A multicriteria methodology for bank asset liability management

Kyriaki Kosmidou1,2, Constantin Zopounidis1

Technical University of Crete Dept. of Production Engineering and Management Financial Engineering Laboratory University Campus 73100 Chania, Greece University of Crete Dept. of Economics University Campus 74100 Rethymno, Greece E-mails: kosmidou@dpem.tuc.gr, kostas@dpem.tuc.gr
2 1

Abstract : The aim of this paper is to present an Asset Liability Management (ALM) technique, which combines a goal programming model with a simulation analysis to determine the balance sheet of a bank for the year 2000. To attain this goal, we analyzed the 1999 balance sheet of a Greek commercial bank facing conflicting goals such as returns, liquidity, solvency, and expansion of deposits and loans under uncertainty. An optimizer was embedded in a simulation model to obtain different optimal solutions for a set of interest rate scenarios, while a sensitivity analysis explored the effects of alterations in the order of goal priorities. Keywords: Asset and liability management, banking, goal programming, optimization, simulation analysis

1. Introduction

Bank asset and liability management is defined as the simultaneous planning of all asset and liability positions on the banks balance sheet under consideration of the different bank management objectives and legal, managerial and market constraints, for the purpose of mitigating interest rate risk, providing liquidity and enhancing the value of the bank (Gup and Brooks, 1993). Nowadays, the growing internationalization, the globalization of financial markets, the increasing competition in the national and international banking markets and the introduction of complex products have increased volatility and risks. The great and fast availability of all kinds of different information due to the development towards an information society has eliminated any delays between the occurrence of an event and the impact on the markets. Consideration of uncertainties is critical in financial planning. Investors often seek to develop long-term strategies that hedge against uncertainties. But evaluating long-term investment strategies requires several components that are not now commonly available. There must be a way to generate scenarios that is logically Moreover, parameters of the

consistent and based on sound economic principles.

scenario generator must fit past data and trends. Thus, the stochastic model, which will be implemented, should take into account changing economic conditions, such as the deregulation of interest rates and currencies. All the above drove banks to seek out greater efficiency in the management of their assets and liabilities. Thus, the central problem of ALM revolves around the banks balance sheet and the main question that arises is: What should be the composition of a banks assets and liabilities on average given the corresponding returns and costs, in order 2

to achieve certain goals, such as maximization of the banks gross revenues? This need has led banks to determine their optimal balance among profitability, risk, liquidity and other uncertainties. The optimal balance between these factors cannot be found without considering important interactions that exist between the structure of a banks liability and capital and the composition of its assets. ALM is heavily dependent on the movement of interest rates in the market. The history of ALM suggests that it is very important for a financial institution to measure, manage and control interest rate risk. Many are the studies that have been developed concerning the bank asset liability techniques.

1.1 Previous Research Looking to the past, we find the first mathematical models in the field of bank management. Asset and liability management models can be deterministic or stochastic (Kosmidou and Zopounidis, 2001). Deterministic models use linear programming, assume particular realizations for random events, and are computationally tractable for large problems. The deterministic linear programming model of Chambers and Charnes (1961) is the pioneer in ALM. Chambers and Charnes were concerned with formulating, exploring and interpreting the use and construction which may be derived from a mathematical programming model which expresses more realistically than past efforts the actual conditions of current operations. Their model corresponds to the problem of determining an optimal portfolio for an individual bank over several time periods in accordance with requirements laid down by bank examiners which are interpreted as defining limits within which the level of risk associated with the return on the portfolio is an acceptable one. 3

