Details

Asset Liability Management Optimisation

A Practitioner's Guide to Balance Sheet Management and Remodelling
Wiley Finance 1. Aufl.

von: Beata Lubinska
74,99 €
Verlag:	Wiley
Format:	EPUB
Veröffentl.:	24.02.2020
ISBN/EAN:	9781119635512
Sprache:	englisch
Anzahl Seiten:	240

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Beschreibungen

Titelbeschreibung

An advanced method for financial institutions to optimize Asset Liability Management for maximized return and minimized risk Financial institutions today are facing daunting regulatory and economic challenges. As they manage bank regulation and competition, institutions are also optimizing their Asset Liability Management (ALM) operations. The function of the ALM unit today goes beyond risk management related to the banking book into managing regulatory capital and positioning the balance sheet to maximize profit. Asset Liability Management Optimization: A Practitioner's Guide to Balance Sheet Management and Remodelling offers a step-by-step process for modeling and reshaping a bank's balance sheet. Based on the author's extensive research, it describes how to apply a quantifiable optimization method to help maximize asset return and minimize funding cost in the banking book. ALM ranks as a key component of any financial institution's overall operating strategy. Now, financial professionals can use an advanced solution for optimizing ALM. This book takes a closer look at the evolving role of the ALM function and the target position of the banking book. It provides strategies for active management, structuring, and hedging of a bank balance sheet, while also exploring additional topics related to ALM. <ul> <li>A description of the Funds Transfer Pricing (FTP) process related to a bank’s target position</li> <li>Detailed examinations of interest rate risk in the banking book (IRRBB)</li> <li>Discussion of Basel III regulatory requirements and maturity gap analysis </li> <li>Overview of customer behavior, along with its impact on interest rate and liquidity risk</li> <li>Practical spreadsheet models (NII sensitivity and EVE volatility IRRBB model, simplified optimization model for minimization of average funding cost for a bank and an example of behavioral model for Non-Maturing Deposits)</li> <li>Explorations of model risk, sensitivity analysis, and case studies </li> </ul> The optimization techniques found in Asset Liability Management Optimization can prove vital to financial professionals who are tasked with maximizing asset return and reducing funding costs as a critical part of business objectives.

Inhaltsverzeichnis

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

Autorenportrait

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. Visit http://www.bladvisory.com/ for more information.

Back cover copy

Praise for Asset Liability Management Optimisation 'This book is a key reference for Treasury professionals at financial institutions. Beata Lubinska has produced an innovative book that covers in a practical way the latest trends in asset liability management.' —Juan Ramirez, Deloitte LLP 'Asset Liability Management Optimisation is a classic reference book for bankers like me. I have worked in the banking sector – predominantly in risk management and internal audit – for almost 20 years and I am very happy to endorse this book. Researchers, students and banking professionals will find it helpful in understanding liquidity risk management and balance sheet management. I hope Dr. Beata Lubinska would write more books periodically as she is an expert on the subject matter and has adequate expertise and industry experience in banking and consultancy and assurance services. Definitely her experience in Big4 and banking has made this book a very valuable reference material.' —Harish Nair, Senior Manager, National Bank Oman Optimise your banking book with a quantifiable approach Asset Liability Management Optimisation: A Practitioner's Guide to Balance Sheet Management and Remodelling offers a step-by-step process for modelling and reshaping a bank's balance sheet. Based on the author's extensive research, it describes how to apply a quantifiable optimisation method to help maximise asset return and minimise funding cost in the banking book. This book takes a closer look at the evolving role of the ALM function and the target position of the banking book. It provides strategies for active management, structuring, and hedging of a bank balance sheet, while also exploring additional topics related to ALM. <ul> <li>A description of the Funds Transfer Pricing (FTP) process related to a bank's target position</li> <li>Detailed examinations of interest rate risk in the banking book (IRRBB)</li> <li>Discussion of Basel III regulatory requirements and maturity gap analysis</li> <li>Overview of customer behavior, along with its impact on interest rate and liquidity risk</li> <li>Practical spreadsheet models (NII sensitivity and EVE volatility IRRBB model, simplified optimisation model for minimisation of average funding cost for a bank and an example of behavioral model for Non-Maturing Deposits)</li> <li>Explorations of model risk, sensitivity analysis, and case studies</li> </ul>