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Asset Liability Management – Earnings at Risk
Earnings-at-Risk (EAR) is computed in order to evaluate the impact of interest rate change on earnings. The approach used is a VaR based approach that takes into account non-parallel shifts in the term structure and its impact on the earnings portfolio of the bank. The balance sheet items to be included in the calculation are those which are interest rate sensitive and generate income or expense cash flows. For…
Premium Courses Monte Carlo Simulation – Commodity – Example$8.99Basel III – Liquidity Framework$41.49Setting Counterparty Limits$69.00How to utilize results of a Black Derman Toy Model$14.49Asset Liability Management – Fall in Market Value of Equity
Fall in market value of equity (MVE) depicts a change in the market value of equity due to changes in market values of assets and liabilities. The respective change in assets and liabilities is computed from the interest rate shock derived, based on the value at risk (VaR) approach.
Step 1: Determine look back periodDetermine the period over which the risk is to be evaluated. For illustration purposes let us…
Premium Courses Calculating VaR (Value at Risk)$199.00Portfolio VaR – EXCEL Example$59.00Forward Prices and Forward Rates - Calculation reference & detailed examples$27.79Credit Analysis & Credit Process - Package$49.00Market Risk Metrics – Jensen’s Alpha
Jensen’s Alpha is the risk-adjusted performance metric that measures a portfolio manager’s returns against those of a benchmark. For asset allocation, the portfolio consists of the instrument (e.g. equity stock) being analyzed and the benchmark is a broad market index (e.g. S&P 500) – in other words we are assessing the instrument’s returns against those of a broad market index. We are measuring the instrument’s performance relative to the…
Premium Courses Portfolio Risk Metrics – EXCEL Example$19.99Valuing Options – Binomial Tree – Traditional Approach – EXCEL Example$12.99Cross Selling Treasury Products$199.00ICAAP – Credit EXCEL Example$99.00Market Risk Metrics – Beta with respect to market indices
Beta is a quantitative measure of the volatility or systematic risk of a given instrument (e.g. equity) to that of the portfolio to which the instrument is a part. It is a correlation measure of the non-diversifiable risk of the instrument in relation to the market.
In the Capital Asset Pricing Model (CAPM) formulation, the portfolio is the market portfolio that contains all the risky assets. Usually for calculation purposes…
Premium Courses Calculating VaR (Value at Risk)$199.00Corporate Finance – First Course – Includes case study$17.49REBOOT$6.99Credit Process$11.99Market Risk Metrics – Holding Period Return
The Holding Period Return represents the return earned by an instrument (e.g. an equity stock) over the time that it is held by an entity or alternatively over the period of analysis. A positive return indicates that the value of the instrument has grown in excess of its principal amount (i.e. the price or value of the instrument at the beginning of the analysis period). A negative return indicates…
Premium Courses Pricing IRS – Module I – Term Structures EXCEL Example$13.99ALM – Crash Course – EXCEL Examples$59.00Setting Counterparty Limits - Package$169.00Pricing IRS – Module II – IRS and CCS EXCEL Example$13.99Market Risk Metrics – Introduction
Market risk is the risk that movements in market prices will adversely impact the value of an investment. There are four principal categories of market risk or risk factors: equity risk, interest rate risk, currency risk and commodity risk. Exposure to market risk for a particular entity is based on:
Volatility of the underlying risk factors The entity’s portfolio’s sensitivity to this volatilityWe may assess volatility or alternatively the riskiness of…
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