A Cash-Flow-Based Optimization Model for Corporate Cash Management: A Monte-Carlo Simulation Approach

Abstract

Cash management is an essential task to ensure a company’s ongoing success, and consists in ensuring the company’s solvency, minimizing risks, and maximizing the financial result. In this paper, we propose a new cash-flow-based model for cash management. This model considers the risk of customer default, the risk of bank default, and the foreign exchange risk, and aggregates them into a single overall risk. Finally, we report the results of numerical experiments, carried out on a case study, via Monte-Carlo simulation, and by using our bi-objective optimization model. The results confirms the validity of the introduced model.