- Competitive decisions include lending & funding decisions
- Non-competitive decisions include: financial instrument contracts, capital & reserves, operating expenses & staffing, securities trading, and interest rate forecasts
Assumptions for BANKdynamics are possible future managerial decisions. Valuable information can be gained prior to committing to decisions by making "What-If" Assumptions. A computer simulation model calculates probable future cash flows and produces expected financial performance measures. BANKdynamics is an Asset/Liability Management computer simulation model which provides the ability to examine What-If questions in two ways:
These allow management to select a set of assumptions that drive the calculation of simulated future income, expense and balance sheet amounts. In the What-if Scenarios, all competitors are assumed to make "normal" or "central tendency" decisions about matters that impact bank customers.
The What-If Simulations are calculated for all quarters of the two future years. Analytical reports about the What-If Simulations are designed to show possible performance results at the end of the second year. Periodic reports will show probable quarterly account balances during the future two years.
These are an advanced form of What-If Simulations. The Competitive Simulations are designed to add the element of competitive assumptions to management's assumptions. During the Competitive Simulations, some portion of the future two years (one quarter, a six month segment, or an annual segment) is calculated using a set of assumptions about the target bank and a set of assumptions from two or more competing banks. Real people make the Assumptions for the competing banks.
Reports from the Competitive Simulations are prepared at the end of each competitive run, which may be the end of any one of eight future quarters, and are presented as "actual" results (virtually). The virtual financial reports and analytical information help estimate the real world impact of assumptions and competition. After each Competitive Simulation, some of the quarters of the two future years are "frozen" to emulate progress through time.