Retail deposit pricing and interest rate risk

"Retail or consumer deposit pricing has only recently been fully deregulated. Subsequently, there has been little academic work done on the pricing of such deposits or the interest rate risk posed by such deposit balances. In this thesis we address the pricing of retail deposits in a dynamic, general equilibrium framework in order to draw conclusion regarding the important time series relationship between deposit and competitive market interest rates. Subsequently, we use this work as the theoretical basis for the construction of appropriate interest rate risk measurement methodologies in such retail deposit markets. We employ our methodology to measure interest rate risk in instantaneous maturity markets, markets for MMDA and NOW accounts, for example, and in discreet maturity markets such as those for consumer CDs. The novelty in our approach is the recognition that retail deposit rates are not determined in perfectly competitive markets whereas traditional interest rate risk or duration analyses implicitly assume that markets are perfectly competitive. We derive a methodology that measures the value of monopoly (quasi) rent streams, which is the ""going concern"" value of the bank attributable to activities in deposit markets. Our methodology leads to natural measures of the interest rate risk inherent in the bank's economic value that can be attributed to retail deposit market access."

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Finance

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2011

Author dc:creator

• Hutchison, David Edgar

Contributors dc:contributor

• Pennacchi, George G.

• Economics, Finance

Statement dc:rights

• Copyright 1993 Hutchison, David Edgar

Language dc:language

eng

Identifier

AAI9411661
(UMI)AAI9411661

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/19526