Interest income is the most important source of revenue for most of the banks. The aim of this paper is to assess the impact of different interest rate scenarios on the banks' interest income. As we do not know the interest rate sensitivity of real banks, we construct for each bank a portfolio...

In the current low interest rate environment, the possibility of a sudden increase in rates is a potentially serious threat to financial stability. As a result, analyzing interest rate risk (IRR) is critical for financial institutions and supervisory agencies. We propose a new method for...

How should we value and manage deposit accounts where deposits have a zero contractual maturity, but which, in practice, remain stable through time and are remunerated below market rates? Does the economic value of the deposit account differ from the face value and can we reliably measure it? To...

This paper analyses theperformance ofmaturity transformation strategiesduring a period of high and low interest rates. Based on German government bond yieldsfrom September 1972 to May 2019,we construct a rolling window of bond ladders where long-term assets are financed by short-term...

Central banks and supervisory authorities regularly conduct stress tests of banks. As losses accumulate in stress scenarios, banks' equity position worsens, and they must pay higher interest rates to retain funding. I explore how variations of Merton-type models can be used to measure bank risk,...

Central banks and supervisory authorities regularly conduct stress tests of banks. As losses accumulate in stress scenarios, banks' equity position worsens, and they must pay higher interest rates to retain funding. I explore how variations of Merton-type models can be used to measure bank risk,...

We provide a macro stress-testing model for banks' market and funding liquidity risks with a survival period of one and three months. The model takes into account the impact of both bank-specific and market-wide scenarios and considers both the first- and second-round effects of shocks. The...

The financial crisis of the late 2000's highlighted the importance of strengthening risk management systems in financial markets. Consequently, an increasing interest in strategies to quantify risk under extreme scenarios has spawned. One of such techniques is CrashMetrics, a methodology for...

This paper analyses theperformance ofmaturity transformation strategiesduring a period of high and low interest rates. Based on German government bond yieldsfrom September 1972 to May 2019,we construct a rolling window of bond ladders where long-term assets are financed by short-term...

How should we value and manage deposit accounts where deposits have a zero contractual maturity, but which, in practice, remain stable through time and are remunerated below market rates? Does the economic value of the deposit account differ from the face value and can we reliably measure it? To...