What is the purpose of ALM?
Asset-liability management (ALM) serves the critical financial purpose of managing a bank or financial institution's balance sheet risks, primarily interest rate risk, liquidity risk, and foreign exchange exposure. By strategically coordinating the maturity, cash flow, and pricing of assets and liabilities, financial institutions ensure they maintain adequate liquidity to meet obligations, protect net interest margins against volatile market shifts, and optimize overall profitability within regulatory compliance frameworks.
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