IRR Sandbox Challenge: Test, Break, Rebuild
IRR Sandbox Challenge: Test, Break, Rebuild
Explore how your balance sheet decisions impact IRR and other trade-offs. This is your chance to experiment
with strategy. No grades. Just insight.
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Instructions
Instructions
Use up to 3 customer portfolios
Choose 1 financial market move
(buy/sell securities, borrow, or do nothing)Measure how your changes affect:
Earnings-at-risk / EVE-at-risk
Earnings, Capital, Liquidity, Asset Quality, Growth
Focus on IRR first, then reflect on broader effects
Challenges
Challenges
What happens when you try to hit a challenge? Did changing one thing cause side effects? What insights can you carry forward?
(Risk) Liquidity Challenges
(Risk) Liquidity Challenges
- Raise Liquidity above 25.5%
- Drive Liquidity negative
(Risk) Asset Quality
(Risk) Asset Quality
- Drop asset quality below 735
- Push asset quality well above 735
Capital & Growth Challenges
Capital & Growth Challenges
- Increase Capital
- Decrease Capital
- Grow the bank (Total Assets $)
- Attempt to shrink the bank
Earnings Challenges
Earnings Challenges
- Lose more money (lower than $40)
- Make more money (higher than $40)
- Make significant shifts in Yield, Cost, and/or Margin
(Risk) IRR Challenges
(Risk) IRR Challenges
- Obtain a "Low" Earnings-at-risk (whatever you think is "Low")
- Lower Earnings-at-risk below -1%
- Raise Earnings-at-risk worse than -10%
- Obtain a "Low" EVE-At-Risk (whatever you think is "Low")
- EVE-at-Risk better than -2%
- EVE-at-Risk worse than -15%
- Flip Earnings-at-risk to UP-rates (i.e. liability sensitive)
- Flip EVE-at-Risk to DN-rates
- Create Earnings-at-risk/EVE-at-Risk mismatches
- Earnings-at-risk negative in both DN & UP stress-tests
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