Sample interview questions: Can you explain the concept of asset-liability management and its relevance to portfolio management?
Sample answer:
Asset-Liability Management (ALM):
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ALM involves aligning a portfolio’s assets and liabilities to manage financial risks, particularly interest rate and liquidity risks.
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ALM is critical in portfolio management to ensure the portfolio can meet its obligations while minimizing risk and maximizing returns.
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It is a dynamic process that requires ongoing monitoring and adjustment to adapt to changing market conditions and the portfolio’s evolving risk profile.
Relevance to Portfolio Management:
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ALM helps portfolio managers balance risk and return objectives.
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It enables them to structure portfolios that meet specific investment goals while managing exposure to potential losses.
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ALM assists in managing interest rate risk by matching the maturities of assets and liabilities to minimize the impact of interest rate fluctuations.
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It helps manage liquidity risk by ensuring sufficient liquid asse… Read full answer