Optimization Model Of Loan's Portfolio Utility Maximization Based On The Yield Of VaR

Optimization of asset portfolio is the decision that maximizes the expected utility ofinvestors. Optimization principle of loan's portfolio utility maximization is accordance withbank's aim of decision making.Results of similar study indicate that the essence of bank'scrisis results from assets misallocation. So improving allocation quality of assets is crucial tothe banks.The thesis analyzes characteristics and issues of current researching, and sets upoptimization model of loan's portfolio utility maximization based on the yield of VaR.Thethesis is divided into five chapters. The first chapter is the thesis background, research contentand research framework.The second chapter is the optimization principle of loan's portfolio utility maximization basedon the yield of VaR.Our model is set up in the third chapter.The forth chapter is applicationand analysis.The fifth chapter is the conclusion and expectation.The main outcomes of thethesis are as follows.(1)Solving contradictions between utility maximization and risk regulation. If theloan's portfolio with the maximal utility goes beyond the efficient boundary under the controlof VaR, the portfolio with the maximal utility on the efficient boundary is the optimalportfolio.(2)Setting up the optimization model of loan's portfolio utility maximization basedon the yield of VaR.This paper controls the risk through Value at Risk, distributes loansaccording to the maximization of banks' utility on the efficient boundary of the loan'sportfolio, and establishes the decision model for the maximization of the utility of the loan'sportfolio based on the restriction of VaR.The major innovations and characterizations of this paper are as followed:(1)It optimizes loans to distribute them through the maximization of the utility of loan'sportfolio. This research represents one nature of the Optimization of Asset Portfolio, that itmaximizes the expected utility of investors, changes the situation among most existingstudies, that optimal loan's portfolio is decidedbased on subjective risk and yield, removes the subjective factors in the distribution of loans, and solves the problem between thedecision model and purpose.(2)The decision model for the utility optimization of existing studies will be a specialexample of the model in this paper, if the risk preference of the decision makers ordecision-making groups of banks is in the allowed range of VaR.(3)This research maximizes the utility of loan's portfolio with the control of its VaR. Ifthe loan's portfolio with the maximal utility is in the efficient boundary under the control ofVaR, such portfolio is the optimal one. Otherwise, the portfolio with the maximal utility onthe efficient boundary is the one.Thus this research solves the problems of existing studiesthat the control of risk is neglected while maximal utility is considered, and that the utilitycan not be optimized under the control of VaR.