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1.
Optimal Liquidity management and Hedging in the presence of a non-predictable investment opportunity
In this paper, we develop a dynamic model that captures the interaction between a firm’s cash reserves, the risk management policy and the profitability of a non-predictable irreversible investment opportunity. We consider a firm that has assets in place generating a stochastic cash-flow stream. The firm has a non-predictable growth opportunity to expand its operation size by paying a sunk cost. When the opportunity is available, the firm can finance it either by cash or by costly equity issuance. We provide an explicit characterization of the firm strategy in terms of investment, hedging, equity issuance and dividend distribution. 相似文献
2.
不确定竞争市场投资决策 总被引:4,自引:1,他引:3
本文针对不确定的竞争市场 ,分析现在作一个数量为 I的不可逆投资 ,产生一个生产容量 k,以在将来不确定竞争市场中比潜在进入的竞争对手具有某种占先优势这样一个投资机会的策略投资行为和机会的价值。用博奕论方法分析和给出了基于现在投资可获得将来增长期权价值的决策方法。 相似文献
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This paper focuses on the production control of a manufacturing system with time-delay, demand uncertainty and extra capacity. Time-delay is a typical feature of networked manufacturing systems (NMS), because an NMS is composed of many manufacturing systems with transportation channels among them and the transportation of materials needs time. Besides this, for a manufacturing system in an NMS, the uncertainty of the demand from its downstream manufacturing system is considered; and it is assumed that there exist two-levels of demand rates, i.e., the normal one and the higher one, and that the time between the switching of demand rates are exponentially distributed. To avoid the backlog of demands, it is also assumed that extra production capacity can be used when the work-in-process (WIP) cannot buffer the high-level demands rate. For such a manufacturing system with time-delay, demand uncertainty and extra capacity, the mathematical model for its production control problem is established, with the objective of minimizing the mean costs for WIP inventory and occupation of extra production capacity. To solve the problem, a two-level hedging point policy is proposed. By analyzing the probability distribution of system states, optimal values of the two hedging levels are obtained. Finally, numerical experiments are done to verify the effectiveness of the control policy and the optimality of the hedging levels. 相似文献
5.
We study three types of practical optimization problems faced by a firm that can control its liquid reserves by paying dividends
and by issuing new equity. In the first problem, we consider the classical dividend problem without equity issuance. The second
problem aims at maximizing the expected discounted dividend payments minus the expected discounted costs of issuing new equity
over strategies associated with positive reserves at all times. The third problem has the same objective as the second one,
but with no constraints on the reserves. Under the assumption of proportional transaction costs, we identify the value functions
and the optimal strategies. We also present the relationship between three problems. 相似文献
6.
Luis H. R. Alvarez 《Mathematical Methods of Operations Research》2010,72(2):249-271
We consider the optimal sequential irreversible investment policy of a value maximizing firm facing decreasing returns to
scale and interest rate uncertainty. We characterize the optimal accumulation policy and its value for a broad class of diffusion
models of the short interest rate by focusing on the marginal investment decision and deriving the marginal value of capital
explicitly. We also state a set of conditions under which there is a maximal capital stock above which the option to expand
productive capacity further in the future becomes valueless. Hence, our results indicate that interest rate uncertainty may
limit the size of an optimally investing firm. 相似文献
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H. Windcliff J. Wang P.A. Forsyth K.R. Vetzal 《Journal of Computational and Applied Mathematics》2007
Hedging a contingent claim with an asset which is not perfectly correlated with the underlying asset results in unhedgeable residual risk. Even if the residual risk is considered diversifiable, the option writer is faced with the problem of uncertainty in the estimation of the drift rates of the underlying and the hedging instrument. If the residual risk is not considered diversifiable, then this risk can be priced using an actuarial standard deviation principle in infinitesimal time. In both cases, these models result in the same nonlinear partial differential equation (PDE). A fully implicit, monotone discretization method is developed for solution of this pricing PDE. This method is shown to converge to the viscosity solution. Certain grid conditions are required to guarantee monotonicity. An algorithm is derived which, given an initial grid, inserts a finite number of nodes in the grid to ensure that the monotonicity condition is satisfied. At each timestep, the nonlinear discretized algebraic equations are solved using an iterative algorithm, which is shown to be globally convergent. Monte Carlo hedging examples are given to illustrate the profit and loss distribution at the expiry of the option. 相似文献
9.
