Asset-Liability Management
Duration:
4 days
4 days
Location:
Prague, Mövenpick Hotel
Prague, Mövenpick Hotel
- Introduction to Asset-Liability Management
- Interest Rate and Spread Analysis
- Funding and Liquidity Management
- Measuring and Managing Rate Risk
- Measuring and Managing Credit Risk
- Measuring and Managing Pre-Payment Risk
- Fund Transfer Pricing and Optimal Capital Allocation
The purpose of this seminar is to give you a good understanding of how Asset-Liability Management can be used as an effective tool to manage an institution’s balance sheet in pursuit of the optimal balance between revenues and risks.
We start with a general introduction to ALM, and we discuss the objectives and means of ALM. Next, we explain important concepts such as margin, spread, leverage, surplus, and balance sheet risk. We look at the balance sheets of “typical” institutions and discuss the funding/investment requirements and constraints that arise from the business nature of these institutions.
We then look at the funding and investment alternatives available to the institution, including various “securitization” techniques. We also discuss the important role of fund transfer pricing on maintaining focus on spreads and margins, and in securing the efficient use of capital.
Next, we look in greater detail into how the various types of balance sheet risks – interest rate risk, credit risk, FX risk, prepayment risk and liquidity risk – can be measured and managed within the overall ALM framework. We explain and discuss measures such as Net Interest Income (NII), GAP, Duration GAP, “Surplus” and “Surplus-at-Risk”, and we show how derivatives, repos, structured finance and other instruments and techniques can be effectively used to manage these risks, while maintaining an optimal balance between assets and liabilities.
Finally, we discuss the role of the Asset-Liability Management Committee (ALCO) and other organizational issues in ALM.
We start with a general introduction to ALM, and we discuss the objectives and means of ALM. Next, we explain important concepts such as margin, spread, leverage, surplus, and balance sheet risk. We look at the balance sheets of “typical” institutions and discuss the funding/investment requirements and constraints that arise from the business nature of these institutions.
We then look at the funding and investment alternatives available to the institution, including various “securitization” techniques. We also discuss the important role of fund transfer pricing on maintaining focus on spreads and margins, and in securing the efficient use of capital.
Next, we look in greater detail into how the various types of balance sheet risks – interest rate risk, credit risk, FX risk, prepayment risk and liquidity risk – can be measured and managed within the overall ALM framework. We explain and discuss measures such as Net Interest Income (NII), GAP, Duration GAP, “Surplus” and “Surplus-at-Risk”, and we show how derivatives, repos, structured finance and other instruments and techniques can be effectively used to manage these risks, while maintaining an optimal balance between assets and liabilities.
Finally, we discuss the role of the Asset-Liability Management Committee (ALCO) and other organizational issues in ALM.
09.00 - 12.00 Funds Transfer Pricing, Capital Allocation and Performance Measurement
- Objectives of Funds Transfer Pricing
- Benefits of Funds Transfer Pricing
- Funds Transfer Pricing Process
- Computing the base transfer rate
- Risk adjustments to base transfer rates
- Implementing FTP
- Shareholder Value Analysis
- Measuring economic capital
- Measuring RAROC
- How FTP enters into the RAROC equation
- Using FTP + RAROC to Support Business Decisions
- Case: FTP and Performance Measurement in "NoHope Bank"
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.00 Organizational Considerations in Asset-Liability Management
- A Closer Look at the ALCO
- Role, composition and tasks
- Policies and procedures
- ALCO Reports
- ALCO Meetings
- ALM System
- General requirements of a good ALM system
- Key inputs and outputs
- Technical, functional, and cost considerations
- Overview of available systems
Evaluation and Termination of the Seminar
