ALM Models
From Open Risk Manual
Definition
ALM Models is a broad description of models that are used for asset and liability management.
They encompass any of the following areas:
- Interest Rate Risk
- Currency Risk
- Optionality Risk (embedded options such as the Prepayment Option and associated Prepayment Risk)
- Credit Risk
- Liquidity Risk
Issues and Challenges
While many of the underlying issues relevant for ALM are extremely well understood (e.g., interest rate models) and ALM managers are generally making use of advanced tools there is relatively less documentation to demonstrate best practice.
