Supply portfolio risk

Haksöz, Çağrı; Kadam, Ashay

doi:10.21314/jop.2009.055

Cited by 21 publications

(16 citation statements)

References 28 publications

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“…Haksöz and Kadam [9] presented a model for supply portfolio risk assessment in the presence of a spot market with transaction cost. Zhao and Bisi [33] studied the buyers' optimal ordering and trading policies when manufacturer and the trading market co-exist and buyers face fees to participate in the trading market, and compared it with the case with no trading fees.…”

Section: Literature Reviewmentioning

confidence: 99%

Optimal procurement of long-term contracts in the presence of imperfect spot market

Feng

Jiang

et al. 2015

Omega

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Section: Literature Reviewmentioning

confidence: 99%

Optimal procurement of long-term contracts in the presence of imperfect spot market

Feng

Jiang

et al. 2015

Omega

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“…Incorporating these risks would better position the model formulation, but make our ongoing analysis more complicate. More about contract risks have been widely discussed in Haksöz and Kadam [38].…”

Section: Model Description and Problem Formulationmentioning

confidence: 99%

Dynamic coordination of production planning and sales admission control in the presence of a spot market

Feng

Pang

2010

Naval Research Logistics

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Abstract:We consider the decision-making problem of dynamically scheduling the production of a single make-to stock (MTS) product in connection with the product's concurrent sales in a spot market and a long-term supply channel. The spot market is run by a business to business (B2B) online exchange, whereas the long-term channel is established by a structured contract. The product's price in the spot market is exogenous, evolves as a continuous time Markov chain, and affects demand, which arrives sequentially as a Markov-modulated Poisson process (MMPP). The manufacturer is obliged to fulfill demand in the long-term channel, but is able to rein in sales in the spot market. This is a significant strategic decision for a manufacturer in entering a favorable contract. The profitability of the contract must be evaluated by optimal performance. The current problem, therefore, arises as a prerequisite to exploring contracting strategies. We reveal that the optimal strategy of coordinating production and sales is structured by the spot price dependent on the base stock and sell-down thresholds. Moreover, we can exploit the structural properties of the optimal strategy to conceive an efficient algorithm.

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“…Sometimes, these renegotiation processes create favorable results, yet sometimes they end in deadlock and may lead to undesirable breach of contracts. A breach of contract is considered to be a type of operational risk that is classified under the "Clients, Products, and Business Practices" category of the Basel II framework (Cruz (2002); Haksöz and Kadam (2009)). Hence, a method for modeling breach of contract risk is highly desirable for procurement and supply chain executives.…”

Section: Introductionmentioning

confidence: 99%

Modeling breach of contract risk through bundled options

Haksöz¹,

Simsek²

2010

JOP

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In this paper, in order to model breach of contract risk, we design and value a bundled option that is composed of contract abandonment and price renegotiation. We show numerically that the bundled option is more valuable for the contract than either of the options, ie, contract abandonment and price renegotiation, in isolation. This value increases monotonically as the spot price becomes more volatile. The value of the bundled option is less than the sum of the individual option values, hence showing the subadditive property. We demonstrate that in the presence of high spotprice volatility, the bundled option is more valuable when the renegotiation date is selected to be closer to the half-life of the contract. We also show that early contract abandonment probability goes down in the presence of a renegotiation option. We conclude that the commodity supplier should negotiate with the buyer a supply chain contract with flexible options at the design stage, obtaining contract abandonment and price renegotiation options-as a bundled option-in order to enhance the supply contract value and reduce the breach of contract risk.

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Supply portfolio risk

Cited by 21 publications

References 28 publications

Optimal procurement of long-term contracts in the presence of imperfect spot market

Optimal procurement of long-term contracts in the presence of imperfect spot market

Dynamic coordination of production planning and sales admission control in the presence of a spot market

Modeling breach of contract risk through bundled options

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