Capital Markets School - October 2023

Internal Use Only

Assumptions

Most important point of the modeling process

Inputs are standard and Scenarios are defined.

Assumptions determine the accuracy of the outputs

Assumptions impact Assets and Liabilities

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Internal Use Only

Prepayment Assumptions • Prepayment of loans and mortgage securities based on interest rate expectations

Answer in the chat: What are the implications of Prepayment Assumptions?

• As rates mover higher, prepayments slow

• SMM, CPR and PSA

• Peer assumptions vs bank specific assumptions

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