Cohen and Hammer (1967), Robertson (1972), Lifson and Blackman (1973), Fielitz and Loeffler (1979) have realized successful applications of Chambers and Charnesmodel. Even though these models have differed in their treatment of disaggregation, uncertainty and dynamic considerations, they all have in common the fact that they are specified to optimize a single objective profit function subject to the relevant linear constraints. Eatman and Sealey (1979) developed a multiobjective linear programming model for commercial bank balance sheet management considering profitability and solvency objectives subject to policy and managerial constraints. Giokas and Vassiloglou (1991) developed a goal-programming model for bank asset and liability management. They supported the idea that apart from attempting to maximize revenues, management tries to minimize risks involved in the allocation of the banks capital, as well as to fulfill other goals of the bank, such as retaining its market share, increasing the size of its deposits and loans, etc. Conventional linear programming is unable to deal with this kind of problem, as it can only handle a single goal in the objective function. Goal programming is the most widely used approach that solves largescale multi-criteria decision making problems. Apart from the deterministic models, several stochastic models have been proposed since the 1970s. These models, including the use of chance-constrained programming (Charnes and Thore, 1966; Charnes and Littlechild, 1968; Pogue and Bussard, 1972), dynamic programming (Samuelson, 1969; Merton, 1969,1990; Eppen and Fama, 1971), sequential decision theory (Wolf, 1969; Bradley and Crane, 1972) and stochastic linear programming under uncertainty (Cohen and Thore, 1970; Booth, 1972; Crane, 1971; Kallberg et al. 1982), presented computational difficulties. The stochastic models, in their 4

majority, originate from the portfolio selection theory of Markowitz (1959) and they are known as static mean-variance methods. Pyle (1971) and Brodt (1978) adapted Markowitzs theory and presented an efficient dynamic balance sheet management plan that considers only the risk of the portfolio and not other possible uncertainties or maximizes profits for a given amount of risk over a multi-period planning horizon respectively. Wolf (1969) proposed the sequential decision theoretic approach that employs sequential decision analysis to find an optimal solution through the use of implicit enumeration. An alternative approach in considering stochastic models, is the stochastic linear programming with simple recourse. Kusy and Ziemba (1986) employed a multi-period stochastic linear program with simple recourse to model the management of assets and liabilities in banking while maintaining computational feasibility. Their results indicate that the proposed ALM model is theoretically and operationally superior to a corresponding deterministic linear programming model and that the computational effort required for its implementation is comparable to that of the deterministic model. Another application of the multistage stochastic programming is the Russell-Yasuda Kasai model (Carino et al., 1994), which aims at maximizing the long term wealth of the firm while producing high income returns. Mulvey and Vladimirou (1992) used dynamic generalized network programs for financial planning problems under uncertainty and they developed a model in the framework of multi-scenario generalized network that captures essential features of various discrete time financial decision problems.

Finally, Mulvey and Ziemba (1998) present a more detailed overview of various asset and liability modeling techniques, including models for individuals and financial institutions such as banks and insurance companies. Moreover, over the years, many models have been developed in the area of financial analysis and financial planning techniques. Kvanli (1980), Lee and Lerro (1973), Lee and Chesser (1980), Baston (1989), Sharma et al. (1995), among others have applied goal programming to investment planning. Booth et al. (1989), Giokas and Vassiloglou

(1991), Seshadri et al. (1999) presented bank models using goal programming. These studies focus on the areas of banking and financial institutions and they use data from the bank financial statements. Taking into consideration all the above, the purpose of this paper is to develop a goal programming system into a stochastic environment, focusing, mainly, on the change of the interest rate risk. Taking into account the financial statements of a Greek commercial bank for the year 1999, a goal programming system is developed in order to determine the assets and liabilities of the bank for the period 2000. The objectives used are based on liquidity, solvency and average yield of assets and liabilities. Moreover, ALM is associated with the changes of the interest rate risk and specifically with the bond interest, deposit interest and loan interest, since the loans and deposits constitute the major accounts of the banks balance sheet and the profitability sources of the banks. Thus, a simulation analysis is performed to generate interest rate scenarios and develop optimal ALM strategies along these scenarios, while a sensitivity analysis explores the effects of alterations in the order of goal priorities. This system provides the possibility to the administrative board and the managers of the bank to proceed to various scenarios related

to their future economic process, aiming mainly to the management of the risks, emerged from the changes of the market parameters. The rest of the paper is organized as follows. The next section outlines the methodology used and presents the application of this methodology in a commercial bank of Greece. Section 3 presents the results of this analysis. Finally, the conclusions of the paper as well as future research perspectives are discussed in the last section.

