Explicit portfolio for unit-linked life insurance contracts with surrender option

Introducing a surrender option in unit-linked life insurance contracts leads to a dependence between the surrender time and the financial market. [J. Barbarin, Risk minimizing strategies for life insurance contracts with surrender option, Tech. rep., University of Louvain-La-Neuve, 2007] used a lot of concepts from credit risk to describe the surrender time in order to hedge such types of contracts. The basic assumption made by Barbarin is that the surrender time is not a stopping time with respect to the financial market.The goal of this article is to make the hedging strategies more explicit by introducing concrete processes for the risky asset and by restricting the hazard process to an absolutely continuous process.First, we assume that the risky asset follows a geometric Brownian motion. This extends the theory of [T. Møller, Risk-minimizing hedging strategies for insurance payment processes, Finance and Stochastics 5 (2001) 419–446], in that the random times of payment are not independent of the financial market. Second, the risky asset follows a Lévy process.For both cases, we assume the payment process contains a continuous payment stream until surrender or maturity and a payment at surrender or at maturity, whichever comes first.     

IMPACT OF OPERATING COSTS ON INVESTMENT STRATEGIES IN NEW TECHNOLOGY ADOPTION WITH A FURTHER NEW TECHNOLOGY ANTICIPATED

The adoption of new technologies often represents a crucial component of firms＇ investment decisions. This paper studies a dynamic duopoly model in which two firms compete in adoption of current technology with a further new technology anticipated. Here it is assumed that the operating costs are not zero which has more explanatory power of the real world. There exist three kinds of equilibria that may occur in adoption of current technology, which mainly depends on the level of operating costs and the first-move advantage. It shows that the faster technological substitution or innovation encourages the leader to invest earlier while induces the follower to invest later. Furthermore,like the investment costs,with the increase of operating costs the follower tends to invest later while the leader tends to invest earlier ,the investment thresholds are more sensitive to the change of operating costs than that of investment costs.     

Exercising QS: quantitative skills in an exercise science course

This study seeks to bring the discipline of exercise science into the discussion of Quantitative Skills (QS) in science. The author's experiences of providing learning support to students and working with educators in the field are described, demonstrating the difficulty of encouraging students to address their skills deficit. A survey of students’ perceptions of their own QS and of that required for their course, demonstrates the difficulties faced by students who do not have the prescribed assumed knowledge for the course. Limited results from academics suggest that their perceptions of students’ QS deficits are even direr than those of the under-prepared students.     

Measurement of loading and operations flexibility in flexible manufacturing systems: An information-theoretic approach

An information-theoretic approach is applied for measuring the flexibility in flexible manufacturing systems (FMSs). The general relation between flexibility and entropy is discussed. The entropy for a Markovian process is obtained and then applied to closed queueing network models of FMSs to discuss loading flexibility which arises from the power to regulate the frequency of the visit of a part to different work stations. The concept of operations entropy as a measure of operations flexibility, which arises from the power to choose the work station and the corresponding operations, is introduced. The operations entropy has been decomposed into entropies within and between operations and entropies within and between groups of operations. This measure has been used to determine the next operation to be performed on a part by using the principle of least reduction of flexibility.The present paper is an improved version of the paper On measurement of flexibility in flexible manufacturing systems: An information-theoretic approach, presented at the II ORSA/TIMS Special Conference on Flexible Manufacturing Systems, held at Ann Arbor in August 1986.     

Buyback contracts with price-dependent demands: Effects of demand uncertainty

We explore buyback contracts in a supplier–retailer supply chain where the retailer faces a price-dependent downward-sloping demand curve subject to uncertainty. Differentiated from the existing literature, this work focuses on analytically examining how the uncertainty level embedded in market demand affects the applicability of buyback contracts in supply chain management. To this end, we seek to characterize the buyback model in terms of only the demand uncertainty level (DUL). With this new research perspective, we have obtained some interesting new findings for buyback. For example, we find that (1) even though the supply chain’s efficiency will change over the DUL with a wholesale price-only contract, it will be maintained constantly at that of the corresponding deterministic demand setting with buyback, regardless of the DUL; (2) in the practice of buyback, the buyback issuer should adjust only the buyback price in reaction to different DULs while leave the wholesale price unchanged as that in the corresponding deterministic demand setting; (3) only in the demand setting with an intermediate level of the uncertainty (which is identified quantitatively in Theorem 5), buyback provision is beneficial simultaneously for the supplier, the retailer, and the supply chain system, while this is not the case in the other demand settings. This work reveals that DUL can be a critical factor affecting the applicability of supply chain contracts.     

Stochastic models for bidding strategies on oligopoly electricity market

In this paper we consider the forward/futures contracts and Asian-type call options for power delivery as important components of the bidding strategies of the players’ profits on the electricity market. We show how these derivatives can affect their profit. We use linear asymmetric supply function equilibrium (SFE) and Cournot models to develop firms’ optimal bidding strategies by including forward/futures contracts and Asian-type options. We extend the methodology proposed by Niu et al. (IEEE Trans Power Syst 20(4):1859–1867, 2005), where only forward contracts for power delivery were considered in the SFE model.     

