Foundations of Financial Risk: An Overview of Financial Risk and Risk-based Financial Regulation, 2nd Edition

Glossary

 

Advanced Measurement Approach

The Advanced Measurement Approach is a sophisticated approach to calculate operational risk capital, allowing the bank to use internally generated models to calculate their operational risk capital requirements.

Asset and liability management (ALM)

Asset and liability management (ALM) in a bank manages the risks that arise due to the mismatches between assets and liabilities in terms of maturity, liquidity, interest rates, etc., and typically focuses on the banking book's interest rate risk and the bank's liquidity risk.

Asset-backed security (ABS)

Asset-backed securities, backed by pools of mortgage loans or other types of securitizable cash flow generating assets, are sold to investors who then receive payments based on the cash flows generated by the assets in the underlying pool.

Asset-based loan

Asset-based loans allow the borrower to pledge a specific asset or a combination of assets, such as inventory, machinery, or equipment, as col­lateral to cover a loan.

Asset conversion loan

Asset conversion loans (self-liquidating loans) are loans that are repaid by converting the asset that is used to collateralize the loan into cash.

Asset transformation

Asset transformation is the process of creating new assets (loan) from liabilities (deposits) with different characteristics by converting small denomination, immediately available, and relatively risk-free bank deposits into loans—new relatively risky, large denomination assets—that ...