2. Applying the Goal Programming Model The present paper, using data from a commercial bank of Greece, presents an ALM methodology in a stochastic interest-rate environment in order to choose strategic directions in banks financial plan. More precisely, the goal programming model of this study was developed in terms of a one-year time horizon (1999). The model used balance sheet and income statement information for 1999 to produce a future course of ALM strategy for the year 2000. As far as model variables are concerned, we used variables familiar to management and facilitated the specification of the constraints/goals. For example, goals concerning measurements such as liquidity, return and risk have to be expressed in terms of utilized variables. The variables used in the specification of the model were taken directly from the 1999 financial statement of a commercial bank of Greece. 42 structural variables were used, of which 22 correspond to assets (Xi, i=1,,22) and 20 to liabilities (Yj, j=1,,20), as they are presented in Table 1. Insert Table 1

2.1 Constraints and goals

Before proceeding to the goal programming formulation it would be appropriate to describe the constraints and goals that were used. Certain constraints are imposed by the banking regulation on particular categories of accounts. For example, the total loans (X8+X9+X10) granted are expected to maintain at least the previous years level (7,632,392) and cannot rise by more than 38% in relation to these levels, as follows:

X 8 + X 9 + X 10 7,632,392 X 8 + X 9 + X 10 1.38 7,632,392

(1) (2)

Similarly, the following constraints state that the total deposits are not expected to increase by more than 28% above the previous years levels (12,348,981) and cannot be lower than that. Y4 + Y5 + Y6 + Y7 + Y8 12,348,981 Y4 + Y5 + Y6 + Y7 + Y8 1.28 12,348,981 (3) (4)

Since the major part of the capital of the commercial banks is consisted of the share capital the variable Y19 is selected for the development of the asset liability management model. Y19 1,052,384 (5)

Moreover, the ratio retained earnings to total assets Y20 indicates the profitability of the total assets. In the present paper this ratio is set equal to 2.27%, which is the average growth rate of the ratio retained earnings to total assets.
Y20 2.27% i =1 X i
22

(6)

The following constraints are derived from the obligation of the bank to reserve a specific amount of its deposits in a special interest-bearing account at the Bank of Greece, as well as in interest-bearing government bonds. Moreover, a percentage of private deposits is directed towards loans for public sector corporations.
Y4 + Y5 + Y6 + Y7 + Y8 1.99( X 8 + X 9 + X 10 ) = 0
(7) (8) (9)
20

Y4 + Y5 + Y6 + Y7 + Y8 2.29( X 4 + X 5 + X 11 + X 12 + X 13 ) = 0
Y4 + Y5 + Y6 + Y7 + Y8 5.67 X 3 = 0

The constraint

22 i =1

X i j =1 Y j = 653,116

(10)

defines the equality relationship between assets and liabilities and net worth (the amount 653.116 refers to the amount of capital that is assumed stable). The following constraint assumes that the total assets are expected to increase not more than 30% above the previous years levels.

22 i =1

X i 1.30 17,327,046

(11)

The goal constraint

Y19 0.3349Y20 0.08(0.2 X 4 0.5 X 8 0.7 X 9 0.5 X 10 0.2 X 11 0.4 X 12 X 13 ) d 1+ + d 1 = 0 (12)

involves the solvency goal which is related to the risk exposure of the bank. The solvency ratio is used as a risk measure and is defined as the ratio of the banks equity capital to its total weighted assets. The weighting of the assets reflects their respective risk, greater weights corresponding to a higher degree of risk. According to the proposal of the Commission of the European Communities, this ratio must be greater than or equal to 8% in order to guarantee the required solvency.

The following constraint defines the liquidity goal, specified as the ratio of liquid assets to current liabilities which is used as a liquidity risk measure. According to the Bank policy this ratio should be approximately 0.60 and not higher than 0.60, indicating that at least half of the total capital of the bank should be derived from the liquid current data of the bank and not from the deposits in order to avoid the liquidity risk.

21 i =1

+ X i 0.6 j =1 Y j d 2 + d2 =0 18

(13)

The constraint
Y4 + Y5 + Y6 + Y7 + Y8 d 4+ + d 4 = 1.28 12,348,981

(14)

defines the goal for the growth of the deposits (28% higher than the previous years deposits), reflecting the management decision to maintain the forecast for deposit growth in the overall economy. Taking into account the historical data of the previous years of the bank, we assume that the average growth rate of the ratio deposits to total assets should be at least 73.31%.
+ Y4 + Y5 + Y6 + d10 d10 = 73.31% 17,327,046

(15)

Similarly, the following constraint specifies the goal for the increase of the loans granted which is set at 38% above the previous years level.

