ALM Model Validation
We validate all of the industry’s primary ALM models.
Why Choose Us
We believe that a review of ALM modeling should be comprehensive and performed in the context of our client’s policies and procedures and recent financial performance. Our model validation begins with a thorough review of our client’s ALM policies and procedures to better understand our client’s goals, objectives and risk tolerances. Next, we review our client’s financial statements for at least the most recent 10 years to understand the institution’s recent financial performance.
Only then do we begin our thorough review of our client’s existing ALM model and ALCO reports, because we believe we must first have the appropriate context for our review and recommendations.
As part of our work, we obtain the data and assumption set inputs (prepayments, pricing lags, pricing betas, etc.) used to produce our client’s most recent ALM reporting package. We input the data and assumptions into the ZM Desk Model to ensure our client’s model is producing expected category level outputs consistent with the category level inputs. Next, we analyze our client’s data aggregations and make recommendations for improvement. We then benchmark our client’s input assumptions to industry standards as well as our client’s experience, including the results from back-testing. As a final step, we make overall recommendations regarding our client’s interest rate risk profile, ALM modeling, and strategies designed to mitigate risk, all in the context of our client’s policies and procedures and actual financial results.