Research On Option Ordering Strategies Of The Risk-Averse Retailer

In recent years,with the rapid development of the economy and the improvement of people’s living standards,the demand of consumers has become more and more individualized and diversified,which results in high uncertainty in market demand.The shortage and overstock risks caused by uncertain demand will easily cause enterprises to suffer certain economic losses,which brings a major challenge to business operations.In order to effectively manage the demand risk,option,as a financial derivative tool,has been widely adopted by many enterprises in practice because of its good flexibility and role of risk-sharing.At present,many scholars use the classic newsvendor model to study the ordering problem of enterprises under uncertain demand,and most of them assume that the decision maker is risk-neutral.However,with the development of economic globalization,the competition among enterprises is particularly fierce.Faced with the increasingly complex business environment,the enterprises pay more attention to risk control,especially for some small and medium-sized enterprises with capital constraint.More and more experiments and investigations show that decision makers tend to show an attitude of risk aversion in the decision-making process,which will have a significant impact on the operational decisions of enterprises.Based on the option contracts,this thesis uses Conditional Value-at-Risk(CVaR)as the risk metric.Considering a single period two-echelon supply chain composed of a risk-neutral manufacturer and a risk_averse retailer,it explores the option ordering strategies of the retailer under random demand.The research results can provide theoretical support for the operational decisions of the risk-averse enterprises.The research content and main conclusions are as follows:(1)The option ordering strategies of the risk-averse retailer with an emergency order opportunity are studied.It assumes the retailer can order from a third-party emergency source through an emergency purchase when stock out occurs.It firstly derives the option ordering strategies of the retailer at different emergency purchase prices and analyses how the risk aversion and price parameters affect his decisions.Then the manufacturer’s option prcing decisions are derived accordingly.Finally,a computational study is conducted to investigate the impact of parameters on the decision makers’ decisions and profits.The results show given an option price,when the emergency purchase price is moderate or high,the optimal option ordering quantity is not monotonic in the risk aversion parameter.If the retailer’s degree of risk aversion is high,the option ordering quantity increases in the exercise price and decreases in the retail price,which is different from the case of risk-neutrality.If the option price is endogenously determined by the manufacturer,the risk-averse retailer may obtain more profit than the risk-neutral retailer.(2)The supply chain strategies and coordination are studied under risk aversion considering the demand depends on consumers’low-carbon preference and retailer’s advertising.Firstly,the optimal decisions of the retailer and the manufacturer under the traditional wholesale price contract are given.As the traditional wholesale price contract cannot coordinate the supply chain,the option and cost-sharing contract is proposed.The optimal decisions of the supply chain members and conditions for supply chain coordination are derived respectively.The results show that when the retailer is conservative,the supply chain can not be coordinated by option and cost-sharing contract.When the supply chain achieves coordination,the retailer’s risk attitude and option price have an important influence on the profit distribution of the whole supply chain.Finally,an improved combination contract is designed to coordinate the supply chain with a conservative retailer.(3)The risk-averse retailer’s optimal option ordering strategies under capital constraint are derived.Based on put option,call option and bidirectional option,the retailer’s optimal decisions without financing and with bank financing are derived respectively.It analyses the effect of risk aversion parameter and initial capital on his optimal decisions.Then it discusses the optimal production decisions of the manufacturer under different option contracts.Finally,a numerical study is conducted to investigate the impact of risk aversion parameter and initial capital on the decisions and profits of the supply chain members.The results show without financing,the retailer’s optimal decision depends on his initial capital.If his initial capital is less than a critical value,he will not order options and use all the money to buy fixed order.Otherwise,he will purchase options and fixed order.And the option ordering quqntity increases in the initial capital and retailer’s degree of risk aversion.But the effect of initial capital on fixed order depends on the option type.Under bank financing,the retailer’s option ordering strategies rely on the risk-free interest rate and are independent of the bank’s loan interest rate and initial capital.The main contributions of this thesis include:It studys the option ordering strategies of the retailer by considering his risk attitude and finds his behavior of risk aversion has a significant effect on the optimal decisions.It enriches the research on supply chain coordination mechanism under risk aversion and discusses the conditions for supply chain coordination based on option and cost-sharing contract.It supplements the research on the option ordering strategy of enterprises under capital constraint,and clarifies the impact of risk aversion parameter and financial constraint on the optimal decisions.