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BNY Mellon Optimization Reduces Intraday Credit Risk by $1.4 Trillion

Author

Listed:
  • 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)

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.

Suggested Citation

  • Brian Blank & Erika Lunceford & John Morik & Song He & Madhusudan Rana & Pavithran Rajendran & Gnanadeeban Gnanapandithan & Katherine Lajoie & Boris Kats & Madangopal Revoor & Victor O’Laughlen & Pras, 2017. "BNY Mellon Optimization Reduces Intraday Credit Risk by $1.4 Trillion," Interfaces, INFORMS, vol. 47(1), pages 38-51, February.
    • Handle: RePEc:inm:orinte:v:47:y:2017:i:1:p:38-51
    DOI: 10.1287/inte.2017.0887
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    Cited by:

    1. Dimitris Andriosopoulos & Michalis Doumpos & Panos M. Pardalos & Constantin Zopounidis, 2019. "Computational approaches and data analytics in financial services: A literature review," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 70(10), pages 1581-1599, October.

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