What Is the Strength of Static GAP Analysis Relative to Duration

question 42

Multiple Choice

What is the strength of static GAP analysis relative to duration gap analysis?

• A) Static GAP analysis recognizes the time value of money of each cash flow.
• B) Static GAP analysis provides a measure of the total portfolio's interest rate risk.
• C) Static GAP analysis is easier to understand.
• D) Static GAP analysis takes the long-run view while duration gap analysis takes a shorter-run view.
• E) The static GAP measure directly correlates with the risk of the bank, i.e., a bank with twice the static GAP is twice as risky.

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Definitions:

Slobodan Milosevic

A Serbian and Yugoslav politician who served as the President of Serbia (1989-1997) and President of the Federal Republic of Yugoslavia (1997-2000), known for his role in the ethnic conflicts and wars that led to the breakup of Yugoslavia.

Josip Broz

Known as Tito, he was a Yugoslav communist revolutionary and political leader who served as Prime Minister (1945–1963) and President (1953–1980) of the Socialist Federal Republic of Yugoslavia.

Standard of Living

The level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class or a geographic area.