List the basic steps in static GAP analysis.?

Answer 1

There are several basic steps to static GAP analysis. 1. Develop an interest rate forecast. 2. Select a series of sequential time intervals for determining what amount of assets and liabilities are rate sensitive within each time interval. 3. Group assets and liabilities into these time intervals, or "buckets," according to the time until the first repricing. The principal portion of the asset or liability that management expects to reprice is classified as rate sensitive. The effects of any off-balance sheet positions, such as those associated with interest rate swaps, futures, and so on, are also added to the balance sheet position according to whether the item effectively represents a rate-sensitive asset or rate-sensitive liability. 4. Calculate GAP. A bank's static GAP equals the dollar amount of rate-sensitive assets (RSAs) minus the dollar amount of rate-sensitive liabilities (RSLs) for each time interval. 5. Forecast net interest income given the assumed interest rate environment and assumed repricing characteristics of the underlying instruments.