Westport Geek

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Archive for the ‘ALM’ Category

Asset Liability Management

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The scope of ALM activities has widened. Today, ALM departments are addressing (non-trading) foreign exchange risks and other risks. Also, ALM has extended to non-financial firms. Corporations have adopted techniques of ALM to address interest-rate exposures, liquidity risk and foreign exchange risk.

The problem was not that the value of assets might fall or that the value of liabilities might rise. It was that capital might be depleted by narrowing of the difference between assets and liabilities. (see diagram below)

Besides ALM, securitization also allows firms to directly address asset-liability risk by removing assets or liabilities from their balance sheets. This not only eliminates asset-liability risk; it also frees up the balance sheet for new business.

On RiskGrossary.com

ALM on Wiki

ALM in Private Wealth Management



Written by walkinggeek

May 26, 2010 at 10:45 am

Posted in ALM, Investment

Conscious Balance-Sheet Management

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“Three big banks—Bank of America Corp., Deutsche Bank AG and Citigroup Inc.—are among the most active at temporarily shedding debt just before reporting their finances to the public”

“Over the past 10 quarters, the three banks have lowered their net borrowings in the “repurchase,” or repo, market by an average of 41% at the ends of the quarters, compared with their average net repo borrowings for the entire quarter”

Quarter-end window dressing techniques is so common that this news should not have come in as a surprise at all. Now the real question, how do they do it?

WSJ : Banks Trim Debt, Obscuring Risks

Written by walkinggeek

May 26, 2010 at 9:15 am

Posted in ALM