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 […]
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 […]
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 […]
c. notes – Considering Derivatives?
Credit unions purchase derivatives for interest rate risk (IRR) protection. As we consider the value that can be obtained from derivatives, it also makes sense to ask how that protection may change over time and if there are circumstances that might make the protection not as beneficial. Many of our clients are using or considering […]