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Karl Frauendorfer
Title
Prof. Dr.
Last Name
Frauendorfer
First name
Karl
Email
karl.frauendorfer@unisg.ch
Phone
+41 71 224 2105
Now showing
1 - 9 of 9
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PublicationManagement of non-maturing deposits by multistage stochastic programmingThe management of non-maturing account positions in a bank's balance like savings and sight deposits as well as certain types of variable-rate mortgages is complicated by the embedded options that its clients may exercise. In addition to the usual interest rate risk, uncertainty in the timing and amount of cash flows must be taken into account when investment or refinancing strategies are determined. This paper introduces a multistage stochastic programming model where the stochastic evolution of interest rates and volume under management is described by stochastic processes in discrete time. Scenarios are generated by means of barycentric approximation which is particularly useful to deal with the observed correlations between interest rates and volume. Practical experience from the application at a major Swiss bank is reported where the model has been employed since the mid-90s.Type: journal articleJournal: European Journal of Operational Research (EJOR)Volume: 151Issue: 3
Scopus© Citations 10 -
PublicationTerm Structure Models in Multistage Stochastic Programming: Estimation and ApproximationThis paper investigates some common interest rate models for scenario generation in financial applications of stochastic optimization. We discuss conditions for the underlying distributions of state variables which preserve convexity of value functions in a multistage stochastic program. One- and multi-factor term structure models are estimated based on historical data for the Swiss Franc. An analysis of the dynamic behavior of interest rates generated with these models reveals several deficiencies which have an impact on the performance of investment policies derived from the stochastic program. While barycentric approximation is used here for the generation of scenario trees, these insights may be generalized to other discretization techniques as well.Type: journal articleJournal: Annals of Operations ResearchVolume: 100Issue: 1-4
Scopus© Citations 6 -
PublicationA Stochastic Optimization Model for the Investment of Savings Account DepositsA bank's financial management faces various sources of uncertainty when funds from savings account deposits are invested in the marketplace. Future interest rates are unknown and customers are allowed to withdraw their deposits at any point in time. The objective is to find a portfolio of fixed income instruments that maximizes the bank's interest surplus from the investment of funds and to manage the prepayment risk inherent to non-maturing accounts. A multistage stochastic programming model is presented that takes into account the uncertain evolution of interest rates and volume. A case study based on interest rate data of a 7 years period indicates that the surplus can be increased by 25 basis points compared to the static approach formerly used, while volatility is reduced significantly.Type: conference paper
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PublicationRefinancing Mortgages in SwitzerlandThis paper presents a multistage stochastic programming model for refinancing mortgages with non-contractual maturity under liquidity restrictions in the market. An extension to the management of other products such as savings accounts is straightforward. The evolution of interest rates is modelled by principal components for short-term and a two-factor mean reversion model with long rate and spread for long-term planning. Barycentric approximation provides tight lower and upper bounds for the original problem with relative discretization errors in the order of one per cent.
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PublicationStochastic Optimization in Asset & Liability Management: A Model for Non-Maturing Accounts(Kluwer Academic Publishers, 2001)
;Ziemba, W.T.Mulvey, J.M. -
PublicationSystematische Steigerung von Erträgen aus Bodensatzprodukten(Deutscher Sparkassen Verlag GmbH, 2005-05-01)
;Fiedler, RobertType: newspaper articleJournal: Betriebswirtschaftliche BlätterIssue: 5 -
PublicationType: newspaper articleJournal: GeldinstituteVolume: 35Issue: 4
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PublicationDynamic Management of Core Deposits(International Financial Publishers NV, 2004-07-01)Fiedler, RobertFor 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.Type: newspaper articleJournal: Banking and FinanceVolume: 3
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PublicationType: newspaper articleJournal: Schweizer BankVolume: 18Issue: 11