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.
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