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Goal programming models for managing interest-rate risk

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  • Booth, GG
  • Bessler, W

Abstract

This paper develops two goal programming models (Forecast Model and Duration Model) to assist a bank in creating optimal strategies to manage interest-rate risk. The Forecast Model requires knowledge concerning the magnitude and direction of potential interest-rate shocks, and the Duration Model only needs information concerning the direction of this shock. The two models are shown to provide identical solutions for a plausible economic scenario. Because of its less restrictive information base, the Duration Model is concluded to be superior to the Forecast Model and other similarly constructed extant models.

Suggested Citation

  • Booth, GG & Bessler, W, 1989. "Goal programming models for managing interest-rate risk," Omega, Elsevier, vol. 17(1), pages 81-89.
    • Handle: RePEc:eee:jomega:v:17:y:1989:i:1:p:81-89
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    Cited by:

    1. Cinzia Colapinto & Raja Jayaraman & Simone Marsiglio, 2017. "Multi-criteria decision analysis with goal programming in engineering, management and social sciences: a state-of-the art review," Annals of Operations Research, Springer, vol. 251(1), pages 7-40, April.
    2. 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.
    3. Cooper, W. W. & Lelas, V. & Sueyoshi, T., 1997. "Goal programming models and their duality relations for use in evaluating security portfolio and regression relations," European Journal of Operational Research, Elsevier, vol. 98(2), pages 431-443, April.

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