Convexity is the major problem associated with the repricing gap.

Question

Quizplus · Accepted Answer

The major problem associated with the repricing gap is interest rate risk, not convexity. The repricing gap model measures the timing differences in the maturity and re-pricing of assets and liabilities, focusing on the risk that interest rates may change. Convexity is more related to the price sensitivity of a bond when interest rates change and is a separate concept from the repricing gap model's focus.

Convexity Is the Major Problem Associated with the Repricing Gap