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. Asset

    1. A resource with economic value that an individual, corporation ...
  2. Interest

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

    A company's legal debts or obligations that arise during the ...
  4. Maturity

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

    1. The difference between the bid and the ask price of a security ...
  6. Inherent Risk

    The risk posed by an error or omission in a financial statement ...
Related Articles
  1. Who determines interest rates?
    Investing

    Who determines interest rates?

  2. Forces Behind Interest Rates
    Economics

    Forces Behind Interest Rates

  3. How Interest Rates Affect The U.S. Markets
    Options & Futures

    How Interest Rates Affect The U.S. Markets

  4. Interest Rates And Your Bond Investments
    Investing Basics

    Interest Rates And Your Bond Investments

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

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

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. 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 ...
  4. 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 ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center