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Liquidity and Interest Risk Management

Liquidity and Interest Risk Management



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Published by james

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Published by: james on Feb 17, 2009
Copyright:Attribution Non-commercial


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Executive CertificateInTreasuryManagement
Liquidity And Interest Risk Management
1.0 Introduction2.0 Functions of the Treasury3.0 The Treasury Function and Volatile Markets4.0 The Structure of the Treasury5.0 Risk Defined6.0 Primary Risks7.0 Treasury and Liquidity Risk 8.0 Liquidity Determinants9.0 Liquidity Risk Dynamics10.0 Liquidity Management Policies
10.1 Typical internal liquidity guidelines encompass the following:
11.0 Foreign currencies12.0 Liquidity Risk Management Strategies
12.1 Liquidity risk can be determined or measured in different waysTable 1 Maturity Ladder under alternative conditionsTable 2 Liquidity Ratios
13.0 Liability Side Risk 13.1 Asset Side13.2 How to meet liquidity calls14.0 What is Asset Liability Management?
14.1 ALM Focus will be on Balancing:
15.0 Liquidity Planning16.0 Interest Rate Risk Management
16.1 Repricing ris
16.2 Yield Curve risk 
16.3 Basis Risk (spread risk)
:16.4 Optionality:17.0 Framework for IRM18.0 Risk Measurement and Management19 0 Repricing Gap MethodTable 3 Gap ModelTable 4 Repricing Gap ModelImpact of changes in interest rateActivityMaturity MethodHow to extend the concept to a Portfolio?Deficiency of Maturity Model :Modified Duration
Other Interest ate Risk Management StrategiesReferences
1.0 Introduction
Treasury is the integral function in the management of liquidity in a financialinstitution or any organization. It is the heart of the organization. Treasuryinvolves the management of funds, i.e. investment of excess liquidity and borrowing to cover any short positions. Any profitable opportunities thatarise during the process of managing liquidity can be exploited for the benefit of the institution/organization.
2.0 Functions of the Treasury
Treasury functions can be summarized as follows:
Cash Flow Management and Position Funding
Maturity Transformation
Gap Management
Trading and investment (income generation)
Liquidity Risk Management
3.0 The Treasury Function and Volatile Markets
Money markets have become volatile in Zimbabwe. Such volatility points tostrategies that avoid the mismatch between assets and liabilities. Strategies

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