The cumulative gap is measured

Cumulative (accumulated) ren - this is the algebraic sum (with sign) of gaps in each time interval, which divided the time horizon. The cumulative gap indicates an imbalance (difference) between the total volume of sensitive assets and liabilities of the bank, which during the time horizon may be overvalued. The economic content of the cumulative gap - is an integral indicator of the level of interest rate risk, which is exposed in the bank during the time horizon. The bank can manage this risk by setting limits cumulative gepu as the maximum of its value and the resulting structure-sensitive assets and liabilities in accordance with the established limit (an index of interest rate risk). Interest rate risk index indicates what portion of the assets (as a positive gap) or liabilities (when the gap is negative) can change its value due to changes in market rates. The index is calculated without regard to sign, since both positive and negative gap could lead to bank losses. Risk assessment of the bank with interest rate risk index provides a sufficient level of accuracy provided that the value of the assets of workers living in the entire time horizon. If the amount of such assets during the period of change, it is logical to evaluate the ratio of cumulative gepu in each period and the value of working assets, which is expected during this period. Category: Management Operations Commercial Bank