Multiobjective optimization of credit capital allocation in financial institutions

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• 作者：Kamil J. Mizgier ; Joseph M. Pasia
• 关键词：Risk management ; Capital allocation ; Multiobjective optimization ; Cost of capital ; OR in banking
• 刊名：Central European Journal of Operations Research
• 出版年：2016
• 出版时间：December 2016
• 年：2016
• 卷：24
• 期：4
• 页码：801-817
• 全文大小：993 KB
• 刊物主题：Operations Research/Decision Theory;
• 出版者：Springer Berlin Heidelberg
• ISSN：1613-9178
• 卷排序：24

文摘

The evolution of international regulation leads to new capital requirements imposed on globally active companies. Financial services firms allocate capital to business lines in order to withstand the materializing credit losses and to measure the performance of various business lines. In this study, we introduce a methodology for optimal credit capital allocation based on operations research approach. In particular, we focus on the efficient allocation of capital to business lines characterized by credit risk losses and cost of capital. We compare different allocation methods and provide a rationale behind using the OR approach. Finally, we formulate a multiobjective optimization model to capital allocation problem and apply it to a real-world case of two financial conglomerates.