BFF3651 – TREASURY MANAGEMENT FORMULA SHEET (W1-W6)

Week 2

Computation of Cost of Funds

1. Historical Weighted Average Cost of Funds

Interest Cost + Other Expenses + Required Return
Earning Assets

2. Marginal Cost of Liability (j)

Interest Rate + Servicing Costs + Insurance
Net Investable Balance of Liability (j)

3. Cost of Debt
PV= [Coupon/ (1+ kd)1] + [FV/ (1+ kd)n]

4. Weighted Marginal Cost of Funds

m
WMC   w j k j
j1

5. Transfer Pricing
6. Component Marginal of Cost
[(Rate+Cost)/ Fund Usage%]

7. WMC of Funds
% of total * Component Marginal of Cost

Week 3

Sources of Uses of Funds

Estimated Liquidity Deficit (-) or surplus (+) for the coming period

=Estimated Changes in Deposits – Estimated Changes in Loans

Structure of Funds Approach

Liquidity Indicator Approach

1. Cash Position Indicator

= Cash and deposits due from FI ÷ Total Assets

2. Liquid Securities Indicator

= Government Securities/ Total Assets

3. Loan Commitments Ratio

= Unused Loan Commitments / Total Assets

4. Capacity Ratio
= Net Loans & Leases / Total Asset

5. Core Deposit Ratio

= Core Deposits/ Total Assets

6. Net Federal Funds and Repurchase Agreements Positions

= (Fed Funds Sold & Reverse Repurchase Agreements – Fed Funds Purchased and
repurchased agreements) / Total Agreement

7. Pledge Securities Ratio

= Pledge Securities/ Total Securities Holding
 8. Hot Money Ratio
= Money Market (Short Term Assets) / Volatile Liabilities

9. Deposit Brokerage Index

= Brokered Deposits / Total Deposits

10. Deposit Composition Ratio

=Demand Deposits/ Time Deposits

Week 5

GAP

= RSA- RSL

Cumulative GAP

Expected NII

= [(RSA* RATE%) + (FIXED RATE* RATE%)] – [(RSL*RATE%) + (FIXED RATE*RATE%)]

Expected NIM

= NII/ (RSA+ Fixed Rate)

Week 6

Duration
k n
CFt (t) CFt (t)
 (1+ r)t

t =1 (1 + r)
t
D = t =k1 
CFt Price of the Security

t =1 (1 + r)
t

Modified Duration

Macaulay's Duration
Modified Duration 
(1  i)

P
 - Modified Duration  i
P
Effective Duration

Pi- - Pi
Effective Duration 
P0 (i - i- )

Weighted Average Duration of Bank Assets

1. Weighted Average Duration of Bank Assets (DA)

n
DA   w iDai
i
2. Weighted Average Duration of Bank Liabilities (DL)
m
DL   z Dl
j
j j

Duration GAP and Economic Value of Equity

ΔEVE  ΔMVA  ΔMVL

Duration GAP

DGAP  DA - (MVL/MVA)DL

 y 
ΔEVE  - DGAP  MVA
 (1  y) 