Simio invites you to participate in our biannual simulation contest. This is open to both graduate and undergraduate student teams. In addition to the fame and glory ("bragging rights" and exposing your work to potential employers) there will be cash prizes totaling $3000, twice a year.
Here is a summary of the December 2017 problem (August through December 2017) that is a problem based on managing intra-day liquidity risk in banking:
SafeBank is a major custodian bank in the global financial market. One of the services SafeBank provides is changing currencies for their clients. For example, if a client wants to buy equity in a German company denominated in EUR, and the client wants to spend USD, SafeBank will take the USD and give out EUR, which allows the client to conduct their transaction. SafeBank makes money by charging the client a small percentage on each exchange. There are thousands of random, unpredictable transactions every day, and they require SafeBank to hold cash in each type of currency. At the end of each day (6:30PM ET), SafeBank conducts a settlement with CLS Bank (Continously Linked Settlement Bank) to reset the quantities of each type of currency. For example, if over the course of the day the sum of all transactions causes SafeBank to have a net increase in USD and a net decrease in EUR, they will give the excess USD to CLS and CLS will return the equivalent amount of EUR. CLS charges SafeBank a small percentage on this exchange. This confines the risk to SafeBank to a single day (known as intra-day liquidity risk). If SafeBank runs out of any type of currency prior to 6:30pm ET, they can conduct a swap with one of their counterparties. This is essentially the same service provided by CLS, but it can occur anytime throughout the day. Swaps help mitigate risk, but they are expensive relative to CLS.
In addition to financial considerations, SafeBank is legally obligated to manage risk. If they are unable to support client transactions for any reason, it can cause a major disruption in the global financial market. Accordingly, they must prove to the government that they have sufficient cash on hand to avoid this situation across a range of stressing scenarios. Choosing the amount of each type of currency to keep on hand is a difficult problem. Students will be asked to simulate system activity (e.g., cash flows from transactions, swaps, and settlements) in order to find the profit maximizing quantities subject to acceptable risk. This will include analysis of revenue, cost, and risk. These analyses will be completed across a range of scenarios including:
For purposes of this problem, students will be asked to consider 3 types of currency: USD, EUR, GBP. A basic system representation is shown below:
Unfortunately, registration is now closed. If you want to be notified of the next competition, visit here!
Judging will be done by an independent panel of judges drawn internationally from both academic and commercial simulation practitioners. Judging is based on a 10-item scoring system where each item is worth between 0.0 and 3.0 points. For more detail see the Contest Judging Criteria.
The top 17 teams out of 220
Contest Overview, Summary of Problem, Judging Criteria and Judges