Are Cash Management Optimization Models Worthwhile?

Hans G. Daellenbach

Journal of Financial and Quantitative Analysis, 1974, vol. 9, issue 4, 607-626

Abstract: 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.

Date: 1974
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