Selecting the best risk measure in multiobjective cash management

Abstract

[EN] In this paper, we consider cash management from a multidimensional perspective in which cost and risk are desired goals to minimize. Cash managers interested in minimizing risk need to select the most appropriate risk measure according to their particular needs. In order to assess the quality of alternative risk measures, we empirically compare eight different risk measures in terms of the combined cost-risk performance of a cash management model. To this end, we rely on goal programming to derive optimal solutions for cash management models. Our results show that risk measures based on cost deviations better capture risk in comparison to those based on a reference cash balance. The methodology proposed in this paper allows cash managers to propose and evaluate new risk measures.