Investments glossary

Zero-Gap Condition

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Quotes of the day:

Not all treasure is silver and gold, mate.

— Johnny Depp, Pirates of the Caribbean

A zero-gap condition exists when a financial institution’s interest rate-sensitive assets and liabilities are in perfect balance for a given maturity. The condition derives its name from the fact that the duration gap – or the difference in the sensitivity of an institution’s assets and liabilities to changes in interest rates – is exactly zero. Under this condition, a change in interest rates will not create any surplus or shortfall for the company, since the firm is immunized to its interest rate risk, for a given maturity.

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