*Tid:* **1 juni 2016 kl 13.00-13.30.**
**Seminarierummet 3424**, Institutionen för
matematik, KTH, Lindstedtsvägen 25, plan 4.
Karta!
*Föredragshållare:*
**
Peter Henningsson och Christina Skoglund (Master Thesis)
**
**Titel:**
A framework for modeling the liquidity
and interest rate risk of demand deposits
**Abstract**
.The objective of this report is to carry out a pre-study and develop a framework
for how the liquidity and interest rate risk of a bank's demand deposits can be
modeled. This is done by first calibrating a Vasicek short rate model and then
deriving models for the bank's deposit volume and deposit rate using multiple
regression.
The volume model and the deposit rate model are used to determine the liquidity
and interest rate risk, which is done separately. The liquidity risk is determined
by a liquidity quantile which estimates the minimum deposit volume that is
expected to remain in the bank over a given time period. The interest rate risk
is quantified by an arbitrage-free valuation of the demand deposit which can be
used to determine the sensitivity of the net present value of the demand deposit
caused by a parallel shift in the market rates. Furthermore, an immunization
and a replicating portfolio are constructed and the performances of these are
tested when introducing the same parallel shifts in the market rates as in the
valuation of the demand deposit.
The conclusion of this thesis is that the framework for the liquidity risk management
that is developed gave satisfactory results and could be used by the bank
if the deposit volume is estimated on representative data and a more accurate
model for the short rate is used. The interest rate risk framework did however
not yield as reliable results and would be more challenging to implement as a
more advanced model for the deposit rate is required.
The full report (pdf)
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