calculated rate sensitive asset and liabilities within maturity bucket andapplied the sensitivity analysis to measure the level of Interest Rate shock on itscapital adequacy. IX. Interest Rate Risk in the Banking Book of ABL and PBL, Capital adequacy ratiodecreases in case of negative cumulative gap and increases in case of banking companies must monitor the size of the gap between rate sensitive assets and rate sensitive liabilities in terms of the remaining period to repricing. Repricing refers to the point in time when adjustments of interest rates on assets and liabilities occur owing to new contracts, renewal of expiring What Are Interest-Sensitive Assets? Interest sensitive assets are financial products that are vulnerable to changes in lending rates. The adjustable-rate mortgage is an example. B) is a refinement of basic gap analysis that accounts for how long a gap will last. C) is a complement to basic gap analysis that accounts for the effect of interest rate changes on market value. D) is a complement to basic gap analysis that accounts for the influence of partially rate-sensitive assets.

## Farmers Aren't Immune to Interest Rate Risk: A Duration Gap Analysis of Farm or falls with interest rates depends on the relative sensitivity of assets and debt.

15 May 2013 The DGA involves bucketing of all Risk Sensitive Assets (RSA) and Risk Keywords: Interest Rate Risk Management, Duration Gap Analysis, information on all material interest-sensitive assets, liabilities, off balance sheet tools of asset-liability management such as cash matching, gap analysis, The data has been treated using the traditional gap analysis model wherein a repricing gap report has been prepared by distributing the Rate Sensitive Assets Farmers Aren't Immune to Interest Rate Risk: A Duration Gap Analysis of Farm or falls with interest rates depends on the relative sensitivity of assets and debt.

### The reality is that the liabilities and assets of banks are not matched in terms of variable rate assets (interest-sensitive assets), if interest rates in general rise,

Basic Gap Analysis: (rate-sensitive assets − rate sensitive liabilities). × ∆ interest rates = ∆ in bank profits. Maturity Bucket Approach measures the gap for several The reality is that the liabilities and assets of banks are not matched in terms of variable rate assets (interest-sensitive assets), if interest rates in general rise, 20 Mar 2019 There are many studies that analyze interest rate risk. Most of The sensitivity- gap analysis measures assets and liabilities that are sensitive to in interest rates. The imbalance or "dollar gap" between rate-sensitive assets and rate-sensitive liabilities measures a financial institution's vulnerability to these

### A bank's GAP is defined as: A) The dollar amount of rate-sensitive assets divided by the dollar amount of rate-sensitive liabilities. B) The dollar amount of earning assets divided by the dollar amount of total liabilities.

For example, Bank ABC has $150 million in interest rate sensitive assets (such as loans) and $100 million in interest rate sensitive liabilities (such as savings accounts and certificates of deposit). The gap ratio is 1.5, or $150 million divided by $100 million. Gap analysis helps identify maturity and repricing mismatches between assets and liabilities. Gap segregates a credit union’s rate-sensitive assets from rate-sensitive liabilities, according to their repricing characteristics. Then the analysis summarizes the repricing mismatches for a defined time horizon. Gap Analysis in Asset Management Gap analysis is also a method of asset-liability management that can be used to assess interest rate risk (IRR) or liquidity risk, excluding credit risk. It is a GAP = Assets - Liabilities 13,488.47 11,260.94 17,138.12 22,670.35 10,576.39 Interest Sensitivity Ratio = Assets / Liabilities 1.0328 1.0237 1.0291 1.0285 1.0117 The above table shows the gap analysis for the year 2005-06 to 2009-10 of state bank of India, here, Gap calculated by sensitivity assets compare with sensitivity liabilities. If interest rates increase, let’s see how the change will affect the company’s expected net interest income using maturity gap analysis. Multiply the market values by change in interest (2%), bearing in mind that the rate sensitive or floating assets and liabilities will be affected by the change in rates.

## Earnings Sensitivity Analysis (Base Case) Example Assets Earnings Sensitivity Analysis (Base Case) Example Liabilities and GAP Measures Interest Rate Forecasts Earnings sensitivity over one and two years versus most likely rate scenario Managing the GAP and Earnings Sensitivity Risk Steps to reduce risk Calculate periodic GAPs over short time

Gap Analysis as a tool for interest-rate risk reduction. Keywords: risk management, interest-rates risk, income gap. The rate-sensitive assets and liabili - ties. 5 Nov 2019 of assets expressed as a percentage of the principal. The. interest rate is analysis method, the interest rate sensitivity gap analysis,. and the Gap analysis measures mismatches between rate sensitive liabilities and rate sensitive assets (including off-balance sheet positions). An asset or liability is

20 Mar 2019 There are many studies that analyze interest rate risk. Most of The sensitivity- gap analysis measures assets and liabilities that are sensitive to in interest rates. The imbalance or "dollar gap" between rate-sensitive assets and rate-sensitive liabilities measures a financial institution's vulnerability to these 15 May 2013 The DGA involves bucketing of all Risk Sensitive Assets (RSA) and Risk Keywords: Interest Rate Risk Management, Duration Gap Analysis,