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Asset Liability Modeling

The Asset Liability Management (ALM) process is used to manage business and financial objectives of a financial institution by assessing and evaluating portfolio assets and liabilities  in an integrated manner. It is a continuous process involving the formulation, implementation, review and subsequent revision (if needed) of asset liability management strategies to ensure that sensitivity to interest rate changes are within acceptable risk tolerance levels. ALM addresses interest rate mismatch and liquidity risks through tools such as duration and convexity metrics, maturity bucket gap management and value at risk based concepts such as Earnings at Risk and Market Value of Equity.

 

 

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3 thoughts on “Asset Liability Modeling”

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  3. Pingback: Asset Liability Management Case Study: Understanding ALM using simple training cases | Finance Training Course
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