Mismatch

AAA

DEFINITION of 'Mismatch'

In general, this means to match incorrectly or unsuitably. In the banking world, it refers to a situation pertaining to asset and liability management. A mismatch occurs when assets that earn interest do not balance with liabilities upon which interest must be paid. For example, an asset that is funded by a liability with a different maturity creates a mismatch.

INVESTOPEDIA EXPLAINS 'Mismatch'

Also known as mismatched books, this situation is common in banking. For example, a bank may borrow for the short term and make long-term loans. Therefore they will fund 30 year mortgages with short term deposits, anticipating that the deposits will be rolled over.

RELATED TERMS
  1. Zero-Gap Condition

    When a financial institution's interest rate-sensitive assets ...
  2. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  3. Liability

    A company's legal debts or obligations that arise during the ...
  4. Asset

    1. A resource with economic value that an individual, corporation ...
  5. Total Annual Loan Cost (TALC)

    The projected total cost that a reverse mortgage holder should ...
  6. Forbearance

    A temporary postponement of mortgage payments.
RELATED FAQS
  1. What role did securitization play in the U.S. subprime mortgage crisis?

    The securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) ... Read Full Answer >>
  2. How often is interest compounded?

    Interest can be compounded on any given frequency schedule. Common interest compounding time frames are daily, monthly, semi-annually ... Read Full Answer >>
  3. How does the loan-to-value ratio affect my mortgage payments?

    Several factors affect the mortgage rate you can obtain when you purchase a home. Lenders analyze credit histories and scores ... Read Full Answer >>
  4. What's the difference between a collateralized debt obligation (CDO) and a collateralized ...

    A collateralized mortgage obligation, or CMO, is a type of mortgage-backed security (MBS) issued by an lender that handles ... Read Full Answer >>
  5. What is the difference between a savings & loan company and a bank?

    Savings and loan (S&L) companies provide many of the same services to customers as banks, including deposits, loans, ... Read Full Answer >>
  6. Why does the loan-to-value ratio matter?

    For mortgage lenders and borrowers, the loan-to-value ratio is an important factor in determining the repayment terms of ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  2. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  3. Investing

    Off-Balance-Sheet Entities: An Introduction

    The theory and practice of these entities varies greatly. Investors need to learn what they're getting into.
  4. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  5. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  6. Credit & Loans

    Is It Worth Buying A Second Home To Rent?

    Mortgage interest rates are low, but consider these dos and don'ts before making the leap into rental property ownership.
  7. Credit & Loans

    How To Combine Two Mortgages Into One?

    If you have a second mortgage as well as a primary, does it make sense to consolidate into a single loan? Here's how to figure it out.
  8. Credit & Loans

    Should I Consolidate My Two Mortgages?

    Consolidating your loans or mortgage may make sense for you, especially when interest rates are low. Here's what you should know.
  9. Credit & Loans

    Top 10 Common Mortgage Scams To Avoid

    How do you know which companies to avoid? Look for these telltale signs.
  10. Credit & Loans

    Can You Get A Mortgage On A Mobile Home?

    You can get a loan for a mobile home, but it may not be a mortgage. These are the choices for funding manufactured housing.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center