This paper deals with the risk management of savings accounts. Savings accounts are non-maturing accounts bearing a relatively attractive rate of return and two embedded options: a customer's option to withdraw money at any time and a bank's option to set the deposit as it wishes. The risk...

Using a novel regulatory dataset of fully identified derivatives transactions, this paper provides the first comprehensive analysis of the structure of the euro area interest rate swap (IRS) market after the start of the mandatory clearing obligation. Our dataset contains 1.7 million bilateral...

Using a novel regulatory dataset of fully identified derivatives transactions, this paper provides the first comprehensive analysis of the structure of the euro area interest rate swap (IRS) market after the start of the mandatory clearing obligation. Our dataset contains 1.7 million bilateral...

We study the allocation of interest rate risk within the European banking sector using novel data. Banks' exposure to interest rate risk is small on aggregate, but heterogeneous in the cross-section. In contrast to conventional wisdom, net worth is increasing in interest rates for approximately...

Non-maturing banking products are important asset and liability positions of banks. Their complexity inter alia arises from a non-trivial pass-through from market to product rates which makes the valuation and risk analysis challenging for both banks and banking supervisors. Based on a large...

Empirically, bank equity value is decreasing in the interest rate. Yet (i) many banks do not hedge interest rate risk and (ii) above 50% of hedging banks use derivatives to increase exposure. We model a bank's capital structure, and show that these facts are consistent with optimal hedging under...

From April 2004 to August 2005, the ten-year Government Bond rised by 250 basis points and is continuing to rise from thereafter. Many banks have profited handsomely from this rise in interest rates. Since interest rates cannot continue to rise indefinitely, there can be a question, Is the...