Asset-Liability Management / Liability-Driven Investing


Asset-liability management is critical in managing your risk and ensuring the appropriate investments are in your portfolio to meet future needs. Regulations, demographic factors and macro-economic variables (low interest rate environments) have all contributed to a more challenging environment where it is essential to have an optimal deployment of assets to fund near-term and forward looking liability distributions, of varying types. At the same time, it is becoming increasingly difficult for those with large, multi-asset portfolios to accurately model the risk profile in a meaningful way - legacy systems can be inflexible and might not provide sufficient visibility, especially at the aggregate level.

With FINCAD's solution you'll obtain the necessary visibility into your portfolio through its customized scenario analysis, flexibility to aggregate all positions and handle the most complex instruments, and its comprehensive view of cash flows for most market standard financial instruments that can be analyzed against different market conditions for more accurate forecasting. FINCAD's solution enables you to perform Asset-Liability Management (ALM) (e.g. Liability Driven Investment (LDI) strategies or effectively managing loan obligations) by providing the following functionality:

Scenario Analysis Capabilities So You Can See the Impact on your Portfolio

  • Perform What-if Analysis: Perform what-if analysis against your portfolio-these can be at a global level or a more targeted level for analysis on specific asset and liability allocation buckets.
  • Allocation Analysis: With FINCAD's flexible solution you can obtain the necessary sensitivities such as DV01, duration, and Greeks matching by user defined allocation buckets to manage market and credit risk.
  • Customized Scenarios: Cash flows can be stress tested against single or multiple pre-built or user-defined scenarios based on market factors to see liquidity implications and ability to meet obligations under stressed market environments. The stress test results include the information you need to mitigate risk exposures.

Flexibility to Manage Even the Most Complex Instruments

  • Calculate Any Payoff: In order to perform the necessary hedging analysis on granular exposures, you need to have a flexible solution. Whether you are trying to model guaranteed payoffs like Variable Annuities (VAs) or trying to add exotic hedging instruments to the asset hedging program, FINCAD gives you the ability to model the most complex financial instruments through its intuitive index expression language and powerful representation of embedded options or triggers.
  • Advanced Curve Building: FINCAD's flexible curve building functionality allows you to perform portfolio analysis under a variety of market scenarios and discounting methodologies, providing an adaptive framework for regulatory changes.

Cash Flow Projections to Allow for Better Hedging Decisions

  • Matching Cash Flows: FINCAD provides forward looking expected cash flows with portfolios that can consist of diverse instrument types (vanilla and exotic) across multiple asset classes and in multiple currencies. Irrespective of the method used for managing your liabilities (e.g. duration or maturity buckets), the output can be used in matching fund distributions with asset and contribution inflows.
  • Dynamically Manage Portfolios: Dynamically manage your portfolio and implement effective rules based mechanisms to trigger hedging rebalance decisions or asset investment decisions to avoid inter-period allocation drift that can erode portfolio performance. As you add or remove instruments from your portfolio, quickly determine the effect has on the overall cash flow profile such as increasing or decreasing risk at certain maturities.
  • Hedge Away Your Risk: Driven by our patent-pending Universal Risk Technology™, FINCAD calculates hedging notionals based on market instruments. This can be used as a decision tool to manage your risk exposures.

FINCAD solutions provide the necessary transparency to satisfy regulators with fully transparent and documented models for your valuations, risk based capital calculations wth audit trails of all calculations.

Contact a FINCAD representative for more information about our Asset Liability Management solution or click here to request a customized demonstration.

Asset-Liability Management - FINCAD Solutions