I need to carry a non-contractual accounts behavoiural study for a bank. The objective is to estimate core/non core ratios and then bucket and ftp them. Any recipe where to start? I have 3yrs of historical data, daily closing balances. From what I googled I understand that I need some kind of seasonal vs growth trend segregation. But only guidelines, nothing in particular. Visually represented my data has (e.g. current accounts) very heavy seasonal bias with highs in shoulder seasons and lows in the festive seasons ;)). How to isolate it? How do I then calculate the true core/volatile ratio?
Here is one of the easier ways to value a non-contractual book. 1.Get your trend line. Using moving averages smooth the data to remove the seasonal bias. Select n that gives the straightest line but still shows the growth trend. 2.Find your percentile extreme value (EV) based on chosen conf. interval. 3.Calculate the ratio of EV to your trend line for each data point. This is essentially your volatile ratio. 4.Put the volatile portion into the shortest bucket, the core into the longer selected tractor. Points: The higher the conf. interval the higher the volatile ratio will be. It will also shorted the duration of the book. For rates sensitivity must use the two components separately. Hope that helps