1

2
3
4

1
2
3
4
5
6
7
RSA
RSL
$GAP
$GAP =RSA-RSL
Assets
assets with maturity less than one year
variable-rate mortgages
short-term commercial loans
portion of fixed-rate mortgages (say 20%)
Liabilities
money market deposits
short-term CDs
variable-rate CDs
federal funds
short-term borrowings
portion of checkable deposits (10%)
portion of savings (20%) if interest rate increases by 5%
=5M+10M+15M+(0.2*10M) 32 1.6
=5M+15M+10M+5M+10M+(0.10*15M)+(0.2*15 49.5 2.475
-17.5 -0.875 income loss due to 5% increase in the interest rate
in the interest rate
100 0.02
0.74
=(Amount of Asset/Liab/Total va
assets/Liab&OE)*duration of the asset
=-2.7*(0.01/1.1)
Assets cha -0.02
Lia change -0.01
=(2*15/95)+(5*0.1/95)
Amount of Asset/Liab/Total value of
iab&OE)*duration of the asset/lia in years
=-2.7*(0.01/1.1)
1.9

5)+(5*0.1/95)
Suppose that, for the FI depicted in Table 8–2, interest rates rise by 1 percent on both RSAs and RSLs. The CGAP would p
the expected annual change in net interest income (ΔNII) of the FI as

RSA- one year Short term Consumer loans 50 RSL-one year Three-month CDs:
Three-month T-bills 30 Three-month bankers accep
Six-month T-notes: 35 Six-month commercial pap
30-year floating-rate mortgages (every nine m 40 One-year time deposits:
155

CGAP RSA-RSL
Change NII CGAP*Change in IR
(RSA-RSL)*Change in IR
=(155-140)*1%
Change NII 0.15 150000
RSLs. The CGAP would project

Gap Ratio=CGAP/Assets
Gap Ratio =(155-140)/270
0.056

Three-month CDs: 40
Three-month bankers acceptances: 20
Six-month commercial paper: 60
One-year time deposits: 20
140
To understand spread effect, assume for a moment that RSAs equal RSLs equal 155 million. Suppose that rates rise
by 1.2 percent on RSAs and by 1 percent on RSLs (i.e., the spread between the rates on RSAs and RSLs increases by
1.2 percent –1 percent = 0.2 percent). The resulting change in NII is calculated as:

ΔNII =(RSA*ΔR)-(RSL*ΔR)
= ($155 million × 1.2%) − ($155 million × 1.0 %)
310,000
uppose that rates rise
and RSLs increases by
Suppose that for the FI in Table 8–2, interest rates fall by 1 percent on RSAs and by 1.2
percent on RSLs. Now the change in NII is calculated as:

ΔNII =(RSA*ΔR)-(RSL*ΔR)
= ($155 million ×(- 1.%) − ($140 million × -1.2 %)
0.13
130000