{"title":"Estimating Maturity Profiles of Nonmaturing Deposits","authors":"Fidelis Musakwa Musakwa, E. Schaling","doi":"10.21314/JOR.2019.414","DOIUrl":null,"url":null,"abstract":"Understanding the maturity profiles of nonmaturing deposits is vital to assess a bank’s funding liquidity risk and interest rate risk. Estimating these maturity profiles is, however, difficult because banks experience regular cash inflows and outflows on nonmaturing deposit accounts. As a result, it is hard to ascertain the time origin of each dollar deposit constituting the total outstanding balance of a portfolio of non-maturing deposit accounts. To overcome this challenge, we propose a new method to convert account balance data into deposit lifetime data amenable to survival analysis. This provides a way to infer a nonmaturing product’s maturity profile from a survival model. We demonstrate how the estimated maturity profile can be employed to project the runoff of outstanding balances on nonmaturing deposits. The model is illustrated with a case study on a retail bank savings product in a South African bank in the 1999–2016 period. Our case study results suggest that the proposed model is well suited to estimating the maturity profile of nonmaturing deposits.","PeriodicalId":46697,"journal":{"name":"Journal of Risk","volume":"1 1","pages":""},"PeriodicalIF":0.3000,"publicationDate":"2019-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Risk","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.21314/JOR.2019.414","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 1
Abstract
Understanding the maturity profiles of nonmaturing deposits is vital to assess a bank’s funding liquidity risk and interest rate risk. Estimating these maturity profiles is, however, difficult because banks experience regular cash inflows and outflows on nonmaturing deposit accounts. As a result, it is hard to ascertain the time origin of each dollar deposit constituting the total outstanding balance of a portfolio of non-maturing deposit accounts. To overcome this challenge, we propose a new method to convert account balance data into deposit lifetime data amenable to survival analysis. This provides a way to infer a nonmaturing product’s maturity profile from a survival model. We demonstrate how the estimated maturity profile can be employed to project the runoff of outstanding balances on nonmaturing deposits. The model is illustrated with a case study on a retail bank savings product in a South African bank in the 1999–2016 period. Our case study results suggest that the proposed model is well suited to estimating the maturity profile of nonmaturing deposits.
期刊介绍：
This international peer-reviewed journal publishes a broad range of original research papers which aim to further develop understanding of financial risk management. As the only publication devoted exclusively to theoretical and empirical studies in financial risk management, The Journal of Risk promotes far-reaching research on the latest innovations in this field, with particular focus on the measurement, management and analysis of financial risk. The Journal of Risk is particularly interested in papers on the following topics: Risk management regulations and their implications, Risk capital allocation and risk budgeting, Efficient evaluation of risk measures under increasingly complex and realistic model assumptions, Impact of risk measurement on portfolio allocation, Theoretical development of alternative risk measures, Hedging (linear and non-linear) under alternative risk measures, Financial market model risk, Estimation of volatility and unanticipated jumps, Capital allocation.
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