Bank ALM Analysis – Earnings versus Economic Value. The two elements used within bank ALM analysis are economic value and earnings. Why is earning emphasized more than value? What is wrong with value analysis? In the ALM world we use two tools to illustrate the impact of interest rate changes. a) Rate or reset gap focusing on [...]
Bank Asset Liability Management – Study Guide – 3rd Edition. The brand new, revised 3rd edition of the ALM Study Guide is out. With 177 pages, 189 figures and illustrations, the new edition weighs in at thrice the size of the 2nd edition and spends more time on building a stronger foundation for [...]
Telenor data plans on 3G phones – bandwidth speed tests. Two days ago, on a Saturday morning, our 2 MB hard-line optic fiber connection died. Since I had to send an urgent email out I took out my trusted phone and plugged in the USB cable to use the tether mode on my Nexus 5. Within [...]
Drive by shooting at Lake Victoria with Canon 70D Last week work related travel led me to Entebbe airport and the breath taking landing and take off at Lake Victoria. Unfortunately work didn’t leave any time at all for sight seeing so the only opportunity I had to capture the scenic lake was on my [...]
Operational Risk Management under Basel accord Operational Risk (OR) is the risk of direct and indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk but ex...
Why do we need Asset Liability Management (ALM)? Banks make money in a variety of ways. The simplest of ways is to act as an intermediary on transactions (such as buying and selling foreign exchange, equities, bonds and other financial securities) and take a small cut on both ends of the transaction (buying and selling). So [...]
Bank Asset Liability Management (ALM) – A quick review of default ALM strategies. In our last post we looked at a history of US Treasuries yield curve shifts between 1978 and 2010. We now move to a simplified analysis of the maturity distribution of assets and liabilities on a bank balance sheet in anticipation of expected yield [...]
A visual history of USD Treasury yield curve shifts – 1978 – 2014. While we have spent a fair bit of time discussing Asset Liability Management models, we really haven’t spent enough time discussing interest rates. Specifically the historical behavior of US Treasury yield curve. We pose some basic questions and try and answer them [...]
Testing Facebook Fan page reach versus Google+ conversions Tired of reviewing, writing and editing content over the last 6 weeks, this weekend I decided to run a slightly skewed social experiment. I had always wondered about the practical reach of my social network fan pages and over the month of June I had been tweaking my [...]
Understanding Option Greeks – Introducing Gamma Gamma is the second derivative of the option price with respect to the price of an underlying asset. Alternatively, it is the rate of change in the option Delta due to a change in the underlying asset price. Figure 1: Gamma against Spot What does that mean in simpler language? In the image [...]