1, Asset-Liability

Management

In banking, asset and liability management (often abbreviated ALM) is the practice of managing risks that arise due to mismatches between the assets and liabilities (debts and assets) of the bank. This can also be seen in insurance. Banks face several risks such as the liquidity risk, interest rate risk, credit risk and operational risk. Asset liability management (ALM) is a strategic management tool to manage interest rate risk and liquidity risk faced by banks, other financial services companies and corporations. Banks manage the risks of asset liability mismatch by matching the assets and liabilities according to the maturity pattern or the matching of the duration, by hedging and by securitization. Much of the techniques for hedging stem from the delta hedging concepts introduced in the BlackScholes model and in the work of Robert C. Merton and Robert A. JarrowModern risk management now takes place from an integrated approach to enterprise risk management that reflects the fact that interest rate risk, credit risk, market risk, and liquidity risk are all interrelated. The Jarrow-Turnbull model is an example of a risk management methodology that integrates default and random interest rates significance:-

6. Function of integrated treasury

of bank?
Answer:

Treasury function was restricted to fund or liquid management. Fund management includes maintaining adequate cash balances to meet the daily requirements, implementing the surplus funds in other operations, sourcing the funds to even the gaps in cash flow. The treasury departments in banks are responsible to meet the Cash Reserve Requirement (CRR) and invest the funds in securities under Statutory Liquid Ratio (SLR). Treasury basically deals with shortterm cash flows(less than one year), but investment in some securities exceeds more than one year. Integrated treasury came into existence as a result of financial reforms, the most important being the deregulation of rupee and partial convertibility of rupee. Rupee is freely convertible on current account. Due to the relaxations of RBI in Foreign Direct Investment (FDI), rupee is now partially convertible on capital account. Banks are permitted a larger limit in terms of their net worth, and overseas borrowing and lending. The functions of integrated treasury are not restricted to traditional functions. The major functions of integrated treasury are as follows: . Performing reserve management, which involves meeting CRR and SLR obligations. . Deploying surplus funds in securities which have low risk and earn profits. . Performing global cash management. . Providing effective and efficient merchant services. . Improving the profit by exploring market opportunities in money market, securities market and forex market. . Assisting the banks in Asset-Liability Management (ALM).
. Managing market risk for the entire bank.