Decay Analysis Financial Glossary

What is it? Statistical analysis of the rate of attrition. Decay analysis is used to analyze historical volatility of core deposit volumes, specifically rates for withdrawals and account closures. Deposit decay rates should be calculated by tracking a representative sample of accounts over a period of time that covers at least one interest rate cycle. Such volatility studies have been used by banks for many years to determine effective maturity assumptions that are then employed in present value analysis to calculate core deposit values for deposit purchases, branch acquisitions, and bank acquisitions.

Finance Term Definition Added By: Sam

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