Full Description
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.
Contents
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
