WITHDRAWALS
In current and saving accounts which are typically non-maturity contracts, counterparties have the option to credit their own accounts at any time and they have the option of withdrawing the entire balance of their current and savings accounts at short notice or with no prior notice at all.4 Thus, the expectations in regards to cash “in” and “out” flows cannot be exactly defined.
Therefore, the evolution of the credit exposure can follow a random behavior as shown in Figure 8.5. However, under normal risk conditions, the behavior pattern of “cash in” and “cash out” is as expected and can be well modelled based on statistical analysis and mapped by using replicated portfolios as discussed in Chapter 5. On the other hand, scenarios should describe the unexpected behaviors resulting from stress conditions. Counterparties, for example, tend to withdraw more money under market stress while at the same time reducing the amount of their savings.8.4
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