Effective Strategies for Assets and Liabilities Management
19 Pages Posted: 14 Feb 2014
Date Written: 2013
This paper contains facts and introductory concepts on Asset and Liability Management, Funds Transfer Pricing Systems and Funding Costs. Banks, hedge funds and more generally finance companies engage in complex capital market activities that involve trading of instruments in derivative or cash forms. All these activities contribute to the company's asset and liability profile and the ability to manage well such a profile is crucial to the success of a business. The paper aims to introduce a number of definitions and market practices that are fundamental for an effective asset and liability management (ALM) strategy. It provides examples of a practically feasible ALM strategy with some stylized features in the data. The reader can make use of the proposed ALM strategies to build more complex management approaches.
Keywords: Asset and Liability Management (ALM), Funds Transfer Pricing Systems, Funding Costs, ALM strategy, FTP Curve, Balance Sheet, Financial Institution, Capital and Funding Management, Liquidity, VaR, ROE, WACC, Basel III
JEL Classification: G00, G01, G10, G20, G28, G30
Suggested Citation: Suggested Citation