363-1081-00L  Asset Liability Management and Treasury Risks

Semester Autumn Semester 2016
Lecturers P. Mangold, M. Eichhorn
Periodicity yearly course
Language of instruction English
Comment Number of participants limited to 30.


Abstract Asset Liability Management (ALM) is the cornerstone of managing the balance sheet of any corporation. The goal of this course is to discuss the foundations and to develop a thorough understanding of the Treasury function, with a particular emphasis on managing the risks relating to ALM.
Objective We attempt to develop an integrated perspective on financial risks materializing in impacts on capital, earnings, and liquidity. Even though the concepts are generally applicable, the course puts a focus on banking institutions.

The course comprises of three parts, Part 1 introducing the fundamental concepts, Part 2 discussing case studies allowing us to dive more deeply into specific real-world examples, focusing on cases where the risk management has failed, while Part 3 will look at hot topics such as new regulations relating to funding, liquidity, market risk, and capital management. We will also discuss whether regulations are fit for purpose or whether they might have unintended consequences.
This course is interactive and students' participation is an important aspect. To make the classes more lively and interactive, students are expected to complete group assignments and give an inclass
presentation.
Content Part 1: Fundamentals of Asset Liability Management
This part covers fundamental concepts for ALM and Treasury, balance sheet and off-balance sheet products, Basel III capital and liquidity rules, trading and hedging principles, interest rate and FX management, performance metrics (e.g. net interest income, net interest margin), operating model for Treasury and Treasury Risk, ALCOs, liquidity risk management, and funds transfer pricing
(FTP).

Part 2: Case Studies
In the second part of the course we are using case studies to analyze real-world examples, allowing us to go into more detail with regards to the fundamental concepts. Particularly, we are focusing on cases of failure, where, for potentially different reasons, corporations have failed and in which ALM has been an important aspect.

Part 3: Hot Topics in ALM and Treasury Risk Management
The last part looks at selected hot topics such as new regulations relating to funding, liquidity, market risk, and capital management. We will also discuss whether regulations are fit for purpose, i.e. whether it contributes to systemic stability, or whether they might have unintended consequences.

Lecture notes No single textbook covers the course, below we list some useful references. Further materials will be made available to students prior to the lectures.
Literature Choudhry, M. 2012. The Principles of Banking. Wiley Finance.
Marrison, C. 2002. The Fundamentals of Risk Measurement. McGraw-Hill.
Prerequisites / Notice Basic knowledge in finance