Proper balance sheet modelling techniques need to take into account the behavioral maturity based on historical observations to ensure that cash flow predictions are more reliable and in sync with these demonstrated behavioral trends. Behavioral assumptions help in addressing assumptions underlying core and non-core portions in deposit rollovers, prepayment events and non-maturity/indeterminate accounts. These assumptions greatly affect the reliability and accuracy of generated ALM reports as well as their dependability for the purpose of forecasting gaps and balance sheet planning.
Salient Benefits offered by the Behavioral Modeling module are:
- Pre-Terminations: Provides models that accommodate early withdrawals, draw-downs and pre-payments which are an important component of balance sheet management as these conditions have a material effect on liquidity risk.
- Data Modelling: Advanced Data Modeling techniques to model liquidity risk across various dimensions.
- Rollovers: Simulate liquidity gaps with rollover risks stemming from maturity mismatches allowing for clear examinations of funding structures by maturity buckets.
- Assumptions: Predict and analyze the impact of potential liquidity gaps under various stress and behavioral assumptions; Model “Liquidity Value at Risk” (maximum cost of liquidity) under certain assumptions.