What are the principal limitations of duration gap analysis? Can you think of some way of reducing the impact of these limitations?
Answer to relevant QuestionsSuppose that a savings institution has an average asset duration of 2.5 years and an average liability duration of 3.0 years. If the savings institution holds total assets of $560 million and total liabilities of $467 ...How is a financial institution’s duration gap determined?The cumulative interest rate gap of Poquoson Savings Bank increases 60 percent from an initial figure of $25 million. If market interest rates rise by 25 percent from an initial level of 3 percent, what changes will occur in ...A financial firm holds a bond in its investment portfolio whose duration is 15 years. Its current market price is $975. While market interest rates are currently at 6 percent for comparable quality securities, a decrease in ...Suppose market interest rates were expected to rise. What type of option would normally be used?
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