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Financial Applications of Linear Programming. Prof.Dr.Aydın Ulucan. Multiperiod Cash Balancing. A company forecasts monthly cash inflow and outflows as shown below for 2013. . Multiperiod Cash Balancing. In order to proceed the payments company should get credit.

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multiperiod cash balancing
Multiperiod Cash Balancing
  • A company forecasts monthly cash inflow and outflows as shown below for 2013.
multiperiod cash balancing1
Multiperiod Cash Balancing
  • In order to proceed the payments company should get credit.
  • There are two types of credit optins: Long and short term.
  • Long term credit might be taken in the beginning of 2013 January. Every month 2.5% interest is paid and the credit is paid back in 2014 January.
  • Short term credits might be taken every month. Monthly credit interest rate is 3.75%.
  • Every month, excess cash earns 1% interest.
multiperiod cash balancing2
Multiperiod Cash Balancing
  • Company would like to maximize its cash balance in 2014 January using linear programming approach.
  • They also would like to develop the model that minimize the total payment to credit interest.
  • There is 65000 TL cash in hand at the beginning of 2013 an at the and of each month company would like to have at least 50000 TL cash in hand.
multiperiod cash balancing3
Multiperiod Cash Balancing
  • ND(t)= ND(t-1)+ FaizGeliri(t-1) +AlınanBorç(t) + NakitGirişi(t) – UDönemBorçFaiziÖdeme(t) - KDönemBorçFaiziÖdeme(t-1) – UDönemKrediGeriÖdemesi (Ocak2011) – KDönemKrediGeriÖdemesi(t-1)
bond portfolio
Bond Portfolio
  • You are holding hold a bond portfolio of four bonds, 100 units of each of them. You are considering rebalancing it. The bid and ask prices of the bonds are given in the table below.
slide8

The cash payments of the bonds in the next three years are as follows.

  • Cash on hand earns 5% interest. You want to rebalance the portfolio in such a way that at any time in the future your cash position will be at least as good as the position that would result from your current portfolio. How much money you can take out today under this condition?
pension funds
Pension Funds
  • The pension fund manager of the Association of Business Professors identified three reliable mutual funds, which have a long time successful record of operation: the Growth Fund, the Global Fund and the Income Fund. All these funds invest in four asset categories: U.S. large capitalization stocks, U.S. small capitalization stocks, foreign stocks and U.S. bonds, in proportions given in the following table.
slide11

The table also shows an average annual return of these funds observed over a long time period.

  • The pension fund offers to its participants a Balanced Package. The minimum and maximum investments of the package in each asset category package is given in the table below.
  • The pension fund has 5 million dollars. How much should the manager invest in the Growth Fund, Global Fund and Income Fund to construct the package and to maximize the annual return?
pension fund matching
Pension Fund-Matching
  • Bir şirket emeklilik fonunu yönetiyorsunuz. Fon her yıl başında aşağıda görülen ödemeleri yapmak zorunda.
slide14

Bu ödemeleri bono satın alarak finanse etmek istiyorsunuz. Üç bono arasından portföy oluşturacaksınız.

    • Bono 1. Maliyet $980, 2011-2014 kupon ödemesi $60, 2015 ödeme $1060
    • Bono 2. Maliyet $970, 2011-2020 kupon ödemesi $65, 2021 ödeme $1065
    • Bono 3. Maliyet $1050, 2011-2023 kupon ödemesi $75, 2024 ödeme $1075
  • 1 Ocak 2010’da bonoları satın alacak ve 11000 dolarlık ödemeyi yapacaksınız. Her yıl elinizdeki nakit %4 faiz kazanıyor. 2010-2024 arası nakit gereksinimini karşılamak için 2010’da almanız gereken bonoları minimize eden modeli kurunuz