Management of Non-Maturing Deposits by Multistage Stochastic Programming


Classic 'non-maturing accounts' like savings or variable-rate mortgages can represent a significant percentage in a banks? balance. The risk management of these accounts is complicated by the embedded withdrawal options that may be exercised by account holders. In cooperation with a leading Swiss bank, a multistage stochastic optimization model has been developed which transforms a non-maturing account position into a combination of standard fixed-income instruments. The implementation of this model led to a software package applicable for a periodic decision making: minimization of refinancing costs or, vice versa, maximization of reinvestment incomes given an initial non-maturing account position).

Additional Informationsunspecified
Commencement Date1 July 1993
Contributors Frauendorfer, Karl (Project Manager); Schürle, Michael (Project Manager) & Haarbrücker, Gido (Project Manager)
Datestamp 16 Sep 2022 10:56
Completion Date 31 December 2002
Publications Frauendorfer, Karl & Schürle, Michael: Stochastic Optimization in Asset & Liability Management: A Model for Non-Maturing Accounts. In Ziemba, W.T. & Mulvey, J.M. (ed.): Probabilistic Constrained Optimization: Methodology and Applications. Dordrecht, NL : Kluwer Academic Publishers, 2001, S. 67-101.
Frauendorfer, Karl & Schürle, Michael: Barycentric Approximation of Stochastic Interest Rate Processes. In Mulvey, J.M. & Ziemba, W.T. (ed.): World Wide Asset and Liability Modelling. Cambridge, UK : Cambridge University Press, 1998, S. 231-262.
Forrest, Bruce; Frauendorfer, Karl & Schürle, Michael: A Stochastic Optimization Model for the Investment of Savings Account Deposits. 1997. - Symposium on Operations Research (SOR'97). - Jena, DE.
Paraschiv, Florentina & Schürle, Michael: Modeling client rate and volumes of non-maturing accounts. Working Paper Series, 2010,
Keywords non-maturing accounts, variable-rate mortgages, prepayment risk, savings account deposits, withdrawal option, multistage stochastic programming
Funders External Financing
Id 7261
Project Status completed
Subjects social sciences
Project Type applied research project
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