Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85891
Authors: 
de Jong, Frank
Wielhouwer, Jacco
Year of Publication: 
2001
Series/Report no.: 
Tinbergen Institute Discussion Paper 01-112/2
Abstract: 
Variable rate savings accounts have two main features. The client rate is variable and deposits can be invested and withdrawn at any time. However, customer behaviour is not fully rational and actions are often performed with a delay. This paper focusses on measuring the interest rate risk of variable rate savings accounts on a value basis (duration) and on the problem how to hedgethese accounts. In order to model the embedded options and the customer behaviour we implement a partial adjustment specification. The interest rate policy of the bank is described in an error-correction model.
Subjects: 
Term structure
duration
uncertain cash flow
variable rates of return
JEL: 
C33
E43
Document Type: 
Working Paper

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