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FINANCIAL MARKET COURSES

Asset & Liability Management (ALM) – Options, FTP & Firm Value

The ALM function is about enhancing value, not merely preserving it. This course addresses a particularly tricky form of market risk in the form of optionality, as well as examining ways in which the central role of the ALM function allows it to efficiently undertake tasks affecting the entire value of an institution. The course begins by examining the implications of optionality for a banking portfolio, and then addresses the firm-wide issues of FTP and the risk monitoring of a bank's value.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Explain the implicit optionality existing in certain banking products, and how the values can be measured and managed

    Identify the objectives of funds transfer pricing (FTP) and the differing ways in which FTP can be manifested

    Explain how the risk monitoring and management of the ALM function ties into firm-wide measurements of profitability and risk

  • COURSE OUTLINE

    Topic 1: Options

    Interest Rate Sensitive & Contingent Options

    Negative Convexity

    Mortgages & Other More Complex Options

    Effective Duration

    Sensitivity to Volatility

    Topic 2: Funds Transfer Pricing (FTP)

    FTP Objectives

    The Internal Bank

    Matched Maturity Marginal Funds Transfer Pricing (MMFTP)

    Risk Transfer

    Profitability Allocation

    Economic & Business Incentives

    Topic 3: ALM & the Value of the Firm

    The Hub & Limits

    Earnings at Risk

    Value at Risk (VAR)

    Risk-Adjusted Returns

    Enhancing Value through ALM

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    90 Minutes

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