Dr.Zhanqin Guo, Professor Zongfang Zhou

Management School of Business, University of Electronic Science & Technology of Chinabr,
Chengdu city, Sichuan, P.R.China, 610054
guozhanqin@126.com, Zhouzf@uestc.edu.cn

This paper proposes an optimization method with (Value at Risk) constraint for loan portfolios based on the view of a bank’s risk-bearing capability. The method has three advantages. First, the economic implication of the objectives is visual and the calculation is easy-to-understand. Second, a bank can set up the risk–bearing capability according to its capital so that it can avoid the potential risk. And third, the decision-maker can plan the optimal loan portfolio according to the status of economy and risk preference. Thus, the method seems more flexible and convenient.