X 8 + X 9 + X 10 d 3+ + d 3 = 1.38 7,632,392
The constraint

(16)

22
i =1

+ RiX X i j =1 R Y j Y j d 5 + d 5 = 30% 17,327,046 + 653,116 20

(17)

defines the goal for the overall return of the selected asset-liability strategy over the year of the analysis. This goal is set at 30% and is defined on the basis of the returns for all assets RX and liabilities RY.

10

Finally, it should be noted that the above goal programming model incorporates also goals reflecting that variables such as cash, cheques receivable, deposits to the Bank of Greece and fixed assets, should remain at the levels of previous years. X 1 0.01 17,327,046 + d 6 d 6+ = 0
(18) (19) (20) (21)

X 2 0.004 17,327,046 + d 7 d 7+ = 0
X 3 0.14 17,327,046 + d 8 d 8+ = 0

X 22 0.015 17,327,046 + d 9 d 9+ = 0

2.2 Mathematical formulation

As was already mentioned the major advantage of goal programming technique is its great flexibility, which enables the decision maker to incorporate easily numerous variations of constraints and goals. Taking into account the constraints and goals as were described above as well as the preferences of the banking managers, the proposed goal programming formulation can be expressed as follows:
+ Min z = d k+ + d k + 2d 2 + 3d1 k =3 k =3 10 10

(22)

subject to X 8 + X 9 + X 10 7,632,392
X 8 + X 9 + X 10 1,38 7,632,392 Y4 + Y5 + Y6 + Y7 + Y8 12,348,981 Y4 + Y5 + Y6 + Y7 + Y8 1.28 12,348,981 Y19 1,052,384

(23)
(24) (25) (26) (27)

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Y20 2.27% i =1 X i
22

(28) (29) (30) (31) (32) (33)

Y4 + Y5 + Y6 + Y7 + Y8 1.99( X 8 + X 9 + X 10 ) = 0 Y4 + Y5 + Y6 + Y7 + Y8 2.29( X 4 + X 5 + X 11 + X 12 + X 13 ) = 0 Y4 + Y5 + Y6 + Y7 + Y8 5.67 X 3 = 0

22

i =1
22

X i j =1 Y j = 653,116
20

i =1

X i 1.30 17,327,046

Y19 0.3349Y20 0.08(0.2 X 4 0.5 X 8 0.7 X 9 0.5 X 10 0.2 X 11 0.4 X 12 X 13 ) d1+ + d1 = 0 (34)

+ X i 0.6 j =1 Y j d 2 + d2 =0 i =1
21 18

(35) (36) (37) (38) (39) (40) (41) (42) (43) (44)

X 8 + X 9 + X 10 d 3+ + d 3 = 1.38 7,632,392
Y4 + Y5 + Y6 + Y7 + Y8 d 4+ + d 4 = 1.28 12,348,981

22

i =1

+ RiX X i j =1 R Y j Y j d 5 + d 5 = 30% 17,327,046 + 653,116

20

X 1 0.01 17,327,046 + d 6 d 6+ = 0
X 2 0.004 17,327,046 + d 7 d 7+ = 0

X 3 0.14 17,327,046 + d 8 d 8+ = 0 X 22 0.015 17,327,046 + d 9 d 9+ = 0

+ Y4 + Y5 + Y6 + d10 d10 = 73.31% 17,327,046

Xi 0, Yj 0, d k+ 0, d k 0 , for all i=1, 2, , 22, j=1, 2, , 20, k=1, 2, , 10

The objective function involves the minimization of the deviations d+ and d from the target values of goals, where d+ denotes the over-achievement of a goal and d the underachievement. The deviations corresponding to different goals are weighted in the 12

objective according to the significance of the goals. It should be mentioned that the above goal programming formulation is based on the version that gives first priority level to the solvency goal, second priority level to the liquidity goal and third priority level to the rest goals (version 1). More precisely, the selected weighted scheme assigns higher weight to under-achievement of the solvency goal ( d 1 ), considering that it is achieved with a priority rank 3/2 higher than the priority rank that is imposed to the over achievement of
+ the liquidity goal ( d 2 ) and three times higher than the priority rank of the remaining goals

