Computational studies of collateral optimisation problems
Abstract
Collateral management is becoming an ever more complex area requiring sophisticated systems and technology. Collateral optimisation aims to optimise funding costs and balance sheet utilisation when allocating assets to meet a range of liabilities. The problem can be modelled as a mathematical optimisation problem, with the objective to minimise the cost of the posted collateral whilst meeting all collateral calls, and satisfying a diverse range of constraints. In practice, constraints such as lot sizes, concentration limits and eligibility criteria could result in a problem that becomes di cult to solve in a reasonable amount of time. This paper presents an integer linear programming formulation of the problem and investigates some of the computational aspects of collateral optimisation problems. Di erent types of problem instances are evaluated to establish their e ect on the runtime performance of the solver. Various types of constraints are examined in order to explore the type of constraints that may make the problem di cult to solve. The results showed that with a basic set of constraints, the problem can be solved within a reasonable amount of time, even for relatively large problem sizes. However, certain types of constraints, such as those related to the diversi cation of assets, signi cantly a ect the time taken to solve the model.