What is a 'duration gap'?
A) the average maturity of liabilities on a balance sheet
B) the difference between the duration of assets and liabilities
C) the difference between the duration of the longest-held and shortest-held liabilities on the balance sheet
D) the average maturity of the portfolio on the asset side of a balance sheet

Question

Quizplus · Accepted Answer

Duration gap is the difference between the duration of assets and liabilities on a balance sheet. It is used to measure the sensitivity of a financial institution's net worth to changes in interest rates. A positive duration gap indicates that a financial institution's assets have a longer-term duration than its liabilities, while a negative duration gap indicates the opposite.

What Is a 'Duration Gap