Multi period balance sheet scenario optimisation

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School of Business | Master's thesis
Information Systems Science
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The objective of this study is to formulate and model a multi period scenario optimisation problem and to obtain recommendations for optimal balance sheet item portfolio. To do this the study gathers data from the public financial statements of the case company Aktia PLC, explains the relevant framework and model specifications, describes the actual optimisation model and finally presents the analysis of the results. The process combines many aspects of finance, decision making and optimisation. The portfolio optimisation problem is done over multiple periods with simulated future scenarios by formulating a tree representing the possible future outcomes. The academic background combines aspects from information management and finance. The frameworks are selected from several different journals and fields in business studies and economics. The study explains the theoretical framework around the main topics of financial portfolio management, decision making and scenario optimisation. For the methodology the thesis aims to form qualitative research on the theories behind the model and the case company data in the form of literature review. The more quantitative research is done on the actual optimisation model and the analysis of these results. The case company was selected to allow for quantitative research and to show that the model works in real life. The results from the model conclude with an optimal solution and a suggestion for changes made in one year for the balance sheet item portfolio. The results were heavily affected by the inputs and thus different solutions could be obtained easily. The base line model performed very well in comparison to other options. When comparing to the actual realisation for the most recently published data, the model showed a slight reduction in profits with the strong positive effect on balance sheet growth. In this solution the profits were 2 384 000€ lower in the model than those observed in year 2013 but the balance sheet total was 1 959 281 000€ larger.
Portfolio optimisation, Multi Period Optimisation, Scenario, Optimisation, Optimization, Scenario tree, Decision Making, Banking, Scenario optimisation, Balance Sheet Optimisation, Simulation
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