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Interest rate risk hedging of a bank balance (Phase 2)
Type
industry project
Start Date
01 October 2005
End Date
31 December 2006
Status
ongoing
Keywords
Multistage Stochastic Optimization
Interest rate derivatives
Interest rate risk management
Description
Aim: Interest rate risk hedging of an entire bank balance with
multistage stochastic optimizations techniques. Alternative specifications of the constraints and objective function are evaluated.
multistage stochastic optimizations techniques. Alternative specifications of the constraints and objective function are evaluated.
Leader contributor(s)
Haeusler, Frank
Member contributor(s)
Aka, Timur
Funder(s)
Range
Institute/School
Range (De)
Institut/School
Principal
Zürcher Kantonalbank
Division(s)
Eprints ID
21874
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PublicationAdjustment Policy of Deposit Rates in the Case of Swiss Non-maturing Savings AccountsRetail banks usually apply simple linear regression models for describing the dynamics of the deposit rates of non-maturing accounts (NMA) like savings deposits. Thus, typical patterns like asymmetry or rigidity that banks follow when adjusting their deposit rates are ignored. This is insofar surprising, as the asymmetric deposit rate adjustment affects the pricing of embedded options for NMA. In this work we contribute to the elimination of these inconsistencies. Based on data for deposit rates from a representative sample of Swiss banks we provide a strong evidence for both asymmetric adjustment and rigidity pattern. Our proposed modeling approaches reveal that the strategies of Swiss banks to adjust deposit rates are regime dependent. In times of market stress, Swiss banks are tight to market rates; however, in normal regimes this is not observed.Type: journal articleJournal: Journal of Applied Finance & BankingVolume: 3Issue: 3