Optimization Model of Loan’s Portfolio Based on Geometric Spectral Measure

Chong Duan (duanchong100@sina.com) and Xiu-min Jia (jxm620168@126.com)
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Chong Duan: Inner Mongolia University of Science and Technology
Xiu-min Jia: Inner Mongolia University of Science and Technology

Chapter Chapter 68 in The 19th International Conference on Industrial Engineering and Engineering Management, 2013, pp 725-740 from Springer

Abstract: Abstract The loan’s portfolio is a hot issue in bank’s risk management. This paper puts forward an optimization model of loan’s portfolio by using geometric spectral measure of risk to control extreme losses of portfolio. These innovations are as follows: firstly, the greater weight is distributed to greater extreme losses by the risk aversion function, which controls the risk of extreme losses. The risk aversion function fits investors’ risk aversion characters. Secondly, an objective weight is given to extreme losses which avoids personal choices. Thirdly, the probability of disaster’s risk occurrence is reduced while taking the geometric spectral measure minimum as an object function.

Keywords: Extreme losses; Geometric spectral measure; Loan’s portfolio; Risk aversion (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-37270-4_68

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DOI: 10.1007/978-3-642-37270-4_68

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