A bank has $10 billion in assets and $9 billion in liabilities. The duration of its assets is 2.2 years. The duration of its liabilities is 1.5 years. Market interest rates rise from 5% to 6%. What is the gain or loss to the bank?
The gain or loss of the bank will be calculated on basis on change in equity of the bank.
Duration Gap Analysis - It is undertaken to compares the sensitivity of a bank's total assets with the sensitivity of its total liabilities to see the impact of potential changes in interest rates on stockholders' ...
The solution calculate gain or loss to a bank for holding their assets and liabilities