BNY Mellon Optimization Reduces Intraday Credit Risk by $1.4 Trillion

Brian Blank (), Erika Lunceford, John Morik (), Song He, Madhusudan Rana, Pavithran Rajendran, Gnanadeeban Gnanapandithan, Katherine Lajoie, Boris Kats, Madangopal Revoor, Victor O’Laughlen () and Prasad Lakshminarsimha Kompella
Additional contact information
Brian Blank: Bank of New York Mellon, Jersey City, New Jersey 07302
Erika Lunceford: Bank of New York Mellon, Jersey City, New Jersey 07302
John Morik: Bank of New York Mellon, Jersey City, New Jersey 07302
Song He: Bank of New York Mellon, Jersey City, New Jersey 07302
Madhusudan Rana: Bank of New York Mellon, Jersey City, New Jersey 07302
Pavithran Rajendran: Bank of New York Mellon, Jersey City, New Jersey 07302
Gnanadeeban Gnanapandithan: Bank of New York Mellon, Jersey City, New Jersey 07302
Katherine Lajoie: Bank of New York Mellon, Jersey City, New Jersey 07302
Boris Kats: Bank of New York Mellon, Jersey City, New Jersey 07302
Madangopal Revoor: Bank of New York Mellon, Jersey City, New Jersey 07302
Victor O’Laughlen: Bank of New York Mellon, Jersey City, New Jersey 07302
Prasad Lakshminarsimha Kompella: Bank of New York Mellon, Jersey City, New Jersey 07302

Interfaces, 2017, vol. 47, issue 1, 38-51

Abstract: As part of the U.S. Tri-Party Repo Infrastructure Reform Program, Bank of New York Mellon developed a set of integrated mixed-integer programming models to solve collateral-management challenges involving short-term secured loans. Its objectives were to minimize intraday credit exposure and the liquidity usage of its clients. Each day, its optimizations tools, rebalancing, continuous portfolio optimization (CPO), and the CPO settlement algorithm, which use these models, are employed to process $1.4 trillion of client collateral. They have helped to reduce the intraday credit risk in BNY Mellon’s U.S. tri-party repurchase market by more than 97 percent and provided several hundred million dollars in annual savings for the dealers.

Keywords: banking; collateral management; securities, portfolio; brokerage and trading (search for similar items in EconPapers)
Date: 2017
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