inventory and cash management
BANKING PRODUCTS AND PROCESSES
ISFS 601
Professor Robert J. Kauffman
January 2014
OPERATIONS IN FINANCIAL SERVICES
ISFS 601
JANUARY 2014
Note: Refer to Hatzakis, Nair and Pinedo (2010) in Production and Operations Management for additional details and comments about research that is worthwhile to conduct in this area.
OPERATIONS IN FINANCIAL SERVICES
ISFS 601 (HNP 5)
Professor Robert J. Kauffman
January 2014
Note: Refer to Hatzakis, Nair and Pinedo (2010) in Production and Operations Management for additional details and comments about research that is worthwhile to conduct in this area.
INVENTORY AND
CASH MANAGEMENT
SESSION 5
T
Cash Can Be Managed as Inventory
• Cash managed like inventory in manufacturing o Doesn’t mean physical cash; instead can be ‘quick’ financial instruments:短期国库券 checking accounts t-bills, o Demand for cash by organizations, individuals varies
• Main concepts are: o Need to estimate ‘transactions demand’ o Models for changes in cash balances o Continuous cash management approach
• Supply chain of physical cash o Think of advantages and disadvantages of cash o Central banks need to produce and distribute cash o Banks need to
5
Cash Management Activities
6
Costs to Obtain and Maintain Cash Balances
Baumol’s Cash Balance Model
Equal Order Quantity
Margin Lending in Brokerage Services
• Brokerages make loans to investors who want to invest funds they don’t have in risky assets, and can pledge securities they own as collateral.
• In ‘margin lending,’ broker extends margin loan to a client of up to the value of equity securities held
• Client can use loaned funds to buy more stocks
• Calculating minimum value required in a client’s account for a margin loan can become complex o Accounts with different types of securities – equities, bonds, derivatives, with different margin reqs o Complexity increases even more with presence of long and short
ISFS 601
Professor Robert J. Kauffman
January 2014
OPERATIONS IN FINANCIAL SERVICES
ISFS 601
JANUARY 2014
Note: Refer to Hatzakis, Nair and Pinedo (2010) in Production and Operations Management for additional details and comments about research that is worthwhile to conduct in this area.
OPERATIONS IN FINANCIAL SERVICES
ISFS 601 (HNP 5)
Professor Robert J. Kauffman
January 2014
Note: Refer to Hatzakis, Nair and Pinedo (2010) in Production and Operations Management for additional details and comments about research that is worthwhile to conduct in this area.
INVENTORY AND
CASH MANAGEMENT
SESSION 5
T
Cash Can Be Managed as Inventory
• Cash managed like inventory in manufacturing o Doesn’t mean physical cash; instead can be ‘quick’ financial instruments:短期国库券 checking accounts t-bills, o Demand for cash by organizations, individuals varies
• Main concepts are: o Need to estimate ‘transactions demand’ o Models for changes in cash balances o Continuous cash management approach
• Supply chain of physical cash o Think of advantages and disadvantages of cash o Central banks need to produce and distribute cash o Banks need to
5
Cash Management Activities
6
Costs to Obtain and Maintain Cash Balances
Baumol’s Cash Balance Model
Equal Order Quantity
Margin Lending in Brokerage Services
• Brokerages make loans to investors who want to invest funds they don’t have in risky assets, and can pledge securities they own as collateral.
• In ‘margin lending,’ broker extends margin loan to a client of up to the value of equity securities held
• Client can use loaned funds to buy more stocks
• Calculating minimum value required in a client’s account for a margin loan can become complex o Accounts with different types of securities – equities, bonds, derivatives, with different margin reqs o Complexity increases even more with presence of long and short