Seminar: Asset and Liability Management

Seminar leader: Peter Speak | June 29–July 1, 2006

At the end of the course delegates should be comfortable with the purpose, structure and techniques of asset and liability management within an organization’s treasury, including liquidity management and the role of cash and derivative instruments. They will also fully understand the need for risk identification, control and management within a treasury and the tools and methodologies that aid and quantify this process.

Agenda

Day 1

Asset and Liability Risk Management Defined

• Aims & Purpose of Asset and Liability Management
• Role of the treasurer
• Asset and liability committee-membership & objectives
• Defining the strategy

Liquidity Management

• Sources of liquidity & risk
• Funding sources
• Liquidity measurement tools
• Modeling liquidity risk
• Contingency analysis
• Case study: building a liquidity analysis model

Interest Rate Exposure Analysis

• Components of interest rate risk
• Embedded options & uncertain cash flows
• Gap analysis
• Case study on gap analysis
• Yield curve analysis
• Duration & Convexity
• Case study on yield curve analysis
• Value at Risk
• Simulation techniques
• Case study on VAR

Day 2

Cash market products

• Cash products: Bills, commercial paper, certificates of deposit
• Repo & stock lending
• Bonds
• Floating Rate Notes
• Bond variants
• Practical issues re accounting, settlement & control

Derivative instruments

• Analyzing derivatives
• Interest Rate Futures & FRAs
• Swaps
• Swap variants
• Bond futures
• Options
• Caps, floor & collars
• Pricing & valuation of derivatives
• Documentation
• Practical issues re settlement, accounting, control of derivatives
• Case study on derivatives

• FRAs and financial futures as sources of hedging
• Hedge ratios
• Stacking vs stripping: the case for each technique
• Cost of carry and futures settlement
• Using options for short and long term hedging
• Using Interest rate swaps as a hedging tool
• Determining the right hedge in different circumstances
• Case studies on hedging: both short term & long term scenarios

Day 3

Foreign Exchange

• Spot and forward foreign exchange pricing and trading
• The economics of foreign exchange and forecasting methods
• Currency swaps
• Foreign exchange management within a treasury
• Foreign Exchange Options & option strategies
• Case studies on foreign exchange hedging
• Exotic options-risks and uses as a hedging tool
• Case studies on exotic options
• Hybrid products
• Risk management
• Stress testing foreign exchange exposure
• Case studies on foreign exchange risk measurement & reporting

Monitoring & Control

• Hedge accounting under IFRS
• Disclosure requirements
• Case studies on hedge accounting & reporting under IFRS
• Internal control requirements
• Risk limit structures
• Management reports
• ALCO reporting