Adjustment Policy of Deposit Rates in the Case of Swiss Non-maturing Savings Accounts

Item Type Journal paper
Abstract

Retail 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.

Authors Paraschiv, Florentina
Projects Aka, Timur; Haeusler, Frank; Paraschiv, Florentina & Schürle, Michael (2005) Interest rate risk hedging of a bank balance (Phase 2) [industry project]
Journal or Publication Title Journal of Applied Finance & Banking
Language English
Keywords non-maturing accounts, deposit rates, asymmetries, rigidity;
Subjects economics
HSG Classification contribution to scientific community
Refereed Yes
Date 4 April 2013
Publisher Scienpress
Place of Publication London UK
Volume 3
Number 3
Page Range 271-323
Number of Pages 53
ISSN 1792-6580
ISSN-Digital 1792-6599
Depositing User Prof. Dr. Florentina Paraschiv
Date Deposited 11 Dec 2012 10:10
Last Modified 23 Aug 2016 11:15
URI: https://www.alexandria.unisg.ch/publications/218622

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Citation

Paraschiv, Florentina (2013) Adjustment Policy of Deposit Rates in the Case of Swiss Non-maturing Savings Accounts. Journal of Applied Finance & Banking, 3 (3). 271-323. ISSN 1792-6580

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https://www.alexandria.unisg.ch/id/eprint/218622
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