CAIIB ABM Module A & C By Ashish Sir Class 6
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Bank Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is the primary objective of Asset-Liability Management (ALM) in a bank?
ALM aims to manage the risk arising from mismatches between assets and liabilities in terms of maturity, interest rate, and liquidity, ensuring stable net interest margins and solvency.
What is the primary function of the Asset-Liability Committee (ALCO) in a bank?
Oversees balance sheet risk and sets ALM policy guidelines.
What does the term 'Net Interest Margin (NIM)' represent in banking?
NIM is the difference between interest income earned on assets and interest paid on liabilities, expressed as a percentage of average earning assets, and is a key profitability indicator for banks.
What does 'Interest Rate Risk in the Banking Book (IRRBB)' refer to?
Risk of loss from interest rate changes affecting banking book positions.
How is the 'Duration Gap' used in interest rate risk management?
Duration Gap measures the difference between the weighted average duration of assets and liabilities; a positive duration gap means asset values fall more than liability values when interest rates rise, exposing the bank to interest rate risk.
What is the 'Gap Analysis' technique used in ALM?
Measures mismatch between rate-sensitive assets and liabilities over time bands.
What is the concept of 'Modified Duration' in bond valuation?
Modified Duration estimates the percentage change in the price of a bond for a 1% change in interest rates; it is calculated as Macaulay Duration divided by (1 + yield/n), where n is the number of compounding periods.
What is the minimum Capital to Risk-Weighted Assets Ratio (CRAR) prescribed by RBI under Basel III?
9 percent (1 percent above Basel III minimum of 8 percent).
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