What information is available from earnings sensitivity analysis that is not provided by static GAP analysis?
Answer to relevant QuestionsAssume that you manage the interest rate risk position for your bank. Your bank currently has a positive cumulative GAP for all time intervals through one year. You expect that interest rates will fall sharply during the ...Suppose that your bank buys a T- bill yielding 4 percent that matures in six months and finances the purchase with a three month time deposit paying 3 percent. The purchase price of the T- bill is $ 3 million financed with a ...Suppose that your bank currently operates with a DGAP of 2.2 years. Which of the following will serve to reduce the bank’s interest rate risk? a. Issue a one year zero coupon CD to a customer and use the proceeds to buy a ...Compare the strengths and weaknesses of GAP and earnings sensitivity analysis with DGAP and EVE sensitivity analysis. Discuss the role of a third party intermediary in an interest rate swap agreement. Describe the risks assumed by the intermediary. How does the intermediary potentially profit from this activity?
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