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The “ALM and Capital Adequacy Course” serves as a introduction as well as a refresher course to Asset Liability Management. The course is divided across a number of core topics from basic concepts such as duration and convexity to more advanced topics such as ALM measurement tools. The following topics are covered in the course:Buy Now
  • Introduction to ALM
  • Interest Rate/ Maturity Mismatch Risk and Liquidity Risk
  • Duration and Convexity, including relationship with options and volatility
  • Asset and Liability Sensitivity
  • ALM framework
  • Building blocks for an ALM model
  • ALM measurement tools
  • ALM reporting
  • ALM Stress Testing
  • Introduction to Capital Adequacy (including a background of capital adequacy regulation)
  • Internal Capital Adequacy Assessment Process (ICAAP) & Liquidity Risk Capital Extensions

Course Prerequisites

Familiarity with basic asset liability management concepts, value-at-risk (VaR), local markets, portfolio management and the Basel II framework.

Course Audience

The course is targeted to intermediate and advance users and is aimed primarily at banking professionals and individuals responsible for asset liability management and risk management within banks, insurance companies and mutual funds who need to quickly review or refresh their understanding of ALM and Capital Adequacy regulations for work, professional review, audit or personal development.

Course Guide

Here is the structure of the course.



Session 1 – Introduction to Asset Liability Management (ALM)33:15 mins
Session 2 – Interest Rate mismatch & ALM21:51 mins
Session 3 – ALM reports and extensions26:59 mins
Session 4 – Evolution of Capital Adequacy requirements16:32 mins
Session 5 – Review of ICAAP (Internal Capital Adequacy Assessment Process) & Basel II (III) – Liquidity risk adjustments34:06 mins
Session 6 – Understanding Duration & Convexity22:58 mins

Session One – Introduction to Asset Liability Management (ALM)

After covering market (price) risk and credit risk, it is now time to take a look at Interest Rate Risk or Maturity Mismatch risk. Before we move on to the topic of bank capital adequacy it is important that we have a good grip on what drives Interest Rate Mismatch and Liquidity risk at a bank.We use Asset Liability Management as a tool to measure interest rate exposure and introduce the concept of maturity mismatch at a high level. This is quickly followed by an introduction to a simplified ALM framework that we will use as a foundation for the ALM stress testing report we will use in later sessions.View a sample of session one

Session Two: Asset Liability Management (ALM)

We continue with more core definitions and introduce the primary questions an ALM framework is expected to answer covering both shareholder value and interest income sensitivity. Starting with duration and convexity we introduce the concept of Asset Sensitivity and Liability Sensitivity before walking through the core steps required for building an ALM model.View a sample of session two

Session Three: Asset Liability Management (ALM) Reports

In our last and final session on ALM, we introduce and walk through the Maturity and Rate GAP reports and use them to build and introduce the Earnings at Risk and Market Value of Equity at Risk reports.  The session uses an Excel based template to walk participants through the 4 report format, their usage and applications.View a sample of session three

Session Four: Introduction to Capital Adequacy

In our refresher on capital adequacy, we review the origins of capital adequacy regulation and margin of safety in banks starting with Regulation Q and the evolution of the Basel I and Basel II standards over the last 30 years.View a sample of session four

Session Five: ICAAP (Internal Capital Adequacy Assessment Process) and Liquidity Risk Capital extensions

We review Pillar I, Pillar II requirements as well as a quick walk through the ICAAP (Internal Capital Adequacy Process) and the Basel II liquidity risk extensions.  Briefly touch liquidity coverage ratio, net stable funding ratio and integrating correlations within stress testing.View a sample of session five

Session Six: Understanding Duration & Convexity

We review duration and convexity; the alternative definition of convexity and its importance to the risk management process, the relationship between options, convexity and volatility.View a sample of session six
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Stress Testing Crash Course: Instructor

Jawwad Ahmed Farid is a Fellow Society of Actuaries (Chicago), a MBA from Columbia Business School (New York City) and a computer science graduate.  During the last 19 years, he has worked as a consultant in North America, Pakistan and the United Kingdom with a number of blue chip clients including Hartford Life, Aegon, American General, Goldman Sachs, ING, Manu Life, Merrill Lynch, Met Life, Sun America, Nationwide, Sumitomo Mitsui Bank, Sun Life of Canada, Pacific Life, AllState, Fidelity Investments, Transamerica, Skandia, GE Financial Assurance, AXA Equitable and Washington Mutual Bank.

Jawwad’s core areas of expertise include Asset/Risk Management, Investments, Product Development & the Financial Services Back Office.  Jawwad blends a rare combination of risk management, information systems, international standards, business and product development skill set side by side with his actuarial expertise.

He is the author of three books on Entrepreneurship (Reboot), Commodity Markets (Understanding Commodities Risk) and Risk Management (Risk Application and Frameworks).

As an investment advisor Jawwad has advised a 3 billion US$ dollar life insurance fund in Pakistan on allocation and bid patterns for 10, 20 and 30 year bonds, a 30 million dollar Middle East fund on their ALM mismatch and fixed income strategy, a 10 million dollar fund on asset allocation and equity market timing in Pakistan. He has also worked with the securities regulator on assessing the state of the corporate bond market as well as issued valuation opinions on cross currency swaps, interest rate swaps, caps, floors, participating forwards and contingent liabilities for Exchange Guarantee Funds in the region.

Jawwad has worked directly as a founder, founding team member, mentor and advisor at multiple startups including two green field life insurance companies, multiple technology product businesses, financial services consulting operations, risk and investment advisory businesses, product focused distribution as well as micro insurance, micro pensions and micro finance startups.

In addition to being a PASHA CEC member and Treasurer he has also served as a judge at the Asia Pacific ICT Awards in Macau, Singapore, Kula Lumpur and Jakarta as well as at PASHA ICT Award in 2006, 2007, 2008, 2009, 2010. He currently serves as member of the oversight board for the PASHA Social Innovation Fund.

His regional client list includes First Gulf Bank, Riyad Bank, Ministry of Finance Malaysia, May Bank, Dubai Islamic Bank, Noor Islamic Bank, Dubai Bonds, Deutsche Bank, SP Jain, Marcus Evans, LSW International, State Bank of Pakistan, National Bank of Pakistan, Muslim Commercial Bank, Crescent Commercial, MyBank, Dawood Islamic Bank, KASB Bank, United Bank Limited, Pak-Kuwait Investment, Saudi Pak Commercial Bank, ABN AMRO, State Life Insurance, Dawood Family Takaful, Asia Health Care, Adamjee Insurance, Shell Pakistan, and International General Insurance.

The Alchemy / LCF Stress Testing  Workshop can be delivered in live instructor led sessions as well as a cost effective online formats for treasury managers, risk professionals, senior leadership teams  as well high value clients and customers.

Please feel free to drop us a line at [email protected] or [email protected] to get a customized proposal for your training needs.

If you liked this course, please also see the quarterly and annual subscription plans for continuing and professional education needs of actuaries, accountants, members of GARP, PRMIA, AICPA and others.