Leverage adjusted duration gap (LADG)

Leverage adjusted duration gap (LADG), LADG = D_assets - (L/A)D_liabilities

Why only bank needs to use LADG? Elsewhere only use D_asset vs. D_liabilities. Thanks.

Banks are highly leveraged, other institutions typically are not.

Thanks, from risk perspective, the number should be as close 0 as possible?

Yes. Zero gap indicates an immunized portfolio. Helpful if there is an interest rate shock.

If you look carefully at the formula, it 's comparing the dollar duration of assets to the dollar duration of liabilities.

No . . . elsewhere we use _ dollar _ duration of assets vs. _ dollar _ duration of liabilities.