The Handbook of ALM in Banking (2nd Edition)
First published:
ISBN: 9781782723455
If you are a Risk.net subscriber you are entitled to 20% off your Risk books purchases. Please email enquiries@riskbooks.com for more information.
As part of your Risk.net subscription you are entitled to 20% off all of your Risk Books purchases. If you would like to place an order please email enquiries@riskbooks.com
The Modelling of Non-Maturity Deposits
George Soulellis
Introduction
Bank Capital and Liquidity
ALM in the Context of Enterprise Risk Management
The New Basel Standards on IRRBB and Their Implications for ALM
Measuring and Managing Interest Rate and Basis Risk
The Modelling of Non-Maturity Deposits
Modelling Non-Maturing Deposits with Stochastic Interest Rates and Credit Spreads
Managing Interest Rate Risk for Non-Maturity Deposits
Replication of Non-Maturing Products in a Low Interest Rate Environment
Managing Mortgage Prepayment Risk on the Balance Sheet
Considerations for ALM in Low and Negative Interest Rate Environments
Credit Spreads
Hedge Accounting
Supervisory Views on Liquidity Regulation, Supervision and Management
Measuring and Managing Liquidity and Funding Risk
Managing Reserve Assets
Instruments for Secured Funding
Asset Encumbrance
Capital Management
A Global Perspective on Stress Testing
Reverse Stress Testing: Linking Risks, Earnings, Capital and Liquidity – A Process-Orientated Framework and Its Application to Asset–Liability Management
XVAs and the Holistic Management of Financial Resources
Optimal Funding Tenors
Funds Transfer Pricing in the New Normal
Balance-Sheet Management with Regulatory Constraints
Within the banking industry, accurate liabilities or deposit-based expected life modelling is widely considered a prerequisite to sound asset–liability management. Its importance in mitigating interest rate risk is undisputed. However, the techniques associated with this are still evolving. This chapter focuses on establishing a concrete analytic methodology for estimating future expected deposit balance trajectories and their associated expected remaining life. We outline a comprehensive approach to guide the reader on how to define the event variable, establish a robust segmentation scheme, introduce key parameters in a time-series multivariate regression and validate and monitor the model on an ongoing basis to ensure its appropriateness.
THE IMPORTANCE OF MODELLING DEPOSIT BALANCES
Many banks worldwide are funded with non-maturity deposits, and the way in which their average lives are modelled has significant implications when estimating their value and their effectiveness in the management of interest rate risk. For example, modelling non-maturity deposits with too short an average life will subject the bank to rising interest rate risk exposure. Forecasting the expected
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
