This financial management course designed by experts at the International Faculty of Finance helps you get the right balance when confronting asset and liability management processes with banks and financial institutions.

This interactive training course rapidly builds the knowledge and skills in the ALM arena. By the end of the course, you will enhance your practical understanding of strategic balance sheet management issues, such as the impact of Basel II and IAS requirements on ALM decision-making.

You will be more prepared to appreciate the conflicts that can arise at the ALCO level in the application of both earnings and valuation methodologies. Overall, you will have a comprehensive understanding of symmetric and asymmetric hedging techniques and develop effective balance sheet hedging strategies banking and credit management.

Who should attend?

This course is suitable for professionals looking to explore the major approaches to the measurement and management of structural risk and hedging techniques.

Training Course Content

Successfully Implementing ALM

• Objectives of the modern ALCO
• Key success factors
• What targets to set?
• What risks measuring?
• Current trends in A/L management

Sample Banks Static Risk Assessment

• Overview
• Bank balance sheet review
• Financial reports
• Which bank do you want to be?

Strategic Liquidity Management

• Liquidity overview
• Cost of liquidity
• Liquidity and ALCO

Strategic Capital Management

• The role of capital
• Bank regulatory capital requirements
• Focus on economic capital.
• The role of ALCO in capital planning

Funds Transfer Pricing

• Role of FTP
• Transfer pricing as a management tool
• FTP and ALCO

Understanding Structural Risk

• Managing disparate operational structures
• Identifying natural hedges

Quantifying Banking Book Risk

GAP Analysis

• Benefits and drawbacks
• Basic calculations
• Symmetry versus asymmetry

Valuation and Price Risk

• Valuing a bond
• Macaulay / modified / effective duration.
• Duration and banking book risk

Static Risk Evaluation

• Comparisons so far incorporating GAP and duration risk elements.
• Which Bank do you want to be?
• Applying a balanced risk/reward approach

Day 2

• Managing Banking Book Risk
• Hedging in ALM
  • Interest rate swaps
• -Structure
  • Presenting in GAP and valuation reports
  • Uses at ALCO
• Hedging concepts and objectives
• Symmetric Hedging Decisions
• Dynamic Simulation Analysis
  • Basic approach
  • Benefits and drawbacks
  • Deterministic simulation approach
  • Rate shock analysis
• Interpreting ALCO Reports (Introduction)
• Assessing Hedge Effectiveness
  • GAP
  • Valuation and price sensitivity
  • Rate shocks
• Hedge Effectiveness Round Table
• Symmetric Hedge Simulation Results
• Final Symmetric Hedging Decisions
• Day 3
• Asymmetric Risk Analysis
• Asymmetric Risk
  • Evaluating embedded options
  • Hedging with caps and floors
• Sample Bank Simulation Results
  • Review of rate shock profiles
  • Asymmetric risk assessments
  • Static vs dynamic risk comparisons
• Asymmetric Hedge Decisions
  • Assessing simulated risk profiles
  • Asymmetric hedging strategies
• Asymmetric Hedge Simulation Results
  • Risk assessments and scores
• Value at Risk vs. Earnings at Risk
  • Methodologies compared.
• –VaR
• –EaR
  • Valuing the balance sheet
  • Implications for ALM
• Advanced Analysis – Monte Carlo Overview
  • Monte Carlo process explained.
  • Methodologies compared.
  • Benefits and drawbacks
• Applying Monte Carlo Analysis
  • Assessing path risk
  • Implications for A/LM
• Final Sample Bank Reviews
• Round Table and Course Closure