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Survey on Core Deposit Modeling in Japan: Toward Enhancing Asset Liability Management

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  • Financial System and Bank Examination Department

    (Bank of Japan)

Abstract

Financial institutions conduct asset liability management (ALM) in three steps. The first step is to gauge the degree of risks inherent in their assets and liabilities, including off-balance transactions. The second step is to reduce funding costs as well as streamline investment. The third step is to seek an optimal combination of assets and liabilities to maximize profits. One of the vital objectives of ALM is to manage interest rate risk caused by the mismatch in the structure of assets and liabilities, since this is a main profit source for financial institutions.

Suggested Citation

  • Financial System and Bank Examination Department, 2014. "Survey on Core Deposit Modeling in Japan: Toward Enhancing Asset Liability Management," Bank of Japan Research Papers 14-03-31, Bank of Japan.
    • Handle: RePEc:boj:bojron:ron140331a
    as

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    References listed on IDEAS

    as
    1. Cox, John C. & Ingersoll Junior, Jonathan E. & Ross, Stephen A., 2007. "A theory of the term structure of interest rates," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 47(2), April.
    2. Jarrow, Robert A. & van Deventer, Donald R., 1998. "The arbitrage-free valuation and hedging of demand deposits and credit card loans," Journal of Banking & Finance, Elsevier, vol. 22(3), pages 249-272, March.
    3. Hull, John & White, Alan, 1990. "Pricing Interest-Rate-Derivative Securities," The Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 573-592.
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