A dynamic deterministic model for international cash management

Abstract

The continual growth and proliferation of multinational firms has made the task of managing international cash payments exceedingly complex. This has prompted the design and construction of deterministic network-based models to aid management in deriving efficient programmes of payments netting in a multicurrency environment. Previous solutions have been limited by either adopting a single period approach, or neglecting the cost compounding effects of executing financial contracts, or lacking the scope to fit into a global cash management system. The present formulation attempts to resolve these mismatches by adopting a wider perspective than currency netting. The model is designed using a network formulation driven by an objective function based on the maximal flow principle and illustrated by an example.