Tag: Principles of Banking paper
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Assume that this bank has a negative duration GAP. Explain the implications of duration GAP in this case and provide some possible transactions/strategies (at least two) to reduce interest rate risk.
QUESTION 1. Part I. A bank has the following information. Its rate-sensitive assets equal £900 million. Its rate-sensitive liabilities equals £700 million. Assume a parallel shift in the yield curve. Present the relevant formulas and calculate: a) The bank’s GAP. [3 marks] b) The expected change in net interest income if rates increase by 1…