Alm Asset Liability MG
Alm Asset Liability MG
Alm Asset Liability MG
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ASSET LIABILITY MANAGEMENT
Significance and Basic Methods
Dr Philip Symes
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Introduction
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Contents
"rice sensiti$ities
(ap management
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Role of Banks
+ank,s own capital pro$ides the liuidity cushion between deposits and
loans
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Return on Equit E!a"#le
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Return on Equit E!a"#le
!imple example.
%7 cost 3 45.896
Assets 3 455;
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Return on Equit E!a"#le
Net profit 3
(ross profit / general
expenses
3 4.@B9 / 5.9
3 4.:B9
Net margin 3
Net profit 1 &e$enue
3 4.:B9 1 44.:
3 5.47?9
Asset utilisation 3
re$enue 1 assets
3 44 1 455
3 5.44
&eturn on assets 3
Net margin < Asset utilisation
3 5.47?9 < 5.44
3 5.54:4:
Le$erage 3
Assets 1 %4 capital
3 455 1 8
3 4:.7?B
&eturn on euity 3
&eturn on assets < Le$erage
3 5.54:4: < 4:.7?B
3 5.754@9
3 )*%) +
&
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Risk Manage"ent
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Risk Manage"ent
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Interest Rates
!imple interest
#ompound interest
Eields
2orward rates
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Interest Rates
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Interest Rates
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Interest Rates
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,rice Sensiti-ities
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,rice Sensiti-ities
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,rice Sensiti-ities
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,rice Sensiti-ities
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,rice Sensiti-ities
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,rice Sensiti-ities
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,rice Sensiti-ities
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,rice Sensiti-ities
in$ersely on yield.
-uration
Maturity
-uration of par loans
-uration of Dero coupon loans
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,rice Sensiti-ities
2loating rate loans are effecti$ely fixed rate loans for the
current interest calculation period.
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,rice Sensiti-ities
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Ga# Manage"ent
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Ga# Manage"ent
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Ga# Manage"ent
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Ga# Manage"ent
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Ga# Manage"ent
!CL offer.
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Ga# Manage"ent
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4se of S5a#s6 Ca#s 7 8loors in ALM
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4se of S5a#s6 Ca#s 7 8loors in ALM
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4se of S5a#s6 Ca#s 7 8loors in ALM
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4se of S5a#s6 Ca#s 7 8loors in ALM
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4se of S5a#s6 Ca#s 7 8loors in ALM
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4se of S5a#s6 Ca#s 7 8loors in ALM
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4se of S5a#s6 Ca#s 7 8loors in ALM
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4se of S5a#s6 Ca#s 7 8loors in ALM
+ut* if you,re not sure about the rates but want to hedge*
buy an option to switch* e.g..
=
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'nterest rate
2loating rate debt
=
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'nterest rate
!elling a cap to subsidise the first one
=
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'nterest rate
+uying a cap for protection
=
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'nterest rate
!elling a floor to subsidise the cap. collar
3&
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4se of S5a#s6 Ca#s 7 8loors in ALM
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4se of S5a#s6 Ca#s 7 8loors in ALM
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Su""ar