EAR and EVE - what it means for banks

•

0 likes•124 views

Banks could set limits such as the maximum tolerance levels for Earnings at Risk. Once limits are set they could be reviewed monthly at the ALCO. Volatility in interest rates could vary the fortunes of banks when deposits are repriced while assets such as investments in long term bonds may remain unchanged. Changes in interest rates also impact on the PVs of asset cash flows and liabilities cash flows thereby changing the Economic Value of Equity.

Business

Asset & Liability Management
hisham's writing pad/ALM/EVE

ECONOMIC VALUE OF
EQUITY (EVE)
PV of Asset cashflows – PV of Liabilities cashflows
A good comparison would be hedged versus unhedged
hisham's writing pad/ALM/EVE

Earnings at Risk
hisham's writing pad/ALM/EVE
Up 100 8.33% -8.33% 100 Down
Up 200 16.67% -16.67% 200 Down
Up 300 25.00% -25.00% 300 Down
Up 400 33.33% -33.33% 400 Down
Earnings-at-Riskbp bp

Calculations for EAR
Asset Liability Asset Liability
10-year bond 8.00% 6-month CD 5.00% 10-year bond 8.00% 6-month CD 5.00%
Base Interest Base Interest
3.00% 3.00%
Up 100bp Up 100bp
Asset Liability Asset Liability
10-year bond 8.00% 6-month CD 6.00% 10-year bond 8.00% 6-month CD 4.00%
Adj Base Interest Interest 1yr Sensitivity EAR Adj Base Interest Interest 1yr Sensitivity EAR
2.50% 2.75% 0.25% 8.33% 3.50% 3.25% -0.25% -8.33%
Up 200bp Up 200bp
Asset Liability Asset Liability
10-year bond 8.00% 6-month CD 7.00% 10-year bond 8.00% 6-month CD 3.00%
Adj Base Interest Interest 1yr Sensitivity EAR Adj Base Interest Interest 1yr Sensitivity EAR
2.00% 2.50% 0.50% 16.67% 4.00% 3.50% -0.50% -16.67%
Up 300bp Up 300bp
Asset Liability Asset Liability
10-year bond 8.00% 6-month CD 8.00% 10-year bond 8.00% 6-month CD 2.00%
Adj Base Interest Interest 1yr Sensitivity EAR Adj Base Interest Interest 1yr Sensitivity EAR
1.50% 2.25% 0.75% 25.00% 4.50% 3.75% -0.75% -25.00%
Up 400bp Up 400bp
Asset Liability Asset Liability
10-year bond 8.00% 6-month CD 9.00% 10-year bond 8.00% 6-month CD 1.00%
Adj Base Interest Interest 1yr Sensitivity EAR Adj Base Interest Interest 1yr Sensitivity EAR
1.00% 2.00% 1.00% 33.33% 5.00% 4.00% -1.00% -33.33%
hisham's writing pad/ALM/EVE

Viewers also liked

ALM – Concentration of Financing AnalysisMohomed Hisham Shariff

Кейс по мультиканальным последовательностям: как измерить вклад баннерной рек...Sergei Kulikov

Stress testingMohomed Hisham Shariff

Funds Transfer PricingMohomed Hisham Shariff

Bond AnalyticsMohomed Hisham Shariff

Var calculationMohomed Hisham Shariff

Beta factor analysisMohomed Hisham Shariff

Technical analysisMohomed Hisham Shariff

Viewers also liked (8)

ALM – Concentration of Financing Analysis

Кейс по мультиканальным последовательностям: как измерить вклад баннерной рек...

