A Mathematical Programming Approach for the Optimal Collateral Allocation Problem

Konstantinos Papalamprou (), Efthymios P. Pournaras () and Styliani Tychalaki ()
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Konstantinos Papalamprou: Aristotle University of Thessaloniki
Efthymios P. Pournaras: National and Kapodistrian University of Athens
Styliani Tychalaki: Aristotle University of Thessaloniki

A chapter in Operations Research Proceedings 2018, 2019, pp 209-215 from Springer

Abstract: Abstract The minimization of regulatory capital requirements has significant impact on the activities of the financial institutions, since it is usually associated with an increase in liquidity which is considered of critical importance for their sustainability and growth. The main tool towards such an aim is the effective allocation of collaterals to the associated set of loans. A methodology regarding this problem, based on the well-known transportation problem, is provided in this paper. Our approach has been implemented and applied to both real data from a systemic bank and synthetic data. From the results obtained it is evident that the proposed formulation leads to less regulatory capital requirements compared to other existing methodologies also implemented for the purposes of the current work.

Keywords: Transportation problem; Collateral optimization; Credit risk (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-030-18500-8_27

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DOI: 10.1007/978-3-030-18500-8_27

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