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Bank Asset and Liability Management: Strategy, Trading, Analysis

Bank Asset and Liability Management: Strategy, Trading, Analysis

Moorad Choudhry, Darren Carter (Foreword by)

ISBN: 978-0-470-82135-0

Apr 2007

1440 pages

In Stock



Banks are a vital part of the global economy, and the essence of banking is asset-liability management (ALM). This book is a comprehensive treatment of an important financial market discipline. A reference text for all those involved in banking and the debt capital markets, it describes the techniques, products and art of ALM. Subjects covered include bank capital, money market trading, risk management, regulatory capital and yield curve analysis.

Highlights of the book include detailed coverage of:

  • liquidity, gap and funding risk management
  • hedging using interest-rate derivatives and  credit derivatives
  • impact of Basel II
  • securitisation and balance sheet management
  • structured finance products including asset-backed commercial paper, mortgage-backed securities, collateralised debt obligations and structured investment vehicles, and their role in ALM
  • treasury operations and group transfer pricing.

Concepts and techniques are illustrated with case studies  and worked examples. Written in accessible style, this book is essential reading for market practitioners, bank regulators and graduate students in banking and finance.

Includes free CD-ROM that contains software on applications described in the book, including a yield curve model, cubic spline spreadsheet calculator and CDO waterfall model.

Foreword xi

Preface xiii

About the Author xxiii

Part I Banking business, bank capital and debt market instruments 1

Chapter 1 Bank business and bank capital 3

Chapter 2 Financial statements and ratio analysis 29

Chapter 3 The money markets 47

Chapter 4 The bond instrument 133

Part II Bank treasury asset–liability management 209

Chapter 5 Asset–liability management I 211

Chapter 6 Asset–liability management II 247

Chapter 7 ALM trading principles 305

Chapter 8 Asset–liability management III: The ALCO 327

Chapter 9 The yield curve 339

Chapter 10 The determinants of the swap spread and understanding the term premium 451

Chapter 11 Introduction to relative spread analysis 477

Part III Financial instruments, applications and hedging 491

Chapter 12 Repo instruments 493

Chapter 13 Money market derivatives 539

Chapter 14 Interest-rate swaps and overnight-index swaps 625

Chapter 15 Hedging using bond futures contracts 713

Chapter 16 Credit risk and credit derivatives 745

Chapter 17 Value-at-Risk (VaR) and credit VaR 833

Part IV Funding and balance sheet management using securitisation and structured credit vehicles 881

Chapter 18 Introduction to securitisation 887

Chapter 19 Structured, synthetic and repackaged funding vehicles 921

Chapter 20 Mortgage-backed securities and covered bonds 961

Chapter 21 Asset-backed securities 999

Chapter 22 Collateralised debt obligations 1021

Chapter 23 Synthetic collateralised debt obligations 1059

Chapter 24 Synthetic mortgage-backed securities 1139

Chapter 25 Structured investment vehicles 1147

Part V Bank regulatory capital 1161

Chapter 26 Bank regulatory capital and the Basel rules 1165

Chapter 27 A primer on Basel II 1195

Part VI Treasury middle office operations 1241

Chapter 28 Funding and Treasury procedures for banking corporations 1243

Part VII Applications software enclosed with the book 1261

Chapter 29 Applications software and spreadsheet models 1263

Appendix Financial markets arithmetic 1277

Glossary 1315

Index 1383