Asset liability management simulation where students hedge rates

An asset liability management simulation is a timed activity where students position a bank's balance sheet against interest rate risk and then live with a rate move. In the Finsimco Asset Liability Management Simulation, each student places every balance on a repricing ladder, sets the behavioural life of the deposits, hedges the gap and explains to a committee what a 200 basis point move did to earnings and to economic value. Unlike a problem set, the result follows from assumptions the student chose.

Undergraduate and postgraduate students on Asset Liability Management, Bank Management, Financial Institutions, Risk Management or Treasury courses, and MBA programmes. Difficulty is adjustable, so the same case can be set as a parallel shift against fixed behavioural assumptions, or with a curve twist, a moving deposit beta and an optionality charge on the mortgage book for Masters and MBA cohorts.

No banking experience is needed, but students should understand present value and that a bond price falls when rates rise. Duration, repricing gaps, net interest income sensitivity and economic value of equity are computed and explained inside the activity, with worked examples in the tool tips.

Best once interest rate risk has been introduced on a single instrument, typically from week six onwards. It also works earlier as a shared reference point, because the balance sheet gives the cohort something concrete to attach duration to.

The Liquidity Risk Management simulation is about whether the cash arrives in time. This one is about what the balance sheet earns and what it is worth when rates move, which is a pricing problem rather than a timing one.

A case study asks students to analyse a bank's interest rate position as reported. Here each student builds the ladder, chooses the assumptions underneath it, sizes the hedge and has to answer for both sensitivity measures. You get the bucketing, the hedge record and the reasoning behind every assumption, rather than a written summary of what they think a treasurer should have done.

Most ALM teaching tools are gap spreadsheets where the buckets are given and the student fills in arithmetic. The Finsimco Asset Liability Management Simulation is different because the bucketing is the decision. Non-maturing deposits have to be placed, the placement is a modelled assumption, and the rate shock prices that assumption rather than the arithmetic. It suits modules that assess balance sheet judgement rather than calculation.

It can sit alongside one or replace it. A gap exercise teaches the mechanics of the ladder. This teaches what the ladder rests on and what happens when two risk measures give opposite advice, which is where ALM actually gets difficult.

They take the treasury, balance sheet and risk roles in turn, place every balance in a repricing bucket, set the behavioural life of the non-maturing deposits, size a swap book against the gap, then work through a 200 basis point shock and defend the result at ALCO.

Every student holds all three. Treasury wants cheap funding, balance sheet wants assumptions it can defend and risk wants both sensitivity measures inside their limits. Nothing is submitted until all three are satisfied, so the student has to reconcile them rather than pick a favourite.

No. A bank can defend protecting earnings or protecting economic value, and the hedge can sit in the swap book or in the funding profile. What scores badly is a position whose behavioural assumptions were never stated, or a hedge sized against a gap the student had mis-bucketed.

Single-player. Every student runs the same case independently, so there is no team formation, no minimum cohort size and no group-work marking to untangle. It runs equally well with one student or several hundred.

About four hours with the default timings, and the timings are yours. Every stage can be lengthened or shortened from the professor panel, so the same simulation fits a longer block or a shorter slot.

Yes. It pauses and resumes without losing submitted data. Two configurations work well: two sessions, with Briefing and Position and Assumptions in the first and the Rate Shock, ALCO Review and debrief in the second; or three sessions, one per decision stage. Briefing can also be set as pre-reading if you would rather open on the first decision.

Yes to all four. Because students work independently inside the platform, a remote or asynchronous run behaves exactly like an in-room one, which also makes it straightforward to set as homework. Delivery is covered across our simulations for universities.

As much or as little as you like. The simulation is self-running and coaching is optional. You control the timeline, can adjust stage timings, and can monitor student inputs live. See how a Finsimco session runs for the setup, controls and first-delivery support.