Integrated Risk Management of Non-Maturing Accounts : Practical Application and Testing of a Dynamic Replication Model

​Customer accounts that neither have a fixed maturity nor a fixed interest rate represent a substantial part of a consumer banks funding. The modelling for their risk management and pricing is a challenging yet crucial task in todays asset/liability management, with increasing computational power allowing for new approaches. Jeffry Stra er outlines an implementation of a state-of-the-art dynamic replication model in detail. A case study with recent data supports the expected superiority of the model. Additionally, it provides tangible recommendations for model specifications derived from practical and mathematical consideration, as well as empirical findings. Practitioners will appreciate the comprehensive programming code attached.