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Question
Can an FI immunize itself against interest rate risk exposure even though its maturity gap is not zero?
A. Yes, because with a maturity gap of zero the change in the market value of assets exactly offsets the change in the market value of liabilities.
B. No, because with a maturity gap of zero the change in the market value of assets exactly offsets the change in the market value of liabilities.
C. Yes, because the maturity model does not consider the timing of cash flows.
D. No, because the timing of cash flows is relevant to immunization against interest rate risk exposure.
E. No, because a representative bank will always have a positive maturity gap.
Answer
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