Static Gap

AAA

DEFINITION of 'Static Gap'

A measure of exposure or sensitivity to interest rates. Static gap is calculated as the difference between assets and liabilities of comparable repricing periods. Static gap can be calculated for short-term and long-term periods. Minus signs in the calculated gap indicate that you have a greater number of liabilities than assets maturing at that particular maturity, and therefore have an exposure to rising rates.

INVESTOPEDIA EXPLAINS 'Static Gap'

Static gap is usually calculated for periods of less than a year – often 0 to 30 days or 31 to 90 days – but can also be calculated for multiple periods. Simple static gaps are inherently imprecise measurements because they do not take into account such factors as interim cash flow, average maturity and prepayment of the loan.

RELATED TERMS
  1. Spread

    1. The difference between the bid and the ask price of a security ...
  2. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  3. Interest

    1. The charge for the privilege of borrowing money, typically ...
  4. Liability

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

    1. A resource with economic value that an individual, corporation ...
  6. Capital Expenditure (CAPEX)

    Funds used by a company to acquire or upgrade physical assets ...
RELATED FAQS
  1. Who determines interest rates?

    In countries using a centralized banking model, interest rates are determined by the central bank. In the first step of ... Read Full Answer >>
  2. What does a cut in interest rates mean for the stock market?

    When the next Federal Reserve meeting is expected to bring interest rate cuts or increases, it is wise, as a stock investor, ... Read Full Answer >>
Related Articles
  1. Economics

    Forces Behind Interest Rates

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

    How Interest Rates Affect The U.S. Markets

    Interest rates can have both positive and negative effects on U.S. stocks, bonds and inflation.
  3. 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.
  4. Economics

    What’s Driving U.S. Stocks? Irony.

    A seesaw week for U.S. stocks ended on the upside last week, though the rally was more a function of slow growth rather than a booming economy.
  5. Taxes

    Will Itemized Deductions Get You A Bigger Refund?

    April and taxes are due soon. If you need to file your return, you might have to decide if itemizing your deductions this year will net you a better deal.
  6. Charts & Patterns

    Why These Could Be 2015's 10 Best Biotech Stocks

    A quick look at a 10 biotech companies that are poised to deliver for shareholders in 2015.
  7. Mutual Funds & ETFs

    How To Build A Bond Ladder?

    Bond laddering is a strategy used when building a portfolio: an investor can spread out interest rate risk and create a stream of cash flows for income.
  8. Investing Basics

    Explaining Pro-Rata

    Pro-rata is a term meaning a fraction of a whole based on a relationship to the whole. Proportionate allocations are made pro-rata.
  9. Investing Basics

    Explaining Interest Rate Risk

    Interest rate risk is the risk that investments already held will lose market value if new investments with higher interest rates enter the market.
  10. Credit & Loans

    Is Now the Right Time to Buy a House?

    Thinking of buying a home? Consider these factors first.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center