di Antonio Castagna
We present an application of stochastic risk factor approach to model the non-maturing deposits and it sketches a benchmark framework to assess the expected profitability and the liquidity risks of a bank compared with the rest of the industry. We calibrate the model to system data available from Banca d’Italia, for both retail and corporate customers. The model allows for
i) integrated modelling of market rates, bank’s creditworthiness and evolution of deposits’ volume;
ii) unified and consistent measurement of the interest rate risk and the liquidity;
iii) negative interest rates;
iv) the evaluation of zero-rate floor on the deposits rates;
v) stress testing.
Benchmark Framework for NMDM