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?

  1. The bank’s deposit betas are assumed to be 100%.
  2. The bank uses a flat interest rate curve for all discounting.
  3. The bank has fully immunized its duration gap (DGAP = 0).
  4. The bank has a negative repricing gap but short asset duration.

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