Optimization

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Overview

Transform strategy into actionable solutions.
The Optimization module in ALM360 helps credit unions identify the most effective actions to improve earnings, reduce risk, and strengthen liquidity, all while adhering to policy limits and governance standards. Using your current balance sheet and ALM360’s unified modeling engine, the Optimization module evaluates a wide array of potential strategies and provides recommendations that align with your objectives and compliance requirements.

What is the Optimization Module in ALM360?

The Optimization module is a decision-support engine that turns objectives (e.g., improve NII, reduce NEV volatility, strengthen liquidity, etc.) and constraints (policy limits, funding rules, concentration caps, duration targets) into clear, ranked actions. It leverages instrument-level analytics across loans, investments, and borrowings to:

Maximize or minimize specific objectives like earnings (NII), risk exposure (NEV), or liquidity metrics.
Honor constraints including policy limits, capital thresholds, duration bands, sector concentrations, or funding rules.
Produce implementable plans with step-by-step trade, funding, and portfolio adjustments.

Key Features

Multi-Objective Optimization: Simultaneously target earnings, risk, and liquidity goals to find the best balance for your credit union.
Constraint-Aware Modeling: Automatically enforce policy limits, duration requirements, and capital thresholds to ensure every recommendation fits your governance framework.
Instrument-Level Precision: Analyze specific securities, loans, and funding options for realistic and actionable strategies tailored to your credit union.

Benefits

Maximize Performance
Identify strategies that measurably improve NII, liquidity, and risk metrics for stronger financial results.
Policy Confidence
Ensure every recommended action aligns with board-approved limits and regulatory requirements, supporting examiner readiness.
Actionable Insights
Move from analysis to practical solutions, giving your team clear options for strengthening earnings, managing risk, and optimizing liquidity, all designed to fit your credit union’s unique goals and constraints.

How it Works

Select Candidates: Begin by choosing investments, loans, and funding sources to include in your optimization analysis.
Set Strategy Constraints: Define targets such as yield, option-adjusted spread (OAS), and other performance metrics to guide the optimization process.
Apply Portfolio Constraints: Specify portfolio-level requirements like average life, duration, strategy size, sector limits, and policy thresholds.
Generate Candidates: Optimization searches feasible strategies across investments, loans, and borrowings, leveraging marketplace inventory and internal portfolios.
Review and Select: Compare “good-better-best” options, stress-test the short list, and finalize the preferred path.

Why Choose the Optimization Module?

Unified Strategy Engine
Optimization is fully integrated with ALM Modeling, Liquidity Reporting, Profitability Analysis, Trade Simulation, and CECL, ensuring consistent data, assumptions, and governance across decisions.

Actionable, Not Just Analytical
You get implementable trade lists and funding plans, not just insights.

Policy and Examiner Ready
Every recommendation is documented against your constraints and assumptions, producing transparent reporting for ALCO, board, and exam teams.

Proactive Balance Sheet Management
Move from reactive adjustments to proactive, continuous optimization, all while keeping your balance sheet aligned with strategy as markets and member behavior evolve.

Enhanced Collaboration
Give ALCO, board, and management a common, data-driven view of alternatives to help support clear decisions and faster consensus.

Use Cases

Maximize earnings within policy constraints.
Minimize interest rate risk exposure.
Strengthen liquidity coverage and resilience.
Rebalance portfolio for optimal performance.

Optimization FAQs

Common objectives include maximizing NII, minimizing NEV volatility, improving liquidity metrics, meeting duration/convexity targets, and balancing risk/return.

You configure policy rules and limits; Optimization enforces them automatically, covering sectors, ratings, concentrations, duration targets, capital, and liquidity thresholds.

Yes. It evaluates portfolios, new purchases/sales, and borrowings, then produces holistic recommendations.

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