On Application of Physical Models in Banking Risk Estimation: Valuing the Demand Deposits
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Date
2010
Authors
Krasnikova, Larysa
Bielenka, Ganna
Journal Title
Journal ISSN
Volume Title
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Abstract
Description
The paper presents a review of existing approaches to valuation of
demand deposits. Special attention is paid to the approach for demand
deposits valuation, which is based on relaxation phenomenon. Such
phenomenon may be observed in magnetic, ferromagnetic and ferroelectric
materials, as well as in the elastic, electric, and magnetic behavior of
materials, and is defined as a delay or lag in the response of a linear system,
measured relative to the expected linear steady state (equilibrium) values.
The bank rate-setting mechanism for demand deposits is found to resemble
closely the anelastic relaxations.
The proposed framework may be applied in the course of risk assessment
and management in commercial banks, as well as for banking regulatory
policy development by supervisory authorities.
Keywords
banking risks, demand deposits, core deposits, relaxation, anelastic model
Citation
Krasnikova L. On Application of Physical Models in Banking Risk Estimation: Valuing the Demand Deposits / Larysa Krasnikova and Ganna Bielenka // ENEC 2010 : Proceedings of International Conference on Econophysics, New Economy and Complexity, 20-22 May, Bucharest, Romania. – 2010. – P. 39–46.