ALM 2: Advanced Tools and Techniques

Value vs. Results Management

• Limits of standard indicators: dead ends and results
• Market value vs. Earning at risk

• Practical workshop

• Construct a virtual bank and use of various ALM methods

Dynamics of Retail Banking

• Necessity of a dynamic approach
• Uncovering risks: level, slope, delay

Anticipating Behaviours

• Estimating customers' behaviour
• Econometric techniques of estimation
• Limits of the quantitative approach

Application to Implicit Options

• Early redemption
• Renegotiation

• Practical workshop

• Construct a simulator applied to fixed-rate loans

Managing Inflation Risk

• Account analysis
• Cash and derivative hedging tools
• Nominal rates and inflation

• Practical workshop

• Analyse spread risk

Managing the Constraints of IAS

• Held-to-maturity vs. Available for sale
• Fair value hedge, Cash flow hedge, Portfolio fair value hedge, Carved out fair value hedge
• Financial information

• Practical workshop

• Study a bank’s financial statements

Residual Risks

• Liquidity risk
• Interest rate risk: convexity, fixing, basis, constant maturity references
• FX risk
• Hidden options
• Counterparty risk

• Practical workshop

• Management of short-term liquidity ratio
• Determine medium and long term liquidity gaps

Accounting and ALM

• IAS 39
• Hedging
• Embedded derivatives
• Internal contracts
• Carve Out and Interest Margin hedge