Asset / Liability Management

Projects:

Client: Commercial Bank
Project: Analysis of the Portfolio Management Process
We assisted in the reorganization and implementation of risk management systems for a money center bank. The project included the development of a portfolio management process that allowed greater flexibility in the use of callable liabilities to hedge prepayment risk within the framework of a traditional transfer pricing system.

Client: Medium-Sized Bank
Project: Assessment of the Asset Liability Management Process and Risk Systems
We evaluated prepayment forecasts, spread assumptions used for market value and income forecasts, deposit runoff rates, COFI forecasts, and deposit pricing forecasts. In addition, we made recommendations for a review process for these assumptions and assisted with policies and procedures for hedge selection and implementation.

Client: Investment Bank and their Counsel
Project: Performed Due Diligence for Mortgage REIT IPO
We have worked with several Issuers, their Investment Banking Firms and their legal Counsel in dealings relating to private placements and initial public offerings for mortgage debt REITs. Tasks included:

Reviewed pro-forma financial data and assumptions, including risk management model and results as part of due diligence process
Appraised asset acquisition process as well as policies for ongoing monitoring of portfolio for whole loan assets
Examined documentation, particularly with respect to adequacy of disclosure of risk factors in prospectus

Client: Savings Bank
Project: Development of an Asset/Liability Management Framework
We worked with the Treasury Department to improve the asset/liability management process. For this project, we created an integrated portfolio optimization system, enhanced option-adjusted spread tools, and assisted in the development and analysis of derivative strategies.

Client: US Mortgage Backed Securities Originator
Project: Evaluated risk management for multi-billion dollar mortgage portfolio
We provided client with an initial report detailing a theoretical framework for analysis of the portfolio. This framework was based on information gathered in the initial meeting, practices of other mortgage banking firms and the circumstances unique to client's position in the market. For subsequent analyses and reports, we focused on:

How should default risk be accounted for within this framework?
What are effective hedge instruments and strategies for the portfolio given the recommended framework?
How does this framework fit with other commonly recognized risk management methodologies?
What implication does this theoretical framework have for the management of capital?

In additional meetings with client, we discussed the report and the analytical framework that was developed. The purpose of these meetings was to determine if modifications were necessary, given special business concerns, data limitations, etc. We issued a final report detailing recommendations for a framework and data analysis to support a model for evaluation for the portfolio.

Client: Insurance Company
Project: Forecast fixed income cashflows and expected equity dividend cashflows
This project focused on $1.4 billion in assets that consisted of ABS, CMBS, MBS, CMO, Corporates, Governments, Treasuries and equity. For MBS products, our proprietary model was used to generate dynamic prepayment forecasts. A static baseline scenario was validated using a commonly accepted system. All fixed income product cashflows were forecast using proprietary analytical tools, and when necessary, augmented by outside vendor's models of structured bonds which link to our proprietary cashflow generator. We built default and loss rate models using historical data and statistical methods. The results indicated the client's assets were forecast to meet NPV targets over the next 30 years using conservative scenarios.