DEFINITION of 'Static Gap'
Static gap is a measure of exposure or sensitivity to interest rates, calculated as the difference between assets and liabilities of comparable repricing periods. It can be calculated for shortterm and longterm time periods. Minus signs (or a negative value) in the calculated gap indicates that you have a greater number of liabilities than assets maturing at that particular maturity, and therefore have exposure to rising rates.
BREAKING DOWN 'Static Gap'
Static gap is usually calculated for periods of less than a year â€“ often 0 to 30 days or 31 to 90 days â€“ 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.
Static Gap Example
For example, a bank has both $5 million in assets and $5 million in liabilities that reprice in any given time window. Changes in interest rates should not change the bank's net interest margin. Under this scenario, we'd have a balanced gap position. If instead, $12 million in assets reprice with only $6 million in liabilities repricing, the bank is in an asset sensitive position. In this case, an asset sensitive bank will benefit from a net interest margin increase if interest rates rise. In contrast, if only $5 million in assets reprice during the same period that $8 million in liabilities reprice, it is known as a liability sensitive position. Here, if interest rates rise, net interest margin will decline. Similarly, if interest rates fall the liabilitysensitive bank will project a wider net interest margin.
A common, and glaring hole in gap analysis is its inability to account for the optionality embedded in many assets and liabilities. If rates drop and assets prepay faster than expected, or if rates rise and the average life of assets is unexpectedly extended, these contingencies are typically not a component of simple static gap reporting and analysis. Other issues arise for nonmaturity deposits â€” certain deposits are carried in perpetuity.

Maturity Gap
Maturity gap is a measurement of interest rate risk for risksensitive ... 
Dynamic Gap
Dynamic gap refers to a method of measure the gap between a bankâ€™s ... 
Static Spread
The static spread is the constant yield spread above the spot ... 
Common Gap
A price gap found on a price chart for an asset. These gaps are ... 
Exhaustion Gap
An exhaustion gap is a gap that occurs after a rapid rise in ... 
Gap Analysis
1) The process through which a company compares its actual performance ...

Trading
3 Gap Trades On SP500 Stocks (AMAT, NEM)
Gaps generate all sorts of trading signals, both when they occur and when price pulls back to test or fill them. 
Investing
Should Investors Squeeze Into The Gap?
The Gap is closing stores and conducting layoffs. Will investor panic lead to opportunity? 
Insurance
Steer Clear of OverPriced Gap Insurance Providers
Major insurers will generally give you a better deal on gap insurance than a car dealership. But watch for gaps in gap coverage. 
Personal Finance
How budgeting works for companies
Budgeting is an integral part of running a business efficiently and effectively. Learn more about the two types of budgets that companies commonly use: static and flexible. 
Trading
Analyzing The Market With Trend Mirrors
Past price action can exert a powerful influence on current rallies and selloffs. 
Investing
Find Turning Points With SingleDay Patterns
On their own, singleday patterns can be unreliable, but that doesn't mean they can't be used effectively. 
Trading
Valeant Stock: Gaps Suggest Potential Recovery
Trading around gaps could show if the recovery party in Valeant stock is already over or just getting started. 
Investing
Gap Rejiggers Its BrickandMortar Strategy
Gap is banking on its healthier Old Navy brand over its Gap and Banana Republic brands. 
Investing
A Gap in Gap's Announced Store Closings (GPS)
A reduction of store count could be a bad sign for the clothing retailer. 
Investing
Use duration and convexity to measure bond risk
Find out how duration and convexity measures can help fixedincome investors manage risks such as interest rate sensitivity within their portfolios.

How do you calculate company equity?
Find out more about company equity, or shareholders' equity, what company equity measures and how to calculate a company's ... Read Answer >> 
How do you calculate net current assets in Excel?
Learn how to calculate net current assets, or working capital, in Microsoft Excel and how to evaluate the financial health ... Read Answer >> 
What is the difference between yield to maturity and the yield to call?
Determining various the various yields that callable bonds can provide investors is an important factor in the bond purchasing ... Read Answer >> 
What does the operating cash flow ratio measure?
Learn about the operating cash flow ratio, how the ratio is calculated and what it indicates about a company. Read Answer >> 
How do I calculate yield to maturity of a zerocoupon bond?
Find out how to calculate the yield to maturity of a zerocoupon bond, and learn why this calculation is simpler than one ... Read Answer >>