The treatment of demand loans and deposits is crucial in measuring a bank's actual exposure to the interest rate risk in the banking book. The repricing gap model, the most popular approach to measure this kind of risk, is based on a maturity/repricing schedule, according to which...

This paper contributes to prior literature and to the current debate concerning recent revisions of the regulatory approach to measuring bank exposure to interest rate risk in the banking book by focusing on assessment of the appropriate amount of capital banks should set aside against this...