THC BLOG

The COVID 19 crisis has challenged balance sheet managers to re-define interest rate risk and re-examine interest rate models while trying to understand the impact of many unanswered questions. This video will help insight into Interest Rate Risk in the coming years.

With the unprecedented events going on in the world, it’s time to activate your contingency plan.
Watch the video to learn how the THC CFP report can help: minimize the disruption of operations; provide flexibility and respond quickly to unplanned events.
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COVID-19 Impact on Balance Sheet Management.

What can we learn from the interest rate model? Rethink fixed income valuation in today's rate environment.

On March 19, 2020, Treasury discount bill rates fell to 20 basis points. As rates continue to fall, a possible negative rate regime can no longer be ignored. Read our new paper on Local Volatilities Model.

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Read our insight on how we price a floating rate note or adjustable-rate mortgage when we do not know how rates (and hence interest payments) will evolve due to Coronavirus.

The new approach that provides interest rate forecasts objectively, efficiently, and systematically.

Today paper "Market Interest Rate Forecast (MIRF)" continues to describe option risk on the balance sheet.

Interest rate models are central to valuing the fixed-income options  in balance sheets and are essential to enterprise risk management.
The current low-interest-rate regime challenges the robustness of many models today. Here we explain the limitations of these interest rate models.

The current low-interest rates have significant repercussions on capital markets. The Asset-Liability Committee (ALCO) has to manage option risk, especially when there are many options embedded on the balance sheet.

Because interest rate models are central to many practices in the capital market, they should be transparent and validated. However, most models today remain black boxes—providing no simple way for users to check the specifications or the intuitive explanations of the model.

While the implementation of CECL can be a burdensome process, using CECL to drive business decisions is simple and intuitive. This blog explains how CECL can be applied to many banking processes.

Today, financial institutions often ask: Which loan products are profitable? Many profitability models are backward-looking, used only for a "reward mechanism." The λ Profitability Model is a decision-support system that enables credit, lending, ALCO, risk management and financial reporting departments to work together coherently. 

Most bankers have considered CECL as simply a change in accounting, yet, CECL must be viewed as a business solution. The FASB Staff Recommends that bankers "...approach CECL implementation as a business solution" and "... to implement CECL in a more thoughtful manner."