We examine the issues inherent in common approaches to deposit model estimation and rate path simulation for risk management.
We examine results of econometric methodologies applied to historical data against various approaches using simultaneous simulation using the SOLVER tool.
We demonstrate that models derived using SOLVER methodologies are both persistent (durable) over long time series and robust (model accurately) across all rate cycles.
We conclude that a simplified SOLVER methodology produces stable results, eliminates expensive and time-consuming re-estimation, and can easily be back-testing against individual firm or market history.

Robust Deposit Rate Models – II