Asset-Liability Management

Tuesday, June 16

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Introduction to ALM

• What is ALM?
• Overview of Financial Risks
• ALM as Management Tool
• The Use of ALM in Banks, Funds, Insurance and Corporate Treasury
• The ALCO and the ALCO process

Interest Rate and Spread Analysis

• Profitability and Interest Rate Risk
  • Margins, leverage and ROE
  • Maturity transformation risk
  • Spread risk
• NPV Risk vs. "Re-pricing" Risk
• GAP Analysis
  • Static GAP
  • Case: GAP analysis in "NoHope Bank"
• Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Interest Rate and Spread Analysis (continued)

• Dynamic GAP-analysis
  • Simulating NII
  • Simulating customer behavior
  • Simulating internal strategies
  • Simulating effect of product mix and pricing
  • Monte Carlo simulation
• Duration Analysis
  • Duration explained
  • Duration GAP
• Yield Curve Analysis
  • Projection of re-pricing rates
  • Key rate duration
• Pre-Payment Analysis
• Value-at-Risk Analysis
• Case: "NoHope Bank"
• Exercises

Wednesday, June 17

09.00 - 09.15 Recap

09.15 - 12.00 Managing Interest Rate Risk

• Structural Management
  • A/L mix and pricing
  • Balance sheet re-engineering
• Strategies for Interest Rate Risk in Portfolio Management
  • Matching, immunization, active management
• Off-Balance Sheet Hedging Strategies
  • Using FRAs and futures to manage re-pricing risk
  • Using Interest Rate Swaps
  • Using interest rate options to cap funding costs
  • Managing pre-payment Risk
  • Managing multi-dimensional IRR
  • Managing contingent IRR
• Case: Using Derivatives in "NoHope Bank"

12.00 - 13.00 Lunch

13.00 - 16.30 Measuring and Managing FX Risk

• FX Risk and Exposure
  • Economic exposure
  • Translation exposure
  • Transaction and future cash flow exposure
• FX VaR
• ALM in a Multi-currency Balance Sheet Environment
• Mitigating FX Risk
  • Internal techniques
  • Forwards and swaps
  • Currency options
• Case: FX Risk Management in "NoHope Bank"
• Exercises

Thursday, June 18

09.00 - 09.15 Recap

09.15 - 12.00 Measuring and Managing Credit Risk in an ALM Framework

• Types of Credit Risk
• Ways of Measuring Credit Risk
  • Traditional (key ratios)
  • Actuarial approach
  • Option-theoretical approach
• Credit Risk According to Basel
  • Use of internal ratings
• Ways of Mitigating Credit Risk
  • Collateral management
  • Netting
  • Credit derivatives
• Balance Sheet Management and Loan Pricing
• The Role of "Asset Securitization" in ALM
  • Creating liquidity
  • Transferring credit risk
  • Balance sheet restructuring
• Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Liquidity Management

• Monitoring and Measuring Liquidity
  • Deterministic and stochastic cash flows
  • Run-off gaps
  • Cumulative gaps
  • Maximum cumulative outflows
  • Dynamic liquidity
• Techniques and Instruments for Liquidity Management
  • Structural management
  • Cash flow projections
  • Borrowing facilities and programs
  • Using repos

Friday, June 19

09.00 - 09.15 Recap

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