IMPLEMENTATION OF BANKING DYNAMICS MODEL USING A DETERMINISTIC DIFFERENTIAL EQUATION SYSTEM
Bank is a financial intermediary institution established with the authority to accept deposits from customers and channel those funds to creditors in need. Banks play a crucial role in the development of a country’s economics. Therefore, the government needs to maintain the stability of the finan...
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| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/82351 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Bank is a financial intermediary institution established with the authority to accept
deposits from customers and channel those funds to creditors in need. Banks play a
crucial role in the development of a country’s economics. Therefore, the government
needs to maintain the stability of the financial system to ensure its optimal functioning.
One way to maintain financial stability is by modeling the movements of bank’s components
using mathematical equations. Deposits, loans, and equity will be modeled using
a modified logistic differential equation system. The modification involves adding a
securities component to ensure that reserve calculations comply with current regulations.
The parameters of this dynamic model will be estimated using the spiral optimization
algorithm based on actual data obtained from the quarterly financial reports of each bank.
The accuracy of the model will be measured based on the mean average percentage
error obtained. The objective of this research is to observe the long-term behavior of
the bank’s components. Therefore, this study will also analyze the sensitivity of the
model when the parameters of non-performing loans and deposit withdrawals are varied.
The components of deposits and loans have a negative linear relationship with these
parameters, whereas the equity component has a positive relationship with both parameters.
Additionally, equilibrium will be found using the Broyden method and its stability
will be analyzed using the Routh-Hurwitz stability criterion. The equilibrium obtained
is influenced by the previously estimated parameters, so the relationship between the
equilibrium of bank balance sheet components and the parameters of non-performing
loans and deposit withdrawals will be analyzed. |
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