Financial networks with socially responsible investing

Qiang Qiang, Ke Ke, Yihong Hu

Research output: Contribution to journalArticle

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Abstract

In this paper, we develop a framework for the modeling, analysis, and computation of solutions to multitiered financial network problems with socially responsible investment in which both the sources of financial funds as well as the intermediaries are multicriteria decision-makers. We assume that these decision-makers seek not only to maximize their net revenues but also minimize risk with the risk being penalized by a variable weight. Furthermore, we assume that the intermediaries are socially responsible companies, who want to maximize their social responsibility levels. We make explicit the behavior of the various decision-makers, including the consumers at the demand markets for the financial products. We derive the optimality conditions, and demonstrate that the governing equilibrium conditions of the financial network economy can be formulated as a finite-dimensional variational inequality problem. Qualitative properties of the equilibrium financial flow and price pattern are provided. A numerical example is used to illustrate the model.

Original languageEnglish (US)
Pages (from-to)231-252
Number of pages22
JournalComputational Management Science
Volume10
Issue number2-3
DOIs
Publication statusPublished - Jun 1 2013

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All Science Journal Classification (ASJC) codes

  • Management Information Systems
  • Information Systems

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