ALM Modeling and Balance Sheet Optimization is a comprehensive book that combines theoretical exploration with practical guidance and code examples on implementing a balance sheet optimization model. The book emphasizes the use of stochastic dynamic programming to develop a deep and holistic understanding of the banking problem. Encompassing the entire implementation stack spanning from data layers to the specification of decision variables, business and regulatory constraints, objective functions, modeling strategies, solving techniques, debugging, and reporting this book serves as a comprehensive guide for constructing highly effective balance optimization models from scratch, enabling the maximization of banking outcomes.

Readers will learn how to build a mathematical model capable of generating projections for portfolios; balance sheet, income and cash flow statements; capital, and risk measures in real-world scenarios. This practical approach is particularly valuable for professionals involved in integrated stress testing, capital adequacy assessment, financial planning, and optimization tasks. In essence, the book offers valuable insights into the challenges of balance sheet optimization, providing readers with the necessary tools to build their own dynamic and comprehensive ALM models.

Autorentext

Diogo Gobira, Market Risk Manager, BNDES

Klappentext

ALM Modeling and Balance Sheet Optimization leads the reader through the vast world of mathematical programming applied to balance sheet optimization. It considers a wide range of business and regulatory constraints and different flavors of financial objectives to show how a mathematical model can be used to orchestrate the available information, market visions, operational constraints and bank objectives, working as a powerful decision support tool. The book argues that, soon, the use of optimization models may no longer be a mere option, becoming a matter of survival for bank institutions as in other sectors.

Readers will be able to understand the theory and implement a mathematical model capable of producing scenario projections for portfolios, balance sheets, results, capital and risk indicators in the real world. This book will be great benefit to those involved with integrated stress testing, capital adequacy testing and financial strategic planning and optimization tasks.

Zusammenfassung

"My long-term plans are to develop software to do balance sheet management, and the approach you wrote about in the book fits right into those plans. The current software used by the largest banks in the United States is antiquated. That presents a business opportunity for a group of people with the right ideas to move the industry forward." -- Brent Ritterbeck, Senior Treasury Specialist, BNY Mellon

Inhalt
Motivation Core ALM Techniques ALM Perspectives: Accounting, Economic and Regulatory Accounting Principles Financial Contracts Modeling Contract Aggregation Scenario Generation Introduction to Mathematical Programming Applied to ALM Preparing The Model Coefficients Contract Sets Core Decision Variables Making The Model Legible With Auxiliary Variables Typical Objective Functions Accounting Constraints Market and Liquidity Constraints Regulatory Constraints Non-Arbitrage Constraints Implementing The Model Using Julia and JuMP 19. Conclusions