• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

June 2025 ACCA Exam Results

Comments & Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for June 2025 exams.
Get your discount code >>

Gap exposure and Basis risk

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Gap exposure and Basis risk

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 3, 2021 at 5:26 pm #622981
    Anonymous
    Inactive
    • Topics: 44
    • Replies: 26
    • ☆☆

    What are gap exposure and Basis risk?

    1) Gap exposure is where there is an interest rate risk between the interest-bearing assets & interest-bearing liabilities. The more the gap between both of them then, there is a gap exposure.

    This is what I read but I couldn’t understand that what does it mean by different bases determined for variable interest rates on assets & liabilities, would you please explain this?

    2) Basis risk is where even if interest-sensitive assets & interest-sensitive liabilities are matched, interest rate risk can arise if variable interest rates on assets & liabilities are determined on different bases (basis risk).

    June 4, 2021 at 7:04 am #623041
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54702
    • ☆☆☆☆☆

    Gap exposure has nothing to do with basis risk.

    If you borrow money you will pay interest, and if you have money on deposit you will receive interest. The interest banks pay on deposits is lower than the interest that they charge on borrowings (because they make a profit on the difference). That is what the gap is, and if interest rates overall go up then this gap/difference gets bigger.

    Basis risk is something completely different – it is the difference between the actual interest rate and the equivalent interest rate on interest rate futures. I would not worry too much about that because it is not examinable until Paper AFM ? )

    August 14, 2023 at 3:08 pm #689892
    sikander044
    Participant
    • Topics: 0
    • Replies: 6
    • ☆

    explain please interestrat CAps floor and collars

    August 15, 2023 at 6:24 am #689938
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54702
    • ☆☆☆☆☆

    They are all explained in detail in my free lectures on interest rate risk management.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • verweijlisa on Financial performance – Example 2 – ACCA Financial Reporting (FR)
  • John Moffat on Linear Programming – Spare capacity and Shadow prices – ACCA Performance Management (PM)
  • John Moffat on The Statement of Financial Position and Income Statement (part d)
  • Salexy on Linear Programming – Spare capacity and Shadow prices – ACCA Performance Management (PM)
  • omerbasheer on The Statement of Financial Position and Income Statement (part d)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in