P Mathur’s research while affiliated with Indian Institute of Technology Kanpur and other places

Multi-Criteria Decision Making is an increasingly accepted tool for decision making in management. In this work, we highlight the application of a novel Multi-Objective Evolutionary Algorithm, NSGA-II to the risk-return trade-off for a bank loan portfolio manager. The manager of a bank operating in a competitive environment faces the stan-dard goal of maximizing shareholder wealth. Specifically, this attempts to maxi-mize the net worth of the bank, which in turn involves maximizing the net interest margin of the bank (among other factors, such as non-interest income). At the same time, there are significant regulatory constraints placed on the bank, such as the maintenance of adequate capital, interest-rate risk exposure, etc. The Genetic Algorithm based technique used here obtains an approximation to the set of Pareto-optimal solutions which increases the decision flexibility avail-able to the bank manager and provides a visualization tool for one of the tradeoffs involved. The algorithm is also computationally efficient and is contrasted with a traditional multi-objective function -the epsilon-constraint method.