TY: JOUR
T1 - Asset classification under the IFRS 9 framework for the construction of a banking investment portfolio
A1 - Brito, R. P.
A1 - Judice, P.
N2 - 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.
UR - https://repositorio.iscte-iul.pt/handle/10071/22487
Y1 - 2021
PB - Wiley