Course Structure

This intermediate-level programme is designed to give delegates practical "hands-on" expertise for immediate implementation in their own organizations. The programme begins by reviewing strategic and tactical considerations in traditional ALM frameworks and extends this analysis to include credit activities, alternative investments and SIVs, derivatives applications, consumer liability products, structured financing, and capital strategies. The programme includes optional late-afternoon sessions on each of the first three days to explore specialised issues in ALM for delegates from different backgrounds and institutions, including: strategic designs of consumer financial products, risks in alternative investment portfolios and liability-driven and immunisation strategies in ALM.

The programme makes extensive use of short problems, case studies, Excel exercises, and Bloomberg information.

Delegates should have a basic understanding of financial markets and products. Pre-course review material will be available to help those wishing to review basic concepts before the programme.

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• Chief Financial Officers
• Treasury Managers
• Asset & Liability Managers
• Consumer Product Managers
• Market and Credit Risk Managers
• Investment Professionals
• Controllers and Finance
• Portfolio Managers
• Securities Analysts
• Insurance Executives
• Pension Fund Managers and Trustees
• Auditors/Accountants
• MIS and Operations Executives
• Budgeting & Planning Executives
• Central Bankers (Supervision Department and Reserve Management)

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Day 1

ALM Introduction and Overview

• The roles of ALM in various financial institutions

• Growing portfolio of risk management as part of
  the ALM

• Regulatory, financial markets, and operations
  perspectives of ALM

• Mapping of financial assets and liabilities to various types of risks

• Organisational requirements for ALM

• The role of treasury and finance in ALM

• Institutional characteristics of successful ALM

• Current market stresses and challenges to the
  practice of ALM going forward

ALM Frameworks for Net Interest Income

• Overview of interest rate, liquidity, and currency
  gaps

• Identifying interest-rate sensitive assets and
  liabilities that impact net interest income (NII)

• Traditional gap analysis of standard asset and
  liability products

• Basis and yield curve twist risks

• Measuring NII risks with static and sensitivity
  analysis

• Analysis of impacts on cash flow, accounting
  performance, and economic value

• Multi-currency NII ALM techniques and
  strategies

• Complications from financial, contractual,
  and real options in assets and liabilities

• Estimating impacts of volatility and
  correlations in assets and liabilities

• Stress testing techniques in ALM

• NII ALM impacts on liquidity and capital
  management

• Measuring cost-to-close exposures

Teams work: short Excel exercises and case studies

Managing NII Risks with Interest Rate and Foreign
Exchange Derivatives

• Review of interest rate and foreign exchange
  derivatives used in ALM

• Pricing forwards, futures, swaps, and options
  using integrated frameworks

• Mark-to-market and mark-to-model techniques

• Applications of interest rate derivatives in NII risk management

• Hedging strategies and effectiveness

• Accounting, liquidity, and counterparty concerns
  from uses of derivatives in ALM

• Managing cost-to-close exposure

Teams work: short Excel exercises and case studies
 

Optional Specialised Module: Consumer Financial
Products in ALM

• The role of retail and commercial deposits in ALM

• Estimating deposit runoff, elasticity, and liquidity
  impacts

• Structuring, pricing, and marketing various types
  of deposits in ALM

• Characteristics of structured products, insurance
  and other alternative consumer products

• Organisational interactions of consumer products
  businesses in ALM

• Transfer pricing policies of consumer funding to
  treasury

Teams work: short Excel exercises and case studies
 

Day 2
Statistical Techniques in ALM

• Review of basic statistical distributions, moments, and techniques used in modeling

• Measuring risks with standard parametric
  approaches

• Value at Risk (VaR) techniques

• Advantages and limitations of VaR

• Correlated modeling of risk in ALM

• Measuring risks with Monte Carlo simulation
  techniques

• Building non-standard Monte Carlo risk modeling

Teams work: short Excel exercises and case studies

Market Risks in Asset Portfolios and ALM

• Trading, available for sale, and investment
  portfolios in various types of financial institutions

• Portfolio mean – variance metrics and controls

• Risks in bonds and fixed income portfolios

• Duration, DV01, convexity, VaR and other
  analytical frameworks for fixed income

