EXPLAIN the purpose of each steps in Static GAP analysis and how a bank would us

ID: 2920798 • Letter: E

Question

EXPLAIN the purpose of each steps in Static GAP analysis and how a bank would use such analysis.

1. Develop an interest rate forecast

2. Select series of sequential time intervals for determining what amount of assets and liabilities are rate sensitive within each time interval

3. Group assets and liabilities into these intervals or 'buckets' according to time to first re-pricing

4. Calculate GAP

5. Forecast net interest income given the assumed interest rate environment and re-pricing characteristics of the underlying instruments

The given question is not of basic maths.hence inapplicable to answer.hope you understand.keep learning,keep checking thank you.

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