What is the CGAP effect? According to the CGAP effect, what is the relation between changes in interest rates and changes in net interest income when CGAP is positive? When CGAP is negative?
Answer to relevant QuestionsWhich of the following is an appropriate change to make on a bank’s balance sheet when GAP is negative, spread is expected to remain unchanged, and interest rates are expected to rise? a. Replace fixed-rate loans with ...If you use duration only to immunize your portfolio, what three factors affect changes in an FI’s net worth when interest rates change?What is the gap-to-total-assets ratio? What is the value of this ratio to interest rate risk managers and regulators?Consider the following. a. What is the duration of a two-year bond that pays an annual coupon of 10 percent and whose current yield to maturity is 14 percent? Use $ 1,000 as the face value. b. What is the expected change in ...What are the differences between a microhedge and a macrohedge for an FI? Why is it generally more efficient for FIs to employ a macrohedge than a series of microhedges?
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