Which of the following is a weakness of the repricing model to measure interest rate risk?
A)Potential for overaggregation of assets and liabilities within each maturity bucket.
B)It ignores how changes in interest rates affect the market value of assets and liabilities.
C)It ignores the reinvestment of loan interest and principal payments that are reinvested at current market rates.
D)It fails to recognize off-balance-sheet activities that may be rate-sensitive.
E)All of the options.

Question

Quizplus · Accepted Answer

All of the options are weaknesses of the repricing model to measure interest rate risk. The potential for overaggregation of assets and liabilities within each maturity bucket can lead to inaccurate measurements. Ignoring how changes in interest rates affect the market value of assets and liabilities can result in incomplete assessments of interest rate risk. Ignoring the reinvestment of loan interest and principal payments at current market rates can lead to a failure to account for future cash flows. Failing to recognize off-balance-sheet activities that may be rate-sensitive can result in incomplete assessments of overall interest rate risk.

Which of the Following Is a Weakness of the Repricing