Stress testing

Funds Transfer Pricing

Bond Analytics

Var calculation

Beta factor analysis

Technical analysis

Similar to EAR and EVE - what it means for banks

Asset Impairment AnalysesDecosimoCPAs

Session7 Koch5ukabuka

The Asset Return - Funding Cost Paradox: The Case for LDINorman Ehrentreich

shinpoong pharm 019170 Algorithm Investment Report알고리즘 기업분석 컨설팅-알기컨,algikeon

Phase 3 net present value (ip)Sariyah

eaglevet 044960 Algorithm Investment Report알고리즘 기업분석 컨설팅-알기컨,algikeon

Asset Liability ManagementHendrix Yapputro , Certified IT Architect

sk bioland 052260 Algorithm Investment Report알고리즘 기업분석 컨설팅-알기컨,algikeon

ecoprobm 247540 Algorithm Investment Report알고리즘 기업분석 컨설팅-알기컨,algikeon

Us Financial Industry Detailed Analysis PowerPoint Presentation SlidesSlideTeam

Baker Hill Prosper 2017 - Anatomy of a Profitable Loan: Before and After You ...Baker Hill

AvalonBay Communities Inc.Sergio Miqueleti

Team Litt Stocktrak Winners 2015Mary Martino

kepco KPS 051600 Algorithm Investment Report알고리즘 기업분석 컨설팅-알기컨,algikeon

Year-end Financial Planning: Bracket ManagementAICPA

Financial Management PowerPoint Presentation SlidesSlideTeam

Portfolio evaluation (5pager) jp omega ltd. v2Ankit Mittal

Cameron Gunter Closing Remarks - AGM 2019PEGcompanies

Sppt chap007AyeshaGupta10

Crg ratoeushakhan

Similar to EAR and EVE - what it means for banks (20)

Asset Impairment Analyses

Session7 Koch5

The Asset Return - Funding Cost Paradox: The Case for LDI

shinpoong pharm 019170 Algorithm Investment Report

Phase 3 net present value (ip)

eaglevet 044960 Algorithm Investment Report

Asset Liability Management

sk bioland 052260 Algorithm Investment Report

ecoprobm 247540 Algorithm Investment Report

Us Financial Industry Detailed Analysis PowerPoint Presentation Slides

Baker Hill Prosper 2017 - Anatomy of a Profitable Loan: Before and After You ...

AvalonBay Communities Inc.

Team Litt Stocktrak Winners 2015

kepco KPS 051600 Algorithm Investment Report

Year-end Financial Planning: Bracket Management

Financial Management PowerPoint Presentation Slides

Portfolio evaluation (5pager) jp omega ltd. v2

Cameron Gunter Closing Remarks - AGM 2019

Sppt chap007

Crg rato

Recently uploaded

HONOR Veterans Event Keynote by Michael HawkinsMichael W. Hawkins

VVVIP Call Girls In Greater Kailash ➡️ Delhi ➡️ 9999965857 🚀 No Advance 24HRS...Call Girls In Delhi Whatsup 9873940964 Enjoy Unlimited Pleasure

unwanted pregnancy Kit [+918133066128] Abortion Pills IN Dubai UAE AbudhabiAbortion pills in Kuwait Cytotec pills in Kuwait

Organizational Transformation Lead with CultureSeta Wicaksana

M.C Lodges -- Guest House in Jhang.Aaiza Hassan

Russian Call Girls In Gurgaon ❤️8448577510 ⊹Best Escorts Service In 24/7 Delh...lizamodels9

Regression analysis: Simple Linear Regression Multiple Linear RegressionRavindra Nath Shukla

The Path to Product Excellence: Avoiding Common Pitfalls and Enhancing Commun...Aggregage

B.COM Unit – 4 ( CORPORATE SOCIAL RESPONSIBILITY ( CSR ).pptxpriyanshujha201

KYC-Verified Accounts: Helping Companies Handle Challenging Regulatory Enviro...Any kyc Account

FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756dollysharma2066

RSA Conference Exhibitor List 2024 - Exhibitors DataExhibitors Data

Pharma Works Profile of Karan Communicationskarancommunications

Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...amitlee9823

How to Get Started in Social Media for Art League CityEric T. Tung

Yaroslav Rozhankivskyy: Три складові і три передумови максимальної продуктивн...Lviv Startup Club

It will be International Nurses' Day on 12 MayNZSG

Monthly Social Media Update April 2024 pptx.pptxAndy Lambert

Boost the utilization of your HCL environment by reevaluating use cases and f...Roland Driesen

Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...Dipal Arora

Recently uploaded (20)

HONOR Veterans Event Keynote by Michael Hawkins

VVVIP Call Girls In Greater Kailash ➡️ Delhi ➡️ 9999965857 🚀 No Advance 24HRS...

unwanted pregnancy Kit [+918133066128] Abortion Pills IN Dubai UAE Abudhabi

Organizational Transformation Lead with Culture

M.C Lodges -- Guest House in Jhang.

