ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Maturity Gap Model

Issues in Asset Liability Management - IV

The biggest weakness of the prescribed model is that it clubs together all assets/liabilities, i e, those with fixed maturities and those with no fixed maturities, whether in theory (saving bank) or practice (working capital finance, generally linked to the prime lending rate). This leads to a number of compromises to be made in classification and therefore reduces the effectiveness of the model in measuring the interest rate risk.

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