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Optimal Equity Recovery For A Cooperative Financial Institution

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  • Tauer, Loren W.
  • Weersink, Alfons

Abstract

A model is developed that shows the usefulness of dynamic optimization in deriving optimal equity recovery strategies for a cooperative lending institution. The objective is to minimize the cost of a member borrowing over time. An interest rate surcharge, above the cost of funds and operating cost, is the control variable to be determined. The financial position of the cooperative is described by equity and loan volume, which are the state variables. Applications show how the surcharge, loans, and equity change over time as model parameters are changed.
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Suggested Citation

  • Tauer, Loren W. & Weersink, Alfons, 1986. "Optimal Equity Recovery For A Cooperative Financial Institution," 1986 Regional Committee NC-161, October 7-8, 1986, St. Paul, Minnesota 127223, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    • Handle: RePEc:ags:nc1986:127223
    DOI: 10.22004/ag.econ.127223
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    Keywords

    Agricultural Finance; Risk and Uncertainty;

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