Asset Liability Management Model with Bank Branches

Abstract

Financial risk management has become very serious on banking. Mathematical programming models based on the idea of ALM (Asset Liability Management ) which is the risk management on banking have been proposed by Hibiki et.al. The key problem to manage assets and liabilities is how to manage bank branches because the branches possess in practice almost all the deposits and loans in the bank. On the other hand, the management in the head office is also essentially required to implement ALM successfully. The corporate plan made in the head office needs further to be broken down into the operational plan taken effect on the branches. The existing ALM models have been studied as to the planning model in the head office. In this paper, an ALM model in consideration of branch management, which is called a two-stage model, is proposed. Finally, numerical examples are analyzed to investigate the usefulness of this model.