The MIIS Eprints Archive

Optimization of Collateral Value Distribution

Bošnjak, I. and Krejić, N. and Milanović, M. and Nikolić, N. and Petković, P. and Rakić, D. (2014) Optimization of Collateral Value Distribution. [Study Group Report]



Loan Loss Provisioning (LLP) is an amount of reserve that banks "put aside" to cover loss in case that loan goes in default, meaning that clients do not repay it. It is a safety buffer for preserving banks liquidity and capital adequacy. On the other hand, the Loan Loss Provisioning is a cost. In the Profit and Lost statement of banks, LLP decreases profit. It is a good tool/mechanism for risk management, but also expensive one, and that is why it is important for banks to optimize it in every possible way.

The aim of optimization is to distribute collateral value to the connected loans, in a way to minimize amount of LLP. It can be done easily on a one loan level, but creating a universal algorithm that is applicable to all loans and all collaterals on the Bank portfolio level, is the goal to be achieved.

Item Type:Study Group Report
Problem Sectors:Discrete
Study Groups:European Study Group with Industry > ESGI 99 (Novi Sad, Serbia, Feb 3-7, 2014)
Company Name:OTP Bank Siberia
ID Code:637
Deposited By: Matthew Hennessy
Deposited On:05 Mar 2014 00:38
Last Modified:29 May 2015 20:15

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