University of Wisconsin Center for Cooperatives
Journal of Agricultural Cooperation
ARTICLES


Title Optimal Equity Recovery for a Cooperative Financial Institution
Author(s) Loren W. Tauer and Alfons Weersink
Series Volume 3
Issue Date 1988
Abstract A model is developed that shows the usefulness of dynamic optimization in deriving optimal equity recovery strategies for a cooperative lending institution. The objective is to minimize the cost of a member borrowing over time. An interest rate surcharge, above the cost of funds and operating cost, is the control variable to be determined. The financial position of the cooperative is described by equity and loan volume, which are the state variables. Applications show how the surcharge, loans, and equity change over time as model parameters are changed.

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