A Study On China’s Commercial Bank Assets Allocation Based On The Stochastic Programming Model

As the dominating part of indirect financing system, commercial banks play adecisive role in the financial markets. Whether commercial banks can allocate scarceresources to the most competitive project not only affects banks’ operating performance,but also has a significant influence on the economic growth of the society.This dissertation, starting from commercial banks’ asset allocation theory, reviewrelevant research literatures, and introduce the idea of modeling stochastic programmingmodel, the objective function and the constraints, scenario generation theory, and geneticalgorithm. From the three aspects of asset allocation structure, asset quality,loan-to-deposit ratio to analyze the status quo of China’s commercial bank assetsconfiguration. The dissertation establishes a stochastic programming model with a simplecompensation, and uses the data of Shenzhen Development Bank to make an empiricalresearch. Genetic algorithm has been used to solve the linear optimization problem.Studies have shown that different types of commercial banks have large differences inaspects of asset allocation structure, asset quality and loan-to-deposit ratio. The reasonsare not only the positioning of the commercial banks, the advantages of resources, thelevel of asset management, but also the customers’ industry and operating conditions.Empirical studies also show that, under the current separate operation model, thestochastic programming model can be adopted to allocate the bank asset. It gives theoptimal asset allocation ratio, and the results are consistent with the actual situations. Themodel indicates that, because of the good liquidity and risk diversification capabilities ofthe bonds, commercial banks can appropriately increase the bond holdings. When facingthe choice of short-term loans and long-term loans, since short-term loans have short-termand low risk, the configuration should be higher than the proportion of long-term loans.