Weaknesses of the repricing model include the fact that: (i) it ignores changes in present values caused by changes in interest rates. (ii) it ignores different cash flow sensitivities within a maturity bucket. (iii) it fails to account for runoffs and prepayments.
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Must estimate cash flows received or paid out during the maturity bucket period. But assumes that runoffs are independent of the level of interest rates. Ignores cash flows from off-balance sheet items usually marked-to-market. Explicitly incorporates market–value effects
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- Weaknesses of the repricing model include the fact that ... II. it ignores different cash flow sensitivities within a maturity bucket. III. it fails to account for runoffs and prepayments.
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