We study a notion of good-deal hedging, that corresponds to good-deal valuation and is described by a uniform supermartingale property for the tracking errors of hedging strategies. For generalized good-deal constraints, defined in terms of correspondences for the Girsanov kernels of pricing measures, constructive results on good-deal hedges and valuations are derived from backward stochastic differential equations, including new examples with explicit formulas. Under model uncertainty about the market prices of risk of hedging assets, a robust approach leads to a reduction or even elimination of a speculative component in good-deal hedging, which is shown to be equivalent to a global risk minimization in the sense of Föllmer and Sondermann (1986) if uncertainty is sufficiently large. 相似文献
10.
A monopolist typically defers entry into an industry as both price uncertainty and the level of risk aversion increase. By contrast, the presence of a rival typically hastens entry under risk neutrality. Here, we examine these two opposing effects in a duopoly setting. We demonstrate that the value of a firm and its entry decision behave differently with risk aversion and uncertainty depending on the type of competition. Interestingly, if the leader’s role is defined endogenously, then higher uncertainty makes her relatively better off, whereas with the roles exogenously defined, the impact of uncertainty is ambiguous. 相似文献
11.
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time, semi-static market of stocks and options. Based on duality results which link quantile hedging to a randomized composite hypothesis test, an arbitrage-free discretization of the market is proposed as an approximation. The discretized market has a dominating measure, which guarantees the existence of the optimal hedging strategy and helps numerical calculation of the quantile hedging price. As the discretization becomes finer, the approximate quantile hedging price converges and the hedging strategy is asymptotically optimal in the original market. 相似文献
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In this paper, we develop a network equilibrium model for supply chain networks with strategic financial hedging. We consider multiple competing firms that purchase multiple materials and parts to manufacture their products. The supply chain firms’ procurement activities are exposed to commodity price risk and exchange rate risk. The firms can use futures contracts to hedge the risks. Our research studies the equilibrium of the entire network where each firm optimizes its own operation and hedging decisions. We use variational inequality theory to formulate the equilibrium model, and provide qualitative properties. We provide analytical results for a special case with duopolistic competition, and use simulations to study an oligopolistic case. The analytical and simulation studies reveals interesting managerial insights. 相似文献
14.
The surge in demand for electricity in recent years requires that power companies expand generation capacity sufficiently. Yet, at the same time, energy demand is subject to seasonal variations and peak-hour factors that cause it to be extremely volatile and unpredictable, thereby complicating the decision-making process. We investigate how power companies can optimise their capacity-expansion decisions while facing uncertainty and examine how expansion and forward contracts can be used as suitable tools for hedging against risk under market power. The problem is solved through a mixed-complementarity approach. Scenario-specific numerical results are analysed, and conclusions are drawn on how risk aversion, competition, and uncertainty interact in hedging, generation, and expansion decisions of a power company. We find that forward markets not only provide an effective means of risk hedging but also improve market efficiency with higher power output and lower prices. Power producers with higher levels of risk aversion tend to engage less in capacity expansion with the result that together with the option to sell in forward markets, very risk-averse producers generate at a level that hardly varies with scenarios. 相似文献
15.
Omkar D. Palsule-Desai 《Annals of Operations Research》2016,241(1-2):411-430
We consider a firm that procures a product from a regular supplier whose production is subject to both supply disruption and random yield risks and a backup supplier whose production capacity requires reservation in advance. Under both deterministic and stochastic demand, we study the impact of the two types of supply risks on the firm’s optimal procurement decisions and the importance of correctly identifying the source of supply risks. We find that if the overall supply risk is unchanged but its main source shifts from random yield to supply disruption, the firm should order more from the regular supplier and reserve less capacity from the backup supplier. Ignoring the existence of supply disruption leads to under-utilization of the regular supplier and over-utilization of the backup supplier. Moreover, we examine the option value of the reserved capacity that is affected by the uncertainty of customer demand. We find that the option value increases/decreases in demand uncertainty if the reservation capacity is exercised after/before demand is realized. 相似文献
16.
《European Journal of Operational Research》2001,135(2):303-310
The valuing of a firm equity as a call option is a crucial problem in financial decision-making. There are two basic aspects that are studied; contingent claim features (payoff functions) and risk (stochastic process of underlying assets). However, non-preciseness (vagueness, uncertainty) of input data is often neglected. Thus, a combination of risk (stochastic) and uncertainty (fuzzy instruments) could be a useful approach in calculating a firm value as a call option. The Black–Scholes methodology of appraising equity as a European call option is applied. Fuzzy–stochastic methodology under fuzzy numbers (T-numbers) is proposed and described. Fuzzy–stochastic model of appraising a firm equity is proposed. Input data are in a form of fuzzy numbers and result, firm possibility-expected equity value is also determined vaguely as a fuzzy set. Illustrative example is introduced. 相似文献
17.
