Non-maturing Deposits, Convexity and Timing Adjustments

  • Oliver Entrop
  • Marco Wilkens
Conference paper
Part of the Operations Research Proceedings book series (ORP, volume 2007)


One key driver of a bank’s total interest rate risk is the position of non-maturing deposits. Several papers such as [6], [8], and [7] value non-maturing deposits in an arbitrage-free framework and analyze their risk profile. All these models consist of three major components: first, the short rate process, i.e. the dynamics of the default-free interest rate term structure; second, the interest rate pass-through, i.e. the link between the development of the deposit rates and the development of default-free interest rates, in general the short rate; third, the development of the deposit volume over time. In this paper, we concentrate on the interest rate pass-through. We provide some term structure model-free results on the valuation of deposits, when the deposit rates are linearly linked to some long-term swap rate (rather than a short-term interest rate) as the reference rate with an unnatural time lag.


Interest Rate Deposit Rate Term Structure Spot Rate Short Rate 
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Copyright information

© Springer-Verlag Berlin Heidelberg 2008

Authors and Affiliations

  • Oliver Entrop
    • 1
  • Marco Wilkens
    • 1
  1. 1.Catholic University of Eichstätt-IngolstadtIngolstadt

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