Insolvency Occurs When an Institution's Duration Gap Becomes Negative

question 64

True/False

Insolvency occurs when an institution's duration gap becomes negative.

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Definitions:

Market Portfolio

An investment portfolio that ideally includes all available assets in the market, weighted by their market capitalization, aiming to mimic the market's overall returns.

Discount Rate

The interest rate used to discount future cash flows to their present value, crucial in determining the value of investments.