Asset Liability Management

Financial institutions hold assets to cover their future liabilities. When the two sides of the balance sheet are not well matched, the institution becomes vulnerable to changes in interest rates, market prices, or unexpected cash demands. The goal of an ALM project is to measure and manage that mismatch, so the institution can meet its obligations under a range of conditions.

The work involves modelling how interest rate changes affect the value of assets and liabilities, running stress tests on the balance sheet, and providing analysis to support investment and hedging decisions. You model cash flows to check that liquid assets are available when obligations come due. For pension funds, this includes projecting long-term liabilities and matching them against the expected returns of the investment portfolio.

The main tools are Python and Excel, often combined with specialist risk systems. Key techniques include duration analysis, cash flow modelling, and scenario analysis. Knowledge of fixed income instruments, interest rate swaps used for hedging, and the regulatory frameworks that govern how banks and pension funds manage their balance sheets is important.

This type of work appears across banking, insurance, and pension fund management. It connects closely to the Risk Manager and Actuary roles. In the Netherlands, DNB regulates how banks and insurers manage their balance sheets, which creates ongoing demand for ALM work.