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A Method for Strategic Asset-Liability Management with an Application to the Federal Home Loan Bank of New York

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  • S. Seshadri

    (Leonard N. Stern School of Business, New York University, New York, New York)

  • A. Khanna

    (Leonard N. Stern School of Business, New York University, New York, New York)

  • F. Harche

    (Leonard N. Stern School of Business, New York University, New York, New York)

  • R. Wyle

    (Dime Bancorp, New York, New York)

Abstract

Strategic asset-liability management is a primary concern in today's banking environment. In this paper, we present a methodology to assist in the process of asset-liability selection in a stochastic interest rate environment. In our approach, a quadratic optimizer is embedded in a simulation model and used to generate patterns of dividends, market value and duration of capital, for randomly generated interest rate scenarios. This approach can be used to formulate, test, and refine asset-liability strategies. We present results of applying this methodology to data from the Federal Home Loan Bank of New York.

Suggested Citation

  • S. Seshadri & A. Khanna & F. Harche & R. Wyle, 1999. "A Method for Strategic Asset-Liability Management with an Application to the Federal Home Loan Bank of New York," Operations Research, INFORMS, vol. 47(3), pages 345-360, June.
    • Handle: RePEc:inm:oropre:v:47:y:1999:i:3:p:345-360
    DOI: 10.1287/opre.47.3.345
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    References listed on IDEAS

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    Cited by:

    1. Dutta, Goutam & Natesan, Sumeetha R. & Thakur, Deepika & Tiwari, Manoj K., 2020. "A Mathematical Programming Approach with Revenue Management in Home Loan Pricing (Revised as on 20-12-2021)," IIMA Working Papers WP 2020-02-02, Indian Institute of Management Ahmedabad, Research and Publication Department.
    2. Sumeetha Natesan & Deepika Thakur & Goutam Dutta & Manoj Kumar Tiwari, 2023. "Pricing and revenue management for bank home loans: a mathematical approach," OPSEARCH, Springer;Operational Research Society of India, vol. 60(2), pages 656-687, June.
    3. ManMohan S. Sodhi, 2005. "LP Modeling for Asset-Liability Management: A Survey of Choices and Simplifications," Operations Research, INFORMS, vol. 53(2), pages 181-196, April.

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