Fall 2005 UMASS Amherst
Operations Research / Management Science Seminar Series

Date: Friday, November 4, 2005

Time: 11:00 AM
Location: Isenberg School of Management, Room 112

Speaker: Professor Suresh Nair

School of Business
University of Connecticut
Storrs, CT

Biography: Suresh Nair has a Ph.D. and MS from Northwestern University and has been at the University of Connecticut Business School since 1988, where he is currently Professor and Ackerman Scholar.  His undergraduate degree is from Indian Institute of Technology. He has won many teaching awards and was part of the team that won the 2002 Wagner Prize for Excellence in the Practice of Operations Research. His research interests are in applying optimization techniques to problems in services, manufacturing, marketing, and finance. He has published in Management Science, Interfaces, Naval Research Logistics, IIE Transactions, IEEE Transactions in Engineering Management, Decision Sciences, Decision Support Systems and European Journal of Operational Research and serves on the Editorial Boards of Production and Operations Management and IEEE Transactions in Engineering Management. Dr. Nair serves as the national Chair of the Financial Services Section of INFORMS. He has been a consultant to various companies including General Electric, Merrill Lynch and JP Morgan Chase.
TITLE: A Specialized Inventory Problem in Banks - Optimizing Sweeps
Abstract: Deposits held at Federal Reserve Banks are an essential input to the business activity of most depository institutions in the United States.  Managing these deposits is an important and complex inventory problem, for two reasons. First, Federal Reserve regulations require that depository institutions hold certain amounts of such deposits at the Federal Reserve Banks to satisfy statutory reserve requirements against customers’ transaction accounts (demand deposits and other checkable deposits). Second, some inventory of such deposits is essential for banks to operate one of their core lines of business: furnishing payment services to households and firms, including wire transfers, automated clearing house (ACH) payments, and check clearing settlement. Because the Federal Reserve does not pay interest on such deposits used to satisfy statutory reserve requirements, banks seek to minimize their inventory of such deposits. In 1994, the banking industry introduced a new inventory management tool for such deposits, the retail deposit sweep program, which avoids the statutory requirement by reclassifying transaction deposits as savings deposits. In this talk, we examine two methods for operating such sweeps programs within the limits of Federal Reserve regulations, and develop a stochastic dynamic programming model to implement one such method, the threshold method. We will provide details on the approach, including the data analysis required to understand account behavior.
This series is organized by the UMASS Amherst INFORMS Student Chapter. Support for this series is provided by the Isenberg School of Management, the Department of Finance and Operations Management, INFORMS, and the John F. Smith Memorial Fund.

For questions, please contact the INFORMS Student Chapter Representative, Ms. Tina Wakolbinger, wakolbinger@som.umass.edu