Balancing stocks, flexible recipe costs and high service level requirements in a batch process industry: A study of a small scale model

Process industries often obtain their raw materials from mining or agricultural industries. These raw materials usually have variations in quality which often lead to variations in the recipes used for manufacturing a product. Another reason for varying the recipe is to minimize production costs by using the cheapest materials that still lead to a satisfactory quality in the product. A third reason for using recipe flexibility is that it may occur that not all materials for the standard recipe are available. If variations in supply and demand are large, keeping sufficient safety stock to cope with these variations may incur prohibitive high costs. This means that the costs of keeping safety stock should be balanced with the costs of sometimes using more expensive recipes. The question now is for what situations and to what extent the use of recipe flexibility is justified. In this paper we study this question by means of a small scale model. For this simple situation we derive a decision procedure to balance safety stock costs and flexibility costs. This procedure is applied to a range of different situations, that are characterized by a set of parameter values, in order to determine for which situations recipe flexibility should be used.     

基于期货、期权与现货组合的采购决策和风险控制研究

针对企业大宗原材料采购容易受到上游价格和下游需求的不确定性影响这一问题,本文以制造商(或分销商)多阶段采购决策为研究对象,建立了包含期货、期权和现货三种采购方式的多阶段组合采购决策模型,以此来应对采购中的价格风险和库存风险.结合某钢构厂原材料采购问题,采用蒙特卡罗仿真方法进行求解.通过对比组合方式与现货方式的求解结果,证明了组合采购方式能够在各种采购环境下为采购商带来更高更稳定的利润,所提出的组合采购决策模型能够有效的规避风险.     

The relationship between exploration and exploitation strategies,manufacturing flexibility and organizational learning: An empirical comparison between Non-ISO and ISO certified firms

The markets in which organizations currently operate require them to use behaviour based on both exploitation strategy and exploration strategy, each of which contributes fundamental benefits for the firm’s success. Exploitation strategy attempts to obtain the maximum advantage from existing abilities, whereas exploration strategy searches for new ways for the organization to adapt. Further, since manufacturing markets are characterized by short product life, they require a high level of manufacturing flexibility, which can play a crucial role in the development of the exploitation and exploration strategies. This study analyses the relationship of manufacturing flexibility to exploitation and exploration strategies, taking into account an issue of maximum international scope: the implementation of ISO standards. In many international markets, ISO implementation is crucial in enabling organizations to be competitive. However, no consensus has been reached concerning the real benefits that these systems provide to the organizations that implement them. The main goal of our study is to analyse whether there are significant differences in the relationship of manufacturing flexibility to exploitation and exploration strategies in ISO 9001:2000 certified organizations and non-certified organizations. Our results show that most of the relationships analysed are only significant in ISO certified organizations. As an added value, the study analyses the relationship of exploitation and exploration strategies to organizational learning orientation and finds this relationship to be significant in all cases.     

Renewable energy investments under different support schemes: A real options approach

This paper adopts a real options approach to analyze investment timing and capacity choice for renewable energy projects under different support schemes. The main purpose is to examine investment behavior under the most extensively employed support schemes, namely, feed-in tariffs and renewable energy certificate trading. We consider both multiple sources of uncertainty under each support scheme and uncertainty with respect to any change of support scheme, and we obtain both analytical (when possible) and numerical solutions. In a Nordic case study based on wind power, we find that the feed-in tariff encourages earlier investment. Nevertheless, as investment has been undertaken, renewable energy certificate trading creates incentives for larger projects. In our baseline scenario and taking the fixed feed-in tariff as a base, the revenue required to trigger investments is 61% higher with renewable certificates. At the same time, investment capacity is 61% higher.     

LAND DEVELOPMENT AND WILDERNESS CONSERVATION POLICIES UNDER UNCERTAINTY: A SYNTHESIS

The effects of uncertainty and irreversibility on land management are examined in an infinite horizon Arrow-Fisher-Henry conservation model with non-linear land-use welfare function which accounts for the possible role of breakthrough benefits stemming from the genetic resources of wilderness. The effects of uncertainty on optimality and certainty-equivalent development strategies are examined. Crucially, “jump” decision rules are shown to be generally non-optimal for managing wilderness areas.     

Electricity swing options: Behavioral models and pricing

Electricity swing options are supply contracts for power, which give the owner the right to change the required delivery on short time notice. It gives more flexibility than fixed base load or peak load contracts. The name “option” is a bit misleading, since it gives the owner multiple exercise rights at many different time horizons with exercise amounts on a continuous scale. We look at the problem to determine a rational ask price for such a contract from the viewpoint of the contract seller. The pricing of these contracts differs drastically from the pricing of financial options. First, peculiar properties arise from the non-storability of the underlying (the energy) and therefore the impossibility to hedge with the underlying, hedging is only possible with some future contracts. Second, the behavior of the owner plays an important role. Based on some behavioral model for the option holder, we develop a game-theoretic model, which allows to identify the equilibrium price. Besides some theoretical results, we present some numerical results which clarify the dependence of the asked price on the amount of flexibility offered in the swing option.     

