Asset Liability Management
Learn how to identify, measure and manage the interest rate risk, credit risk and liquidity risk on the balance sheets of firms, with particular emphasis on the balance sheets of financial institutions.
CPE Credits: 14
Prerequisite knowledge:
- Fixed income arithmetic
- Intermediate MS Excel skills
- Elementary calculus
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Asset and Liability Management
- Maturity Mismatch
- Interest Rate Spread
- Funding
- Repricing and Maturity Mismatch
- Yield Curve Risk
- Basis Risk
- Option Risk
- Historic yield curves as a reflection of the economic environment
- Importance of yield curve shifts
- Economic and policy drivers of yield curve shifts
- What changes are forecast for the current curve?
- Typical Bank Liability Profile
- Typical Bank Asset Profile
- Adjustments when rates are expected to rise
- Adjustments when rates are expected to fall
- Business and regulatory limitations
- What is the default convention? Interest rates rising or falling?
- What is Asset Sensitivity and Liability Sensitivity?
- NII Analysis – Calculating the impact of interest rates changes on net interest income
- What is the difference between Price or Maturity Gap and Rate or Reset Gap?
- ALM NII repricing adjustments by maturity
- Market Value of Equity Analysis – calculating the impact of interest rate changes on MVE
- Fall in Market Value of Equity
- Earnings at Risk
- Cost to Close
- Rate Sensitive Gap
- Price Sensitive Gap
- Liquidity Gap
- Net Interest Income (NII) at Risk
- Duration Gap Analysis
- Macaulay duration
- Yield duration: Macaulay and modified
- Effective Duration
- Duration of Equity
- Monte Carlo Rate Simulations
- Market Value of Equity VaR
Module 1.1: Business Model and ALM Framework
Module 1.2: Asset & Liability Management
Module 1.3: Yield Curve Shifts and Spreads
Module 1.4: Bank ALM Strategy
Module 2.1: ALM Modeling Assumption
Module 2.2: ALM Risk Measurement Tools
Module 2.3: Duration and Convexity
Modules
Module 3.1: What is Liquidity Risk
Module 3.2: Sources of Liquidity Risk
Module 3.3: Measurement of Liquidity Risk
Module 3.4: Liquidity Management Plan
Module 4.1: Quantitative Measurement of Liquidity Risk
Module 4.2: Contingency Funding Plans
Modules
Module 4.3: ALCO Risk Monitoring and Reporting
Module 4.4: U.S and Basel III Liquidity Risk Requirements
Module 5.1: Managing NII and MVE risk with Fixed Income Derivatives
Module 5.2: Managing NII and MVE Risk with FX Derivatives
Module 6.1: Silicon Valley Bank Case Study
Module 6.2: Signature Bank Case Study