Estimating the Interest Rate Risk of Banks Using Time Series of Accounting-Based Data

37 Pages Posted: 6 Mar 2008 Last revised: 17 Jun 2011

Oliver Entrop

University of Passau

Christoph Memmel

Deutsche Bundesbank

Marco Wilkens

University of Augsburg

Alexander Zeisler

Barclays

Date Written: May 31, 2011

Abstract

This paper proposes a new method of estimating the interest rate risk of banks from the perspective of bank outsiders. The key innovation is the inclusion of time series of accounting-based data instead of using only the latest available reports to estimate the maturity structure of banks. Using regulatory accounting-based data, we estimate the model for more than 1,000 German universal banks and compare the results with a unique data set of bank-internal quantified interest rate risk. We find evidence that our model yields a significantly better fit of banks’ internally quantified interest rate risk than standard approaches that rely on one-point-in-time data.

Keywords: Interest rate risk, accounting-based approach, banking supervision, model evaluation

JEL Classification: G18, G21

Suggested Citation

Entrop, Oliver and Memmel, Christoph and Wilkens, Marco and Zeisler, Alexander, Estimating the Interest Rate Risk of Banks Using Time Series of Accounting-Based Data (May 31, 2011). Available at SSRN: https://ssrn.com/abstract=982070 or http://dx.doi.org/10.2139/ssrn.982070

Oliver Entrop (Contact Author)

University of Passau ( email )

Innstrasse 27
Passau, 94032
Germany
+49 851 509 2460 (Phone)
+49 851 509 2462 (Fax)

Christoph Memmel

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Marco Wilkens

University of Augsburg ( email )

Universitaetsstr. 16
Augsburg, 86159
Germany
+49 821 598 4124 (Phone)
+49 821 598 4223 (Fax)

HOME PAGE: http://www.wiwi.uni-augsburg.de/bwl/wilkens/team/wilkens_marco/

Alexander Zeisler

Barclays ( email )

5 The North Colonnade
Canary Wharf
London, London E14 4BB
United Kingdom
+44 20 7773 8989 (Phone)

HOME PAGE: http://www.barclays.com

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