What is a Repricing Opportunity
A repricing opportunity is a change in the market environment that allows for a reassessment of the value of an investment. This can happen with stocks, bonds or other types of investments.
Specifically dealing with interest rates and their effects on the market: a repricing opportunity can be defined as the change in the 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.
BREAKING DOWN Repricing Opportunity
Events which create repricing opportunities can be specific to a particular company, or be sweeping changes that affect multiple investments in the marketplace.
Relating to interest rates and banks: depending on the mix of assets and liabilities the bank's portfolio 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.