An FI's balance sheet is characterized by long-term fixed-rate assets funded by short-term variable-rate securities. Most likely the bank has a

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Quizplus · Accepted Answer

A negative repricing gap occurs when liabilities reprice or mature faster than assets, which is the case when funding long-term fixed-rate assets with short-term variable-rate liabilities. A positive duration gap indicates that the assets have a longer duration than liabilities, suggesting that the value of assets is more sensitive to changes in interest rates than the value of liabilities, which aligns with the scenario of long-term assets and short-term liabilities.

An FI's Balance Sheet Is Characterized by Long-Term Fixed-Rate Assets