BUS-F 446 Study Guide - Midterm Guide: Cash Flow, Risk-Adjusted Return On Capital, Reserve Requirement
Chapter Notations
Chapter Eight: Interest Rate Risk I
NII = change in net interest income in the ith maturity bucket
GAP (CGAP) = the dollar size of the gap between the book value of rate sensitive assets and liabilities in
maturity bucket i
Ri = yield to maturity on security i
RSA = an asset on the balance sheet that is repriced at or near current market interest rates within a
maturity bucket.
RSL= a liability on the balance sheet that is repriced at or near current market interest rates within a
maturity bucket.
PtB = the present value of the cash flows on a bond
F = the face value of a security (e.g., a bond) to be paid on maturity
C= dollar amount of a coupon payment on a bond paid at a stated rate (e.g., 10 percent) of the face value
PtD = the present value of the cash flows on a deposit
Mi = the weighted-average maturity of an FI’s assets (liabilities), I = A or L
Wij = the importance of each asset (liability) in the asset (liability) portfolio as measured by the market
value of that asset (liability) position relative to the market value of all the assets (liabilities)
Mij = the maturity of the jth asset (or liability), j = 1...n
A = the market value of an FI’s assets
L = the market value of an FI’s liabilities
E = the net worth or true equity value of an FI
maturity gap = MA - ML,
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Document Summary
Nii = change in net interest income in the ith maturity bucket. Gap (cgap) = the dollar size of the gap between the book value of rate sensitive assets and liabilities in maturity bucket i. Rsa = an asset on the balance sheet that is repriced at or near current market interest rates within a maturity bucket. Rsl= a liability on the balance sheet that is repriced at or near current market interest rates within a maturity bucket. B = the present value of the cash flows on a bond. D = the present value of the cash flows on a deposit. Mi = the weighted-average maturity of an fi"s assets (liabilities), i = a or l. Wij = the importance of each asset (liability) in the asset (liability) portfolio as measured by the market value of that asset (liability) position relative to the market value of all the assets (liabilities)
