An asset – liability management stochastic program of a leasing company

Tomáš Rusý; Miloš Kopa

Kybernetika (2018)

  • Volume: 54, Issue: 6, page 1247-1263
  • ISSN: 0023-5954

Abstract

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We build a multi-stage stochastic program of an asset-liability management problem of a leasing company, analyse model results and present a stress-testing methodology suited for financial applications. At the beginning, the business model of such a company is formulated. We introduce three various risk constraints, namely the chance constraint, the Value-at-Risk constraint and the conditional Value-at-Risk constraint along with the second-order stochastic dominance constraint, which are applied to the model to control risk of the optimal strategy. We also present the structure and the generation process of our scenarios. To capture the evolution of interest rates the Hull-White model is used. Thereafter, results of the model and the effect of the risk constraints on the optimal decisions are thoroughly investigated. In the final part, the performance of the optimal solutions of the problems for unconsidered and unfavourable crisis scenarios is inspected. The methodology of a stress test we used was proposed in such a way that it answers typical questions asked by asset-liability managers.

How to cite

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Rusý, Tomáš, and Kopa, Miloš. "An asset – liability management stochastic program of a leasing company." Kybernetika 54.6 (2018): 1247-1263. <http://eudml.org/doc/294429>.

@article{Rusý2018,
abstract = {We build a multi-stage stochastic program of an asset-liability management problem of a leasing company, analyse model results and present a stress-testing methodology suited for financial applications. At the beginning, the business model of such a company is formulated. We introduce three various risk constraints, namely the chance constraint, the Value-at-Risk constraint and the conditional Value-at-Risk constraint along with the second-order stochastic dominance constraint, which are applied to the model to control risk of the optimal strategy. We also present the structure and the generation process of our scenarios. To capture the evolution of interest rates the Hull-White model is used. Thereafter, results of the model and the effect of the risk constraints on the optimal decisions are thoroughly investigated. In the final part, the performance of the optimal solutions of the problems for unconsidered and unfavourable crisis scenarios is inspected. The methodology of a stress test we used was proposed in such a way that it answers typical questions asked by asset-liability managers.},
author = {Rusý, Tomáš, Kopa, Miloš},
journal = {Kybernetika},
keywords = {asset-liability management; multi-stage stochastic programming; stress test},
language = {eng},
number = {6},
pages = {1247-1263},
publisher = {Institute of Information Theory and Automation AS CR},
title = {An asset – liability management stochastic program of a leasing company},
url = {http://eudml.org/doc/294429},
volume = {54},
year = {2018},
}

TY - JOUR
AU - Rusý, Tomáš
AU - Kopa, Miloš
TI - An asset – liability management stochastic program of a leasing company
JO - Kybernetika
PY - 2018
PB - Institute of Information Theory and Automation AS CR
VL - 54
IS - 6
SP - 1247
EP - 1263
AB - We build a multi-stage stochastic program of an asset-liability management problem of a leasing company, analyse model results and present a stress-testing methodology suited for financial applications. At the beginning, the business model of such a company is formulated. We introduce three various risk constraints, namely the chance constraint, the Value-at-Risk constraint and the conditional Value-at-Risk constraint along with the second-order stochastic dominance constraint, which are applied to the model to control risk of the optimal strategy. We also present the structure and the generation process of our scenarios. To capture the evolution of interest rates the Hull-White model is used. Thereafter, results of the model and the effect of the risk constraints on the optimal decisions are thoroughly investigated. In the final part, the performance of the optimal solutions of the problems for unconsidered and unfavourable crisis scenarios is inspected. The methodology of a stress test we used was proposed in such a way that it answers typical questions asked by asset-liability managers.
LA - eng
KW - asset-liability management; multi-stage stochastic programming; stress test
UR - http://eudml.org/doc/294429
ER -

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