Interest gap

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A mismatch in the timing at which interest rate assets and liabilities are repriced.

A positive gap (assets repricing more quickly than liabilities) means an exposure to falling interest rates and vice versa.

Banks and other financial institutions commonly have a 'structural' interest gap, resulting from the nature of their business and the structure of their balance sheets.

This structural interest gap is usually negative.

The negative interest gap results from shorter-term liabilities funding longer term assets.

See also