Modelling the interest rate management through portfolio slection: the case of Crédit Foncier de Monaco

Docs en anglais | 82 pages | 30-09-2008 | Format : | Note : Non noté

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Résumé

The transformation of deposits into loans generates a return but engender financial risks, and particularly an interest rate risk. However, the Basel II Committee does not provide any standardized method to manage this crucial risk. The arbitrage of the bank between net interest margin and volatility is function of its utility. Thus, we adapt the Markowitz portfolio selection theory on the banking and more particularly the commercial balance-sheet. We test this model on the Crédit Foncier de Monaco and find that this tool maximizes under constraints the risk-adjusted performance and determines the optimal allocation of the assets; we compare then the theoretical objectives with the actual results.

Table of contents:

Introduction

1/ THEORETICAL MODELLING

I) Identification
II) Measurement
III) Management
IV) Modelling

2/ EMPIRICAL APPLICATION

I) Presentation
II) Adaptation
III) Simulation

Conclusion
Glossary
Bibliography
Appendices

Recommandations

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