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Asset Liability Management
 

Asset Liability Management

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Through this presentation, Mr. Vineet Khanna, Director - Practices, SAS India; talks about the key considerations for ALM, need for data management, analytics and ...

Through this presentation, Mr. Vineet Khanna, Director - Practices, SAS India; talks about the key considerations for ALM, need for data management, analytics and optimisation.

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    Asset Liability Management Asset Liability Management Presentation Transcript

    • Copyright © 2014, SAS Institute Inc. All rights reserved. make connections • share ideas • be inspired Asset Liability Management Vineet Khanna
    • Copyright © 2012 SAS Institute Inc. All rights reserved. Asset Liability Mangement – Key Considerations • Data Governance • Data Integrity • Models • Processes • Documentation • Static NII, Repricing gaps, Economic value, duration convexity, projected balance sheet EV • Scenarios • Simulated values at risk values (NII, EVE), Data Handling FTP & Profitability Cash Flow Analysis & Optimization • Methodologies • Add on Costs Credit OAS Capital Cost Overheads • Period End Data Portfolio & Market GL Recon Behavioural Assumptions • New Business Templates Volume & Rates New Products Chart of Accounts • OutputData Asset Liability Management Liquidity Risk & Behavioural Models
    • Copyright © 2012 SAS Institute Inc. All rights reserved. Data Management  Month End New Data Portfolio and Market Data Correct errors Reviewing behavioral assumptions  Tying back to GL  New products  Behavioral Assumption Decay / Volume Curves / Draw Downs / Roll Overs
    • Copyright © 2012 SAS Institute Inc. All rights reserved. New Business Assumptions  New Business Volumes and Rates New business templates behavioral assumptions  Adding new product  Reviewing Chart of Accounts Creating / Updating Mappings portfolios  Run Analysis  Output data checks # exposure (in vs. out) Market data (base case and simulated states) Review analysis log files
    • Copyright © 2012 SAS Institute Inc. All rights reserved. Cash Flow Analysis & Optimization  Base Case  Scenario  Simulation Based  Optimization  Stress Testing
    • Copyright © 2012 SAS Institute Inc. All rights reserved. Liquidity Risk  Basel III Ratios  Scenarios •Deposit runoff scenarios •Risk factor scenarios •Scenario cash flows •Haircuts on asset values • Intraday Liquidity Risk • Behavioral Models
    • Copyright © 2012 SAS Institute Inc. All rights reserved. Behavioral Modelling & Liquidity • Statistical methodology to estimate future client behaviour. •Linear Regression, Logistic Regression •Time Series – AR, MA, ARMA, ARIMA, ARCH, GARCH, ARIMAX •Hazard Rate Models •Monte Carlo Simulation, Historical Simulation •Delta Normal (Analytical) Simulation •Trigger and Threshold Models • Adjust contractual cashflows to reflect the mostly likely client behaviour. • Transform results of these models into estimated cashflows ASSETS Prepayments Draw-downs Roll-over New Business LIABILITIES Core / Non-core Early redemption Roll-over New Business Administered Rates
    • Copyright © 2012 SAS Institute Inc. All rights reserved. Behavioral Modelling Workbench
    • Copyright © 2012 SAS Institute Inc. All rights reserved. Behavioral Model - Prepayments Interest Rates Risk Drivers Model Strategy Macro Factors Client Characteristics Endogenous Pre - Endogenous Discriminatory ∑ Prepayment_value1 ----------------------------- ∑ Asset_value1 Target Variable ContinuousTarget Variable Type Linear RegressionModel Type
    • Copyright © 2012 SAS Institute Inc. All rights reserved. Behavioral Model – Core / Non Core Interest Rates Risk Drivers Model Strategy Macro Factors Confidence Indices Endogenous Endogenous Endogenous Core ----------------------------- Total Target Variable ContinuousTarget Variable Type Historical Simulation / Linear Regression / Trigger ModelModel Type
    • Copyright © 2012 SAS Institute Inc. All rights reserved. FTP & Profitability  Methodologies Matched Maturity, WAL, Duration, Cash flow etc  Costs • Credit spread • Option-adjusted spread • Capital cost spread
    • Copyright © 2012 SAS Institute Inc. All rights reserved. Risk Aggregation and ERM Data Management – Data Models and Data Flows – DDS and Data Marts Trading Systems Core Banking Loan Origination >>> Mark to Market Portfolio Credit Risk Risk Aggregation Market Risk Credit Risk ALM Firm-wide Risk Scenario Analysis, Risk (VaR) Calculation Market Portfolio Optimization Counterparty Exposure Credit Portfolio Optimization Cash Flow Optimization Economic Value Calculation Firmwide Risk Analysis Firmwide Portfolio Optimization Application Common: Reconciliation, Portfolio Segmentation, Backtesting Risk Reporting Data Model SAS Risk Clients: Business User and Analytical Risk Users Executive Risk Portal Add-in for MS Office Other SAS Clients Cash Flow Analysis, FTP and Liquidity Risk Common Risk Foundation: Pricing Models, Cash Flow Models and Methods
    • Copyright © 2012 SAS Institute Inc. All rights reserved. SAS RISK MANAGEMENT FOR BANKING Data Management – Data Models and Data Flows – DDS and Data Marts Trading Systems Core Banking Loan Origination >>> Mark to Market Portfolio Credit Risk Risk Aggregation Market Risk Credit Risk ALM Firm-wide Risk Scenario Analysis, Risk (VaR) Calculation Market Portfolio Optimization Counterparty Exposure Credit Portfolio Optimization Cash Flow Optimization Economic Value Calculation Firmwide Risk Analysis Firmwide Portfolio Optimization Application Common: Reconciliation, Portfolio Segmentation, Backtesting Risk Reporting Data Model SAS Risk Clients: Business User and Analytical Risk Users Executive Risk Portal Add-in for MS Office Other SAS Clients Cash Flow Analysis, FTP and Liquidity Risk Common Risk Foundation: Pricing Models, Cash Flow Models and Methods
    • Copyright © 2010, SAS Institute Inc. All rights reserved. make connections • share ideas • be inspired Copyright © 2014, SAS Institute Inc. All rights reserved. Vineet.Khanna@sas.com