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.
Asset Liability Management or ALM for short tracks and evaluates changes in bank earnings and shareholder value due to changes in the interest rate environment. It uses a combination of frameworks, metrics and reports to quantify a bank’s exposure to interest rate shifts
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.
- Asset Liability Management – Earnings at Risk
- Asset Liability Management – Fall in Market Value of Equity
- Duration & Convexity Calculation Example
- Duration, Convexity Calculator for US Treasuries
- Cox-Ingersoll-Ross (CIR) interest rate model – Parameter calibration, Short rates simulation and modeling of longer term interest rates – An example
- How to build a Black Derman Toy (BDT) Model in EXCEL
- How to utilize the results of a BDT interest rate model
- How to construct a multifactor HJM interest rate model
Recent ALM Posts
- EXCEL Duration Calculation between Coupon Payments
- FAS 157 Fair value liabilities disclosure
- FAS 157 Term B syndicated loan fair value disclosure
- Fair value disclosure FAS 157 Revolving credit facilities
- CIR Model – Appropriate Time Step
- ILAAP ALM LCR Reports Template Validator
- Liquidity Gap Implementation Challenges
- ALM Training for Board & ALCO Members
- Asset Liability Mismatch
- NII in banking vs Economic Value
Premium Courses:
- ALM – Crash Course – Package
- ALM – Crash Course – EXCEL Examples
- Asset Liability Management (ALM) Crash Course – Package
- ALM Report Validator
- Black Derman Toy Model Construction – EXCEL Example
- Black-Derman-Toy (BDT) Interest Rate Model – Package
- Building Maturity & Liquidity Profiles for Deposits and Advances
- Calibration of CIR Model – EXCEL Example
- Calibration of Black Derman Toy (BDT) Interest Rate model to US Treasuries
- Cox-Ingersoll-Ross (CIR) Interest Rate model – EXCEL example
- Duration Convexity – EXCEL Example
- Duration and Convexity for US Treasury Bill, Note and Bond
- Heath Jarrow Merton – HJM 3 – Factor Interest Rate Model
- Heath Jarrow Merton (HJM) Interest Rate Model – Package
- How to construct a Black Derman Toy Model in EXCEL
- How to utilize results of a Black Derman Toy Model – EXCEL Example
- How to utilize results of a Black Derman Toy Model
- Interest Rate Simulation Crash Course
- Interest Rate Simulation Crash Course – Package
- Principal Component Analysis – PCA – US Treasury Yield Rates
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