Browse:  #  A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z 

Duration gap

Duration gap Definition

The duration gap is the difference between the duration of assets and liabilities.

Example: The duration gap tells how cash flows for assets and liabilities are matched. A positive duration gap is when the duration of assets exceeds the duration of liabilities (which means greater exposure to rising interest rates). If rates go up by 1% the price of assets fall more than the price of liabilities. A negative duration gap is when the duration of assets is less than the duration of liabilities (which means greater exposure to declining interest rates). If rates go down by 1% the price of assets goes up less than the price of liabilities.

Duration has a double-facet view. While a positive duration gap means greater risk, it also means that your payables became due before your receivables, on average.

RELATED TERMS
Cashflow matching







Browse:  #  A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z