José R. Rodríguez-Mancilla 《Annals of Operations Research》2010,177(1):21-45
This paper studies some of the implicit risks associated with strategies followed by a risk averse investor who maximizes
the expected value of his final wealth, subject to a risk tolerance constraint characterized in terms of a convex risk measure
such as Conditional Value-at-Risk. Embedded probability measures are uncovered using duality theory; these are used to assess
the probability of surpassing a standard Value-at-Risk threshold. Using one of these embedded probabilities, a closed-form
measure of the financial cost of hedging the loss exposure associated to the optimal strategies is derived and shown to be,
under certain assumptions, a coherent measure of risk. 相似文献
18.
The price of a European option can be computed as the expected value of the payoff function under the risk-neutral measure. For American options and path-dependent options in general, this principle cannot be applied. In this paper, we derive a model-free analytical formula for the implied risk-neutral density based on the implied moments of the implicit European contract under which the expected value will be the price of the equivalent payoff with the American exercise condition. The risk-neutral density is semi-parametric as it is the result of applying the multivariate generalized Edgeworth expansion, where the moments of the American density are obtained by a reverse engineering application of the least-squares method. The theory of multivariate truncated moments is employed for approximating the option price, with important consequences for the hedging of variance, skewness and kurtosis swaps. 相似文献
19.
Valuing the option to invest in an incomplete market 总被引:3,自引:0,他引:3
Vicky Henderson 《Mathematics and Financial Economics》2007,1(2):103-128
This paper considers the impact of entrepreneurial risk aversion and incompleteness on investment timing and the value of
the option to invest. A risk averse entrepreneur faces the irreversible decision of when to pay a cost in order to receive
a one-off investment payoff. The uncertainty associated with the investment payoff can be partly offset by hedging, but the
remaining unhedgeable risk is idiosyncratic. Nested within our incomplete set-up is the complete model of McDonald and Siegel
(Q J Econ 101:707–727, 1986) which assumes investment payoffs are perfectly spanned by traded assets. We find risk aversion
and idiosyncratic risk erode option value and lower the investment threshold. Our main finding is that there is a parameter
region within which the complete and incomplete models give differing investment signals. In this region, the option is never
exercised (and investment never occurs) in the complete model, whereas the entrepreneur exercises the option in the incomplete
setting. Strikingly, this parameter region corresponds to a negative implicit dividend yield on the payoff, and so this exercise
behavior contrasts with conventional wisdom of Merton (Bell J Econ Manage 4:141–183, 1973) for complete markets. Finally,
in this parameter region, increased volatility speeds-up investment and option values are not strictly convex in project value,
in sharp contrast to the conclusion of standard real options models.
The author thanks George Constantinides, Graham Davis, Jerome Detemple, Avinash Dixit, David Hobson, Stewart Hodges, Bart
Lambrecht, Andrew Lyasoff, Robert McDonald, Pierre Mella-Barral, Jianjun Miao, Bob Nau (ES discussant), Gordon Sick, James
Smith, Stathis Tompaidis, Elizabeth Whalley and Zvi Wiener for their comments. The author also thanks seminar participants
at the University of Texas at Austin (2004), Kings College London, the Cornell Finance Workshop, the Oxford-Princeton Finance
Workshop, the BIRS Finance Workshop (2004), the Eighth Annual Real Options conference, the Bachelier Finance Society Third
World Congress (2004), Princeton University, Boston University, the Fields Institute Toronto, QMF 2004, Warwick Business School,
and the Econometric Society Winter Meetings (2006). First version: July, 2004. 相似文献
20.
Andrew Ngai 《Insurance: Mathematics and Economics》2011,49(1):100-114
For many years, the longevity risk of individuals has been underestimated, as survival probabilities have improved across the developed world. The uncertainty and volatility of future longevity has posed significant risk issues for both individuals and product providers of annuities and pensions. This paper investigates the effectiveness of static hedging strategies for longevity risk management using longevity bonds and derivatives (q-forwards) for the retail products: life annuity, deferred life annuity, indexed life annuity, and variable annuity with guaranteed lifetime benefits. Improved market and mortality models are developed for the underlying risks in annuities. The market model is a regime-switching vector error correction model for GDP, inflation, interest rates, and share prices. The mortality model is a discrete-time logit model for mortality rates with age dependence. Models were estimated using Australian data. The basis risk between annuitant portfolios and population mortality was based on UK experience. Results show that static hedging using q-forwards or longevity bonds reduces the longevity risk substantially for life annuities, but significantly less for deferred annuities. For inflation-indexed annuities, static hedging of longevity is less effective because of the inflation risk. Variable annuities provide limited longevity protection compared to life annuities and indexed annuities, and as a result longevity risk hedging adds little value for these products. 相似文献