The repricing model ignores information regarding the distribution of assets and liabilities within maturity buckets.This limitation of the model refers to
A)market value effect.
B)overaggregation.
C)runoffs and pre-payments.
D)OBS activities.

Question

Quizplus · Accepted Answer

Overaggregation refers to the limitation of the repricing model where it ignores information regarding the distribution of assets and liabilities within maturity buckets. This means that the model does not account for differences in interest rate sensitivity and liquidity within different maturity buckets, which can lead to inaccurate results. This limitation can be addressed by using more advanced modeling techniques that take into account the specific characteristics of each asset and liability.

The Repricing Model Ignores Information Regarding the Distribution of Assets