Please use this identifier to cite or link to this item:
http://hdl.handle.net/10071/22596
Author(s): | Brito, R. P. Judice, P. |
Date: | 2022 |
Title: | Asset classification under the IFRS 9 framework for the construction of a banking investment portfolio |
Volume: | 29 |
Number: | 4 |
Pages: | 2618 - 2648 |
ISSN: | 0969-6016 |
DOI (Digital Object Identifier): | 10.1111/itor.12976 |
Keywords: | Asset classification Backtesting IFRS 9 Derivative-free optimization Sensitivity analysis Stochastic simulation |
Abstract: | Under the International Financial Reporting Standard 9 framework, we analyze the trade-off of classifying a financial asset at amortized cost versus at fair value. Defining an impairment model and based on historical (2003–2019) data for the 10-year Portuguese Government bonds, we analyze the annual performance (income/comprehensive income) of different investment allocations. Setting as objectives the maximization of the income and the minimization of the semivariance of the comprehensive income, we suggest a biobjective model in order to find efficient allocations. Given the nonsmoothness of the semivariance function, we compute the solution of the suggested model by means of a multiobjective derivative-free algorithm. Assuming that the yields and funding rates follow a correlated mean-reverting process and that the bonds’ rating dynamics are described by an ordinal response model, we show a possible approach to mitigate the estimation error ingrained in the proposed biobjective stochastic model. Finally, we assess the out-of-sample performance of some of the suggested efficient allocations. |
Peerreviewed: | yes |
Access type: | Open Access |
Appears in Collections: | BRU-RI - Artigos em revistas científicas internacionais com arbitragem científica |
Files in This Item:
File | Description | Size | Format | |
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article_81386.pdf | Versão Aceite | 1,68 MB | Adobe PDF | View/Open |
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