IDEAS home Printed from
   My bibliography  Save this article

The Productivity of Financial Intermediation and the Technology of Financial Product Management


  • Martin R. Holmer

    (HR&A, Inc., Washington, D.C.)

  • Stavros A. Zenios

    (University of Cyprus, Nicosia, Cyprus)


Financial intermediaries—banks, thrifts, and life insurance companies—have experienced low productivity over the last decade or two. Low productivity has manifested itself as a declining market share of their products relative to capital market assets. In some cases, low productivity caused a failure to meet contractual obligations embodied in their financial products. These failures resulted in customer losses, and/or taxpayer losses when failed intermediaries were guaranteed by government agencies. This productivity problem has been analyzed mostly from an economic science perspective, by R. C. Merton (Merton, R. C. 1990. The financial system and economic performance. J. Fin. Serv. Res. 263–300.) and Z. Bodie (Bodie, Z. 1990. Pension funds and financial innovation. Finan. Mgmt. (Autumn).). The focus of the economic analysis is the improvement of regulatory measures for intermediaries whose financial products are guaranteed by government agencies. In this paper we take a management science perspective by focusing on the technology of financial product management. An assessment of current technologies finds that their use can leave financial intermediaries exposed to substantial risks. An improved technology— integrated product management (IPM)—is suggested that enables intermediaries to increase productivity. Therefore, they can respond more effectively to market pressures from competing capital market assets and to regulatory pressures from government agencies. Technical and organizational aspects of integrated product management are described, and its application to three examples is discussed. The problem outlined here presents a major challenge to management scientists. It is an example of the service-sector applications that A. Geoffrion (Geoffrion, A. M. 1992. Forces, trends and opportunities in MS/OR. Opns. Res. 40 423–445.) addressed in his 1991 Omega Rho lecture.

Suggested Citation

  • Martin R. Holmer & Stavros A. Zenios, 1995. "The Productivity of Financial Intermediation and the Technology of Financial Product Management," Operations Research, INFORMS, vol. 43(6), pages 970-982, December.
  • Handle: RePEc:inm:oropre:v:43:y:1995:i:6:p:970-982
    DOI: 10.1287/opre.43.6.970

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Amy V. Puelz, 2002. "A Stochastic Convergence Model for Portfolio Selection," Operations Research, INFORMS, vol. 50(3), pages 462-476, June.
    2. Andrea Consiglio & Somayyeh Lotfi & Stavros A. Zenios, 2018. "Portfolio diversification in the sovereign credit swap markets," Annals of Operations Research, Springer, vol. 266(1), pages 5-33, July.
    3. Abramov, Alexander E. (Абрамов, Александр) & Aksenov, Ivan V. (Аксенов, Иван) & Radygin, Alexander D. (Радыгин, Александр) & Chernova, Maria I. (Чернова, Мария), 2018. "Modern Approaches to Measuring the State Sector: Methodology and Empirics
      [Современные Подходы К Измерению Государственного Сектора: Методология И Эмпирика]
      ," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 28-47, April.
    4. John Board & Charles Sutcliffe & William T. Ziemba, 2003. "Applying Operations Research Techniques to Financial Markets," Interfaces, INFORMS, vol. 33(2), pages 12-24, April.
    5. Andrea Consiglio & Stavros A. Zenios, 1999. "Designing Portfolios of Financial Products via Integrated Simulation and Optimization Models," Operations Research, INFORMS, vol. 47(2), pages 195-208, April.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:oropre:v:43:y:1995:i:6:p:970-982. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Matthew Walls). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.