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数字金融workshop：Banking on Uninsured Deposits
发布日期：2024-05-07 12:00 来源：
第七讲 Banking on Uninsured Deposits
时间/Time： 5月7日 周二 北京时间上午 09:00-10:30
Monday 6 May 2024, 9-10:30 p.m. EDT
地点/Venue：Zoom会议（会议号: 897 2560 1400 密码: 938759）
主讲人/Speaker： Alexi Savov
主持人/Host： 胡佳胤 Jiayin Hu
Abstract
We model the impact of interest rates on the liquidity risk of banks. Banks hedge
the interest rate risk of their assets with their deposit franchise: when rates rise the value of their assets falls, but the value of their deposit franchise rises. Yet the deposit franchise is only valuable if deposits remain in the bank. This makes the deposit franchise runnable if deposits are uninsured. We show there is no run equilibrium at low interest rates, but a run equilibrium emerges as rates rise. This is because the value of the deposit franchise rises with rates, making a run more destructive, and hence more likely. To prevent a run, the bank needs to keep the value of its uninsured deposit franchise from exceeding its equity. It can do so by shortening the duration of its assets, so that their value falls less if rates rise. However, this undoes the bank’s interest rate hedge, which can make it insolvent if rates fall. The uninsured deposit franchise therefore poses a risk management dilemma: the bank cannot simultaneously hedge its interest rate and liquidity risk exposures. We show banks can address the dilemma by buying claims with option-like payoffs to interest rates, or by raising additional capital as interest rates rise. These strategies minimize the additional capital needed to prevent a run if rates rise and avoid insolvency if rates fall.
主讲人介绍/Biography:
Alexi Savov is the Marcus Nadler Professor of Finance and Economics at the New York University Stern School of Business. He is a Research Associate in Asset Pricing at the National Bureau of Economic Research.
Professor Savov’s research studies how monetary policy affects the financial system. His work highlights the importance of financial institutions for the transmission of monetary policy to firms and households. Professor Savov's work has been published in leading academic journals such as The Quarterly Journal of Economics, The Journal of Finance, and The Journal of Financial Economics. His papers have received several prizes including the 2022 Journal of Finance Brattle Group Prize Distinguished Paper, the 2018 Journal of Finance Amundi Pioneer Prize Distinguished Paper, and the 2011 Journal of Finance Smith-Breeden Prize Distinguished Paper.
Professor Savov earned his Ph.D. in Finance and M.B.A. from the University of Chicago Booth School of Business, and his B.A. from Washington University in St. Louis, where he graduated with summa cum laude honors.
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数字金融workshop：Banking on Uninsured Deposits
发布日期：2024-05-07 12:00 来源：
第七讲 Banking on Uninsured Deposits
时间/Time： 5月7日 周二 北京时间上午 09:00-10:30
Monday 6 May 2024, 9-10:30 p.m. EDT
地点/Venue：Zoom会议（会议号: 897 2560 1400 密码: 938759）
主讲人/Speaker： Alexi Savov
主持人/Host： 胡佳胤 Jiayin Hu
Abstract
We model the impact of interest rates on the liquidity risk of banks. Banks hedge
the interest rate risk of their assets with their deposit franchise: when rates rise the value of their assets falls, but the value of their deposit franchise rises. Yet the deposit franchise is only valuable if deposits remain in the bank. This makes the deposit franchise runnable if deposits are uninsured. We show there is no run equilibrium at low interest rates, but a run equilibrium emerges as rates rise. This is because the value of the deposit franchise rises with rates, making a run more destructive, and hence more likely. To prevent a run, the bank needs to keep the value of its uninsured deposit franchise from exceeding its equity. It can do so by shortening the duration of its assets, so that their value falls less if rates rise. However, this undoes the bank’s interest rate hedge, which can make it insolvent if rates fall. The uninsured deposit franchise therefore poses a risk management dilemma: the bank cannot simultaneously hedge its interest rate and liquidity risk exposures. We show banks can address the dilemma by buying claims with option-like payoffs to interest rates, or by raising additional capital as interest rates rise. These strategies minimize the additional capital needed to prevent a run if rates rise and avoid insolvency if rates fall.
主讲人介绍/Biography:
Alexi Savov is the Marcus Nadler Professor of Finance and Economics at the New York University Stern School of Business. He is a Research Associate in Asset Pricing at the National Bureau of Economic Research.
Professor Savov’s research studies how monetary policy affects the financial system. His work highlights the importance of financial institutions for the transmission of monetary policy to firms and households. Professor Savov's work has been published in leading academic journals such as The Quarterly Journal of Economics, The Journal of Finance, and The Journal of Financial Economics. His papers have received several prizes including the 2022 Journal of Finance Brattle Group Prize Distinguished Paper, the 2018 Journal of Finance Amundi Pioneer Prize Distinguished Paper, and the 2011 Journal of Finance Smith-Breeden Prize Distinguished Paper.
Professor Savov earned his Ph.D. in Finance and M.B.A. from the University of Chicago Booth School of Business, and his B.A. from Washington University in St. Louis, where he graduated with summa cum laude honors.
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