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Erschienen in:
2019 | OriginalPaper | Buchkapitel
The Role of a Reference Yield Fitting Technique in the Fund Transfer Pricing Mechanism
verfasst von : Ewa Dziwok
Erschienen in: Contemporary Trends and Challenges in Finance
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Abstract
The funds transfer pricing (FTP) structure has become a base for the process of asset and liability management (ALM) in a modern bank. According to the supervisory documents, FTP is thus a regulatory constraint and an important tool in the ALM process. What is more institutions should have an adequate internal transfer pricing mechanism based on reference rate delivered from the market in a form of the yield curve. The fragility and sensitivity of the reference yield in time could have huge consequences for the liquidity risk management process.
The aim of the article is to compare the methods of estimating the FTP reference yield depending on the goodness of fit methodology (least square methods based on rates and prices will be taken into account). The data taken into account come from Polish money market and cover the period between 2005–2017 and the results obtained let point out the periods when disturbances on the market affected the goodness of model’s fit to real data and—in consequence—have an effect on the fund transfer pricing mechanism.