FINTECH: A Series of 40 Time Shared Models Used at Manufacturers Hanover Trust

Company
Author(s): Abraham Bettinger
Source: Interfaces, Vol. 2, No. 4 (Aug., 1972), pp. 62-63
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/25058931
Accessed: 03-10-2017 04:50 UTC

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide
range of content in a trusted digital archive. We use information technology and tools to increase productivity and
facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at
http://about.jstor.org/terms

INFORMS is collaborating with JSTOR to digitize, preserve and extend access to Interfaces

This content downloaded from 190.152.233.78 on Tue, 03 Oct 2017 04:50:02 UTC
All use subject to http://about.jstor.org/terms
INTERFACES
Vol. 2, No. 4
August 1972

JULIO BUCATINSKY

In this issue: Bankers are required to have, as a

* Time-shared models in a bank prerequisite, expertise in money man
* A model for portfolio selection
agement. It is, therefore, mandatory
that they be able to solve complex
* Implementation of a forecasting
problems both rapidly and accurately.
system To achieve this end FINTECH was
* Systems design in the public sector created to analyse and solve daily
* Solving a waste collection problem problems which exist in our banking
* Information system for public environment. In an evolutionary fash
health planning ion, we have developed a package
* Bulletin Board which can be broken down into four
TIMS meetings distinct categories as follows:
Other meetings/symposia 1. Investment Portfolio Programs
Personal notes a. A total of twelve models deal
Notices ing with areas such as swap
* Deadline for future issues of ping of government and muni
INTERFACES cipal bonds utilizing discount
ed cash flow as one of the tech
FINTECH ? A Series of 40 Time niques
Shared Models Used at Manufac b. Reinvestment yield problem
turers Hanover Trust Company solving utilizing an interactive
Over the last four years Manufac technique
turers Hanover Trust Company's Op c. Optimization of the govern
erations Research Department has ment bond portfolio via linear
developed approximately 100 models programming
that are currently used throughout It has been estimated by one of the
the bank. A group of 40 models has senior investment officers that during
trading of 1970 it would have requir
been set aside and designated as FIN
TECH. FINTECH is an acronym
ed 100 bond people to analyse the
proposed swaps offered to our com
which stands for financial technology,
pany. By using the models in this
combining bank expertise with mod
package, only a handful of people
ern management science techniques
and the computer. were required. Since 1969 all pro
Copyright ? 1972, The Institute of Management Sciences

62
This content downloaded from 190.152.233.78 on Tue, 03 Oct 2017 04:50:02 UTC
All use subject to http://about.jstor.org/terms
posed bond swaps and refundings on Time Sharing for the user's con
have been analysed by the Invest venience, using an outside vendor's
ment Portfolio Programs. computer. This allows the user the
benefit of being able to solve his
2. Credit Analysis
a. Cash Flow ? annual, semi-an problems at his convenience, at his
own location, cheaply and without
nual and quarterly, based upon
red tape or transportation problems.
an intertemporal iteration Almost all programs have been writ
b. Consolidation statements
ten in a conversational mode and
c. Statement spreading
have the facility for simulating vari
The recurring usage of these models
ables as required.
has been enormous by virtue of a se Since these models were created to
nior management decision that all
solve the daily problems which exist
large loan proposals, as well as long in this institution, their success can
term borrowing, be accompanied by be measured by the fact that our
a cash flow forecast.
Time Sharing charges have tripled
3. General Bank Analysis Program over the past year, thereby indicating
a. Forecasting bank earnings via that they are getting three times more
auto regression usage than one year prior. A further
b. Forecasting bank earnings via indication of their value is that senior
Intertemporal Balance Sheet, management has decided to market
P & L Funds Flow Forecasting this package to its correspondent
c. Capital adequacy and liquidity banks and corporations. It is felt that
via the Federal Reserve For these problems and their respective
mula solutions are not unique to this in
stitution but rather that they have
4. Computer Aids to Problem Sol global appeal.
ving /Abraham Bettinger, Manufacturers
a. Buy vs. Lease using discounted Hanover Trust, 4 New York Plaza,
cash flow and simultaneous
New York, New York/
costings
b. Loans and Discounts (with BAYESIAN DECISION MODEL FOR
variations and options) PORTFOLIO SELECTION
c. Present value and rate of re
turn. "The probability of rain tomorrow
is 20%" or, if you prefer, "the prob
The exact dollar benefit from this ability of no rain tomorrow is 80%."
package to the bank is extremely Such statements are common in our
difficult to estimate; however, the fact daily lives. Not as common is a state
that so many of these programs have ment like "there is a 75% chance that
been made mandatory for analysing stock xyz will increase by 20% in the
proposals by senior management next six months."
should lend adequate credence to its Since early 1966, Dr. John Y. T.
value. Kuark, Associate Professor of Statis
tics and Economics at the University
Time Sharing Operation and Inter of Denver and President of Castle
action of Programs Enterprises Incorporated, has been
As is evident from the description researching the stock market and
of the categories, it is easy to see that models for investment decision mak
the spectrum covers an extremely ing. After much theorizing and test
broad area of the bank's endeavors. ing he has developed a portfolio se
We decided to place these programs lection model, based upon sources

INTERFACES August 1972 63

This content downloaded from 190.152.233.78 on Tue, 03 Oct 2017 04:50:02 UTC
All use subject to http://about.jstor.org/terms