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Asset and liability management in financial crisis

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Author Info

  • Arzu Tektas
  • E. Nur Ozkan-Gunay
  • Gokhan Gunay

Abstract

Purpose – An efficient asset-liability management requires maximizing banks' profit as well as controlling and lowering various risks. This multi-objective decision problem aims to reach goals such as maximization of liquidity, revenue, capital adequacy, and market share subject to financial, legal requirements and institutional policies. This paper models asset and liability management (ALM) in order to show how different managerial strategies affect the financial wellbeing of banks during crisis. Design/methodology/approach – A goal programming model is developed and applied to two medium-scale Turkish commercial banks with distinct risk-taking behavior. This article brings new evidence on the performance of emerging market banks with different managerial philosophies by comparing asset-liability management in crisis. Findings – The study has shown how shifts in market perceptions can create trouble during crisis, even if objective conditions have not changed. Originality/value – The proposed model can provide optimal forecasts of asset-liability components and banks' financial standing for different risk-taking strategies under various economic scenarios. This may facilitate the preparation of contingency plans and create a competitive advantage for bank decision makers.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Journal of Risk Finance.

Volume (Year): 6 (2005)
Issue (Month): 2 (March)
Pages: 135-149

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Handle: RePEc:eme:jrfpps:v:6:y:2005:i:2:p:135-149

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Related research

Keywords: Assets management; Banking; Financial management; Liability; Turkey;

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Citations

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Cited by:
  1. Aouni, Belaid & Colapinto, Cinzia & La Torre, Davide, 2014. "Financial portfolio management through the goal programming model: Current state-of-the-art," European Journal of Operational Research, Elsevier, vol. 234(2), pages 536-545.
  2. Dorothea Diers & Martin Eling & Christian Kraus & Andreas Reuß, 2012. "Market-consistent embedded value in non-life insurance: how to measure it and why," Journal of Risk Finance, Emerald Group Publishing, vol. 13(4), pages 320-346.
  3. Uluc Aysun, 2006. "Capital Flows, Maturity Mismatches and Profitability in Emerging Markets: Evidence from Bank Level Data," Working papers 2006-29, University of Connecticut, Department of Economics, revised Oct 2007.

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