ADAPTIVE MANAGEMENT OF BANK INVESTMENT ACTIVITY: PORTFOLIO STRATEGIES UNDER MARKET INSTABILITY

In the context of heightened financial volatility and increasing risk exposure in the banking sector, the issue of enhancing the effectiveness of credit and investment activity (CIA) has gained particular relevance. Conventional approaches to evaluating the performance of banks’ investment operations typically focus on asset profitability and risk, often disregarding the interactions among portfolio components, the volatility of cash flows, and asset sensitivity to external shocks. These limitations necessitate the adoption of portfolio management principles and adaptive asset allocation strategies to ensure a sustainable risk-return balance. The study aims to justify and empirically verify approaches to improving the efficiency of CIA in banks by structurally optimizing the credit and investment portfolio (CIP) through the application of portfolio theory and adaptive management under conditions of financial instability. The research employs a range of analytical tools, including portfolio optimization models, correlation analysis, and multi-factor assessment techniques. The study evaluates both traditional and advanced methods of managing CIP structures, with a focus on diversification, volatility, and asset substitution strategies. The findings reveal that structural optimization of CIP enhances CIA efficiency by incorporating low-risk, lowvolatility assets and minimizing inter-asset correlations. The introduction of a high-performance asset led to a significant improvement in the integrated portfolio efficiency indicator, increasing from 18.04% to 22.11%, while reducing the overall risk from 22.91% to 19.9%. The reduction in portfolio risk was primarily driven by decreased asset volatility (62.2%), surpassing the effect of lowered asset correlations (39.98%). The study proposes adaptive asset management strategies based on substitution principles and standardized benchmarking, which ensure strategic flexibility in dynamic market conditions. It is shown that portfolio size determines the appropriate management strategy: large-scale portfolios benefit from divesting volatile assets, while substitution strategies are more effective for smaller portfolios. Ultimately, achieving high CIA efficiency requires a multifactor approach to CIP formation that integrates asset interactions, diversification levels, volatility, and sensitivity to external shocks.