Asset Liability Management

Asset Liability Management

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.

Recent ALM Posts

  1. EXCEL Duration Calculation between Coupon Payments
  2. FAS 157 Fair value liabilities disclosure
  3. FAS 157 Term B syndicated loan fair value disclosure
  4. Fair value disclosure FAS 157 Revolving credit facilities
  5. CIR Model – Appropriate Time Step
  6. ILAAP ALM LCR Reports Template Validator
  7. Liquidity Gap Implementation Challenges
  8. ALM Training for Board & ALCO Members
  9. Asset Liability Mismatch
  10. NII in banking vs Economic Value

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Premium Courses:

  1. ALM – Crash Course – Package
  2. ALM – Crash Course – EXCEL Examples
  3. Asset Liability Management (ALM) Crash Course – Package
  4. ALM Report Validator
  5. Black Derman Toy Model Construction – EXCEL Example
  6. Black-Derman-Toy (BDT) Interest Rate Model – Package
  7. Building Maturity & Liquidity Profiles for Deposits and Advances
  8. Calibration of CIR Model – EXCEL Example
  9. Calibration of Black Derman Toy (BDT) Interest Rate model to US Treasuries
  10. Cox-Ingersoll-Ross (CIR) Interest Rate model – EXCEL example
  11. Duration Convexity – EXCEL Example
  12. Duration and Convexity for US Treasury Bill, Note and Bond
  13. Heath Jarrow Merton – HJM 3 – Factor Interest Rate Model
  14. Heath Jarrow Merton (HJM) Interest Rate Model – Package
  15. How to construct a Black Derman Toy Model in EXCEL
  16. How to utilize results of a Black Derman Toy Model – EXCEL Example
  17. How to utilize results of a Black Derman Toy Model
  18. Interest Rate Simulation Crash Course
  19. Interest Rate Simulation Crash Course – Package
  20. Principal Component Analysis – PCA – US Treasury Yield Rates

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