What is maturity mismatch?

What is maturity mismatch?

Maturity mismatch is a term used to describe situations when there's a disconnect between a company's short-term assets and its short-term liabilities—specifically more of the latter than the former. Maturity mismatches can also occur when a hedging instrument and the underlying asset's maturities are misaligned.

What is duration gap formula?

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What is a positive gap?

A positive gap, or one greater than one, is the opposite, where a bank's interest rate sensitive assets exceed its interest rate sensitive liabilities. A positive gap means that when rates rise, a bank's profits or revenues will likely rise. There are two types of interest rate gaps: fixed and variable.

What is the maturity gap for County Bank?

What is the maturity gap for County Bank? MA = [0*20 + 15*160 + 30*300]/480 = 23.75 years. ML = [0*100 + 5*210 + 20*120]/430 = 8.02 years.

What is gap or mismatch risk?

The Gap or Mismatch risk can be measured by calculating Gaps over different time intervals as at a given date. Gap analysis measures mismatches between rate sensitive liabilities and rate sensitive assets (including off-balance sheet positons).

What means NBFC?

Non-Banking Financial Company A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance ...

What is maturity gap analysis?

The maturity gap analysis compares the value of assets that either mature or are repriced within a given time interval to the value of liabilities that either mature or are repriced during the same time period. Reprice means there's the potential to receive a new interest rate.

What is the meaning of duration gap?

The duration gap is a financial and accounting term and is typically used by banks, pension funds, or other financial institutions to measure their risk due to changes in the interest rate. ... The duration gap measures how well matched are the timings of cash inflows (from assets) and cash outflows (from liabilities).

What is a negative gap?

A negative gap is a situation where a financial institution's interest-sensitive liabilities exceed its interest-sensitive assets. A negative gap is not necessarily a bad thing, because if interest rates decline, the entity's liabilities are repriced at lower interest rates. In this scenario, income would increase.

What is negative duration gap?

The duration gap is a financial and accounting term and is typically used by banks, pension funds, or other financial institutions to measure their risk due to changes in the interest rate. ... Conversely, when the duration of assets is less than the duration of liabilities, the duration gap is negative.

What is the meaning of the term maturity gap?

• DEFINITION of Maturity Gap. Maturity gap is a measurement of interest rate risk for risk-sensitive assets and liabilities.

What is maturity gap for County Bank?

• Maturity gap is a measurement of interest rate risk for risk-sensitive assets and liabilities. Using the maturity gap model, the potential changes in the net interest income variable can be measured. Click to see full answer. Consequently, what is the maturity gap for County Bank? MA = [0*20 + 15*160 + 30*300]/480 = 23.75 years.

How does the maturity gap affect net interest income?

• Using the maturity gap model, the potential changes in the net interest income variable can be measured. In effect, if interest rates change, interest income and interest expense will change as the various assets and liabilities are repriced.

What is the maturity gap in a 16 year old?

• On tests that measure impulse control, self-regulation, and resistance to peer pressure, 16-year-old children typically perform less well than adults. The fact that cognitive maturity (CM) develops earlier and peaks sooner than emotional maturity (EM) is called the "maturity gap."