Which of the following is not a weakness of the repricing model to measure interest rate risk?
A)Potential for over-aggregation 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 and it fails to recognise off-balance-sheet activities that may be rate sensitive.
D)It ignores how changes in currency exchange rates affect the market value of assets and liabilities.

Question

Quizplus · Accepted Answer

The repricing model measures interest rate risk by grouping assets and liabilities into time buckets based on their expected maturity or repricing date. While it has some weaknesses, such as the potential for over-aggregation and the failure to recognize off-balance-sheet activities, it does account for changes in interest rates on the market value of assets and liabilities. However, it does not take into consideration how changes in currency exchange rates affect the market value of assets and liabilities, which is a weakness of the repricing model.

Which of the Following Is Not a Weakness of the Repricing