Interest Rate Risk in the Banking Book (IRRBB), part 2

What you'll learn

Understand how banks model the interest rate risk of savings and non-maturing deposits
Learn how deposit beta, repricing dynamics and market rates can be used to model savings rates
Learn practical approaches to modelling deposit stability, runoff and customer behaviour
Understand how savings-rate and volume models translate into IRRBB interest-rate sensitivity
Learn why models that fit history extremely well can still fail when interest-rate regimes change
Develop a practical framework for challenging, validating and improving behavioural IRRBB models

Requirements

No quantitative background required. Basic knowledge of banking products is helpful.

Description

Welcome toInterest Rate Risk in the Banking Book, Part Two .
In Part One, we built a virtual bank from the ground up and used current accounts and mortgages to develop an intuitive understanding of how interest rate risk arises, how it is measured, and how banks can model and hedge it.
In Part Two, we continue our journey by introducingsavings deposits.
Savings present a particular challenge for IRRBB. We do not know exactly how customer rates will respond when market rates change, how long customers will keep their balances with the bank, or how money may migrate between different deposit products.
We therefore build the savings model step by step. We start withsavings-rate modelling, from the familiar deposit beta to more sophisticated approaches, using historical data and out-of-sample testing to assess their performance.
We then turn tovolume modelling, exploring deposit stability, cohort analysis, segmentation and runoff assumptions. We bring rate and volume models together to understand how they determine the interest rate sensitivity of savings, before consideringmigration between products and segments.
As in Part One, the course takes a largelynon-quantitative and intuitive approach. The emphasis is on understanding the economics behind the models, the practical choices involved, and their limitations.
By the end of the course, you will have a practical understanding of how banks model savings for IRRBB.
Do enjoy!

Who this course is for

Banking professionals working in ALM, Treasury or balance sheet management
Market and interest-rate risk managers who want to strengthen their understanding of IRRBB
Internal auditors, regulators and supervisors reviewing IRRBB frameworks
Bank managers who need to understand how interest-rate risk affects the balance sheet
Consultants and finance professionals working with banks
Students or analysts entering bank risk management, Treasury or ALM
Financial journalists who want to understand banking-book interest rate risk

Homepage

https://www.udemy.com/course/interest-rate-risk-in-the-banking-book-irrbb-part-2/

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