The performance of bank portfolio optimization-Reference-Cited by-同舟云学术

The performance of bank portfolio optimization

Published:2023-11-27 Issue:3 Volume:31 Page:1458-1485
ISSN:0969-6016
Container-title:International Transactions in Operational Research
language:en
Short-container-title:Int Trans Operational Res

Author:

Coelho Catarina¹^ORCID,Santos José Luis²^ORCID,Júdice Pedro³^ORCID

Affiliation:

1. Department of Mathematics University of Coimbra Coimbra Portugal

2. CMUC, Department of Mathematics University of Coimbra Apartado 3008 Coimbra Portugal

3. ISCTE Business Research Unit Avenida das Forças Armadas Lisboa Portugal

Abstract

AbstractGiven a liability structure, the bank portfolio optimization determines an asset allocation that maximizes profit, subject to restrictions on Basel III ratios and credit, liquidity, and market risks. Bank allocation models have not been tested using historical data. Using an optimization model based on turnover constraints, we develop such tests, which document the superior performance of optimization strategies compared to heuristic rules, resulting in an average annual out‐of‐sample outperformance of 15.1% in terms of return on equity using our data set. This outperformance is remarkable and contrasts with the reported underperformance of several portfolio optimization methods in the case of investment management.

Funder

European Regional Development Fund

Fundação para a Ciência e a Tecnologia

Publisher

Wiley

Subject

Management of Technology and Innovation,Management Science and Operations Research,Strategy and Management,Computer Science Applications,Business and International Management

Link

https://onlinelibrary.wiley.com/doi/pdf/10.1111/itor.13395

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