9-34 Immunizing the balance sheet of an FI against interest rate risk requires that the leverage adjusted duration gap (DA-kDL)should be set to zero.

Question

Quizplus · Accepted Answer

Setting the leverage adjusted duration gap to zero means that the changes in the value of assets and liabilities due to a change in interest rates would be perfectly matched, thereby immunizing the balance sheet against interest rate risk.

9-34 Immunizing the Balance Sheet of an FI Against Interest