Modelling Retail Deposit Spreads in the UK

Frank Skinner (), Benton Gup, Michael Ioannides and Doowoo Nam
Additional contact information
Frank Skinner: ICMA Centre, University of Reading
Benton Gup: University of Alabama
Michael Ioannides: School of Business, Rutgers University, NJ, USA
Doowoo Nam: College of Business, The University of Southern Mississippi

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: Models that are based on mean-variance analysis seek portfolio weights to minimise the variance of the portfolio for a given level of return. The portfolio variance is measured using a covariance matrix that represents the volatility and correlation of asset returns. However these matrices are notoriously difficult to estimate and ad hoc methods often need to be applied to limit or smooth the mean-variance efficient allocations that are recommended by the model. Moreover the mean-variance criterion has nothing to ensure that tracking errors are stationary. Although the portfolios will be efficient, the tracking errors will in all probability be random walks. Therefore the replicating portfolio can drift very far from the benchmark unless it is frequently re-balanced.Â

Keywords: Deposits; yield Cruves; Stochastic Interest Rates (search for similar items in EconPapers)
JEL-codes: G13 G2 G21 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2001-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.icmacentre.ac.uk/pdf/discussion/DP2001-02.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.icmacentre.ac.uk/pdf/discussion/DP2001-02.pdf [302 Found]--> https://www.icmacentre.ac.uk/pdf/discussion/DP2001-02.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rdg:icmadp:icma-dp2001-02

Access Statistics for this paper

More papers in ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading Contact information at EDIRC.
Bibliographic data for series maintained by Marie Pearson ().