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A Guide to Behavioural Modelling - Product Image

A Guide to Behavioural Modelling

  • ID: 4804084
  • Book
  • June 2019
  • Risk Books
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Client behaviour deeply impacts a bank's liquidity, funding, interest-rate position and, consequently, the management of its asset/liability mismatch and related profitability. Therefore it is imperative that risk managers and modellers alike understand how to model client behaviour according to the needs of their business. It is the aim of this book to improve that understanding and highlight modelling techniques from the simple through to the complex, offering a broad suite of tools to improve the management of an institution's balance sheet.

Since the 2008 global financial crisis, there has been increasing interest from external stakeholders (regulators, shareholders, institutional investors) in understanding how client behaviour impacts banks profitability, as well as how banks manage their liquidity, funding and interest rate risk.

Matteo Formenti and Umberto Crespi of UniCredit Group have gathered together chapter authors from across the globe who are all experts in their field. This book will aim to explain in a simple and effective way how it is possible to model client behaviour for the proper management of an institution's balance sheet, and to expand the readers knowledge of the drivers behind behavioural models.

The book is divided into five parts:

  • Part I: An Introduction to IRRBB
  • Part II: NMD Behavioural Models
  • Part III: Prepayment Behavioural Models
  • Part IV: Behavioural Models for Non-performing Exposure and Non-committed Lines
  • Part V: Accounting and Hedging

This book is required reading for model developers, risk managers, model validators and the regulators whose job it is to understand how institutions approached the regulatory requests.

A Guide to Behavioural Modelling proves that modelling client's behaviour involves several stakeholders, and can improve the awareness of business decisions in different areas - liquidity, funding, interest rate, internal transfer systems- but that there is no one-size-fits-all modelling solution. Rather, different approaches, from the simple to the most-advanced, are equally appropriate depending on the needs of the institution.

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About the Authors




1. Insights on Banks? Recourse to Behavioural Models from a Focused IRRBB Stress Test

 Federico Pierobon

European Central Bank

2. Implementing Regulatory Guidance on IRRBB

Behavioural Models: Challenges and Opportunities

Enrique Benito


3. The Stakeholders of Interest Rate Risk Behavioural Models

Roberto Virreira

State Street

4. Governance of Behavioural Models

Daniel Almehed


5. The Nature of IRRBB and Typical Metrics Employed

Jacek Rze?znik



6. A Framework for Developing NMD Behavioural Models

Matteo Formenti and Umberto Marco Crespi

UniCredit Group

7. The Literature on NMD Behavioural Models

Serena de Rienzo

UniCredit Group

8. Interest Rate Risk of Non-maturity Bank Accounts: From Marketing to Hedging Strategy

Andreas Blichlinger

Swisscanto Invest by Z?rcher Kantonalbank

9. NMDs and IRRBB: A Methodological Proposal for a Behavioural Model

Rosa Cocozza; Domenico Curcio; Igor Gianfrancesco

University of Naples Federico II; University of Naples

Federico II; Extrabanca

10. Non-maturity Deposit Modelling: A Financial Wealth Allocation Approach

Francesco Frascarelli and Vanessa Pagliaccia

UniCredit Group SpA

11. A Benchmark Framework for Non-maturing Deposits: An Application

Antonio Castagna; Antonio Scaravaggi; Bernardo Rapagnetta

lason Ltd

12. NMD Behavioural Models Used in Marketing

Bogusz Stankiewicz


13. The Validation of NMD Behavioural Models

Marco Palumbo

UniCredit Group

14. The Choice of Maturity Profile in NMD Behavioural Models

Matteo Formenti

UniCredit Group

15. Acknowledging the Elephant in the Room: The Mismatch Centre

David Green

David Green Advisors, LLC


16. Prepayment Risk Modelling for ALM, Finance and FTP: A Survival Model

Pierluigi Coriazzi & Lisa Signani


17. Modelling of Prepayment on Fixed Rate Residential Mortgages: A Logistic Regression Approach

Roberto Baccaglini

UniCredit Group SpA

18. A Simple Approach to Modelling Prepayment Events

Matteo Formenti and Mattia Rossi

UniCredit Group and KPMG


19. Integrating Credit Risk within the ALM Framework

Alina Preger and Sophie He


20. Modelling Committed Credit Lines

Antonio Castagna

Iason Ltd


21. Accounting of the Sight Deposit and Hedging

Luca Ingargiola


Data Used in the Book



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Matteo Formenti works at UniCredit Group, where he was initially in the group’s internal validation team on the internal models for pillar I and pillar II of the Basel Accords, with a focus on the validation of behavioural models for ALM purposes (interest rate and liquidity risk). Group Finance Department with a specific focus on ALM topics such as the development of behavioral models across the Central Eastern Europe and banking book interest rate strategy. Matteo currently manages the team in charge of executing and setting the fund transfer pricing within the Group. He is visiting professor of market risk at MIP (Milan Politecnique) and full professor of asset management at LIUC (University of Castellanza), and holds an MSc in economics and a PhD in finance with a theoretical and empirical thesis on asset pricing theory.

Umberto Crespi has over 20 years of experience in the banking sector. He started his career in 1999 on the financial engineering desk of Fineco Bank SpA, and after eight years became the Head of Treasury & ALM. In 2007, Umberto moved to the Group Finance Department of UniCredit Group to cover different activities, and in 2010 was appointed Head of the Model and Interest Rate Strategy team within Group ALM & Financial Planning, with responsibility for behavioural models and banking book interest rate risk strategy. Currently, he is the Head of the Operational ALM team within Group Finance Department. Umberto is a member of the European Banking Federation ALM IRRBB Working Group and the ASSIOM FOREX ALM Commission. He has a degree in monetary and financial economics from the Bocconi University in Milan.

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