The risk that arises when income decreases due to changes in interest rates associated with changed maturity profile of interest-bearing assets and liabilities. Differences in the maturity of off-balance sheet instruments and items also give rise to this type of risk.
Gap risk exposes the institution to parallel shifts (curve level) and pivotal shifts (curve shape) in the yield curve.
This risk comes in two forms: short-term gap risk and long-term gap risk.
It is also known as mismatch risk.
