Panel data modeling of bank deposits

Springer Science and Business Media LLC - Tập 17 - Trang 247-264 - 2020
Sofia Costa1, Marta Faias2, Pedro Júdice3, Pedro Mota2
1Universidade Nova de Lisboa, Lisbon, Portugal
2Universidade NOVA de Lisboa and Centro de Matemática e Aplicações (CMA), NOVA, Lisbon, Portugal
3Montepio Bank and ISCTE Business Research Unit, Lisbon, Portugal

Tóm tắt

Studying the dynamics of deposits is important for three reasons: first, it serves as an important component of liquidity stress testing; second, it is crucial to asset-liability management exercises and the allocation between liquid and illiquid assets; third, it is the support for a Liquidity at Risk methodology. Current models are based on $$\textit{AR}(1)$$ processes that often underestimate liquidity risk. Thus, a bank relying on those models may face failure in an event of crisis. We propose an alternative approach for modeling deposits, using panel data and a momentum term. The model enables the simulation of a variety of deposit trajectories, including episodes of financial distress, showing much higher drawdowns and realistic liquidity at risk estimates, as well as density plots that present a wide range of possible values, corresponding to booms and financial crises. Therefore, this methodology is more suitable for liquidity management at banks, as well as for conducting liquidity stress tests.

Tài liệu tham khảo