TY - BOOK AU - Farahvash, Pooya TI - Asset-liability and liquidity management SN - 9781119701880 U1 - 332.10681 PY - 2020/// CY - New Jersey PB - John Wiley & Sons, Inc. KW - Asset-liability management KW - Bank liquidity N1 - TABLE OF CONTENTS About the Author xvii Preface xix Abbreviations xxiii Introduction 1 Asset-Liability Management Metrics 5 ALM Risk Factors 7 Organization of This Book 8 Chapter 1 Interest Rate 17 Interest Rate, Future Value, and Compounding 18 Use of Time Notation versus Period Notation 22 Simple Interest 23 Accrual and Payment Periods 24 Present Value and Discount Factor 29 Present Value of Several Cash Flows 32 Present Value of Annuity and Perpetuity 33 Day Count and Business Day Conventions 34 Treasury Yield Curve and Zero-Coupon Rate 40 Bootstrapping 43 LIBOR 48 Forward Rates and Future Rates 49 Implied Forward Rates 50 Forward Rate Agreements 55 Interest Rate Futures 56 Swap Rate 58 Determination of the Swap Rate 61 Valuation of Interest Rate Swap Contracts 66 LIBOR-Swap Spot Curve 70 Interpolation Methods 75 Piecewise Linear Interpolation 76 Piecewise Cubic Spline Interpolation 78 Federal Funds and Prime Rates 84 Overnight Index Swap Rate 87 OIS Discounting 88 Secured Overnight Financing Rate 94 Components of Interest Rate 95 Risk Structure of Interest Rate 97 Term Structure of Interest Rate 98 Expectation Theory 100 Market Segmentation Theory 102 Liquidity Premium Theory 102 Inflation and Interest Rate 102 Negative Interest Rate 103 Interest Rate Shock 105 Parallel Shock 106 Non-Parallel Shock 107 Interest Rate Risk 109 Summary 110 Notes 112 Bibliography 114 Chapter 2 Valuation: Fundamentals of Fixed-Income and Non-Maturing Products 115 Principal Amortization 116 Bullet Payment at Maturity 116 Linear Amortization 117 Constant Payment Amortization 118 Sum-of-Digits Amortization 121 Custom Amortization Schedule 123 Fixed-Rate Instrument 124 Valuation 124 Yield 130 Duration and Convexity 133 Dollar Duration and Dollar Convexity 142 Portfolio Duration and Convexity 143 Effective Duration and Effective Convexity 144 Interest Rate Risk Immunization 145 Key Rate Duration 155 Fisher-Weil Duration 156 Key Rate Duration 160 Floating-Rate Instrument 165 Pre-Period-Initiation Rate Setting 166 Post-Period-Initiation Rate Setting 166 Valuation Using Estimated Interest Rates at Future Reset Dates 168 Using Implied Forward Rate 168 Using Forecasted Rate 171 Valuation Using Assumption of Par Value at Next Reset Date 177 Duration and Convexity 182 Valuation Using Simulated Interest Rate Paths 184 Non-Maturing Instrument 191 No New Business Treatment 192 No New Account Treatment 196 Constant Balance Treatment 197 Inclusion of Prepayment and Default: A Roll Forward Approach 198 Summary 207 Notes 210 Bibliography 210 N2 - Asset-Liability and Liquidity Management distils the author’s extensive experience in the financial industry, and ALM in particular, into concise and comprehensive lessons. Each of the topics are covered with a focus on real-world applications, based on the author’s own experience in the industry. The author is the Vice President of Treasury Modeling and Analytics at American Express. He is also an adjunct Professor at New York University, teaching a variety of analytical courses. Learn from the best as Dr. Farahvash takes you through basic and advanced topics, including: The fundamentals of analytical finance Detailed explanations of financial valuation models for a variety of products The principle of economic value of equity and value-at-risk The principle of net interest income and earnings-at-risk Liquidity risk Funds transfer pricing A detailed Appendix at the end of the book helps novice users with basic probability and statistics concepts used in financial analytics ER -