Index
ABCP see asset-backed commercial paper
accrual pricing
agenda, ALM
ALCO see asset and liability committee
ALM see asset and liability management
annualized interest rates
annuities
arbitrage
asset and liability committee (ALCO)
agenda
ALM
developments
policy
report
business planning
hedging
interest rate risk
internal funding policy
large banks
management reporting
medium banks
members
objectives
policy
regular discussion points
reporting
simulation modelling
small banks
strategic overview
asset and liability management (ALM)
banking book
basic concepts
capital management
cornerstone philosophy
derivative trading house
desk/unit
developments
example
foundations
gap
interest rate risk
policy
roles of desk
securitization
traditional
value-at-risk
see also asset and liability committee; liquidity ; net present value
asset-enrule;backed commercial paper (ABCP)
characteristics
conduits
structure illustration
assets
Basel II
core/non-core
fixed-rate
internal funding policy
liquidity gap
liquidity ratio
maturity
pricing
ROC
short-term debt
weighted risk
see also asset
Atkinson, Paul
back-up facilities
balance sheets
components
liquidity policy
securitization
bancassurance groups
bank bills see banker’s acceptances
Bank of England
capital structure
report 2009
yield curve
Bank for International Settlements (BIS)
banker’s acceptances
banking book
Basel I
Basel III
liquidity gap
PVBP reports
simulation modelling
Basel Accord 1988
Basel Committee for Banking Supervision (BCBS)
Basel I rules
Basel II
capital adequacy
capital requirement level
capital types
risk-adjusted exposure
Basel II rules
bank assets
Basel I
corporate lending
credit rating
credit risk
IRB approaches
minimum capital requirements
operational risk
overview
public disclosure
retail lending
sector-specific impact
sovereign business
supervisory process
three-pillar approach
Basel III rules
initial impact
new business model
provisions
Basel rules
banking capital
Basel I
Basel II
Basel III
Basel ratio
basis risk
BBA see British Bankers’ Association
BBAM Bloomberg screen
BCBS see Basel Committee for Banking Supervision
benchmark bonds
bills of exchange see banker’s acceptances
BIS see Bank for International Settlements
black box models
Bloomberg screens
BBAM
BSR
DCX
DES
GP
RRRA
Tullett & Tokyo
Blundell-Wignall, Adrian
bonds
benchmark
capital-raising
Eurobonds
interest rate futures
LAB
relative values
segmentation hypothesis
sovereign
strip
undated
zero-coupon
see also government bonds; yield curve
boot-strapping
borrowers
Bradford & Bingley
breakeven principle
British Bankers’ Association (BBA)
BSR Bloomberg
building societies
earnings chart
orthodox behaviour
segmentation hypothesis
business activities
capital markets
commission
fees
financial statements
list of activities
operating costs
scope
services
trading income
traditional institutions
see also net interest income; ratios; trading book
’The business of banking’ (The Economist)
business model
bank strategy
capital structure
core competencies
historical model
leverage ratios
liquid asset buffer
liquidity risk management
market stability
new model
recommendations
sustainable models
buy and hold
buy–sell see sell/buyback
buyback see sell/buyback
capital
adequacy
ALM reporting
analysis ratios
Basel rules
borrower/lender conflict
capitalraising
countercyclical buffer
definition
efficient management
markets
ratios
ROC
structure
WACC
see also regulatory capital
capital structure
business models
contingent capital
desirable capital ratios
simplification
cashflows
see also matched book approach
certificates of deposit (CDs)
credit intermediation
days remaining
Euro-CDs
example
money markets
secondary markets
tenor
yield
classic repos
Bloomberg screen
examples
illustration
legal treatment
’legs’ terminology
repo rate
reverse
terms of trade
trade diagram
transaction diagrams
clean deposits see money market deposits
collateral
commercial bills see banker’s acceptances
commercial letters of credit
commercial paper (CP)
ABCP
day-count convention
example
issuance methods
liquidity gap
markets
programmes
US CP/ECP
yield
commission
competencies
compound interest
concentration report
conduits
see also special purpose vehicles
contingent capital
contingent liabilities
Cooke ratio
corporate lending
corporate project appraisals
costs
bank operations
cost/income ratios
funding costs
internal funding
securitization
traditional ALM
WACC
countercyclical capital buffer
coupons
CP see commercial paper
creating a tail
’credit card’ banks
credit intermediation
credit limits
ancillary business
credit process
default
’know your risk’ dictum
limit categories
limit excess
macro-level limits
portfolio diversification
principles
rationale
setting
credit ratings
bank internal ratings
Basel I
Basel II
credit limits
foreign countries
rationale
securitization
short-term debt
see also internal ratings-based approaches
credit risk
asset exposure
Basel II
credit limits
credit rating
default
definition
hedging
interest rate swaps
loan origination
migration risk
MtM valuation
understanding
credit-supported commercial paper
cross-border lending flows
cumulative liquidity model
currency day-count base
current accounts
customer deposits
customer knowledge
day-count convention
days remaining, CDs
DCX Bloomberg screen
default
loan origination
PD
risk
sovereign business
delta-VaR volatility calculation
demand deposits
derivatives
Basel II
gap management
money markets
Rubinstein
trading book
trading house ALM profile
yield curve
DES Bloomberg screen
desk, ALM
disclosure of information
discount
CP
factors
as quotation basis
rates
T-bills
zero-coupon yield curve
dollars
DV01 reports
Eurodollar futures
Singapore dollars
US market
duration gap
DV01 reports
dynamic gap
EAD see exposure at default
earnings composition charts
ECAIs see external credit assessment institutions
The Economist
ECP see Eurocommercial CP
effective interest rates
EL see expected loss
eligible banker’s acceptances
Euro-CDs
Eurobonds
Eurocommercial CP (ECP)
Eurodollar futures
expectations hypothesis
local
return-to-maturity
unbiased
yield-to-maturity
expected loss (EL)
expenses
exposure at default (EAD)
external credit assessment institutions (ECAIs)
extrapolation
federal funds
fees
Financial Services Authority (FSA)
consultative papers
LAB
new proposals
Policy Statement 09/16
stress tests
UK
financial statements
balance sheets
P&L report
fixed rates
assets
interest rate swaps
liabilities
mortgages
flat yield curve
floating rate notes (FRNs)
floating rates
assets
FRNs
liabilities
forward pricing
forward rate agreements (FRAs)
definition
example
hedging
interest rate swaps
key dates
mechanics
’notional’ cash
pricing
settlement
standard terms
forward rates
breakeven principle
FRAs
futures
money market term
points to note
yield curve
FRAs see forward rate agreements
frictionless markets
FRNs see floating rate notes
FSA see Financial Services Authority
funding
concentration report
costs
federal funds
hedging
illiquid assets
inter-entity funding report
liquidity management
liquidity policy
long/short
net stable funding ratio
policy
securitization
source report
traditional ALM
wholesale
see also internal funding policy
future values
futures
delivery
Eurodollar
interest rate
short sterling
see also interest rate futures
gap
ALM
analysis
duration
historical bank model
interest
interest rate
liquidity
management
margin
maturity
NII
ratio
reports
repricing intervals
risk
traditional ALM
general collateral (GC)
classic repos
credit intermediation
repos
specials trading
gilts
credit intermediation
liquidity portfolio
undated bonds
government bonds
gilts
liquidity risk
repo collateral
yield curve
see also sovereign business
GP Bloomberg screen
haircuts
see also margin
HBOS
hedging
ALCO
ALM reporting
credit risk
FRAs
interest rate
futures
risk
swaps
tools
liquidity
OISs
policy
traditional ALM
holding period returns
HSBC
humped yield curve
income
ALCO reports
commission
cost/income ratios
fees
reports
risk
statements
trading
see also net interest income
incremental gap
inflation
insurance
inter-entity funding report
interest
calculations
cashflows
gap
margin
money markets
see also net interest income
interest-bearing current accounts
interest rate futures
Bloomberg screen
convergence
description
Eurodollar contract
examples
hedging
LIFFE exchange
pricing
short sterling
tick values
interest rate gap
ALCO reporting
ALM gap
calculation of
gap reports
liquidity gap
interest rate risk
ALM policy
banking book
basis risk
gap analysis
gap risk
interest rate gap
management
measurement
NII
option risk
runoff risk
securitization
sources
traditional ALM
yield curve risk
interest rate swaps
comparative advantage
descriptions
fixed/floating rate
hedging
mortgages
overnight
quotes table
secondary markets
SONIA
structure
swap spreads
vanilla swaps
yield curve
interest rates
ALCO reporting
annualized
compound interest
conventions
derivatives
effective
expectations
FRAs
futures
gap
hedging
matched book trading
prime rate
reports
’risk’ free
sensitivity
simple interest
swaps
term structure
trading
traditional ALM
yield curve
see also interest rate risk
internal funding policy
ALCO responsibilities
asset pricing
best practice
cost of funds
framework
liability pricing
liquidity premium
liquidity risk
ongoing basis
ROC
scope
transfer pricing
internal rate of return (IRR)
internal ratings-based (IRB) approaches
Basel II
corporate lending
credit risk
retail lending
sovereign business
interpolation
inverted yield curve
investment-grade credit ratings
investment risk
IRB approaches see internal ratings-based approaches
IRR see internal rate of return
Italy
Jarrow, Robert
LAB see liquid asset buffer
large banks
Lehman Brothers
lenders
letters of credit (LoCs)
leverage
historical bank model
leveraged loans
ratios
leverage ratios
Basel III
capital ratios
