Asset-Liability Management for Correcting Mismatch

1091 Words Jan 29th, 2018 4 Pages
Assets driven strategies to correct the mismatch approach in shortening the duration of the asset portfolio. The financing strategy based asset securitization is commonly employed. Normally portfolios of long-term assets such as leasing and hire purchase portfolios are securitized, and the resulting product is redistributed or short-term assets or used to pay short-term liabilities.Responsibility strategies driven primarily focus on lengthening the maturity profile of liabilities. These strategies may include, for example issue of foreign equity in the form of additional shares of stock or convertible preference shares (which can also help in increasing Tier I capital finance companies ) , the issuance of redeemable preference shares subordinated debt instruments , obligations and access to long-term debt , including bank loans and long term loans . Strategies used to correct an imbalance in the form of D ( A) < D ( L ) (which is necessary if you expect interest rates to decline ) will be the reverse of the strategies discussed above.
Assets driven strategies focus on lengthening the maturity profile of the assets by deploying loanable funds available in long-term assets such as leasing and hire purchase .
Responsibility driven strategies focus on shortening the maturity profile of liabilities,…
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