Using the Utility Theory for Finding an Optimal Structure of Bank Asset Liability

Subject Areas : Journal of Investment Knowledge

M. E. Pourzarand ¹ (Department of Industrial Management, Science and Research Branch, Islamic Azad University)
M. Alborzi ² (Department of Industrial Management, Science and Research Branch, Islamic Azad University)
F. Hosseinzade Lotfi ³ (Department of Mathematics, Science and Research Branch, Islamic Azad University)
M. Shahriari ⁴ (Department of Industrial Management, Science and Research Branch, Islamic Azad University (Corresponding Author))

Received: 2013-05-05 Accepted : 2013-07-11 Published : 2013-07-11

Keywords: Bank Asset - Liability, Utility Theory,

Abstract :

A classic bank Asset - Liability problem tries to find an optimal solution that maximize the return and minimize the risk simoltaneously. But there is an obvious conflict between these objectives that makes it impossible. Based on this situation, there are too many studies that try to propose some helpful method; But most of them lie on decision makers empirical ideas. This paper proposes a novel method that use a utility theory as a more quantitative approach for solving the problem. At first, it measures the utility function of the related managers and then the problem reduce to a solvable one for finding the optimal solution.