• Risks in commercial and retail mortgages, MBS,
  and sub-prime portfolios

• Risks in off-balance sheet commitments and
  contingencies

• Risks in derivatives portfolios

• Risks in credit card portfolios and various ABS
  products

• Risks in equity portfolios and equity arbitrage
  strategies

• Specific risks in portfolios of corporate bonds and
  equities

• Understanding equity beta and alpha in ALM
  context

• Establishing policies and controls for market risks

Teams work: short Excel exercises and case studies

Credit Risks in Asset Portfolios and ALM

• Credit risks in commercial/retail loans, credit
  risky bonds, and derivatives

• Interpreting and using credit spreads

• Expected and unexpected credit losses

• Credit risk metrics: probability of default (PD),
  exposure at default (EAD), loss given default
  (LGD), and credit correlation

• The linkage of PD, EAD, and LGD to credit spreads

• Default intensities and migrations

• Estimating recovery rates and LGD from real
  world experience

• Estimating default probabilities from current
  market data

• Real-world versus risk-neutral default probabilities

• Estimating and using Credit Value at Risk in ALM
  frameworks

• Establishing policies and controls for credit
  portfolio risks

Teams work: short Excel exercises and case studies

Optional Specialised Module: ALM Risks in
Alternative Investments

• Structured investment products

• Capital guaranteed notes

• Overview of CDO products

• Constant Proportional Portfolio Insurance (CPPI)
  and CPDO products

• Arbitrage portfolios

• Recent challenges from Special Investment
  Vehicles (SIVs)

• Special liquidity and other concerns in alternative
  investments and vehicles

Teams work: short Excel exercises and case studies
 

Day 3
Credit Portfolio Risk Management Techniques in
ALM

• Benefits and challenges of active credit portfolio
  risk management

• Credit structuring alternatives as ALM risk
  mitigants

• Using credit derivatives to manage and/or
  securitise credit risk

• Review of credit default swaps (CDS), credit
  linked notes, and other credit derivatives products

• CDS pricing and mark-to-market valuation

• Comparing and contrasting credit swaps and
  securitised CDO/CLOs/CBOs

• CDS and cash/hybrid CDO/CLO/CBP product
  strategies in ALM portfolio management

• Overview of copula techniques models and
  their applications in pricing correlation in ALM

Teams work: short Excel exercises and case studies

Operational Risks in ALM

• Operational risk management framework in ALM

• Evidence of operational failures

• Key components of operational risk

• Specific tools and models for operational risks in
  ALM

• Operational value-at-risk

• Operational risk transfer techniques

Teams work: short Excel exercises and case studies

Financing Strategies in ALM

• Defining the mix of financing of alternatives

• The relationship of financing versus capital

• Developing and maintaining financial market
  access

• Measuring costs of financing alternatives

• Framework for optimising financing choices

• Managing liquidity and maturity profile

• Maintaining desired rating and financial flexibility

• Market risks inherent in financing choices

• Use of derivatives in financing strategies

• Securitisation and credit enhancement financing
  strategies

• Impact of regulatory capital requirements on
  financing strategies

Teams work: short Excel exercises and case studies

Optional Specialised Module: Strategic ALM

• Products and Techniques

• Liability-driven investment strategies

• Structured investment products as strategic ALM

• Opportunities for structured financing products
  and strategies

• Off-balance sheet and special purpose vehicle
  financing

Teams work: short Excel exercises and case studies
 

Day 4
ALM and Liquidity

• What can go wrong in liquidity management

• Examples and lessons of recent liquidity
  challenges

• Linkages of liquidity risks to market, credit, and
  operations risks

• Developing policies and controls on liquidity risk
  management

• Elements of liquidity contingency planning

• The role of ALM in liquidity management

Teams work: short Excel exercises and case studies

ALM and Regulatory Capital

• The regulatory environment for financial
  institutions

• The impacts of Basel II on the practice of ALM

• Linkage of regulatory capital to risk portfolios

• Regulatory capital mitigation strategies

• Regulatory impact of financing and capital decisions

• Relationship of regulatory capital and economic
  capital

Teams work: short Excel exercises and case studies

ALM and Financial Performance

• Balancing financial performance targets within
  risk management policies and controls

• Developing acceptable business and entity-wide
  risk profiles

• Measuring risk-adjusted financial performance

• Returns on economic capital

• Efficient employment and allocation of capital

• The role of ALM in the deployment, management, and conservation of capital

Teams work: short Excel exercises and case studies
 

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