Suppose the financial statements of Northern Trust, Fifth Third Bank, and JP Morgan Chase Bank all exhibit negative duration GAPs $($on their respective balance sheets$)$ for yearend $2023.$  How would you interpret a negative duration GAP. What type of asset$/$liability structure would lead to a negative duration GAP? Would a negative duration GAP ever be desirable? If so$,$ under what type of interest rate forecasts? How could these banks use an interest rate swap to magnify their strategic interest rate risk sensitivity$?$

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A negative duration GAP suggests that a banks liabilities have a longer duration than its assets Thi... View the full answer