CMS Sept 2022

Internal Use Only

GAP Measurements – Question?

I'm looking at our gap report and it shows our cumulative gap to be 116% which is asset sensitive, yet when I look at the rates up simulation on the income shock report it shows my net interest margin declining when rates rise. Is there something wrong with the model?

47

Internal Use Only

GAP Measurements – Question?

• No , you've just observed the biggest weakness of the gap report. It doesn't capture option risk .

• There are several accounts where option risk is likely to show up on a bank's balance sheet today.

48