Negative Maturity Transformation

Derivatives
Quanto Call
June 2, 2021
Banking
Positive Maturity Transformation
June 2, 2021

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.

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Posts