On the Risk Management of Demand Deposits and Interest Rate Margins

This paper deals with risk mitigation of interest rate margins related to banks demand deposits. We assume that deposits are linked rates and business risk, which cannot be fully hedged on financial markets. The dynamics forward market follows a standard model (i.e. BGM model). deposit is the monetary amount put in account by clients. It accounting M1 (monetary aggregate 1). Using linear regression, ways. take viewpoint an asset liability manager focusing bank's net operating income at given quarter according rules. use static hedging strategies for bank deposit. illustrate our results using data from 1997 -- 2019 both US Euro zones. allows us compare margin these two main zones, setting clearly different (roughly speaking, zone equal about half while, zone, much closer).