DEFINITION of 'Dynamic Gap'

Refers to asset and liability risk management at financial institutions. An asset-liability model that takes into account projected future balances or the difference between interest sensitive assets and interest sensitive liabilities at specific future time periods. Simply: a bank's gap is defined as the difference between a bank's rate-sensitive assets and rate-sensitive liabilities.


Gap analysis is the method to determine the market risk, or interest rate exposure. Dynamic gap analysis attempts to reflect the reality that, on an ongoing basis, loan payments and maturities are replaced with new loans; deposit withdrawals are replaced by new deposits. It is the opposite of static gap analysis.

  1. Zero-Gap Condition

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  2. Maturity Gap

    Maturity gap is a measurement of interest rate risk for risk-sensitive ...
  3. Interest Rate Gap

    An interest rate gap is the difference between the rates of liabilities ...
  4. Asset/Liability Management

    A technique companies employ in coordinating the management of ...
  5. Net Interest Income

    The difference between the revenue that is generated from a bank's ...
  6. Total Liabilities

    The aggregate of all debts an individual or company is liable ...
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