Editing Duration gap (section)

{{Short description|Financial institutions duration gap}}
{{refimprove|date=July 2008}}

In [[Finance]], and [[accounting]], and particularly in [[asset and liability management]] (ALM), the '''duration gap''' measures how well matched are the timings of [[Cash flow|cash inflows]] (from assets) and cash outflows (from liabilities), and is then one of the primary [[asset–liability mismatch]]es considered in the ALM process<!-- and {{slink|Fractional-reserve banking#Hypothetical example of a bank balance sheet and financial ratios}} -->.
The term is typically used by banks, [[pension fund]]s, or other [[financial institution]]s to measure, and manage, their risk due to changes in the interest rate: by duration matching, that is creating a "zero duration gap", the firm becomes [[immunization (finance)|immunized]] against [[interest rate risk]]. 
See {{slink|Financial risk management#Investment management}}. 
<ref name="Mishkin">Frederic S. Mishkin and Apostolos Serletis (2004). [https://www.pearsoned.ca/highered/divisions/text/mishkin_2/data/appendices/09_ch09_mishkin_append1.pdf Duration Gap Analysis] </ref>
<ref name="analystprep">Staff (2020). [https://analystprep.com/study-notes/frm/risk-management-for-changing-interest-rates-asset-liability-management-and-duration-techniques/ Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques], analystprep.com </ref>