Asset Liability Management
Asset Liability Management (ALM) is a decisional tool that helps to manage interest rate risks and their correlated risks, with the objective of sustaining the profit or enriching the institution. The difficulty with the endeavor comes from the inadequate data system, the complexity of financial products; in particular, on the embedded options and the credit risks. In this paper, we shall present a complete feasible solution to ALM, from practical experiences, by modelling the cash flows of all products and providing the optimization for restructuring of the balance sheet to meet the risk/return objective of the management. Discussions on strategies and ALM organization are also given to assure a smoothly running ALM solution.
KeywordsInterest Rate Cash Flow Balance Sheet Credit Risk Term Structure
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