Because of its simplicity, smaller depository institutions still use this model as their primary measure of interest rate risk.
A)The repricing model.
B)The maturity model.
C)The duration model.
D)The convexity model.
E)The option pricing model.

Question

Quizplus · Accepted Answer

The repricing model is the simplest and most straightforward model for measuring interest rate risk. It assumes that all assets and liabilities of a financial institution will reprice or mature within a short period of time (usually less than one year) and thus, interest rate changes will have an immediate impact on net interest income. This model is particularly useful for smaller depository institutions who have simple balance sheets and fewer complex financial instruments.

Because of Its Simplicity, Smaller Depository Institutions Still Use This