1 / 10

Asset&Liability Management

Asset&Liability Management. The Concept of Duration and Managing A Bank’s Duration Gap. 7-2. The Concept of Duration. Duration is the weighted average maturity of a promised stream of future cash flows. 7-3. To Calculate Duration. 7-4. Price Sensitivity of a Security. 7-5.

inara
Télécharger la présentation

Asset&Liability Management

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Asset&Liability Management The Concept of Duration and Managing A Bank’s Duration Gap

  2. 7-2 The Concept of Duration Duration is the weighted average maturity of a promised stream of future cash flows.

  3. 7-3 To Calculate Duration

  4. 7-4 Price Sensitivity of a Security

  5. 7-5 Duration of an Asset Portfolio Where: wi = the dollar amount of the ith asset divided by total assets Dai = the duration of the ith asset in the portfolio

  6. 7-6 Duration of a Liability Portfolio Where: wi = the dollar amount of the ith liability divided by total liabilities Dli = the duration of the ith liability in the portfolio

  7. 7-7 Duration Gap

  8. 7-8 Change in the Value of a Bank’s Net Worth

  9. 7-9 Impact of Changing Interest Rates on Bank’s Net Worth

  10. 7-10 Limitations ofDuration Gap Management • Finding Assets and Liabilities of the Same Duration Can be Difficult • Some Assets and Liabilities May Have Patterns of CFs Not Well Defined • Customer Prepayments May Distort the Expected Cash Flows in Duration • Not a Linear Relationship Between Prices and Interest Rates

More Related