c. myblog

June 18, 2015

Key Business Questions

When credit unions evaluate changes in strategy or financial structure, the focus from an A/LM perspective is often on valuation and net interest margin.  However, these traditional approaches to measuring risk will not answer several critical business questions.  Consider, does NEV or net interest income analysis allow a credit union to see: Under what rate […]

May 28, 2015

Betas – An Unintended Consequence of Simplifying Pricing Assumptions

Non-maturity deposits (NMDs) and their treatment in A/LM modeling is often a hot-button topic with examiners and management teams.  While there are key risk characteristics of NMDs not addressed with many methodologies (see previous blog entries below), the topic of this blog concerns NMD pricing assumptions. Blog:  Isolating Interest Rate Risk with a Static Balance […]

May 21, 2015

Prepare for Your Upcoming Exam

A successful exam is often tied to the preparation done in advance. Simply having the most recent A/LM results ready, without understanding the overall risk profile and rationale for key assumptions, is not a recipe for success. One best practice in preparation for an upcoming exam is to anticipate some questions that could arise and […]

May 1, 2015

Comparison of Interest Rate Risk Methodologies

Interest rate risk was originally viewed as a process that should be done in a back room, resulting in volumes of information that was stored on a shelf to be available when examiners walked in. However, the complexity of the world has changed over time and so must the use of tools to help evaluate […]

September 26, 2014

Isolating Interest Rate Risk with a Static Balance Sheet

Some will say that a static balance sheet income simulation achieves its objective of isolating interest rate risk by reducing the variables in the simulation. The question then is: What risk should be isolated? Interest rates change and cash flows do not change Interest rates change and cash flows change in response If the answer […]

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