hard · FRM Part 2 Liquidity & Treasury Risk
A bank finds its 'Earnings Lens' (NII sensitivity) and 'Economic Value Lens' (EVE sensitivity) show opposite signs for a given interest rate shock.
What is the most likely structural cause of this disagreement?
- The bank’s deposit betas are assumed to be 100%.
- The bank uses a flat interest rate curve for all discounting.
- The bank has fully immunized its duration gap (DGAP = 0).
- The bank has a negative repricing gap but short asset duration.
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