Asset & Liability Management – Forecasting Volume and Duration of Core Demand Deposits

Demand deposits accounted for more than 27% of the total liabilities of Canadian Western Bank at the end of 2006. These deposits have no specific maturities and may behave as current liabilities or as longer maturing liabilities. The bank pays lower interest on the demand deposits than on the most part of fixed-term deposits. If we can estimate the portion of the demand deposits that act as longer-term liabilities, we can invest that amount in assets with a higher rate of return. This amount is referred to as “core deposits”.

Feature Set Generation from Customer Transaction Data for Customer Classification

Verafin is an information technology company that specializes in customer intelligence solutions for small and midsize financial institutions. There is a high demand for automated fraud and money laundering detection and prevention systems since such activities cost millions to the financial industry every year. A key problem with detection techniques is the accurate and descriptive profiling of the account. Thus, it is important to identify the salient features in transaction data that would enable the company to accurately profile the accounts.

Insolvency Prediction of Property and Casualty Insurers

The intern will study possible enhancements to insolvency prediction models of the partner company. Her study will extend the previous models by combining macroeconomic market information and firm-specific information to identify firms facing possible financial trouble. The results of the study will provide helpful information for the company’s surveillance efforts to prevent insolvency or reduce the costs of insolvency for PACICC.

Global Warming Catastrophes Impact on Insurance

Scientists believe that global warming will trigger increasingly more frequent and violent storms, heat waves, flooding, tornadoes and cyclones in some areas of the globe, while other areas will slip into cold or drought. Although the effects of climate change will impact every segment of the business community, the insurance industry is especially at risk. Extreme weather events in past years have caused tens of billions of dollars in losses for insurers.

Hedging Property & Casualty Insurance Risk

The Property and Casualty Insurance Council of Canada (PACICC) is an umbrella body which insures Canadians against the risk that their providers of car and house insurance fail. It comprises many insurance companies, both large and small. The concern is that a local disaster might force the collapse of a locally concentrated insurance company, at large cost to PACICC. Such events are rare but costly. As such, it makes sense for PACICC to join with other similar bodies (such as CDIC, CUCC, and CIDO) to share these risks.

Modelling and Computation of Credit Risk and Credit Derivatives

For the past 10 years, the credit derivative markets have experienced unprecedented growth. Combined with this expansion, credit risk modelling has become quite a challenging task for many financial institutions. The Royal Bank of Canada has substantial trading exposure in credit derivatives and is looking to further its modelling research and management process.

Valuing Options in the Alberta Electricity Market

Like many companies in the energy business, Encana Power Corp. is interested in pricing options and future contracts related to the price of power and gas. The heat rate plays a role in related decisions and it is of importance to determine better estimates of swing and related options. The internship research will develop and calibrate models for the underlying assets using the large amounts of data available to Encana.

Optimal Investment Strategies

A major challenge for portfolio managers is that it is hard for them to predict the future. In practice, they would settle for being able to identify which stocks are likely to perform well and which are likely to perform badly in the next month. This project will include the investigation of algorithms for using specific collections of research data about a family of stocks to do just this, and will also be concerned with ways of assessing how best to compare the quality of alternative algorithms.

Efficient Calculation of Greeks for Interest Rate Exotics Using the BGM Pricing Model

QUIC Financial Technologies produces software used in the pricing of contracts in financial markets. Such software is based on mathematical models. In turn these models must be calibrated to market data. The sensitivity of the prices given by the models to small changes in the input parameters, that is the derivatives of the prices, are called the ‘Greeks’ because they are usually labeled ‘delta’, ‘gamma’, ‘theta’, etc. Thus, this project will investigate new ways to calculate the Greeks.