Gap ratio - Definition

The value of all Interest Rate-sensitive assets divided by the value of all interest rate-sensitive liabilities owned by a firm. In other words, gap ratio is the difference in Rate sensitive Liabilities and Rate sensitive Assets. For Example, If a Bank has $2 Million in Rate sensitive liabilities and $3 Million in Rate sensitive assets, Then its Gap Ratio is 1.5, ($3 Million/$2 Million).



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