Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition

Garbage in – garbage out

It may be useful to underline that if a scenario is irrelevant, the measure of risk made through a simulation model will be irrelevant too. Risk management is not a science, it is an art; the art of designing relevant scenarios.

Key Points The impact of an interest rate change on the net interest margin of a bank is analysed through The simulation consists of the forecast of balance sheets and income statements related to different scenarios. Risk management = design relevant scenarios, analyse the risk, and decide how ...