Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition

Limits to the use of repricing gaps

To analyse the impact of a change of interest rate on the net interest margin, we need two pieces of information: the gap and the relevant change of interest rate.

The gap indicates whether there is a net asset position to reprice, or whether there is a net debt position to reprice.

Gap = (repriced assets) – (repriced liabilities) over a specific period of time

	A positive gap indicates an excess of short-term assets to reprice.
	A negative gap indicates an excess of short-term liabilities to reprice.

To measure ...