c. myblog

October 3, 2018

Does Analyzing Business Decisions Through Volatility Make Sense?

A strong indicator of expected trends and opportunities credit unions are exploring is often found in the type of what-ifs requested from our clients. One of the many what-if requests we are getting is addressing deposits leaving, especially high-balance money markets. This pressure on liquidity, combined with other changes in the environment, is resulting in […]

August 8, 2018

Don’t Forget to Look Down

For a very long time, asset/liability management (A/LM) and managing interest rate risk (IRR) were almost exclusively about what would happen if market rates rose.  When rates were near zero, risk limits that looked down to negative rate environments did not receive much consideration.  But that’s not the case anymore.  The industry needs to dust […]

July 11, 2018

Policy Risk Limits are Often a Moving Target

With market interest rates on the rise for the first time in nearly 15 years, comes a host of new considerations for the credit union industry. Among them is an understanding that many Interest Rate Risk (IRR) policy limits are in fact a moving target. Whether rates stay put, continue to increase, or possibly head […]

June 13, 2018

Are Net Interest Income (NII) Simulation Pricing Assumptions Producing Optimistic Results?

We perform many model validations each year.  In most income simulations, it is assumed that all new volume loan rates will move at 100% of the change in market rates.  However, recent trends show that the “typical” new volume assumptions used by many credit unions are not representative of what is happening.  This can cause […]

February 18, 2016

OBSERVATIONS FROM ALM MODEL VALIDATIONS: DO DECAY RATES MATTER?

Yes. Decay rates do matter, but they are often not appropriately applied in the asset/liability management (ALM) process. Decay rates are essential for capturing the risk of evolving member behavior, namely deposit migration, as rates change. This blog will focus on using decay rates when simulating net economic value (NEV). Model validations typically reveal two […]

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