Development of ALM tool for non-maturing accounts
Type
industry project
Start Date
01 April 2004
Status
ongoing
Keywords
Multistage Stochastic Programming
Asset & Liability Management
Risk Management
Non-Maturing Accounts
Term structure model (parameter estimation)
Description
Non-maturing account positions in a bank's balance are dynamically replicated using a multistage stochastic programming model. Scenarios are generated for the relevant risk factors (market rates, client rate, volume). The corresponding stochastic models are calibrated using historic data. A replicating portfolio is determined that minimizes the risk for a measure specified by the decision maker.
Leader contributor(s)
Member contributor(s)
Aka, Timur
Haeusler, Frank
Funder(s)
Method(s)
Multistage Stochastic Programming
Division(s)
Eprints ID
7282

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Publication

Dynamic Replication of Non-Maturing Assets and Liabilities

2005-09-07 , Schürle, Michael , Haasis, Hans-Dietrich

Non-maturing assets and liabilities (NoMALs) are those positions in a bank's balance that have no contractual maturity such as traditional savings deposits. For the calculation of transfer prices and the quantification of interest rate risk, a fix maturity profile must be assigned to a NoMAL position. Usually a replicating portfolio of fixed-income instruments with constant weights is determined from historical data whose cash flows match those of the underlying position. As an alternative, a multistage stochastic programming model is proposed where the replicating portfolio is derived from representative scenarios of the relevant risk factors (market rates, client rate, volume). Moreover, the portfolio composition is frequently readjusted using the current information about market rates and changes in volume. Compared to the traditional static method, practical experience shows that the margin of NoMALs can be significantly increased at reduced volatility by such a dynamic approach.

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Publication

Dynamic Management of Core Deposits

2004-07-01 , Frauendorfer, Karl , Schürle, Michael , Fiedler, Robert

For many banks, deals based on interest rate differences are one of the most important sources of income. In this context, the uncertainty regarding future interest rates and cash flows forms the central challenge in asset and liability management for every bank.

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Publication

Modeling client rate and volumes of non-maturing accounts

2011-08-28 , Paraschiv, Florentina

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