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Are Cash Management Optimization Models Worthwhile?

Published online by Cambridge University Press:  19 October 2009

Hans G. Daellenbach
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Extract

The objective of this paper is to determine upper bounds of the potential savings that can be realized by the application of cash management optimization models. These upper bounds are found by simulation as the difference between the performance of a deterministic optimization model--which finds the optimal policy in hindsight--and the simulated performance of a hypothetical treasurer who uses simple heuristic cash management rules as informally practiced by many treasurers, based on prediction of random cash flows. The results of this analysis leave serious doubts as to profitability of cash management optimization models.

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Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 9 , Issue 4 , September 1974, pp. 607 - 626
Copyright
Copyright © School of Business Administration, University of Washington 1974

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