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Optimization of Bank Liquidity Management using Goal Programming and Fuzzy AHP

Author Affiliations

  • 1Novin Pajoohan Research Institute, Department of Economics and Management, Tehran, IRANGraduate School of Management, Multimedia University, MALAYSIA

Res. J. Recent Sci., Volume 4, Issue (6), Pages 53-61, June,2 (2015)


In this research, Goal Programming (GP) and Fuzzy Analytic Hierarchy Process (FAHP) were integrated. The financial objectives of Parsian Bank (a leading private bank in Iran) were identified and prioritized. An optimal liquidity management model incorporating the following objectives was devised; capital sufficiency, liquidity risk, liquidity ratio, claims from other banks, investments portfolio, total consumption to total resources ratio, growth of total assets, fixed assets and other assets. Afterwards, the goal and structural limitations of variables were taken consideration and finally, the optimal liquidity management model was estimated. Then, by using the input variables (the liabilities side in the balance sheet and the related subsets) and the outputs (the assets side in the balance sheet and their subsets) in the period of 2011-2012, the optimal values for liquidity ratios and other items in the balance sheet were calculated using Lingo software. They were then compared with real values in the balance sheet accordingly. Next, the solutions and suggestions were offered for optimizing liquidity management in the bank. The eight objectives used for the preparation of optimal liquidity model were prioritized using the viewpoints of senior financial directors of the bank with the emphasis on a questionnaire, which was designed based on the FAHP method. Furthermore, in order to test the estimated model and assess its efficacy, the total return of the bank (R) was calculated once using the real items in the balance sheet, and another time using the values obtained from the model as well as the return formula (both for the period of 2011-2012). The results demonstrateda noticeable increase in the return of the estimated model in comparison with the real return of the bank. In addition, it should be stated that the estimated model can diminish the liquidity risk and increase the growth of the total assets of Parsian Bank, which evidently presents the reliability, validity, and application of the estimated liquidity management model for the banking system.


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