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Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition by Youssef F. Bissada, Jean Dermine

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Solution to Stage Fourteen

1.
 Repricing gaps
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In the case of a positive gap in which the assets coming for repricing are larger than the debt being repriced, an increase in the interest rate level will be good for you as the additional interest income will exceed the additional interest expense. In reverse, a drop in the interest rate level will be bad for you.

In the case of a negative gap in which the deposits coming for repricing are larger than the asset being repriced, an increase in the interest rate level will be bad for you as the additional interest expense will exceed the additional interest ...

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