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)over-aggregation
C)runoffs and pre-payments
D)off-balance-sheet activities

Question

Quizplus · Accepted Answer

Over-aggregation refers to the failure of the repricing model to distinguish between various assets and liabilities, such as those classified by maturity buckets or interest rate types. This leads to an inaccurate measure of interest rate risk since assets and liabilities within each bucket may vary in their sensitivity to interest rate changes.

The Repricing Model Ignores Information Regarding the Distribution of Assets