PGP 2010-12 Term VI TALM Course outline

MDI

Post Graduate Programme in Management (2010-12)

(Term VI Elective)

Treasury

and Asset Liability Management

Course Outline

Financial assets are acquired as part of regulatory requirements, as in commercial banks, or they may have been acquired as investments or Trading Assets. This activity of the bank or financial companies has a critical bearing on the bottom-line and is done by the Treasury. Efficient management of this portfolio has become critical. The first part of this course discusses trading activity of banks. The second part of the course is about Asset Liability Management. Banking is an enterprise which deliberately takes on mismatches and other such risks to earn money. Assets and Liabilities have, therefore, to be actively managed. Banks have to estimate the risk carried on the balance sheet, work out how the value of the balance sheet would change in response to changes in the interest rate etc, determining what mix of assets and liabilities would be beneficial and how to go about achieving this mix. Learning Outcomes Treasury operations: Factors important to a trader / dealer , their estimation Interest rate scenario in India Set up and working of a Treasury Profit opportunities in treasury operations Strategies adopted by dealers/traders Risks and risk management in trading Asset Liability Management Measurement of risk associated with a banks balance sheet Risk management strategies Liquidity risk management Interest rate risk management Use of derivatives in ALM RBI guidelines and requirements Pedagogy As the course will be oriented towards practical aspects, learning would be mainly through discussions and debates. Faculty : Prof N.R.Bhusnurmath Tele Extn : 174 ,

bhusnurmath@mdi.ac.in, (M) 98 100 97 448 Room No B-8 ,

PGP 2010-12 Term VI TALM Course outline

MDI

Readings /References: Readings specific to each session will be given. In addition to that, for further reading, the following books are recommended. 1. Risk Management in Banking Joel Bessis John Wiley & Sons Ltd 2. Hand Book of Asset Liability Management Edited by FJ Fabozzi, A Konishi 3. Managing Bank Assets & Liabilities Edited by Prof JSG Wilson Euromoney Publications (1998) 4. Finance pages of all business papers 5. Market reports on mecklai.com , debtonnetindia.com, pnbgilts.com Session Topic Functions of a Treasury Learning Objectives Front Office Mid-Office Back-Office Operational Risk in a Treasury Factors influencing interest rates Call Money Markets T Bills CBLO G-Secs Market Market & Market conventions Merchant Rates Forex Trading in India Use of Derivatives for hedging & trading Marketing of Derivatives Measurement of Risks Bank-Book Treasury Book Measurement Use of derivatives Measurement Use of derivatives Issues & Challenges Pedagogy & Readings Case Study Reading 1 Market reports Discussions & Debate Readings 2 Case Study Readings 3 Case Study Readings 4 Case Study Readings 5 Discussions Readings 6 Discussions Readings 7 Case Study Readings 8 Case Study Readings 9 Guest Faculty

2 3 4 5

Interest Rate Scenario in India Money Markets Bond Markets Foreign Exchange Market Derivatives in Treasury Risks on a banks Balance Sheet Liquidity Risk Interest Rate Risk

7 8 9

10

Inter Bank Markets

Evaluation : Quizzes 4*10 End Term Class Participation

40 % 50 % 10 %