Download Asset and Liability Management for Banks and Insurance by Marine Corlosquet-Habart, William Gehin, Jacques Janssen, PDF

By Marine Corlosquet-Habart, William Gehin, Jacques Janssen, Raimondo Manca

This e-book introduces ALM within the context of banks and insurance firms. even though this technique has a middle of primary frameworks, types may well differ among banks and insurance firms due to the diversified dangers and ambitions concerned. The authors evaluate and distinction those methodologies to attract parallels among the commonalities and divergences of those providers and thereby offer a deeper knowing of ALM in general.

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Extra resources for Asset and Liability Management for Banks and Insurance Companies

Example text

We will voluntarily not describe in detail all the calculations. For that, the readers can refer to the documents available on the website of the European Insurance and Occupational Pensions Authority (EIOPA)2, particularly the Technical Specifications. 1. Solvency II in a nutshell The initial Solvency I directive was introduced in 1973 and was aimed at revising and updating the current European Union (EU) Solvency legislation. Solvency II has a much wider scope because it reflects the new risk management practices to define the required capital and manage risks.

Fortunately, it is possible to construct an indicator to measure this influence called the duration of the considered flow F. 3] with −Dm (i ) = C '(i ) C "(i ) ,(1 + i) Dm (i ) = D(i ), CV (i ) = . 4] 30 Asset and Liability Management for Banks and Insurance Companies It follows that the absolute variation of the market value is given by the two following formulas, respectively, at first- and second-order approximations: C (i + Δi ) − C (i ) ≅ −Dm (i )Δi × C (i ). 5] 1 2 C (i + Δi) − C (i) ≅ −Dm (i)C (i)Δi + CV (i)C (i) (Δi ) .

Year Interest income Adm. 1. 03%. 42% now. This example shows that the movements of the interest rate can have a strong influence on the profit. Fortunately, it is possible to construct an indicator to measure this influence called the duration of the considered flow F. 3] with −Dm (i ) = C '(i ) C "(i ) ,(1 + i) Dm (i ) = D(i ), CV (i ) = . 4] 30 Asset and Liability Management for Banks and Insurance Companies It follows that the absolute variation of the market value is given by the two following formulas, respectively, at first- and second-order approximations: C (i + Δi ) − C (i ) ≅ −Dm (i )Δi × C (i ).

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