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The GAP ratio is a measure used in banking to assess interest rate risk, specifically the relationship between an institution's rate-sensitive assets and rate-sensitive liabilities. When determining the GAP ratio, the calculation involves dividing the volume of rate-sensitive assets by the volume of rate-sensitive liabilities.

This ratio helps banks understand their exposure to interest rate changes. A GAP ratio greater than one indicates that a bank has more rate-sensitive assets than rate-sensitive liabilities, which generally implies that if interest rates rise, the bank's income could increase due to higher returns on those assets. Conversely, a ratio less than one suggests that liabilities are greater in volume, indicating a potential risk of reduced income if interest rates rise.

The correct answer reflects this established financial concept, making it clear that the GAP ratio is fundamentally about the relationship of assets to liabilities in terms of interest rate sensitivity.