On Matching Book: A Problem in Banking and Corporate Finance

Martin Shubik and M. J. Sobel
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M. J. Sobel: 312A Harriman Hall, State University of New York, Stony Brook, New York 11794-3775

Management Science, 1992, vol. 38, issue 6, 827-839

Abstract: In each of the asset and liability markets in which the banking firm is an intermediary, typically there are instruments with differing maturities. The bank matching book problem is to manage the term structures of assets and liabilities. In our first model, the bank borrows and lends only short run. In our second model, the bank borrows only short run but can lend short run and long run. The criterion in both models is the expected value of the present value of dividends issued. Both models yield dynamic programming problems. Broad aspects of optimal policies are indicated.

Keywords: banking; matching book; dynamic model; interest rates; inventories (search for similar items in EconPapers)
Date: 1992
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