What is 'run-off rate' in SAP FS-LRM - Liquidity and Risk Management?

run-off rate - Overview

• Component: FS-LRM

• Component Name: Liquidity and Risk Management

• Description: The expected reduction in percent in an institution's sources of refinancing in a stress scenario. For example, the run-off rate of retail bank accounts is the expected draw-down of the accounts over a defined period of time under a specified liquidity scenario.

run-off rate - Details

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  Key Concepts: 
  Run-off rate is a term used in SAP FS-LRM Liquidity and Risk Management. It is a measure of the rate at which a company's liabilities are expected to be paid off over time. It is used to calculate the amount of liquidity that a company needs to maintain in order to meet its obligations. 
  
  How to use it: 
  The run-off rate is calculated by taking into account the expected payment dates of the company's liabilities, as well as the expected interest rates on those liabilities. The run-off rate can then be used to determine the amount of liquidity that a company needs to maintain in order to meet its obligations. 
  
  Tips & Tricks: 
  It is important to note that the run-off rate should be updated regularly in order to ensure that it accurately reflects the current market conditions. Additionally, it is important to consider other factors such as the company's credit rating and its ability to access capital when calculating the run-off rate. 
  
  Related Information: 
  The run-off rate is closely related to other financial metrics such as liquidity ratios and debt coverage ratios. Additionally, it can be used in conjunction with other financial models such as discounted cash flow analysis and Monte Carlo simulations in order to better understand a company's financial position.