limiting leverage
median ratios
LGD see loss given default
liabilities
contingent
excess
fixed-rate
internal funding
liquidity gap
liquidity ratio
maturity
NIBLs
pricing
see also asset and liability management
LIBID bid rate
LIBOR
internal funding
money markets
US dollars 2005
LIFFE futures exchange
liquid asset buffer (LAB)
best practice
component instruments
liquidity portfolio
liquidity
banking book
facilities
historical bank model reports
securitization
liquidity gap
cash matching
definition
European bank profile
example profiles
gap risk/limits
guidelines
illustration
interest rate gap
liquidity risk
management
marginal gap
matched book
matching assets/liabilities
reports
time issues
undated assets/liabilities
see also gap
liquidity management
basic case
demand deposits
funding gap
illustration
interest cashflows
liquidity gap
prepayment options
preset contingencies
traditional ALM
liquidity policy
balance sheet changes
basic framework
categorizing risk
funding options
management process
risk appetite
summary template
types of risk
liquidity portfolio
examples
liquid asset buffer
liquidity preference theory
liquidity premium
calculation methodology
internal funding policy
yield curve
see also transfer price
liquidity ratios
liquidity risk
access to facilities
Basel III
business model
contingency plans
core customer deposits
dealing with stresses
exposure awareness
factor
FSA proposals
funding illiquid assets
indicator usage
internal funding
key metrics
liquidity buffers
management
metrics
monthly snapshot
new model
NSFR
policy statement
stress-testing
transfer-pricing
wholesale funds
liquidity risk factor (LRF)
Lloyds Banking Group
loan origination
black box models
default
failed UK banks
guidelines
knowing the customer
loan security
standards
subprime lending restrictions
loan-to-deposit ratio (LTD)
local expectations hypothesis
LoCs see letters of credit
London Interbank Offered Rate see LIBOR
loss given default (LGD)
LRF see liquidity risk factor
LTD see loan-to-deposit ratio
M see maturity
margin
ALCO reporting
gap
initial
interest
maintenance limit
repos
variation
mark to market (MtM)
markets
business model
capital
CP
credit risk
money markets
perfect markets
risk
secondary
stability
US dollar rates
matched book
cash mapping
liquidity gap
trading
maturity (M)
assets
Basel II
buckets
gap
liabilities
regulatory capital
transformation
see also liquidity risk factor
medium-sized banks
migration risk
Modelling Fixed Income Securities (Jarrow)
modified duration
money markets
CDs
commercial paper
day-count convention
deposits
derivatives
discount-basis securities
forward rates
interest calculations
issuers
repos
yield-basis securities
Morgan Stanley
mortgages
MtM see mark to market
multiple cashflows
corporate projects
extrapolation
future values
interpolation
IRR
NPV
perpetual cashflows
present values
multiple discounting
negative yield curve see inverted yield curve
net interest income (NII)
gap
operational risk
P&L report
simulation modelling
net present value (NPV)
duration gap
gap reports
sensitivity
volatility
net stable funding ratio (NSFR)
NIBLs see non-interest-bearing liabilities
NII see net interest income
non-interest-bearing current accounts
non-interest-bearing liabilities (NIBLs)
non-interest income
non-performing loans (NPLs)
Northern Rock
notes, FRNs
NPLs see non-performing loans
NPV see net present value
NSFR see net stable funding ratio
OECD see Organization for Economic Cooperation and Development
off-balance-sheet instruments
see also derivatives
OISs see overnight indexed swaps
operations
costs
environment
expenses
risk
option risk
Organization for Economic Cooperation and Development (OECD)
overcollateralization
see also margin
overnight indexed swaps (OISs)
cashflows
examples
hedging funding
overnight interest rate swaps
P&L report see profit and loss report
PD see probability of default
pensions
perfect markets
periodic gap
perpetual cashflows
plain vanilla interest rate swaps
planning, ALCO
policy
ALCO
hedging
internal funding
liquidity
securitization
Policy Statement 09/16, FSA
portfolios
diversification
duration gap
liquidity
position management
positive yield curve
preferred habitat theory
prepayment options
present value of a basis point report see PVBP report
present values
multiple cashflows
multiple discounting
PVBP reports
see also net present values
price/pricing
accrual pricing
assets
derivatives
forward pricing
FRAs
gap analysis
interest rate futures
liabilities
risk
sell/buybacks
T-bills
transfer price
yield curve
prime interest rate
probability of default (PD)
profit and loss (P&L) report
commission income
cost/income ratios
fee income
NII
operating expenses
provisions
trading income
project appraisals
provisions
pure expectations hypothesis
PVBP reports
ratings see credit ratings; internal ratings-based approaches
ratios
Basel
capital
cost/income
gap
leverage
liquidity
LTD
net stable funding
