Asset Liability Management

Asset Liability Management for Banks

Financial Institutions incur a variety of risks arising from the different features of their assets and liabilities. For example, a bank may have short term customer deposits and long term assets, such as 30-year mortgages. As customer deposits tend to be short term in nature, many of these deposits may be withdrawn at a moment’s notice, while the long term asset will still be on the banks’ balance sheet. This can potentially leave the bank exposed to a funding problem.

Asset Liability Management for Insurance

An insurance company is also faced with a variety of risks. Consider an annuity option extending the original life of the annuity or the pension fund attempting to match their liability outflows with the cash flows from assets. Regardless of the specific situation, these institutions have to manage a variety of risks on their balance sheets including: interest rate risk, liquidity risk, funding risk, foreign exchange risk, credit risk, counter-party credit risk, and model risk, to name a few.

GFMI offers a full suite of asset liability management courses. Following are just a few examples from our asset liability management curriculum: