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. Asset

    1. A resource with economic value that an individual, corporation ...
  4. Liability

    A company's legal debts or obligations that arise during the ...
  5. Forbearance

    A temporary postponement of mortgage payments.
  6. Mortgage Modification

    A permanent change in a homeowner's home loan terms that makes ...
Related Articles
  1. Reading The Balance Sheet
    Investing Basics

    Reading The Balance Sheet

  2. The Essentials Of Corporate Cash Flow ...
    Retirement

    The Essentials Of Corporate Cash Flow ...

  3. Off-Balance-Sheet Entities: An Introduction
    Investing

    Off-Balance-Sheet Entities: An Introduction

  4. What Is A Cash Flow Statement?
    Markets

    What Is A Cash Flow Statement?

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center