Asset and Liability Management
From Open Risk Manual
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Definition
Asset and Liability Management (ALM) is a broad description of tasks with the precise composition depending on the organization / business model. For financial institutions, ALM may encompass managing risks and exposures in some of the following areas:
- Interest Rate Risk
- Liquidity Risk
- Currency Risk (FX Risk)
- Optionality risks (embedded options such as Prepayment Risk)
- Credit Risk may be also in scope (some aspects) but is more commonly identified as part of Credit Portfolio Management
Gap Management
An essential aspect of ALM is managing "gaps" (mismatches) of maturities and cashflows on either side of the Balance Sheet
