0
$\begingroup$

I was wondering wich is the standard for pricing clients account balances in commercial banks. Is there any book that adress alm problems?

$\endgroup$

1 Answer 1

1
$\begingroup$

Look at the p.65 of this document. They reveal some information regarding the mapping of the assets and liabilities. Based on this mapping, you could perform gap analysis and see if you have any deficit in a given maturity slot and then hedge accordingly.

Joel Bessis' books on Banking Risk Management may also be useful.

UPDATE: Alright, here is the approach that is used:

$V(T) = V_0 e^{(-q \sigma \sqrt{T - 0.5 T \sigma^2})}$

$V_0$ - clients' account balances today (or on calculation date)

$T$ - periods of mapping (could be 3M, 6M, 9M, 1Y, etc.)

$q$ - quantile (95%, 99%, etc.)

$\sigma$ - volatility of the clients' account balances over a time period (12M, 24M, 36M)

Basically, the account balance follows GBM with chosen confidence level $q$.

$\endgroup$
2
  • $\begingroup$ The document only says that they used a statisticcal aproach, but not how it was done. $\endgroup$ Oct 28, 2016 at 20:46
  • $\begingroup$ Updated my answer. HTH. $\endgroup$
    – AK88
    Dec 20, 2016 at 3:34

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.