Repricing Opportunity

AAA

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.

INVESTOPEDIA EXPLAINS '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. Interest Rate Sensitivity

    A measure of how much the price of a fixed-income asset will ...
  2. Interest Sensitive Liabilities

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

    Assets held by a bank that are vulnerable to changes in interest ...
  4. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  5. Finance

    The science that describes the management, creation and study ...
  6. Variable Interest Rate

    An interest rate on a loan or security that fluctuates over time, ...
RELATED FAQS
  1. What are some of the advantages and disadvantages of absorption costing?

    Companies must choose between using absorption costing or variable costing in their accounting systems. There are advantages ... Read Full Answer >>
  2. What is the difference between the cost of capital and the discount rate?

    The cost of capital refers to the actual cost of financing business activity through either debt or equity capital. The discount ... Read Full Answer >>
  3. Why does zero-based budgeting require ongoing evaluation and management?

    Zero-based budgeting must have ongoing evaluation and management due to the fact a zero-based budget requires management ... Read Full Answer >>
  4. What is the prime cost formula?

    The term "prime cost" refers to the direct costs of manufacturing an item. It is calculated by adding the cost of raw materials ... Read Full Answer >>
  5. How can I lower my effective tax rate without lowering my income?

    There are lots of ways to lower your effective tax rate, although your individual circumstances determine whether you can ... Read Full Answer >>
  6. How does the use of International Financial Reporting Standards (IFRS) affect key ...

    While much has been achieved since 2002 in convergence between international financial reporting standards (IFRS) and U.S. ... Read Full Answer >>
Related Articles
  1. Investing

    Earnings: Quality Means Everything

    It's quantity that generates all the hype, but there are more meaningful factors that gauge true performance.
  2. Options & Futures

    Managing Interest Rate Risk

    Learn which tools you need to manage the risk that comes with changing rates.
  3. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  4. 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.
  5. Options & Futures

    Immunization Inoculates Against Interest Rate Risk

    Big-money investors can hedge against bond portfolio losses caused by rate fluctuations.
  6. Retirement

    How Much Is Enough To Finance Your Retirement?

    Keep these points in mind as you calculate your retirement asset goal.
  7. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  8. Economics

    Explaining the Cash Budget

    A cash budget is a plan for the inflows and outflows of cash for a business or an individual.
  9. 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.
  10. Budgeting

    10 Worst And Best Vacation Cities In The U.S.

    The many costs of planning a vacation will put a stress on most people’s finances, but where you choose to go can be what really makes your travel budget.

You May Also Like

Hot Definitions
  1. 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 ...
  2. Covered Call

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

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center