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Recently I started working in a bank as a modeler, one of the possible topic is FTP - Fund Transfer Pricing. After I studied that subject a little on wiki and read a website or two in that field I gained a little knowledge in that area.

But apparently very little.

I mean, when I understood is the purpose of FTP, and the approach in general, such as find representative products to decide the points on the grid, choose interpolation method, then do some qualitative adjustments due to business needs.

I feel that their language is yet unclear.

I am looking for a book that bridges this gap.

I hope it could explain where modelling come into place, and what are the industry practices. for example, how to

  • Derive an appropriate bank credit spread for funds which are 12 Months and below?
  • Obtain an appropriate bid ask spread for the Bank’s funding curve?

Also I hope it gives some more detailed part on the business side, such as how the approaches shall change according to each bank/financial institute's main business.

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2 Answers 2

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I have honestly not come across a good book (or good enough review to make me buy the book) on Fund Transfer Pricing. While it is not my career focus, I had to familiarize myself a bit with the topic because of certain requirements involving funding trading operations and the performance of funding specific operations.

Personally I would recommend the following papers and presentation material because I read through them myself and I feel it answers several of your questions (bank credit spreads, funding curves and obtain funding in the market, some papers directly cover FTP in commercial banks (which I assume would tangent your project):

In no particular order:

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  • $\begingroup$ thanks! i only read 1), 2) and 6). let me digest the rest. Also, in case anyone happened to be here, i got a book by Alexandre Adam, "Handbook of Asset and Liability Management, from models to optimal return strategies", its Ch 7 discussed FTP. $\endgroup$
    – athos
    Aug 1, 2013 at 6:39
  • $\begingroup$ I will look around a bit more but it would help if you could give more specific topics of interest to pinpoint what you exactly are looking for. $\endgroup$
    – Matt Wolf
    Aug 1, 2013 at 7:09
  • $\begingroup$ @athos, the above I found the most valuable even after further sifting through couple more papers so there is unfortunately not more I found of value. $\endgroup$
    – Matt Wolf
    Aug 6, 2013 at 5:09
  • $\begingroup$ the problem with that is, i found very hard to understand it... maybe i'm too stupid :( thank you for your time and suggestion! $\endgroup$
    – athos
    Aug 6, 2013 at 6:24
  • $\begingroup$ Well, its not an easy topic, especially applied because its not purely quantifiable in practice. $\endgroup$
    – Matt Wolf
    Aug 6, 2013 at 14:14
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This book is nice if your interested in a more quantitative approach to replicating portfolio and forward looking FTP rate for core-deposits

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