Two processes interacting only during breakdown: The case where the load is not lost

This paper deals with two parallel processors interacting only during breakdown. The system is analyzed in the case where the load is not lost, and in steady state. Generating functions are obtained by solving a functional equation in two complex variables with the aid of the theory of boundary value problems for regular functions.This work was supported by French Cooperation under Grant AI 89/424, INRIA-France and MEDCAMPUS (programme of the European Communities).     

Teaching young children decomposition strategies to solve addition problems: An experimental study

The ability to count has traditionally been considered an important milestone in children's development of number sense. However, using counting (e.g., counting on, counting all) strategies to solve addition problems is not the best way for children to achieve their full mathematical potential and to prepare them to develop more complex and advanced computational skills. In this experimental study, we demonstrated that it was possible to teach children aged 5-6 to use decomposition strategy and thus reduced their reliance on counting to solve addition problems. The study further showed that children’ ability to adopt efficient strategies was related to their systematic knowledge of the part-part-whole relationship of the numbers 1-10.     

A flexible adaptive memory-based algorithm for real-life transportation operations: Two case studies from dairy and construction sector

Effective routing of vehicles remains a focal goal of all modern enterprises, thriving for excellence in project management with minimal investment and operational costs. This paper proposes a metaheuristic methodology for solving a practical variant of the well-known Vehicle Routing Problem, called Heterogeneous Fixed Fleet VRP (HFFVRP). Using a two-phase construction heuristic, called GEneralized ROute Construction Algorithm (GEROCA), the proposed metaheuristic approach enhances its flexibility to easily adopt various operational constraints. Via this approach, two real-life distribution problems faced by a dairy and a construction company were tackled and formulated as HFFVRP. Computational results on the aforementioned case studies show that the proposed metaheuristic approach (a) consistently outperforms previous published metaheuristic approaches we have developed to solve the HFFVRP, and (b) substantially improves upon the current practice of the company. The key result that impressed both companies’ management was the improvement over the bi-objective character of their problems: the minimization of the total distribution cost as well as the minimization of the number of the given heterogeneous number of vehicles used.     

A stochastic aggregate production planning model in a green supply chain: Considering flexible lead times,nonlinear purchase and shortage cost functions

In this paper we develop a stochastic programming approach to solve a multi-period multi-product multi-site aggregate production planning problem in a green supply chain for a medium-term planning horizon under the assumption of demand uncertainty. The proposed model has the following features: (i) the majority of supply chain cost parameters are considered; (ii) quantity discounts to encourage the producer to order more from the suppliers in one period, instead of splitting the order into periodical small quantities, are considered; (iii) the interrelationship between lead time and transportation cost is considered, as well as that between lead time and greenhouse gas emission level; (iv) demand uncertainty is assumed to follow a pre-specified distribution function; (v) shortages are penalized by a general multiple breakpoint function, to persuade producers to reduce backorders as much as possible; (vi) some indicators of a green supply chain, such as greenhouse gas emissions and waste management are also incorporated into the model. The proposed model is first a nonlinear mixed integer programming which is converted into a linear one by applying some theoretical and numerical techniques. Due to the convexity of the model, the local solution obtained from linear programming solvers is also the global solution. Finally, a numerical example is presented to demonstrate the validity of the proposed model.     

Hedging entry and exit decisions: optimizing location under exchange rate uncertainty

^** Email: alexru00{at}ms41.hinet.net^*** Email: ctlin{at}mail.yust.edu.tw The Cobb–Douglas production function with Abel's (1983,Am. Econ. Rev., 173, 228–233) model is extended herein,and real options analysis (ROA) for entry–exit decision-makingestablished utilizing Dixit's (1989b) decision model under exchangerate uncertainty. This work considers the effects of real exchangerates on strategies that determine the locations of productionby firms that are entering markets in two countries. The ROAis also adopted to evaluate the switching location between twocountries. A continuous-time model optimization problem is solvedin closed-form. This provides a useful beginning to an importantanalysis of the effects on industry of exchange rate fluctuationswhen the optimal entry (exit) trigger for transferring locationsis important for a basic global logistics model. Furthermore,a myopic solution of the optimal entry (exit) trigger, sensitivityanalysis and some characteristics of the optimal productionstrategy are sought. This paper contributes to the problem ofchoice of foreign production strategy.     

保费和索赔到达率与余额相依的最优有界分红率问题

研究保费和索赔到达率与余额相依的最优有界分红问题,目标是最大化破产前的累积期望折现分红.首先,给出一个策略是平稳马氏策略的充分必要条件,运用测度值生成元的理论得到测度值动态规划方程(DPE),并且给出了验证定理的证明.最后,讨论了测度值DPE和相应拟变分不等式(QVI)之间的关系,并且证明了最优分红策略为具有波段结构的...