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Optimization of Integrated Risk in Commercial Banking based on Financial Statements.

Published on Jan 1, 2014in Procedia Computer Science
· DOI :10.1016/j.procs.2014.05.295
Chunbing Bao3
Estimated H-index: 3
(CAS: Chinese Academy of Sciences),
Jianping LiXiaolei19
Estimated H-index: 19
(CAS: Chinese Academy of Sciences)
+ 3 AuthorsChang Liu3
Estimated H-index: 3
(CAS: Chinese Academy of Sciences)
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Abstract
Abstract Integrated risk control and asset optimization is an important issue in commercial bank industry. This paper combines balance sheet with income statement, and forms a structure measuring each asset's risk based on the method using income statement only, having a better use of the data resource. Considering the commercial bank's diversified pursuit of low risk and high profit, we solve the problem using the method of multiple objective programming, and we give the Pareto surface to support selection decisions. The analysis framework of the integrated risk optimization based on financial statements provides a feasible idea for commercial banks’ asset optimization research with limited data resource.
  • References (15)
  • Citations (0)
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References15
Newest
Jianping LiXiaolei19
Estimated H-index: 19
(CAS: Chinese Academy of Sciences),
Xiaoqian Zhu7
Estimated H-index: 7
(CAS: Chinese Academy of Sciences)
+ 3 AuthorsYong Shi39
Estimated H-index: 39
(CAS: Chinese Academy of Sciences)
Risk aggregation considering inter-risk dependence has always been a challenge to both researchers and practitioners. The objective of this study is to formulate ways of aggregation of bank risks and comprehensively compare simple summation, variance–covariance and copula approach. Firstly, the three popular approaches are adopted to aggregate credit risk, market risk and operational risk of banks based on Austrian banking data. Then, two comparisons are mainly made. Total risks aggregated by di...
Published on Jun 1, 2013in Journal of Banking and Finance2.21
Nalan Gulpinar9
Estimated H-index: 9
(Warw.: University of Warwick),
Dessislava A. Pachamanova11
Estimated H-index: 11
(Babson College)
This paper presents an asset liability management model based on robust optimization techniques. The model explicitly takes into consideration the time-varying aspect of investment opportunities. The emphasis of the proposed approach is on computational tractability and practical appeal. Computational studies with real market data study the performance of robust-optimization-based strategies, and compare it to the performance of the classical stochastic programming approach.
Published on Jan 1, 2012
Willem K. Brauers20
Estimated H-index: 20
(University of Antwerp),
Romualdas Ginevičius25
Estimated H-index: 25
,
Askoldas Podvezko2
Estimated H-index: 2
The aim of this study is to rank the banks registered in Lithuania by Multi-Objective Optimization (MOO). As these banks work in the same macro-economic environment the objectives are chosen on basis of the CAMEL classification (‘C’ Capital adequacy, ‘A’ Asset quality, ‘M’ Management quality, ‘E’ Earnings, ‘L’ Liquidity). Traditional Cost-Benefit does not respond to these purposes, translating all direct and indirect costs and benefits into money. On the contrary MOO takes care of different obje...
Published on Jan 1, 2012in Systems Engineering - Theory & Practice
Li Jian-ping1
Estimated H-index: 1
,
Feng Ji-chuang1
Estimated H-index: 1
We propose a new risk integration method from the perspective of the financial data,i.e., the risk integration method based on financial statement.This paper applies this method in Chinese listed securities companies to measure the market risk,credit risk,operational risk,liquidity risk and the overall risk,and analyses the relationships among them.The research finds that,there are significant diversification benefits among these risks,which will help to reduce the demand for capital provision. ...
Published on Feb 17, 2011in Applied Mathematical Finance
Ping Chen6
Estimated H-index: 6
(University of Melbourne),
Hailiang Yang22
Estimated H-index: 22
(HKU: University of Hong Kong)
This paper considers an optimal portfolio selection problem under Markowitz's mean-variance portfolio selection problem in a multi-period regime-switching model. We assume that there are n + 1 securities in the market. Given an economic state which is modelled by a finite state Markov chain, the return of each security at a fixed time point is a random variable. The return random variables may be different if the economic state is changed even for the same security at the same time point. We sta...
Published on Jan 1, 2011in Journal of Banking and Finance2.21
Robert Ferstl6
Estimated H-index: 6
(University of Regensburg),
Alex Weissensteiner5
Estimated H-index: 5
Stochastic linear programming is a suitable numerical approach for solving practical asset-liability management problems. In this paper, we consider a multi-stage setting under time-varying investment opportunities and propose a decomposition of the benefits in dynamic re-allocation and predictability effects. We use a first-order unrestricted vector autoregressive process to model asset returns and state variables and include, in addition to equity returns and dividend-price ratios, Nelson/Sieg...
Published on Dec 1, 2010in Journal of Banking and Finance2.21
Gavin Lee Kretzschmar7
Estimated H-index: 7
(Edin.: University of Edinburgh),
Alexander J. McNeil32
Estimated H-index: 32
,
Axel Kirchner6
Estimated H-index: 6
With the majority of large UK and many US banks collapsing or being forced to raise capital over the 2007-9 period, blaming bankers may be satisfying but is patently insufficient; Basel II and Federal oversight frameworks also deserve criticism. We propose that the current methodological void at the heart of Basel II, Pillar 2 is filled with the recommendation that banks develop fully-integrated models for economic capital that relate asset values to fundamental drivers of risk in the economy to...
Published on Jan 1, 2010in Chinese Journal of Management Science
Cai Chen1
Estimated H-index: 1
The correlations among the credit,market and operational risk significantly influence the integrated risk.This paper proposes a model to integrate credit,market and operational risk considering correlation.The integrated risk is computed by Copula function and Monte Carlo simulation.The diversification benefit and the overall risk variation from different copulas are explored.At last,the empirical results base on an accepted literature data show,this proposed model can describe the risk correlat...
Published on Dec 1, 2009in Journal of Optimization Theory and Applications1.60
Mei Choi Chiu9
Estimated H-index: 9
(HKUST: Hong Kong University of Science and Technology),
Duan Li35
Estimated H-index: 35
(CUHK: The Chinese University of Hong Kong)
Under the safety-first principle (Roy in Econometrica 20:431–449, 1952), one investment goal in asset-liability (AL) management is to minimize an upper bound of the ruin probability which measures the likelihood of the final surplus being less than a given target level. We derive solutions to the safety-first AL management problem under both continuous-time and multiperiod-time settings via investigating the relationship between the safety-first AL management problem and the mean-variance AL man...
Published on Jun 1, 2009in Insurance Mathematics & Economics1.31
Thomas Gerstner11
Estimated H-index: 11
(University of Bonn),
Michael Griebel41
Estimated H-index: 41
(University of Bonn),
Markus Holtz7
Estimated H-index: 7
(University of Bonn)
New regulations, stronger competitions and more volatile capital markets have increased the demand for stochastic asset-liability management (ALM) models for insurance companies in recent years. The numerical simulation of such models is usually performed by Monte Carlo methods which suffer from a slow and erratic convergence, though. As alternatives to Monte Carlo simulation, we propose and investigate in this article the use of deterministic integration schemes, such as quasi-Monte Carlo and s...