c. myblog

December 11, 2015

Observations from ALM Model Validations: For the Real Assumptions, Go to the Source

Do the assumptions outlined in your ALM model’s assumption summary line up with what is actually being utilized to calculate the results? In performing model validations, we have seen numerous instances in which there were discrepancies between reported assumptions and what was used in the actual reporting. This situation creates unnecessary challenges and makes it […]

November 20, 2015

Observations from ALM Model Validations: Extremely Profitable New Business ROA in Static Balance Sheet Simulations

In this installment of our series on observations from model validations, we’ll focus in on the results from traditional income simulations, specifically static balance sheet simulations. We often see results that show low risk despite the credit union having a material amount of fixed-rate, long-term assets. Take the example below which shows the NII results […]

November 5, 2015

Observations from ALM Model Validations: Optimistic New Volume Rate Assumptions

When running static or dynamic balance sheet income simulations, assumptions regarding the interest rates received on new business are needed. On the surface, this seems to be an easier assumption to make relative to some of the other assumptions needed in asset/liability management modeling (ALM modeling). However, in model validations we have performed, we have […]

October 22, 2015

Observations from ALM Model Validations: NEV – Loans Devalue in Rate Shocks – or Do They?

When considering valuation as a measure of interest rate risk, and value volatility as an indicator of changes in interest rate risk, many institutions perform net economic value (NEV) analysis. When working with credit unions, or performing model validations, a concern many have is ensuring the models have the “right” assumptions. What is the “right” […]

October 8, 2015

Observations from ALM Model Validations: Prepayment Speeds

This blog is a continuation of our series to share observations from A/LM model validations that we’ve performed. Prepayment speed assumptions impact earnings, net worth, and NEV within an A/LM simulation. Too often, though, people may simply expect that their assumptions have been input correctly and are operating as intended. Some of the issues to […]

Start typing and press Enter to search