Philosophiae Doctor - PhD / The aim of this study is to construct and propose continuous-time mathematical models
for optimal management of bank capital, reserves and liquidity. This aim emanates from
the global financial crisis of 2007 − 2009. In this regard and as a first task, our objective
is to determine an optimal investment strategy for a commercial bank subject to capital
requirements as prescribed by the Basel III Accord. In particular, the objective of the
aforementioned problem is to maximize the expected return on the bank capital portfolio
and minimize the variance of the terminal wealth. We apply classical tools from stochastic
analysis to achieve the optimal strategy of a benchmark portfolio selection problem which
minimizes the expected quadratic distance of the terminal risk capital reserves from a
predefined benchmark.
Secondly, the Basel Committee on Banking Supervision (BCBS) introduced strategies
to protect banks from running out of liquidity. These measures included an increase of
the minimum reserves that the bank ought to hold, in response to the global financial
crisis. We propose a model to minimize risk for a bank by finding an appropriate mix of
diversification, balanced against return on the portfolio. Thirdly and finally, in response
to the financial crises, the Basel Committee on Banking Supervision (BCBS) designed a
set of precautionary measures (known as Basel III) for liquidity imposed on banks and one
of its purposes is to protect the economy from deteriorating. Recently, bank regulators
wanted banks to depend on sources such as core deposits and long-term funding from
small businesses and less on short-term wholesale funding.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uwc/oai:etd.uwc.ac.za:11394/6643 |
| Date | January 2019 |
| Creators | van Schalkwyk, Garth |
| Contributors | Witbooi, Peter |
| Publisher | University of the Western Cape |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Rights | University of the Western Cape |
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