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What Are Some Things to Consider as Part of the Budget Process?

We help a lot of institutions with the creation of their budgets and long-term forecasts. There are many questions that often arise as part of that process. The most common question is, what rate environment should I plan on? There is no easy answer to this question; the reality is that whichever environment gets incorporated […]

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 […]

Evaluating Derivatives―Part III: Economic Value as Rates Change Instantly

This blog will begin to review the economic value of a swap when testing an instantaneous rate change. This builds on the blog Evaluating Derivatives—Part II:  Economic Value.  As before, the example swap has the following terms: 7-year term Notional amount: $100 million Credit union pays fixed rate of 2.00% Credit union receives 3-month LIBOR […]

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