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...

We formulate the optimal balance sheet management problem as a linear program and study it using a duality approach. In addition to helping to determine the optimal balance sheet, the dual problem also provides us the market prices of interest rate risk and credit risk. Our methodology is used...

Banks make profits from the difference between short-term and long-term loan interest rates. To issue loans, banks raise funds from capital markets. Since the long-term loan rate is relatively stable, but short-term interest is usually variable, there is an interest rate risk. Therefore, banks...

Banks make profits from the difference between short-term and long-term loan interest rates. To issue loans, banks raise funds from capital markets. Since the long-term loan rate is relatively stable, but short-term interest is usually variable, there is an interest rate risk. Therefore, banks...