Minority Issues Forum Student Poster Presenters
INFORMS 2006, Pittsburgh, PA
November 5, 2006
Risk, Financing and the Optimal Number of
Suppliers
Pierre-Yves Brunet
Industrial and Operations Engineering
University of Michigan
Abstract
We
study how supply risk, fixed supplier costs, financial constraints, and the
dual role played by the suppliers as the providers of parts and the financiers
of the manufacturer affect the relationship among firms in a supply chain,
supplier selection, and supply chain performance. Using a one-period model, we
consider joint procurement and financing decisions of a firm with limited
financial capital, facing either an uncertain demand or an uncertain supply. We
find that the optimal financing decisions are consistent with the financial
Òpecking orderÓ theory and we characterize the optimal operational decisions.
Our analysis suggests that the alternative financing sources (bank loans and
trade credit) are complementary and that the firm uses more suppliers if the bank
financing is not available. Surprisingly, we also find that the limit on the
supplier loans and the wholesale price affect the optimal number of suppliers
in a non-monotone way. By considering tradeoffs between the expected profit and
the value of the option to default, we explain the effects of supply
uncertainty on the shareholdersÕ value and the optimal decisions. Finally, we
address the question of whether the firms operating in the developing economies
should contract with more suppliers than the firms operating in the developed
economies. The answer is ÒnoÓ, if the fixed cost of an extra supplier is high.
However, financial constraints will force firms in the developing economies to
the suboptimal level of production and cause higher stock-out rates. This
is joint work with Volodymyr Babich, Gšker Aydõn, Pierre-Yves Brunet, Jussi
Keppo, and Romesh Saigal.
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Load Balancing Heuristic for Parallel Queues with
Heavy-Tailed Service Distributions
Luz A. Caudillo-Fuentes
Industrial and Operations Engineering
University of Michigan
Abstract
Many
practical applications of queueing models involve heavy-tailed service times.
With non-exponential services, the dynamic load balancing of a parallel
processing network (PPN), a system of parallel queues, is a mathematically
intractable problem. As an approximation, we consider a two station, two class
exponential model with "usual" and "slow" customer types.
Structural results for this model are used to develop a heuristic model
for heavy-tailed service PPN's.
Aircraft and Crew Scheduling Problems –
Sequential Approach
Jenny Diaz-Ramirez
Industrial Engineering
Tecnologico de Monterrey (ITESM), Campus Toluca,
Mexico
Abstract
An
approach to solve simultaneously the Aircraft and Crew Scheduling Problems is
expected to get more adapted solutions for small airlines with objective values
at least as good as the current available ones. First, in order to test this
hypothesis, a sequential approach has been developed. Models and solution
algorithms to solve them with a sequential approach are proposed.
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Pricing Equity Default Swaps under the Jump
Diffusion Constant Elasticity Volatility Model
Rafael Mendoza-Arriaga
Industrial Engineering and Management Sciences
Northwestern University
Abstract
Equity
Default Swaps (EDS) are financial instruments designed to bring credit
protection to buyers by incorporating both: the debt issuing firmÕs default
event and its stock price. The EDS buyer makes regular premium payments at
established intervals in order to obtain protection on the event of default,
being entitled to receive a recovery amount as percentage of the debtÕs
notional at the moment the stock price reaches a lower barrier level or jumps
to default. Carr and Linetsky introduced the Jump to Default Extended CEV Model
(JDCEV) in order to capture the positive link between default and equity
volatility factors by allowing the jump to default hazard rate to be an
increasing affine function to the variance, while also capturing the inverse
relationship between the volatility and the stock price. Our contribution in
this work is the reduction of the JDCEV process into a standard CEV process by
means of GirsanovÕs theorem and accurately pricing the EDS instruments by
truncated α-moments of the CEV process, where α can be a negative or
non integer number. The advantage of this work over recent conducted research
is that while we use the JDCEV process as the underlying dynamics, the later
has only been focused on the standard CEV processes and it hasnÕt been able to
accurately formulate the Equity Default Swap instruments. Also the authors are
not aware of any previous analytical solution to the truncated α-moments
of the CEV process.