Search: "yield curve"

Optimize Your Budget Business Intelligence

Given all of the time and rigor that typically go into the annual budget process, it makes sense to consider how that process might be improved and generate greater business intelligence for decision-makers.  Beyond creating a base budget, following these 6 steps can help take the budgeting process to the next level and provide leaders […]

The Importance of Isolating Variables within Stress Tests

Stress testing is an important function of long-term interest rate risk modeling and risk management processes. As with any long-term interest rate modeling, stress testing requires both skill as well as an ability to fully understand and determine which assumptions influence the outputs and which assumptions are driving the results of the stress test. During […]

Long-Term CDs – Questionable Cost of Funds Protection

The 10-year Treasury closed below 1.40% 3 days in July! The flattening of the yield curve has many folks worried about further pressure on net interest margins. Some, though, are hoping to extract a benefit by locking in long-term funding at historically low interest rates. As an Asset/Liability Management (A/LM) strategy, this approach employs the […]

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” […]

Observations From ALM Model Validations: High Starting NEV Ratios

When performing model validations, it is common to see a net economic value (NEV) ratio that is considerably higher than the credit union’s current net worth ratio. Understanding NEV and net worth are two completely different concepts; there are reasons why starting with a high NEV ratio in the base environment may not be reasonable. […]

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