Russian Call Girls In Gurgaon ❤️8448577510 ⊹Best Escorts Service In 24/7 Delh...

Regression analysis: Simple Linear Regression Multiple Linear Regression

The Path to Product Excellence: Avoiding Common Pitfalls and Enhancing Commun...

B.COM Unit – 4 ( CORPORATE SOCIAL RESPONSIBILITY ( CSR ).pptx

KYC-Verified Accounts: Helping Companies Handle Challenging Regulatory Enviro...

FULL ENJOY Call Girls In Mahipalpur Delhi Contact Us 8377877756

RSA Conference Exhibitor List 2024 - Exhibitors Data

Pharma Works Profile of Karan Communications

Call Girls Electronic City Just Call 👗 7737669865 👗 Top Class Call Girl Servi...

How to Get Started in Social Media for Art League City

Yaroslav Rozhankivskyy: Три складові і три передумови максимальної продуктивн...

It will be International Nurses' Day on 12 May

Monthly Social Media Update April 2024 pptx.pptx

Boost the utilization of your HCL environment by reevaluating use cases and f...

Call Girls Navi Mumbai Just Call 9907093804 Top Class Call Girl Service Avail...

EAR and EVE - what it means for banks

1. Asset & Liability Management hisham's writing pad/ALM/EVE

2. ECONOMIC VALUE OF EQUITY (EVE) PV of Asset cashflows – PV of Liabilities cashflows A good comparison would be hedged versus unhedged hisham's writing pad/ALM/EVE

3. Earnings at Risk hisham's writing pad/ALM/EVE Up 100 8.33% -8.33% 100 Down Up 200 16.67% -16.67% 200 Down Up 300 25.00% -25.00% 300 Down Up 400 33.33% -33.33% 400 Down Earnings-at-Riskbp bp

4. Calculations for EAR Asset Liability Asset Liability 10-year bond 8.00% 6-month CD 5.00% 10-year bond 8.00% 6-month CD 5.00% Base Interest Base Interest 3.00% 3.00% Up 100bp Up 100bp Asset Liability Asset Liability 10-year bond 8.00% 6-month CD 6.00% 10-year bond 8.00% 6-month CD 4.00% Adj Base Interest Interest 1yr Sensitivity EAR Adj Base Interest Interest 1yr Sensitivity EAR 2.50% 2.75% 0.25% 8.33% 3.50% 3.25% -0.25% -8.33% Up 200bp Up 200bp Asset Liability Asset Liability 10-year bond 8.00% 6-month CD 7.00% 10-year bond 8.00% 6-month CD 3.00% Adj Base Interest Interest 1yr Sensitivity EAR Adj Base Interest Interest 1yr Sensitivity EAR 2.00% 2.50% 0.50% 16.67% 4.00% 3.50% -0.50% -16.67% Up 300bp Up 300bp Asset Liability Asset Liability 10-year bond 8.00% 6-month CD 8.00% 10-year bond 8.00% 6-month CD 2.00% Adj Base Interest Interest 1yr Sensitivity EAR Adj Base Interest Interest 1yr Sensitivity EAR 1.50% 2.25% 0.75% 25.00% 4.50% 3.75% -0.75% -25.00% Up 400bp Up 400bp Asset Liability Asset Liability 10-year bond 8.00% 6-month CD 9.00% 10-year bond 8.00% 6-month CD 1.00% Adj Base Interest Interest 1yr Sensitivity EAR Adj Base Interest Interest 1yr Sensitivity EAR 1.00% 2.00% 1.00% 33.33% 5.00% 4.00% -1.00% -33.33% hisham's writing pad/ALM/EVE

EAR and EVE - what it means for banks

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (8)

Similar to EAR and EVE - what it means for banks

Similar to EAR and EVE - what it means for banks (20)

Recently uploaded

Recently uploaded (20)

EAR and EVE - what it means for banks