Ciência-IUL
Publications
Publication Detailed Description
Journal Title
International Transactions of Operations Research
Year (definitive publication)
2024
Language
English
Country
United Kingdom
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Abstract
Given a liability structure, the bank portfolio optimization determines an asset allocation that maximizes profit, subject to restrictions on Basel III ratios and credit, liquidity, and market risks. Bank allocation models have not been tested using historical data. Using an optimization model based on turnover constraints, we develop such tests, which document the superior performance of optimization strategies compared to heuristic rules, resulting in an average annual out-of-sample outperformance of 15.1% in terms of return on equity using our data set. This outperformance is remarkable and contrasts with the reported underperformance of several portfolio optimization methods in the case of investment management.
Acknowledgements
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Keywords
Fields of Science and Technology Classification
- Mathematics - Natural Sciences
- Computer and Information Sciences - Natural Sciences
- Economics and Business - Social Sciences
- Other Social Sciences - Social Sciences
Funding Records
Funding Reference | Funding Entity |
---|---|
UIDB/00324/2020 | Fundação para a Ciência e a Tecnologia |
PTDC/MAT-APL/1286/2021 | Fundação para a Ciência e a Tecnologia |