An advanced method for financial institutions to optimise Asset Liability Management for maximised return and minimised risk Virtually all financial institutions rely on Asset Liability Management units to match term structures and cash flows of their asset liability portfolios. This has always been key to maximising returns while minimising risk. However, the role of the ALM unit has evolved and expanded in recent years. Heavy regulation and increased competition have forced banks to constantly seek ways to improve their ALM operations. ALM units must now actively manage regulatory capital…mehr
An advanced method for financial institutions to optimise Asset Liability Management for maximised return and minimised risk Virtually all financial institutions rely on Asset Liability Management units to match term structures and cash flows of their asset liability portfolios. This has always been key to maximising returns while minimising risk. However, the role of the ALM unit has evolved and expanded in recent years. Heavy regulation and increased competition have forced banks to constantly seek ways to improve their ALM operations. ALM units must now actively manage regulatory capital and monitor the banking book to ensure their institutions remain profitable and increasing competition for resources has forced Asset Liability Managers to extend beyond the risk management field. These are new challenges. Luckily, there are practical ways to overcome them. Asset Liability Management Optimisation will teach you how to develop an ALM operation built to thrive in today's world. Author Beata Lubinska emphasises a quantifiable and holistic approach, in which interest rate risk and liquidity risk management are combined, helping ALM units precisely determine whether their efforts have yielded genuine improvements. This book is for any ALM professional or unit eager to adapt to new responsibilities and expectations. ALM operations must evolve for financial institutions to succeed. This invaluable guide explains how they can. Visit http: //www.bladvisory.com/ for more information.Hinweis: Dieser Artikel kann nur an eine deutsche Lieferadresse ausgeliefert werden.
BEATA LUBINSKA is a Founder of BL Advisory & Consulting, a boutique firm based in London. Previously, she has worked in senior positions in a number of financial services companies such as GE Capital, Deloitte, Standard Chartered Bank, and MeDirect Group in London, where her focus was mainly on Interest Rate Risk in the Banking Book (IRRBB), Market Risk, Balance Sheet Management, and Funds Transfer Pricing. She has over 16 years of practical experience developed in the Asset Liability management space gained both in Milan and London. Beata is also a faculty member at The Certificate of Bank Treasury Risk Management, where she teaches optimisation techniques in Asset Liability Management. She holds a PhD in Finance from Wroclaw University of Economics.
Inhaltsangabe
Foreword ix About the Author xi Introduction xiii Chapter 1 ALM of the Banking Book 1 The Role of Asset Liability Management in Commercial Banks 1 Overview of Financial Risks Existing in the Banking Book 7 Regulatory Requirements - Basel III 13 Capital Requirements According to Basel III/CRD IV 17 Selective Review of the Literature Related to ALM and Integrated Management of the Interest Rate Risk and Liquidity Risk in Commercial Banks 19 Chapter 2 Methods of Measurement and Management of the Interest Rate Risk and Liquidity Risk 23 Interest Rate Risk in the Banking Book - Measurement and Management 24 Exposure to Short-Term Interest Rate Risk - Maturity Gap Analysis 24 Maturity Gap Analysis from the Economic Value Perspective 33 Liquidity Risk in the Banking Book - Measurement and Management 41 Short-Term Liquidity Management Principles 45 Medium Long-Term Liquidity - The Principles of Structural Liquidity Management 46 The Role of Funds Transfer Pricing in Banks 50 Pricing of Different Products in the Banking Book 54 Behaviouralisation Concept in FTP 57 Chapter 3 Customer Behaviour and Its Impact on Interest Rate and Liquidity Risk 61 Significance and Impact of Behavioural Issues in the Banking Book 61 Modelling of Customers' Deposits - Liabilities Side 63 Balance Sensitivity Modelling 68 Modelling of Loans with Early Redemption Optionality -Assets Side 70 Statistical Prepayments 70 Financial Prepayments 71 Chapter 4 Formulation of the Optimisation Process and Articulation of the Decision Model 73 The Optimisation Method Applied to the Banking Book 74 Introduction of the Optimisation Concept 75 Definition of the Initial Banking Book Profile 79 Building the Objective and Constraint Functions in the Optimisation Process 81 The Importance of Model Sensitivity Analysis 96 Definition of the Sensitivity Parameters for the Optimisation Model 98 'Significant Changes in Interest Rates' Scenario 98 Changes in the Initial Proportions of the Asset Base 100 Changes in the Output of the Deposit Characterisation Model - Balance Volatility, Balance Sensitivity, and Average Life of the Product 100 Introduction of the CPR into the Model 100 Chapter 5 Practical Example of the Optimisation Process and Quantification of the Economic Impact under Base and Stress Scenarios 101 Case Study: Economic Impact from the Optimisation Model under Baseline and Sensitivity Scenarios for Bank 1 102 Case Study: Economic Impact from the Optimisation Model under Baseline and Sensitivity Scenarios for Bank 2 114 Conclusions 125 Appendix 1 Details of the Analysis Performed for Bank 1 129 Appendix 2 Details of the Analysis Performed for Bank 2 157 Bibliography 209 Index 213
Foreword ix About the Author xi Introduction xiii Chapter 1 ALM of the Banking Book 1 The Role of Asset Liability Management in Commercial Banks 1 Overview of Financial Risks Existing in the Banking Book 7 Regulatory Requirements - Basel III 13 Capital Requirements According to Basel III/CRD IV 17 Selective Review of the Literature Related to ALM and Integrated Management of the Interest Rate Risk and Liquidity Risk in Commercial Banks 19 Chapter 2 Methods of Measurement and Management of the Interest Rate Risk and Liquidity Risk 23 Interest Rate Risk in the Banking Book - Measurement and Management 24 Exposure to Short-Term Interest Rate Risk - Maturity Gap Analysis 24 Maturity Gap Analysis from the Economic Value Perspective 33 Liquidity Risk in the Banking Book - Measurement and Management 41 Short-Term Liquidity Management Principles 45 Medium Long-Term Liquidity - The Principles of Structural Liquidity Management 46 The Role of Funds Transfer Pricing in Banks 50 Pricing of Different Products in the Banking Book 54 Behaviouralisation Concept in FTP 57 Chapter 3 Customer Behaviour and Its Impact on Interest Rate and Liquidity Risk 61 Significance and Impact of Behavioural Issues in the Banking Book 61 Modelling of Customers' Deposits - Liabilities Side 63 Balance Sensitivity Modelling 68 Modelling of Loans with Early Redemption Optionality -Assets Side 70 Statistical Prepayments 70 Financial Prepayments 71 Chapter 4 Formulation of the Optimisation Process and Articulation of the Decision Model 73 The Optimisation Method Applied to the Banking Book 74 Introduction of the Optimisation Concept 75 Definition of the Initial Banking Book Profile 79 Building the Objective and Constraint Functions in the Optimisation Process 81 The Importance of Model Sensitivity Analysis 96 Definition of the Sensitivity Parameters for the Optimisation Model 98 'Significant Changes in Interest Rates' Scenario 98 Changes in the Initial Proportions of the Asset Base 100 Changes in the Output of the Deposit Characterisation Model - Balance Volatility, Balance Sensitivity, and Average Life of the Product 100 Introduction of the CPR into the Model 100 Chapter 5 Practical Example of the Optimisation Process and Quantification of the Economic Impact under Base and Stress Scenarios 101 Case Study: Economic Impact from the Optimisation Model under Baseline and Sensitivity Scenarios for Bank 1 102 Case Study: Economic Impact from the Optimisation Model under Baseline and Sensitivity Scenarios for Bank 2 114 Conclusions 125 Appendix 1 Details of the Analysis Performed for Bank 1 129 Appendix 2 Details of the Analysis Performed for Bank 2 157 Bibliography 209 Index 213
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