Term structure of liquidity

One of the main scopes in A/L management is the classification of balance sheet
items according to their maturities. The reason for this is twofold and has consequences on the concept of ‘maturity’. The first reason is the management of interest
rate risk and the second is the management of liquidity risk. For liquidity risk
management purposes classical gap analysis is misleading as the term structure of
interest rates and liquidity will differ considerably for many financial instruments.
We give an example to clarify this.