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The Asset-Liability Management Strategy System at Fannie Mae

Author

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  • Martin R. Holmer

    (HR&A, Inc., Suite 1202, 1156 15th Street, NW, Washington, DC 20005)

Abstract

Fannie Mae uses the asset-liability management strategy (ALMS) system to support portfolio management decisions regarding a large, highly leveraged portfolio of home mortgage assets. The ALMS system employs a combination of Monte Carlo security cash-flow simulation methods and options-based pricing methods to estimate a holding-period return distribution for each asset and liability considered in the portfolio optimization. It uses the return distributions to determine which portfolio composition maximizes the expected utility of return on portfolio equity. The return distribution calculations are distributed in parallel across a network of Unix workstations. We implemented this distributed computation fairly easily using commercially available client-server database-management software, transforming the feasibility prototype model into an interactive-interface, multi-user, distributed-processing application for use by Fannie Mae staff.

Suggested Citation

  • Martin R. Holmer, 1994. "The Asset-Liability Management Strategy System at Fannie Mae," Interfaces, INFORMS, vol. 24(3), pages 3-21, June.
    • Handle: RePEc:inm:orinte:v:24:y:1994:i:3:p:3-21
    DOI: 10.1287/inte.24.3.3
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    Cited by:

    1. Berkelaar, A.B. & Hoek, H. & Lucas, A., 1999. "Arbitrage and sampling uncertainty in financial stochastic programming models," Econometric Institute Research Papers EI 9919-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.

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    Keywords

    finance: management;

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