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Mastering R for Quantitative Finance by Edina Berlinger, Ferenc Illés, Milán Badics, Ádám Banai, Gergely Daróczi, Barbara Dömötör, Gergely Gabler, Dániel Havran, Péter Juhász, István Margitai, Balázs Márkus, Péter Medvegyev, Julia Molnár, Balázs Árpád Szűcs, Ágnes Tuza, Tamás Vadász, Kata Váradi, Ágnes Vidovics-Dancs

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Modeling non-maturity deposits

The importance of non-maturity deposits (NMD) in banking is substantially high as the large part of commercial banks' balance sheets consist of client products with non-contractual cash-flow features. Non-maturity deposits are special financial instruments as the bank has an option to change the paid interest on the deposit account at any time, and the client has the option to withdraw any amount from the account without a period of notice. The liquidity and interest rate risk management of these products are a crucial part of ALM analysis; therefore, modeling of non-maturity deposits needs special attention. The uncertain maturity and interest rate profile generates a high level of complexity in their hedging, internal ...

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