A multiobjective conditional value-at-risk model in time interval for loan portfolios

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

2 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)253-265
Journal / PublicationInternational Journal of Management Science and Engineering Management
Volume3
Issue number4
Publication statusPublished - 2008

Abstract

Within the past several years, important advances have been made in conditional value-at-risk (CVaR) model in finance engineering. CVaR has superior properties in many respects. But, some practical risk problems, such as lending plan of bank, are multiobjective decision making. So, it is key question to study multiobjective CVaR model. This paper proposes a general multiobjective CVaR model in time interval for loan portfolios. First, we introduce the concept of α-VaR and α-CVaR for the case of multiple losses with random variable under the multiple confidence level vector α in time interval. Then, we propose a multiobjective CVaR model in time interval and prove two equality theorems. The solution of solving multiobjective CVaR model can be obtained by finding out solution to another nonlinear optimal problem. Next, we build multiobjective CVaR model to find out the best period and proportion for lending plan. Finally, the numerical results of the best period and proportion for lending plan are given in time interval. 

Research Area(s)

  • Credit risk, Loss functions, Pareto efficient solutions, α-cvar