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:

Statistic

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Tissues in the body that have the ability to contract and move parts of the body.