Which of the following is a measure for banks to use to assess their exposure to interest rate risk?
A)capital ratio
B)leverage measure
C)duration
D)gap ratio
E)duration AND gap ratio

Question

Quizplus · Accepted Answer

Duration and gap ratio are both measures used by banks to assess their exposure to interest rate risk. Duration measures the sensitivity of the price of a bond or other fixed-income investment to a change in interest rates. The gap ratio measures the difference between the rate-sensitive assets and rate-sensitive liabilities over a certain period, helping banks understand their exposure to changes in interest rates.

Which of the Following Is a Measure for Banks to Use