Bank Asset and Liability Management

The Bank Asset and Liability Management (ALM) Crash course starts off with a review of core concepts and quickly delves into core tools including Gaps, NII, Earnings at Risk and Cost to close reports. In addition to the traditional mismatch focus, the course also includes a short section on Liquidity Management as well as a related concepts section with relevant equations and ALM formulae. A detailed step by step case study on implementing ALM report formats in a banking context is also included.

Asset Liability Management (ALM) & Bank Capital

Three new additions to this section include the ALM assumptions, tweaks and hacks post, the kill a bank in one day simulation and trade weighted liquidity stress testing. The Asset liability management assumptions, tweaks and hacks post is a must read if you are looking to catch up on terminology and usage. The kill a bank in one day simulation walks through the many ways asset liability mismatch can drive a bank onto the path of insolvency. Traded weighted liquidity stress testing introduces the concept of adjusting trading positions based on average trading volumes for the same positions. All three posts provide a link to actual ALM practice in the banking industry and would help lay the groundwork for the sections that follow.

Core Concepts

We continue with an application orientation and review of ALM concepts. Written for executive management teams and board members the material works through asset liability management applications, challenges and choices. A short review of basic calculations behind ALM is also included. “Why ALM?” reviews primary usage while “A Visual History” reviews the interest rate environment experienced over the last thirty years. ALM strategies walk through the interest rate mismatch choices ALM models are supposed to help boards with. NII and economic value compare the bias that exists towards NII versus MVE that exists in ALM analysis. ALM strategy review builds upon the foundation laid in the earlier ALM posts and brings gaps into the picture.

A short guide to Bank Asset Liability Management reporting templates and conventions including a review of building Maturity and Liquidity gaps. Now that we have done the high level groundwork it is now time to get our hands really dirty. We review report formats, templates and calculations. While the earlier sections worked with a board level review, posts in this section focus on building reports and models by using a section by section review.

Asset Liability Management – Case Studies & Guides
Liquidity Management and ALM

An inventory of related posts and materials that you would find of interest. In addition to value at risk, take a look at the zero and forward rate case study, the Monte Carlo Simulation how to reference, the advance risk management workshop and the building maturity profile for IAS 30 reporting posts.

For more posts on Asset Liability Management, check out our resource guide.

Asset Liability Management Crash Course

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