Margin Optimizer The Margin Optimizer is a tool for the identification of dynamic replication portfolios for banking products without contractually determined duration like savings deposits or variable mortgages. The Margin Optimizer bases on models for the description of the stochastic dynamics of the relevant risk factors of a variable product (market rates, customer interest rates and volumes, and the interdependencies between these). Elaborate mathematical procedures construct a multitude of representative scenarios of these factors in such a way that preserves relevant statistical characteristics. Along each of these pathes, the Margin Optimizer then specifies the best portfolio strategy. You could compare the principle of operation to a chess computer that assesses many possible moves of the opponent and the respective best reactions over several rounds. The result is the one move that represents the 'best' strategy taking into account all future events. Analogously, the Margin Optimizer calculates the most profitable allocation of assets for today by integrating the future decisions in all included developments. At the same time, it respects given limits for risk, liquidity, or other measures at all times and in every scenario. The result does not only exhibit an optimized risk profile. It is also more efficient than classical solutions because the multi-stage dynamic optimization of the portfolio anticipates future risks concerning reinvestment and financing. Our experience so far shows that the choice for a dynamic reinvestment and financing strategy may both increase and stabilize the margins of variable products substantially.