Volume 16, Issue 2 (7-2019)                   jor 2019, 16(2): 97-113 | Back to browse issues page

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Rahnama Roodposhti F, Amini M R, Shamsi H, Rezaei M. Constructing a Composite Index of Risk in the Banking Sector: A Multilayer DEA Approach (Case Study: Tehran Stock Exchange Member Banks). jor. 2019; 16 (2) :97-113
URL: http://jamlu.liau.ac.ir/article-1-1663-en.html
Islamic Azad University, Science and Research Branch, Tehran, Iran
Abstract:   (2183 Views)
Risk analysis is necessary for portfolio management. Investors in setting an appropriate portfolio need to pay attention to risk-related indicators as well as profitability. Beside soft approaches for composing indicators to an index such as AHP, the optimization approaches such as DEA are also considered. However, if the indicators have a hierarchical structure, then it is no longer possible to use the basic DEA model for weighting and ranking. Therefore, it is necessary to extend the DEA model to be able to consider the hierarchical structure of indicators and sub-indicators. In this paper, by reviewing the various risk indicators in the banking sector such as credit risk, liquidity risk, and profitability risk and also by using the multilayer DEA (MLDEA) approach, a Composite Risk Index (CRI) will be constructed. To indicate the capabilities of the MLDEA model, 10 Iranian banks in Tehran Stock Exchange were evaluated. The results indicated the Pasargad has the best performance (lowest Risk) among all other banks under evaluation. In this bank, Liquidity risk is the best, and credit risk and profitability risk are second and third, respectively. In addition to providing the CRI score and the weights of sub-indicators, the discriminative power of the model has also been significantly improved.
 
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Type of Study: Research | Subject: Special
Received: 2018/04/9 | Accepted: 2019/02/20 | Published: 2019/07/15

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