2003 | OriginalPaper | Chapter
Risk-Return Optimization of the Bank Portfolio
Author : Ursula Theiler
Published in: Operations Research Proceedings 2002
Publisher: Springer Berlin Heidelberg
Included in: Professional Book Archive
Activate our intelligent search to find suitable subject content or patents.
Select sections of text to find matching patents with Artificial Intelligence. powered by
Select sections of text to find additional relevant content using AI-assisted search. powered by
In an intensifying competition banks are forced to develop and implement enterprise wide integrated risk-return management systems. Financial risks have to be limited and managed from a bank wide portfolio perspective. Risk management rules must be accomplished from internal and regulatory points of view. Expected returns need to be maximized subject to these constraints, leading to a generalized portfolio optimization problem under different capital limits. We give a survey on a risk-return optimization model for the bank portfolio that maximizes the expected returns to the planning horizon with respect to internal and regulatory loss risk constraints. We derive consistent planning information that ensures efficient return targets and maximal capital use of the economic and the regulatory capital. The impact of the optimization is shown by an application example.