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MANAGING INTEREST RATE RISK: DURATION GAP AND MARKET VALUE OF EQUITY - page 34 / 39

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Asset / liability sensitivity and DGAP

Funding GAP and Duration GAP are not directly comparable.

Funding GAP examines various “time buckets” while DGAP represents the entire balance sheet.

Generally, if a bank is liability (asset) sensitive in the sense that net interest income falls (rises) when rates rise and vice versa, it will likely have a positive (negative) DGAP suggesting that assets are more price sensitive than liabilities, on average.

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