RCFs see revolving credit facilities
recession
recovery rate (RR)
regulation
see also Basel rules
regulatory capital
Basel rules
capital adequacy
requirements
reinvestment risk
relative bond values
reports/reporting
ALCO
ALM
BCBS list
concentration report
funding
gap reports
income reports
inter-entity funding
interest rate gap
liquidity gap
liquidity reports
management
P&L report
product breakdown report
risk–return profile
summary liquidity report
traditional ALM
type of interest rate
weekly qualitative
repos
Basel II
classic repo
collateral
credit intermediation
definitions
legal treatment
liquidity portfolio
margin
matched book
repo dealers
repo rate
sell/buyback
special trading
trading
retail lending
return on assets (ROA)
return on capital (ROC)
return on equity (ROE)
liquid asset buffer
liquidity ratio
new business model
operating expenses
return-to-maturity expectations hypothesis
returns
holding period
time-weighted rate of return
yield curve
see also return on
reverse repos
revolving credit facilities (RCFs)
risk
ALM reporting
basis
default
gap
income
investment
liquidity gap
market
migration
mitigation
operational
option
price
reinvestment
repo collateral
runoff
VaR methodology
weighted risk assets
yield curve
see also credit risk; interest rate risk; liquidity risk
risk-adjusted exposure
risk management
ALM policy
common approach
historical bank model
liquidity
see also risk
Riskmetrics VaR methodology
risk–return
ROA see return on assets
ROC see return on capital
ROE see return on equity
RR see recovery rate
RRRA Bloomberg screen
Rubinstein on Derivatives
Rubinstein, Mark
runoff risk
secondary markets
securities
banker’s acceptances
Bloomberg BBAM screen
discount basis
eligible banker’s acceptances
lending
money market deposits
T-bills
yield basis
see also Treasury bills
securitization
ABCP
ALM policy
small banks
medium banks
large banks
simulation modelling
benefits
examples
interest rate risk
liquidity
policy
process
simulation modelling
segmentation hypothesis
sell/buyback
Bloomberg screen
examples
transaction diagram
settlement
short sterling futures
short-term debt
simple interest
simulation modelling
Singapore dollars
SIVs see structured investment vehicles
small banks
small-and-medium-sized enterprises (SMEs)
SONIA see sterling overnight interest rate average
sovereign business
Basel II
bonds
calculation
examples
IRB approaches
OECD
see also government bonds
special purpose vehicles (SPVs)
ABCP
securitization
see also conduits
specials trading
contributory factors
’going special’
matched book
repos
specific collateral
spot rates
spot sales, see also sell/buybacks
spot yield curve see zero-coupon yield curve
SPVs see special purpose vehicles
standards, loan origination
standby letters of credit
static gap
sterling overnight interest rate average (SONIA)
stock collateral see general collateral
stock loans
stresses
strip bonds
structural liquidity management
structured deposits
structured investment vehicles (SIVs)
subprime lending
summary liquidity report
swaps
see also interest rate swaps
syndicated loans
T-bills see Treasury bills
tactical liquidity management
tenor
term loans
term structure of interest rates
tick values
time
deposits
liquidity gap
maturity buckets
time-weighted rate of return
value of money
total return swaps
TP see transfer price
trade bills see banker’s acceptances
trading
approach
book
credit intermediation
income
interest rates
matched book
repos
specials
yield curve
trading book
Basel I
Basel III
credit risk
traditional ALM
blended costs
borrowing costs
capital requirements
critique
funding costs
funding management
gap analysis
hedging risk
interest rate risk
liquidity management
maturity gap
setting risk limits
transfer price (TP)
Treasury bills (T-bills)
discount rate
example
money markets
price calculation
US dollar market rates
Treasury function of bank
Tullett & Tokyo
UBS credit business
unbiased expectations hypothesis
undated bonds
United Kingdom (UK)
failed banks
FSA
gilts
NII
United States (US)
failed banks
federal funds
prime interest rate
US CP
WACC example
see also dollars; Treasury bills
valuation, MtM
value date
value-at-risk (VaR)
ALM
Riskmetrics
trading income
vanilla interest rate swaps
VaR see value-at-risk
variable rates
assets
liabilities
mortgages
variation margin
volatility
weighted average cost of capital (WACC)
weighted risk assets
wholesale funding
wholesale marketing
yield
CDs
CP
as quotation basis
yield curve
analysis
breakeven principle
derivatives pricing
example calculations
expectations hypothesis
flat yield curve
forward rates
future yield
importance
interest rate swaps
liquidity preference theory
measuring returns
relative bond values
risk
segmentation hypothesis
setting the yield
shape
theories
trading
usage
yield-to-maturity
zero-coupon
yield-to-maturity
zero-coupon bonds
zero-coupon yield curve
arithmetic
discount factors
equation compliance