Using Monte Carlo for the Assessment of a Brokered Bank Deposit Business

Jan Vlachý

Abstract

This paper addresses the issue of a cost-benefit analysis when considering the use of third-party distribution channels for saving accounts. Whilst static budgeting methods seem to be generally appropriate for conventional banking projects based on branching or internet, they provide grossly misleading estimates of commissioning expenses, which can lead to completely unrealistic project assessment and poorly designed commission schedules. Using a case study based on actual project experience in the Czech Republic, the author applies a numerical statistical simulation model serving as a potent tool for strategic decision-making as well as business negotiation.

Keywords

consumer banking, distribution channels, agency commissions, statistical simulation

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https://doi.org/10.5817/FAI2013-2-4

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