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

1. Copyright © 2014, SAS Institute Inc. All rights reserved.
make connections • share ideas • be inspired
Asset Liability
Management
Vineet Khanna

2. 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

3. 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

4. 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

5. Copyright © 2012 SAS Institute Inc. All rights reserved.
Cash Flow Analysis & Optimization
 Base Case
 Scenario
 Simulation Based
 Optimization
 Stress Testing

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Liquidity Risk
 Basel III Ratios
 Scenarios
•Deposit runoff scenarios
•Risk factor scenarios
•Scenario cash flows
•Haircuts on asset values
• Intraday Liquidity Risk
• Behavioral Models

7. 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

8. Copyright © 2012 SAS Institute Inc. All rights reserved.
Behavioral Modelling Workbench

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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