A decision-dependent randomness stochastic program for asset-liability management model with a pricing decision

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11320%2F21%3A10438218" target="_blank" >RIV/00216208:11320/21:10438218 - isvavai.cz</a>

Result on the web

<a href="https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=Sa7J.kPkQr" target="_blank" >https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=Sa7J.kPkQr</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.1007/s10479-020-03583-y" target="_blank" >10.1007/s10479-020-03583-y</a>

Result language

angličtina

Original language name

A decision-dependent randomness stochastic program for asset-liability management model with a pricing decision

Original language description

In this study, we present a stochastic programming asset-liability management model which deals with decision-dependent randomness. The model focuses on a pricing problem and the subsequent asset-liability management problem describing the typical life of a consumer loan. Such problems are frequently tackled by many companies, including multinationals. When doing so, they must consider numerous factors. These factors include the possibility of their customer rejecting the loan, the possibility of the customer defaulting on the loan and the possibility of prepayment. The randomness associated with these factors have a clear relationship with the offered interest rate of the loan which is the company&apos;s decision and thus, induces decision-dependent randomness. Another important factor, which plays a major role for liabilities, is the price of money in the market. This is determined by the market interest rates. We captured their evolution in the form of a scenario tree. In summary, we formulated a non-linear, multi-stage stochastic program with decision-dependent randomness, which spanned the lifetime of a typical consumer loan. Its solution showed us the optimal decisions that the company should make. In addition, we performed a sensitivity analysis demonstrating the results of the model for various parameter settings that described different types of customers. Finally, we discuss the losses caused if companies do not act in the optimal way.

Czech name

—

Czech description

—

Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

—

OECD FORD branch

10103 - Statistics and probability

Project

<a href="/en/project/GA18-05631S" target="_blank" >GA18-05631S: Stochastic optimization problems with endogenous uncertainty</a><br>

Continuities

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year

2021

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Annals of Operations Research

ISSN

0254-5330

e-ISSN

—

Volume of the periodical

299

Issue of the periodical within the volume

1

Country of publishing house

NL - THE KINGDOM OF THE NETHERLANDS

Number of pages

31

Pages from-to

241-271

UT code for WoS article

000522924400001

EID of the result in the Scopus database

2-s2.0-85083223137