( (d k+ + d k ), k = 3,..,10 ). Once the optimal solution z* of the goal programming problem (22)-(44) is obtained, a post-optimality stage is performed to investigate the sensitivity and the robustness of the optimal solution that was obtained from the above goal programming formulation. This is achieved through the investigation of the existence of sub-optimal solutions that correspond to objective function values lower than z* + k(z*), where k(z*) is a small portion of the optimal solution z*. In this case study k(z*) is set equal to 5% of z*. This additional constraint is incorporated into the initial goal programming formulation and the new goal programming formulation is solved 42 times. Each of the 42 obtained solutions corresponds to the maximization of the asset and liability variables. The final ALM solution is specified as the average of the 42 solutions obtained during the post optimality analysis.

3. Simulation Analysis and Results

The major unknown element in the above goal programming formulations which is of interest to the banks managers is the return of the assets and liabilities used in the goal constraint (38). These involve the bonds interest rates, the interest rates of the loans

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granted and the interest rates of the deposits to the bank. To cope with the uncertainty on these parameters a scenario analysis approach is employed. This analysis involves the consideration of 2,500 scenarios on the aforementioned uncertain parameters. The scenarios are generated at random as follows. Initially, 50 scenarios are generated for the bonds interest rates. The bonds interest rates are generated as normally distributed random variables with appropriate mean and standard deviation so that they range (approximately) between 10% and 13%. 50 scenarios are also generated for the interest rates of the deposits at the bank. Similarly to the scenarios for the bonds, the deposits interest rates RD are treated as normally distributed random variables with appropriate mean and standard deviation so that they range (approximately) between 3.5% and 7%. On the basis of the deposits interest rates, the loans interest rates RL are specified as: RL=RD+S, where S is the spread between RL and RD. The spread is defined as normally distributed random variables with mean and standard deviation so that it ranges (approximately) between 3% and 4%. The goal programming formulation (22)-(44) is solved for each of the 2,500 interest rate scenarios and 2,500 different solutions are obtained. Each of these solutions is then evaluated along all scenarios. This evaluation leads to the calculation of the expected present value and the corresponding risk of the return (standard deviation) among the solutions. An interactive technique through the set of non dominated solutions was performed. This analysis concluded 207 solutions, non-dominated by any other solution in terms of their expected present value and risk. Each of these solutions can be considered as ALM strategies to implement during the year 2000. For comparison reasons the actual strategy (AS) that the bank followed during the year 2000 is also considered along the same dimensions. Table 2a presents the results (expected present value, in euro) 14

for AS and for 11 (out of the 207 non-dominated solutions) of the non-dominated identified solutions (ND1, ND2, , ND11), that are similar to the actual strategy of the bank (in terms of the expected present value and risk)1. It should be noted that in the present paper, the selection criterion of these 11 non-dominated solutions was based on their expected present value. Taking into account a different selection criterion we could have probably ended to the presentation of a different set of 11 out of 207 non dominated solutions. A sensitivity analysis was carried out, exploring the effects of alterations in the order of goal priorities. As was expected, changes in the order of priorities, by giving first priority level to the liquidity ratio and second to the solvency ratio (version 2), had no effect on the results, since the optimal solution of the model (version 1) achieves the two relevant goals. Only variations affecting the order of the loans and deposits goals

produce a different optimal solution. Reordering the priority levels (version 2) produces the optimal solution in Table 2b for AS and for 11 of the non-dominated identified solutions (ND1, ND2, , ND11) (Kosmidou and Zopounidis, 2004). However, the

comparison of the solution of the second version of the problem to that of the original indicates that the optimal values of the variables change only marginally. This is

explained by the fact that the original solution does not deviate much from the target values of the loans and deposits goals.

Insert Table 2a and Table 2b

We present only 11 out of the 207 non dominated solutions due to the saving of space.

