A Combined Analytical Hierarchy Process-Goal Programming Model for the Optimization of Bank Liquidity

Document Type : Original Article

Author

Professor of Business Finance, Tarbiat Modares University Tehran Iran

10.22108/far.2024.139765.2014

Abstract

One of the most critical responsibilities of bank managers is liquidity management. The purpose of this study is to design and implement a combined mathematical model of the Analytical Hierarchy Process (AHP) and Goal Programming (GP) for bank liquidity management. Initially, a conceptual model was drawn up, followed by the definition of model variables based on the bank's financial statements. Due to the presence of multiple, conflicting goals and the differing importance of each goal, the GP technique was utilized. The weighted nature of the GP model allowed for the calculation of the importance of ratios affecting the bank's liquidity within the objective function through the Analytical Hierarchy Process. The model was solved, and the analytical results were presented to bank officials. Finally, the effectiveness of the proposed model was validated through a survey of seven main questions related to seven evaluation dimensions from 30 banking experts. Given the similarities in banking systems in the country, with minor modifications, the proposed model and pattern of this research could provide the necessary foundations for efficient liquidity management in other banks as well as help other Iranian banks to enhance their liquidity management efficiency with some adjustments.

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Articles in Press, Accepted Manuscript
Available Online from 29 April 2024
  • Receive Date: 11 November 2023
  • Revise Date: 24 April 2024
  • Accept Date: 29 April 2024