Introduction Determining the optimal portfolio of bank facilities with the Markowitz approach and meta-heuristic algorithms (Case study of Sina Bank)

Iman Dadfar (), Roya Seyfipour (), Azadeh Mehrabiyan () and Narciss Aminrashti ()
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Iman Dadfar: PHD student in economics, Department of Economics, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University
Roya Seyfipour: Assistant professor, Department of Economics, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University
Azadeh Mehrabiyan: Assistant professor, Department of Economics, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University
Narciss Aminrashti: Assistant professor, Department of Economics, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University

Quarterly Journal of Applied Theories of Economics, 2024, vol. 11, issue 2, 167-198

Abstract: Banks face credit risk in the process of providing facilities based on the amount of resources provided. In the meantime, facility portfolio management can be effective in reducing credit risk by optimally allocating resources to economic sectors. In this research, the portfolio of Sina Bank's facilities is determined by using the Markowitz modern portfolio model and meta-heuristic algorithms of genetics and firefly. Comparing the performance of the models indicates the greatest efficiency of the genetic algorithm model in optimizing the bank's facilities portfolio. the results of the estimation of this model show that the service & commercial, housing & construction sectors have the largest share in the optimal portfolio of the bank's facilities. Industry & mining, agriculture & water sectors are considered risky assets of Sina Bank. the process of granting facilities has not been optimal. To reduce the credit risk of that bank's facilities, 52.4% should be allocated to the service & commercial sector, 40.7% to the housing & construction sector, 3.5% to the industry & mining sector, 3.4% to be allocated to agriculture & water sector

Keywords: Optimization; Markowitz modern portfolio model; Genetic algorithm; Firefly algorithm (search for similar items in EconPapers)
JEL-codes: C58 G11 G21 G32 (search for similar items in EconPapers)
Date: 2024
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