15

Assuming that the decision maker choose the solutions ND1, ND2, ND3 of version 1 and the solutions ND1, ND2, ND3 of version 2 as the most preferred ones, based on the expected value and standard deviation, Table 3 presents the final values of all decision variables based on the selected solutions for both versions. solutions could be considered as a base for the final decision. The following sets of

Insert Table 3

If we analyze the content of the above Table 3 and compare it with the actual results of the banks financial statement we conclude that the values of the variables X2, X3 do not differ significantly from those of the actual strategy. This is due to the restriction

imposed, that the variables of fixed assets, cash, cheques receivable and deposits with the Bank of Greece should remain at the levels of previous years. Although variable X4 of the solution ND1 does not vary significantly from the AS, the values of X4 of the other solutions in both versions differ significantly from the AS. Similarly, the values of X8 for the solutions ND2 (version 1), ND3 (version 1), ND1 (version 2) and ND3 (version 2) have not significant differences with those of the AS. The above results clearly indicate that the main source of funds for the bank is the accounts of loans and deposits. The values of X9, X10, Y1,, Y8, concerning the loans and deposits variables, differ significantly from those of the AS. Moreover, the performance of the solutions obtained through the

proposed goal programming model either outperform or not the actual strategy of the bank, both in terms of their expected present value and the risk evaluated through all the interest rates scenarios considered in the simulation analysis. This is due to the fact that several restrictions were imposed on the loans and deposits goals during this research. 16

Based on the historical data of the financial statements of the bank it was assumed that the total deposits and the total loans were not expected to increase by more than 28% and 38% respectively above the previous years levels. Moreover, since ALM deals with uncertainty, it was necessary to perform a simulation analysis. Thus, the consideration of scenarios on loans and deposits interest rates contributes to the selection of the optimal solution for the bank. With the introduction into the monetary union, the commission and interest rate income from loans and deposits has been reduced due to the common currency. Thus, the bank should change its policy and find new income resources in order to sustain the desirable income levels of deposits and loans and consequently of its assets.

4. Conclusions
This paper has presented the problem of bank ALM. The problem was handled through a goal programming model, in which goals secondary to the objective function were included as additional hard constraints. This model addresses the multiobjective nature of the problem, as it allows the incorporation of several objectives. The objectives used are based on liquidity, solvency and average return of assets and liabilities. A postoptimality analysis is performed to investigate the sensitivity and the robustness of the optimal solution. Moreover, a simulation analysis on interest rate scenarios as well as a sensitivity analysis in the order of goal priorities have been investigated to obtain a wide range of non-dominated solutions. Finally, as the number of solutions was relatively

large, a technique of interactive search through the set of non dominated solutions was performed. Thus, from the 2.500 solutions that were obtained from the solution of the

17

goal programming model, we concluded to 207 solutions, non-dominated by any other solutions in terms of their expected present value and risk. Current trends in the sophistication of the data and the frequent fluctuations of the market rates emphasize the need for all organizations to have an asset liability management system which can give them an accurate representation of its current position and the favorable scenarios for the future. Finally, a number of further developments of the model can be explored and several features, such as bank performance ratios, could be incorporated into the model to determine the favorable alternatives in changing market environments. Moreover, the off balance sheet assets and liabilities could be taken into account into the model. The consideration of derivatives would be interesting in order to know how derivatives hedge the interest rate risk. Such variations as well as the development of a decision support system for asset liability management will be studied in future research.

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Table 1: The decision variables of the goal programming formulation

