Business and Personal Finance Dictionary

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• GAP
  
  1. As a measurement of exposure to interest rate risk, the amount of mismatch or imbalance between the quantity of an entity's assets and the quantity of its liabilities that reprice in a defined or selected time period. In a single time period, the net mismatch or imbalance may be called the interval gap. Over a series of consecutive time periods or buckets, the total net imbalance or mismatch may be called the cumulative gap. See rate-sensitive assets and rate-sensitive liabilities. 2. One of the four components of interest rate risk. The component of interest rate risk arising from the mismatch defined above. Also called mismatch or repricing risk. 3. As a measurement of liquidity risk, the amount of mismatch between the quantities of cash provided from decreases in liabilities and increases in assets and the quantities of cash used by increases in assets and decreases in liabilities in a defined or selected time period.
  
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