K. Kosmidou, C. Zopounidis
     Technical University of Crete,
     Dept. of Production Engineering and Management,
     Financial Engineering Laboratory,
     University Campus, 73100 Chania, Greece

Abstract
During the last decade, the growing internationalization, the globalization of financial markets and the introduction of complex products have increased volatility and risks.  Moreover, the uncertainty that prevails in the financial and investment environment has prompted banks to seek out greater efficiency in the management of their assets and liabilities.  Today’s asset management decisions create tomorrow’s problems as well as opportunities.  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 bank’s liabilities and capital and the composition of its assets.  In managing its assets and liabilities, a bank should face several conflicting goals, such as the maximization of returns, the minimization of risk, the maintenance of a desirable level of liquidity and solvency, the expansion of deposits and loans. In this paper we develop a multiobjective mathematical programming, whose main purpose is to maximize earnings over a finite time horizon, given a collection of assets, liabilities, investment prospects, a forecast of future demand for funds.  Taking into account all the above we include the essential institutional, legal, financial, structural and bank-related policy constraints as proposed from the bank’s board.  We present results of applying this multiobjective methodology to data from the Commercial Bank of Greece.