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A Dynamic Model of Functioning of a Bank

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  • Oleg Malafeyev
  • Achal Awasthi

Abstract

In this paper, we analyze dynamic programming as a novel approach to solve the problem of maximizing the profits of a bank. The mathematical model of the problem and the description of a bank's work is described in this paper. The problem is then approached using the method of dynamic programming. Dynamic programming makes sure that the solutions obtained are globally optimal and numerically stable. The optimization process is set up as a discrete multi-stage decision process and solved with the help of dynamic programming.

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  • Oleg Malafeyev & Achal Awasthi, 2015. "A Dynamic Model of Functioning of a Bank," Papers 1511.01529, arXiv.org.
    • Handle: RePEc:arx:papers:1511.01529
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    References listed on IDEAS

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    1. Richard Bellman, 1957. "On a Dynamic Programming Approach to the Caterer Problem--I," Management Science, INFORMS, vol. 3(3), pages 270-278, April.
    2. Elton, Edwin J & Gruber, Martin J, 1971. "Dynamic Programming Applications in Finance," Journal of Finance, American Finance Association, vol. 26(2), pages 473-506, May.
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