Interest Sensitive Assets

AAA

DEFINITION of 'Interest Sensitive Assets'

Assets held by a bank that are vulnerable to changes in interest rates. This change can occur either when the asset matures or when it is repriced according to an index rate. The value of these assets is adjusted according to the rise or fall of a published rate or index

INVESTOPEDIA EXPLAINS 'Interest Sensitive Assets'

There are several types of interest sensitive assets such as adjustable rate mortgages (ARMs) and variable rate consumer and demand loans. The benchmarks that their pricing adjustments are tied to can include the 6-month T-Bill rate, the LIBOR and the prime rate. The sensitivity of these assets to interest rate changes can negatively affect the customers more than the bank itself.

RELATED TERMS
  1. LIBOR

    LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate ...
  2. Repricing Opportunity

    The change in interest rate of an interest-sensitive asset or ...
  3. Negative Gap

    A situation where a bank's interest-sensitive liabilities exceed ...
  4. Interest Rate Sensitivity

    A measure of how much the price of a fixed-income asset will ...
  5. Interest

    1. The charge for the privilege of borrowing money, typically ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
RELATED FAQS
  1. Do long-term bonds have a greater interest rate risk than short-term bonds?

    The answer to this question lies in the fixed income nature of bonds and debentures, often referred to together simply as ... Read Full Answer >>
  2. Is the banking sector subject to any seasonal trends?

    The banking industry, including retail and investment banks, is subject to seasonal trends. Seasonality is most commonly ... Read Full Answer >>
  3. What is the difference between an Equity REIT and a Mortgage REIT?

    There are several types of real estate investments trusts (REITS) that investors can purchase, including equity REITS and ... Read Full Answer >>
  4. Can small investors buy collateralized mortgage obligations (CMOs)?

    Collateralized mortgage obligations (CMOs), which are pools of mortgage-backed securities (MBS), are available to smaller ... Read Full Answer >>
  5. What is the difference between an option-adjusted spread and a Z-spread in reference ...

    Unlike the Z-spread calculation, the option-adjusted spread takes into account how the embedded option in a bond can change ... Read Full Answer >>
  6. What are some historical examples of debt securitization?

    The first debt securities were probably sovereign debt assets that were transferred from the British government to mercantilist ... Read Full Answer >>
Related Articles
  1. Insurance

    ARMed And Dangerous

    In a climate of rising interest rates, having an adjustable-rate mortgage can be risky.
  2. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  3. Investing Basics

    5 Things To Know About Asset Allocation

    Overwhelmed by investment options? Learn how to create an asset allocation strategy that works for you.
  4. Investing Basics

    Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.
  5. Options & Futures

    The Benefits Of ETF Investing

    Exchange-traded funds provide unique opportunities for investors. Find out how.
  6. Investing Basics

    What Investors Should Know About Interest Rates

    Understanding interest rates helps you answer the fundamental question of where to put your money.
  7. Options & Futures

    The REIT Way

    Ever considered investing in real estate? Read about the REIT and see if it's the investment for you.
  8. Investing Basics

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  9. Bonds & Fixed Income

    The Impact Of Interest Rates On Real Estate Investment Trusts

    REITs are high-yield investments, but do they have an inverse relationship with interest rates? Find out here.
  10. Home & Auto

    What Are The Tax Advantages Of Buying A Home?

    Don't forget these deductions and credits that homeowners can use to reduce their tax bill.

You May Also Like

Hot Definitions
  1. Fracking

    A slang term for hydraulic fracturing. Fracking refers to the procedure of creating fractures in rocks and rock formations ...
  2. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  3. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  4. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  5. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  6. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
Trading Center