IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

A stochastic programming approach to cash management in banking

Listed author(s):
  • Castro, Jordi
Registered author(s):

    The treasurer of a bank is responsible for the cash management of several banking activities. In this work, we focus on two of them: cash management in automatic teller machines (ATMs), and in the compensation of credit card transactions. In both cases a decision must be taken according to a future customers demand, which is uncertain. From historical data we can obtain a discrete probability distribution of this demand, which allows the application of stochastic programming techniques. We present stochastic programming models for each problem. Two short-term and one mid-term models are presented for ATMs. The short-term model with fixed costs results in an integer problem which is solved by a fast (i.e. linear running time) algorithm. The short-term model with fixed and staircase costs is solved through its MILP equivalent deterministic formulation. The mid-term model with fixed and staircase costs gives rise to a multi-stage stochastic problem, which is also solved by its MILP deterministic equivalent. The model for compensation of credit card transactions results in a closed form solution. The optimal solutions of those models are the best decisions to be taken by the bank, and provide the basis for a decision support system.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 192 (2009)
    Issue (Month): 3 (February)
    Pages: 963-974

    in new window

    Handle: RePEc:eee:ejores:v:192:y:2009:i:3:p:963-974
    Contact details of provider: Web page:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    in new window

    1. J. G. Kallberg & R. W. White & W. T. Ziemba, 1982. "Short Term Financial Planning under Uncertainty," Management Science, INFORMS, vol. 28(6), pages 670-682, June.
    2. Willem Klein Haneveld & Maarten van der Vlerk, 1999. "Stochastic integer programming:General models and algorithms," Annals of Operations Research, Springer, vol. 85(0), pages 39-57, January.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:192:y:2009:i:3:p:963-974. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.