Derivatives

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June 2, 2021
Banking

Positive Maturity Transformation

June 2, 2021

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A maturity transformation which results in assets being ‘on average’ shorter in maturity than liabilities. This occurs when banks and other financial institutions (intermediaries) accept funds of longer maturity than their loans (loans extended to clients). Financial institutions with negative maturity transformation are said to be borrowing long in order to lend short.

In general, banks engage in positive maturity transformation, while insurers engage in negative maturity transformation.

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