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Liquidity planning in a small bank

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  • Chiang, Dalen T

Abstract

Given a forecast of supply and demand for cash in each period of an infinite planning horizon, and with a known current portfolio, a policy is chosen to invest these cash supplies in securities of different maturities so that the demand in every future period can be satisfied by securities maturing in that period. The objective is to maximize the minimum of the excess over the planning horizon so that any illiquidity in one period is spread out over the entire planning horizon. Analytical solutions are obtained for single maturity and barbell investment policies. Feasibility and optimality conditions are determined for these policies.

Suggested Citation

  • Chiang, Dalen T, 1979. "Liquidity planning in a small bank," Omega, Elsevier, vol. 7(4), pages 287-295.
    • Handle: RePEc:eee:jomega:v:7:y:1979:i:4:p:287-295
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    Cited by:

    1. García Cabello, Julia & Lobillo, F.J., 2017. "Sound branch cash management for less: A low-cost forecasting algorithm under uncertain demand," Omega, Elsevier, vol. 70(C), pages 118-134.

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