The term “Convexity” is an extremely important concept in the financial markets and as such, it must be taken into account in the ALM modeling process. In the mortgage market, for example, it refers to the fact that borrowers will exercise their option to refinance when mortgage loan rates decline. This causes the average life of higher rate loans to shorten thus severely limiting the price appreciation that would normally accompany a long-term asset in a period of falling rates. Correspondingly  More...

The average maturity is one of several critical inputs necessary to compute the NMD valuation for NEV purposes. The deposit flows must be evaluated going back in time and in the context of a “closed sample”. This means that the historical behavior of a large group of accounts must be studied to determine when, on average, their deposits leave the institution. This behavior determines the estimated average maturity. There are other procedures that may be used but disruptions in the financial mark  More...

The IP Dept. policy concerning MICR toner is as follows: Excessive rejects! Sorters will not read regular toner, this means that every check that is printed using regular toner will have to be keyed manually to be processed. If the IP Saff detect a significant rise in your CU reject rates and it is attributed to the toner, there will be a per item reject fee put into place. Industry standards dictate that all checks are to be machine readable - if it is not MICR toner, it is not machine rea  More...

Interest rate risk is the risk of an adverse effect on the earnings and liquidity position of a financial institution resulting from changing interest rates. A sound ALM position has a balance sheet structure such that management is able to raise deposit rates in a rising rate environment in a manner that is consistent with rising asset returns so that the net interest income (NII) remains reasonably stable. This can be difficult to accomplish if a long-term asset structure is primarily financed  More...

The maximum allowed annual contribution is indexed each year by the government and is normally announced in the 2nd quarter of the current year for the next year. The limits for 2009 were posted on May 13, 2008 and are quoted below. 2007 Annual Contribution Levels for HSAs: Single (self-only) coverage $2,850 and Family coverage $5,650 Catch-up contribution for accountholders is $800 in 2007. Catch-up Contributions are allowed for an accountholder who is at least 55 years   More...

Securing transmission of financial information in ecommerce is currently the major application of SSL certificates. However, with incidence of identity theft on the rise, protection of personally identifiable information is becoming ever more important. This category of data would include identity and social security numbers, as well as e-mail addresses. So, if you are handling financial transactions on your web site, there is no question that SSL certificates are required. If you are managing  More...