Designing an Optimum Model for Liquidity Risk Measurement in non-interest banking; a case study of Mellat bank

Pourzarandi, Mohammad Ebrahim; Omrani, Meysam; Kavand, Mojtaba

Designing an Optimum Model for Liquidity Risk Measurement in non-interest banking; a case study of Mellat bank

Authors

¹ Faculty member in Islamic Azad University, Tehran Shomal branch

² Master of financial management, University of Imam Sadigh University

³ Ph.D. student, University of Imam Sadigh

Abstract

Determining the required liquidity of a bank is the most important activity of its managers. A firm can be recognized as a financial institute with a high liquidity if it has the capability of rapid access to cash with appropriate cost and appropriate time. For this reason, the financial manager of a financial institute tries to implement a proper liquidity management, regarding competitive environmental changes, via scientific models and techniques of prediction.
This paper aims to propose an optimum risk liquidity measurement in non-usury banking system in Iran by determining variables influencing liquidity risk, goals and structural limitations for which it applies goal programming technique. For this reason, after prediction of 2010 liquidity, for measuring the liquidity risk, the current study compares the liquidity resulting from the model and real liquidity during 2007 to 2010 which can disclose the amount of bank liquidity deficiency or surplus.
As results show all priorities and goals defined by bank managers were achieved completely. In the field of assets allocation, allocation derived from the model led to optimum allocation of resources. In other words goals of managers will be fulfilled according to bank structural limitations if the allocation of resources in the bank was just like what the model suggests.

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