X1: X2: X3: X4: X5: X6: X7: X8: X9: X10: X11: X12: X13: X14: X15: X16: X17: X18: X19: X20: X21: X22: Cash Cheques receivable Deposits to the Bank of Greece Treasury bills and other securities issued by the Greek State Other Treasury bills and securities Interbank deposits and loans repayable on demand Other interbank deposits and loasn Loans and advances to customers maturing within one year Loans and advances to customers maturing after one year Other receivables Securities issued by the Greek State Other securities Shares and other variable-yield securities Investments in non-affiliates Investments in affiliates Other assets Deferred charges Accrued income state bonds Accrued income other bonds Accrued income loans and advances Other accrued income Fixed assets Y1: Y2: Y 3: Y4: Y5 : Y6: Y7: Y8: Y9: Y10: Y11: Y12: Y13: Y14: Y15: Y16: Y17: Y18: Y19: Y20: Due to credit institutions Due to credit institutions with agreed maturity Commitments arising out of sale and repurchase transactions Deposits repayable on demand Saving deposits Deposits with agreed maturity Cheques and orders payable Commitments arising out of sale and repurchase transactions (customer amounts) Dividends payable Income tax and other taxes payable Withholdings in favour of social security funds and other third parties Other liabilities Accruals and deferred income Accrued interest on time deposits Other accrued expenses of the year Provisions for staff retirement indemnities Other provisions for liabilities and charges Loans of reduced indemnity Share Capital Retained earnings

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Table 2a: Results of the scenario simulation (version 1)

Solutions AS ND1 ND2 ND3 ND4 ND5 ND6 ND7 ND8 ND9 ND10 ND11

Expected present value 1,938,864.22 2,130,981.42 2,128,391.16 2,121575.94 2,114,888.59 2,113,781.52 2,111,739.58 2,107,943.52 2,107,422.41 2,104,687.38 2,103,863.46 2,103,381.86

Standard Deviation 55,437.14 55,004.64 44,105.87 43,862.38 43,633.00 43,515.20 42,837.61 42,560.53 42,531.65 42,462.88 42,164.79 42,137.06

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Table 2b: Results of the scenario simulation (version 2)

Solutions AS ND1 ND2 ND3 ND4 ND5 ND6 ND7 ND8 ND9 ND10 ND11

Expected present value 1,938,864.22 2,130,947.93 2,128,422.47 2,121,607.22 2,113,233.20 2,112,101.98 2,111,768.84 2,107,974.04 2,107,453.12 2,104,718.17 2,101,786.31 2,101,280.91

Standard Deviation 55,437.14 55,007.54 44,103.41 43,859.93 43,582.24 43,463.85 42,835.52 42,558.45 42,529.57 42,460.81 42,108.90 42,079.55

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Table 3: Results of the decision variables

Version 1 Variables X2 X3 X4 X8 X9 X10 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y19 Y20 AS 79,079.94 1,883,999.81 6,976,945.44 8,262,491.89 3,610,828.97 19,372.98 851,488.71 3,205,814.06 986,568.61 3,070,110.44 6,712,749.03 5,637,741.45 189,980.40 4,515,094.38 744,576.73 337,545.89 ND1 71,153.30 2,786,231.92 3,779,185.45 189,120.55 144,370.52 7,605,169.72 27,912.73 27,125.26 172,567.99 12,087,289.46 309,248.10 306,890.03 3,011,042.54 83,464.84 5,018,383.78 529,219.80 ND2 69,915.08 2,786,260.08 164,344.93 7,605,997.51 143,622.98 189,120.55 26,153.74 25,907.52 72,640.73 12,087,359.25 305,942.27 304,176.22 3,017,216.88 83,400.03 5,075,529.05 527,320.69 ND3 68,682.47 2,786,222.04 164,344.93 7,602,072.28 147,439.82 189,120.55 27,417.96 27,327.37 75,889.30 12,087,247.24 308,393.81 306,577.45 3,012,156.41 83,504.04 5,048,367.63 527,505.57 ND1 71,056.40 2,786,646.51 164,344.93 7,676,080.94 74,586.21 189,120.55 270,579.40 26,259.55 162,181.26 12,087,413.96 305,449.34 308,075.08 3,015,889.90 83,349.23 5,038,760.56 529,822.53

Version 2 ND2 70,873.21 2,786,646.51 164,344.93 189,120.55 74,435.69 7,676,246.28 25,910.89 24,359.51 157,660.64 12,087,531.83 305,751.76 306,072.61 3,017,611.03 83,239.78 5,060,526.05 528,632.55 ND3 70,361.87 2,786,626.42 164,344.93 7,675,934.70 74,729.57 189,120.55 25,313.61 24,993.44 70,504.22 12,087,396.61 306,082.00 307,206.82 3,016,121.01 83,365.34 5,090,478.27 527,213.99

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