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Financial Risk Management of RTVU What is the Interest Rate Sensitive Gap?
Interest rate sensitive assets and interest rate sensitive liabilities refer to assets or liabilities whose income or liabilities are greatly affected by interest rate fluctuations. When interest-sensitive liabilities are greater than interest-sensitive assets, lower interest rates will increase bank profits, while higher interest rates will reduce profits. When interest-sensitive liabilities are less than interest-sensitive assets, interest rate increases will increase bank profits, while interest rate decreases will reduce profits.