Repricing Opportunity

DEFINITION of 'Repricing Opportunity'

The change in interest rate of an interest-sensitive asset or liability. Banks earn income from interest, so their income fluctuates with changes in interest rates. A bank can minimize its interest-rate risk and maximize its net interest income by minimizing the differences in repricing opportunities between its assets, such as adjustable-rate mortgages, and its liabilities, such as the rate of interest it pays on customer deposits or certificates of deposit.

BREAKING DOWN 'Repricing Opportunity'

Depending on the mix of assets and liabilities it holds, repricing opportunities can make a bank either asset-sensitive or liability-sensitive. Banks also experience other types of risk, including: foreign currency exchange rate risk, commodity price risk and trading investment portfolio risk.

RELATED TERMS
  1. Negative Gap

    A situation where a bank's interest-sensitive liabilities exceed ...
  2. Net Interest Income

    The difference between the revenue that is generated from a bank's ...
  3. Interest Sensitive Liabilities

    Any type of short-term deposit held by a bank that pays a variable ...
  4. Interest Sensitive Assets

    Assets held by a bank that are vulnerable to changes in interest ...
  5. Pooled Cost Of Funds

    A formula for finding the cost of funds. The pooled cost of funds ...
  6. Liability Management

    Use and management of liabilities, such as customer deposits, ...
Related Articles
  1. Investing

    Analyzing A Bank's Financial Statement

    Investors should analyze a bank’s interest rate risk and credit risk when analyzing its financial statement.
  2. Investing

    Analyzing A Bank's Financial Statements

    A careful review of a bank's financial statements can help you identify key factors in a potential investment.
  3. Managing Wealth

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
  4. Personal Finance

    Where To Put Your Cash: Call Deposit Vs Time Deposit Accounts

    Time deposit accounts and call deposit accounts allow customers to earn higher interest in exchange for less access to their cash.
  5. Investing

    What is a Bank?

    A bank is a financial institution licensed to receive deposits or issue new securities to the public.
  6. Investing

    What's a Liability?

    A liability is a debt. It is an obligation that arises during the course of business and represents a third-party claim on the company's assets. A liability can arise in a number of different ...
  7. Entrepreneurship & Small Business

    Understanding Total Liabilities

    Total liabilities are the combined debts an individual or company owes.
  8. Personal Finance

    How Interest Rates Affect the Housing Market

    Understand how rate changes can affect home prices and learn how you can keep up.
  9. Personal Finance

    Explaining Term Deposits

    A term deposit (more often called a certificate of deposit or CD) is a deposit account that is made for a specific period of time.
  10. Investing

    Explaining Long-Term Liability

    A long-term liability is an obligation a company owes a year or more into the future.
RELATED FAQS
  1. Do banks have working capital?

    Learn the reasons why banks do not have working capital due to the lack of typical current assets and liabilities accounts, ... Read Answer >>
  2. What is the difference between an expense and a liability?

    Learn what liabilities and expenses are, which financial statements they are listed on, and the differences between liabilities ... Read Answer >>
  3. How do commercial banks make money?

    Learn the different ways commercial banks make money, including interest from loan products and banking fees charged to customers. Read Answer >>
  4. What factors are the primary drivers of banks' share prices?

    Find out which factors are most important when determining the share price of banks and other lending institutions in the ... Read Answer >>
  5. What are the primary sources of market risk?

    Learn about market risk and the four primary sources of market risk including equity, interest rate, foreign exchange and ... Read Answer >>
  6. What is the difference between a demand deposit and a term deposit?

    Understand the meaning of demand deposits and term deposits, and learn about the major differences between these two types ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center