By Moorad Choudhry
Banks are an integral part of the worldwide economic system, and the essence of banking is asset-liability administration (ALM). This ebook is a entire therapy of a major monetary industry self-discipline. A reference textual content for all these inquisitive about banking and the debt capital markets, it describes the ideas, items and paintings of ALM. topics lined contain financial institution capital, funds marketplace buying and selling, hazard administration, regulatory capital and yield curve analysis.
Highlights of the e-book comprise exact assurance of:
- liquidity, hole and investment probability management
- hedging utilizing interest-rate derivatives and credit derivatives
- impact of Basel II
- securitisation and stability sheet management
- structured finance items together with asset-backed advertisement paper, mortgage-backed securities, collateralised debt tasks and based funding automobiles, and their position in ALM
- treasury operations and crew move pricing.
Concepts and strategies are illustrated with case reports and labored examples. Written in obtainable type, this ebook is key analyzing for industry practitioners, financial institution regulators and graduate scholars in banking and finance.
Includes unfastened CD-ROM that includes software program on purposes defined within the publication, together with a yield curve version, cubic spline spreadsheet calculator and CDO waterfall version.
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Additional info for Bank Asset and Liability Management: Strategy, Trading, Analysis
The first bank to offer most of the basic banking functions known today was the Bank of Barcelona in Spain. Founded by merchants in 1401, this bank held deposits, exchanged currency, and carried out lending operations. It also introduced the bank cheque. Modern banking was introduced in what is now Italy. In the 15th century the Lombards, a group of bankers from the north of Italy began to apply accounting to work around a religious moral repugnance of usury. Accounting principles were used to keep a record of loans, and the loan was paid back “voluntarily”.
The counterparties to this trading activity can include other banks and financial institutions such as hedge funds, corporates and central banks. Trading book activity generates the same risk exposure as that on the banking book, including market risk, credit risk and liquidity risk. It also creates a need for cash management. Much trading book activity involves derivative instruments, as opposed to “cash” products. Derivatives include futures, swaps and options. These can be equity, interest-rate, credit, commodity, foreign exchange (FX), weather and other derivatives.
The modern banking institution is a complex beast, which in many cases operates in a wide range of products and services and across international markets. Banks are the cornerstone of the global economy, and at the highest level the banking sector influences, and is influenced by, macroeconomic trends such as GDP growth, central bank base interest rates, equity and debt capital markets activity, and the supply and demand for investments and credit. However, notwithstanding our first statement that banks now engage in many complex activities outside traditional borrowing and lending, we must remember that at the core of all capital markets activity lies the need to bring together the suppliers of capital with the borrowers of capital.
Bank Asset and Liability Management: Strategy, Trading, Analysis by Moorad Choudhry