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. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  2. Spread

    1. The difference between the bid and the ask price of a security ...
  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. Fee Harvesting Card

    Credit cards targeted at consumers with poor credit scores that ...
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 interest ...
  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, ...
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 The Impact On Equities If The Rates Hike?

    The Fed is on course for raising interest rates. True, that leaves the question of when (most likely June or September, but could be later) and how much.
  5. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  6. Fundamental Analysis

    Efficiency Ratio

    There are many types of efficiency ratios, but all measure how well a company utilizes its resources to make a profit. Business managers use these ratios to determine how well they are operating ...
  7. Investing Basics

    What is Profit?

    Profit is a general term used to denote when earnings exceed the expenses incurred to generate those earnings.
  8. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  9. Investing

    Deferred Tax Liability

    Deferred tax liability is a tax that has been assessed or is due for the current period, but has not yet been paid. The deferral arises because of timing differences between the accrual of the ...
  10. Charts & Patterns

    Why These Are 2015's Most-Promising Bank Stocks

    Which bank stocks should offer the best bang for your buck in 2015? Possibly these, so read on.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center