Question

In: Finance

How do I find the dollar and duration gap from a bank? For example JPMorgan chase...

How do I find the dollar and duration gap from a bank? For example JPMorgan chase Bank

Solutions

Expert Solution

To find the dollar gap for a bank like JP Morgan or any other bank just deduct the rate sensitive liabilities of the bank from its rate sensitive assets. In other words dollar gap = rate sensitive assets – rate sensitive liabilities. For a bank like JP Morgan rate sensitive assets and liabilities will be those assets and liabilities whose value is sensitive to changes in interest rates. As interest rate changes these assets and liabilities are revalued. An example of rate sensitive asset will be bonds held by JP Morgan. An example of rate sensitive liability for JP Morgan will be variable rate CDs.

With regards to duration gap it can be computed using the following formula: Duration Gap = duration of earning assets – duration of paying liabilities * paying liabilities/earning assets. Thus for a bank like JP Morgan duration gap is simply the difference in the price sensitivity of interest-yielding assets and the price sensitivity of liabilities to a change in yields.

jeff jeffy answered 4 months ago
Next > < Previous

Related Solutions

The Criminalization of American Business What do Bank of America, Citigroup, JPMorgan Chase, and Goldman Sachs...
The Criminalization of American Business What do Bank of America, Citigroup, JPMorgan Chase, and Goldman Sachs have in common? All paid hefty fines for purportedly misleading investors about mortgage-backed securities. In fact, these companies paid the government a total of $50 billion in fines. The payments were made in lieu of criminal prosecutions. Today, several hundred thousand federal rules that apply to businesses carry some form of criminal penalty. That is in addition to more than four thousand federal laws,...
The duration gap (DGAP) of the bank is
The duration gap (DGAP) of the bank is
how a typical bank-with a positive duration gap and a negative gap-entering into a futures contract...
how a typical bank-with a positive duration gap and a negative gap-entering into a futures contract to sell a T-bond a specified price can help offset the negative impact of rising interest rate.
Bank of America and JPMorgan Chase are major competitors to Wells Fargo. Please (1)analyze their strategies,...
Bank of America and JPMorgan Chase are major competitors to Wells Fargo. Please (1)analyze their strategies, (2)core competencies, and (3)competitive response for both Bank of America and JPMorgan Chase.
Horton v. JPMorgan Chase Bank, N.A. Court of Appeals of Texas, Dallas, 2018 WL 494776 (2018)....
Horton v. JPMorgan Chase Bank, N.A. Court of Appeals of Texas, Dallas, 2018 WL 494776 (2018). Background and Facts: Robbie Horton, a paralegal for the law firm of Stovall & Associates, P.C., opened an individual checking account with JPMorgan Chase Bank (Chase) with a signature card. The terms of the account required Horton to notify Chase, in writing, of any unauthorized item within thirty days of when a statement showing the item was made available. A failure to provide the...
What is the duration GAP of a bank whose assets and liabilities are as follows? Assets:...
What is the duration GAP of a bank whose assets and liabilities are as follows? Assets: Cash $48 million Short-term Investments (D=0.8) $149 million Short-term Loans (D=0.6) $201 million Long-term Investments (D=4.2) $254 million Long-term Loans (D=6.2) $398 million Liabilities: Demand Deposits $46 million Short-term Interest-bearing Deposits (D=0.3) $595 million CDs (D=2.5) $148 million Borrowed funds (D=0.1) $153 million Round to three decimals.
What is the duration GAP of a bank whose assets and liabilities are as follows? Assets:...
What is the duration GAP of a bank whose assets and liabilities are as follows? Assets: Cash $52 million Short-term Investments (D=0.4) $153 million Short-term Loans (D=0.8) $201 million Long-term Investments (D=3.8) $247 million Long-term Loans (D=5.2) $400 million Liabilities: Demand Deposits $46 million Short-term Interest-bearing Deposits (D=0.3) $592 million CDs (D=2.8) $148 million Borrowed funds (D=0.1) $151 million Round to three decimals.
Explain how leadership skills can be used to encourage innovation to improve JPMorgan Chase as a company.
Explain how leadership skills can be used to encourage innovation to improve JPMorgan Chase as a company.  
A bank wants to use direct refinancing to manage its duration gap, DG. Currently, for its...
A bank wants to use direct refinancing to manage its duration gap, DG. Currently, for its assets, loans = $22 million and cash = $6 million. Equity = $4 million. Average DA = 2.75 years, and average DL = 4 years. a) Should the bank buy loans with cash or sell existing loans for cash to reduce its interest risk? b) What is the duration of the bank's existing loans? c) How much cash will be used to eliminate the...
Question 21 What is the Duration Gap for the bank balance sheet shown below? Assets Amount...
Question 21 What is the Duration Gap for the bank balance sheet shown below? Assets Amount Duration Liabilities and Equity Amount Duration Cash 80 0.00 Non-interest deposits 150 0.00 Securities 300 4.00 NOW checking 150 1.50 Loans, net 570 5.00 MMDA 300 0.25 Fed funds sold 0 CDs 170 2.00 Non-earning assets 50 Fed Funds purchased 150 0.00 $1,000 Equity 80 $1,000 A. 3.41 years B. 4.05 years C. 3.35 years D. 5.25 years E. 0.70 years
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT