Asset & Liability Management Masterclass

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1. Scope of ALM:

• The concept of asset liability management
• The various types of market risks and their implications on the institution
• The short term and the long term risks

2. Objectives of ALM:

• Objectives of asset liability management
• The target measures and its importance
• The dichotomy of the two target measures, viz., NII and EVPE

3. Growing Relevance of ALM:

• The significance of ALM function
• The various influencing factors financial volatility, interest rate risk and others that contribute to the growing relevance of ALM
• The seven dimensions of interest rate risk
• The various regulatory initiatives and the managements recognition of ALM

4. A Nine-part Framework for ALM:

• The purpose and significance of ALM framework
• In detail the nine-components of ALM framework
• The role, relevance and application of the framework

5. Strategies of ALM:

• The various types of strategies in ALM process
• The difference between the various strategies that can be used on the basis of parameters such as speed, flexibility, costs and risk involved

6. Yield Curve Analysis:

• The concept of yield curve and its types
• The various theories under yield curve analysis
• The types of interest rates and its computation
• The applications of yield curve analysis

7. Interest Rate Gap Analysis – I:

• The concept of gap analysis
• The method of preparation of gap report
• The process of calculating gap, cumulative gap and related measures
• The critical factors that have to be considered while slotting balance sheet items in the gap report
• How to identify the key positions in gap report

8. Interest Rate Gap Analysis – II:

• The computation of income statement impact of gap
• The process of setting up gap limits
• The various restructuring strategies to be followed if gap is not within limits
• The strengths and limitations of gap analysis

9. Interest Rate Gap Analysis – III:

This course introduces you to the various restructuring strategies to be followed if gap is not within limits. It elaborates on the on and off-balance strategies for controlling gap. The following strategies are discussed:

• Asset Restructuring Strategy
• Liability Restructuring Strategy
• Growth Strategy
• Shrinkage Strategy
• Off-Balance Sheet Strategy

10. Simulation and Scenario Analysis – I:

• The concept of simulation
• The process of measuring risk positions or simulating various accounts and setting risk limits
• The distinction between various methods of choosing scenarios for simulation
• The ways of presenting the outcomes of simulation
• The various criteria used for selecting an appropriate business strategy
• How to avoid analysis paralysis
• The components and issues involved in simulation modeling
• The concept of stress testing and backtesting

11. Simulation and Scenario Analysis – II:

• Modeling of non-specific maturity items
• The techniques for identifying various factors that affect account balances and for analyzing rate sensitivity of core deposits
• The need to align business plan with various rate scenarios
• The process and steps involved in Monte Carlo Simulation
• The advantages and disadvantages of Monte Carlo Simulation

12. Duration I:

• The concept of duration and modified duration
• The application of formulae for duration and modified duration
• The computation of different types of bonds
• The relationship between duration, yield, coupon, maturity of a bond and thereby comprehend the properties of duration

13. Duration II:

• The computation of duration of perpetual bonds, embedded options and floaters
• The computation of duration of a portfolio
• The application of the concept of duration for off-balance sheet items
• The effects of approximation involved while using modified duration
• The difference between gap and duration
• The strategies of risk management
• The strengths and limitations of duration

14. Duration III:

This course explains duration of equity and leverages and other items. It helps the user understand:

• The calculation of duration of equity
• The designing of hedging strategies to manage the interest rate sensitivity of the balance sheet

15. Duration IV:

This unit introduces you to the duration of complex items. It helps the user understand:

• Computation of duration of complex items by using the concept of portfolio replication
• Duration calculations using zero coupon yields for finding present value of cash flows

16. Strategies for Interest Risk Management:

This course elaborates on the five strategies for interest rate risk management using duration:

• Dedication
• Immunization
• Indexation
• Active Management
• Rate Anticipation

17. Basis Point Value:

• The concept of basis point value
• The change in the value of the portfolio due to one basis point change in the interest rates
• The relationship between BPV, duration and modified duration
• The calculation of BPV of on-balance sheet and off-balance sheet items
• The computation of BPV of a portfolio
• The advantages of BPV as a risk control technique

18. Convexity:

• The concept of convexity and its properties
• The calculation of convexity of different types of bonds
• The computation of convexity of a portfolio
• The impact of price change on convexity
• The concept of positive and negative convexity

19. Review of Statistical Concepts:

• The various statistical measures viz., measures of central tendency and measures of dispersion
• The statistical relationship between the standard deviation and confidence intervals for normal distributions
• The concept of correlation and volatility and the methods to calculate them

20. Value at Risk – I:

• The concept of Value at Risk
• The concept of trading and banking book
• The various methodologies of estimating VaR and their strengths and weaknesses
• The comparison between the strength and limitation of VaR

21. Value at Risk – II:

• The computation of VaR of foreign exchange spot, foreign exchange options positions, common shares/stocks, fixed income portfolio
• The various applications of VaR

22. Application of Analytical Techniques:

• The framework of the analytical techniques – gap, duration, simulation and value at risk
• The concept and assumption under each technique
• The comparison and analysis of each of the techniques across various parameters
• The application of techniques with real life case studies

23. AL Organization:

• The various elements of AL Organization viz., the ALCO, the AL sub-committee, and the ALCO support group
• The scope of ALCO
• The key issues of centralization and decentralization

24. ALCO Meetings:

This course discusses about the meetings in Asset Liability Organization. It helps the user understand:

• The operational aspects of ALCO meetings
• The data requirements of ALCO meetings

25. ALM Policies and Procedures:

This course discusses about ALM policies and procedures. It helps the user understand:

• The ALM policy and the procedure manual
• The contents of the ALCO reports

26. Funds Transfer Pricing-Practices

This course discusses the fundamental concepts of Funds Transfer Pricing (FTP). It helps the user understand:

• The concept of funds transfer pricing
• The various risks affecting the income and value of an institution

27. Funds Transfer Pricing:

• This course presents an analysis of various techniques used in Funds Transfer Pricing.

28. Audit of ALM:

This course gives an introduction of the concept of audit of ALM. It helps the user understand:

• The significance and concept of audit of ALM function
• The overall approach and scope for the function of ALM audit
• In details the applications of the audit process
• The various types of AL models and examine different scenarios and assumptions involved in the audit

$400 – 12 Month Program – Enroll Now

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