asset liability management - intro
Post on 21-Oct-2014
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Asset Liability Management for banking. Quick review guideTRANSCRIPT
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Asset Liability Management
Jawwad Ahmed Farid
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ALM at a glance
Value/
Income
Maturities
Interest Rates
Repricing
Funding
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Dimensions
Maturity
Liquidity
Funding
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ALM
Equity Liabilities Assets
Re-price Liabilities
Re-price Assets
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Risk - Return
Metric or Target
Account
Change in Interest Income
Change in Market Value
Driver Change in
Interest Rate
Setting Balance
Sheet Income
Statement
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ALM Framework - I
Business Model
Risk Analysis
Financial Model
Liquidity Model
Capital Model
Stress Tests
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ALM – Framework - II
Value at Risk
Simulation ALM Portfolio Review
Capital
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Building the ALM model
Balance Sheet
P&L Valuation
ALM Reports Interest Rate
Generator Calculation
Engine
Presentation
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ALM Cheat Sheet
Sigma
Duration
Convexity
Asset Sensitive
Liability Sensitive
Value at Risk
Hedging Tools
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ALM Cheat Sheet
See link above for ALM convention & FAQ’s • R.P Reprice • As Assets • L Liabilities • NII Net Interest Income (PnL) • MVE Market Value of Equity (Value) • EaR Earning at Risk (NII with VaR) • Asset Sensitive • Liability Sensitive
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ALM Cheat Sheet
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Liquidity Risk & Stress Testing
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Name Crisis
Change in market conditions
Operational Loss
Asset related Loss
Regulatory scandal
Accounting Scandal
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Liquidity Crisis Name Crisis
Asset and share price under
pressure
Rating Downgrad
e
Counterparty Limits
Withdrawn or
restricted
Margin and
Collateral Calls
Liquidity driven
Asset Sale
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Cash Generation • Repurchase agreements
• Discount window
• Outright sale at depressed prices
• Off market settlement for netting off liabilities
Asset Sales
• Secured Term loans
• Equity Injection
• Asset Swap for Cash
• Regulatory driven cash injection or take over
Cash Generation
• Realignment and restructuring of resources
• Discontinued operations
• Limit management
• Centralization of cash management
Cash conservation
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Bear Stearns
Under 90 days
Crisis in full bloom 20th December 2007 – Q4 Loss
JP Morgan Takeover 16th
March 2008 @ 2$ a share
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Lehman
Under 30 days
Crisis in full bloom 19th August 2008 – Q3 Loss & write
downs
Lehman Bankruptcy Filing
15th Sep 2008
9th June: $45 billion in liquidity, 20% reduction risky assets, leverage from 31:1 to 25:1. Survived March Bear fallout. Raised US$ 10 billion through capital issues in April/June
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Jawwad Ahmed Farid
alchemya.com FinanceTrainingCourse.com