Capital Markets School - October 2023

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?

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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.

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