| 1. |
- Blomvall, Jörgen, 1974-, et al.
(författare)
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Corporate Hedging: an answer to the "how" question
- 2018
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Ingår i: Annals of Operations Research. - New York, United States : Springer-Verlag New York. - 0254-5330 .- 1572-9338. ; 266:1-2, s. 35-69
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Tidskriftsartikel (refereegranskat)abstract
- We develop a stochastic programming framework for hedging currency and interest rate risk, with market traded currency forward contracts and interest rate swaps, in an environment with uncertain cash flows. The framework captures the skewness and kurtosis in exchange rates, transaction costs, the systematic risks in interest rates, and most importantly, the term premia which determine the expected cost of different hedging instruments. Given three commonly used objective functions: variance, expected shortfall, and mean log profits, we study properties of the optimal hedge. We find that the choice of objective function can have a substantial effect on the resulting hedge in terms of the portfolio composition, the resulting risk and the hedging cost. Further, we find that unless the objective is indifferent to hedging costs, term premia in the different markets, along with transaction costs, are fundamental determinants of the optimal hedge. Our results also show that to reduce risk properly and to keep hedging costs low, a rich-enough universe of hedging instruments is critical. Through out-of-sample testing we validate the findings of the in-sample analysis, and importantly, we show that the model is robust enough to be used on real market data. The proposed framework offers great flexibility regarding the distributional assumptions of the underlying risk factors and the types of hedging instruments which can be included in the optimization model.
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| 2. |
- Bodnar, Taras, et al.
(författare)
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A closed-form solution of the multi-period portfolio choice problem for a quadratic utility function
- 2015
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Ingår i: Annals of Operations Research. - : Springer Science and Business Media LLC. - 0254-5330 .- 1572-9338. ; 229:1, s. 121-158
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Tidskriftsartikel (refereegranskat)abstract
- In the present paper, we derive a closed-form solution of the multi-period portfolio choice problem for a quadratic utility function with and without a riskless asset. All results are derived under weak conditions on the asset returns. No assumption on the correlation structure between different time points is needed and no assumption on the distribution is imposed. All expressions are presented in terms of the conditional mean vectors and the conditional covariance matrices. If the multivariate process of the asset returns is independent, it is shown that in the case without a riskless asset the solution is presented as a sequence of optimal portfolio weights obtained by solving the single-period Markowitz optimization problem. The process dynamics are included only in the shape parameter of the utility function. If a riskless asset is present, then the multi-period optimal portfolio weights are proportional to the single-period solutions multiplied by time-varying constants which are dependent on the process dynamics. Remarkably, in the case of a portfolio selection with the tangency portfolio the multi-period solution coincides with the sequence of the single-period solutions. Finally, we compare the suggested strategies with existing multi-period portfolio allocation methods on real data.
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| 3. |
- Bohlin, Markus, et al.
(författare)
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Maintenance optimization with duration-dependent costs
- 2015
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Ingår i: Annals of Operations Research. - : Springer Science and Business Media LLC. - 0254-5330 .- 1572-9338. ; 224:1, s. 1-23
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Tidskriftsartikel (refereegranskat)abstract
- High levels of availability and reliability are essential in many industries where production is subject to high costs due to downtime. Examples include the mechanical drive in natural gas pipelines and power generation on oil platforms, where gas turbines are commonly used as a power source. To mitigate the effects of service outages and increase overall reliability, it is also possible to use one or more redundant units serving as cold standby backup units. In this paper, we consider preventive maintenance optimization for parallel k-out-of-n multi-unit systems, where production at a reduced level is possible when some of the units are still operational. In such systems, there are both positive and negative effects of grouping activities together. The positive effects come from parallel execution of maintenance activities and shared setup costs, while the negative effects come from the limited number of units which can be maintained at the same time. To show the possible economic effects, we evaluate the approach on models of two production environments under a no-fault assumption. We conclude that savings were substantial in our experiments on preventive maintenance, compared to a traditional preventive maintenance plan. For single-unit systems, costs were on average 39 % lower when using optimization. For multi-unit systems, average savings were 19 %. We also used the optimization models to evaluate the effects of re-planning at breakdown and effects due to modeling of inclusion relations. Breakdown re-planning saved between 0 and 11 % of the maintenance costs, depending on which component failed, while inclusion relation modeling resulted in an 7 % average cost reduction.
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| 4. |
- Burdakov, Oleg, 1953-, et al.
(författare)
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Optimal scheduling for replacing perimeter guarding unmanned aerial vehicles
- 2017
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Ingår i: Annals of Operations Research. - : Springer. - 0254-5330 .- 1572-9338. ; 249:1, s. 163-174
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Tidskriftsartikel (refereegranskat)abstract
- Guarding the perimeter of an area in order to detect potential intruders is an important task in a variety of security-related applications. This task can in many circumstances be performed by a set of camera-equipped unmanned aerial vehicles (UAVs). Such UAVs will occasionally require refueling or recharging, in which case they must temporarily be replaced by other UAVs in order to maintain complete surveillance of the perimeter. In this paper we consider the problem of scheduling such replacements. We present optimal replacement strategies and justify their optimality.
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| 5. |
- Carling, Kenneth, et al.
(författare)
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Distance measure and the p-median problem in rural areas
- 2015
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Ingår i: Annals of Operations Research. - : Springer. - 0254-5330 .- 1572-9338. ; 226:1, s. 89-99
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Tidskriftsartikel (refereegranskat)abstract
- The p-median model is used to locate P facilities to serve a geographically distributed population. Conventionally, it is assumed that the population patronize the nearest facility and that the distance between the resident and the facility may be measured by the Euclidean distance. Carling, Han, and Håkansson (2012) compared two network distances with the Euclidean in a rural region with a sparse, heterogeneous network and a non-symmetric distribution of the population. For a coarse network and P small, they found, in contrast to the literature, the Euclidean distance to be problematic. In this paper we extend their work by use of a refined network and study systematically the case when P is of varying size (1-100 facilities). We find that the network distance give as good a solution as the travel-time network. The Euclidean distance gives solutions some 4-10 per cent worse than the network distances, and the solutions tend to deteriorate with increasing P. Our conclusions extend to intra-urban location problems.
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| 6. |
- Choi, Yongrok, et al.
(författare)
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Optimizing enterprise risk management : a literature review and critical analysis of the work of Wu and Olson
- 2016
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Ingår i: Annals of Operations Research. - : Springer Science and Business Media LLC. - 0254-5330 .- 1572-9338. ; 237:1-2, s. 281-300
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Tidskriftsartikel (refereegranskat)abstract
- Risks exist in all aspects of our lives. Using data in both Scopus and ISI Web of Science, this review paper identifies pioneer work and pioneer scholars in enterprise risk management (ERM). Being ranked the first based on the review data, Desheng Wu has been active in this area by serving as a good academic network manager on the global research network, His global efforts with diverse networking have enabled him to publish outstanding papers in the field of ERM. Therefore, this paper also conducts a literature review of his papers and critical analysis of the work of Wu and Olson, from the perspective of the ERM, to glean implications and suggestions for the optimization and customization of the ERM.
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| 7. |
- Chronopoulos, Michail, et al.
(författare)
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When is it better to wait for a new version? Optimal replacement of an emerging technology under uncertainty
- 2015
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Ingår i: Annals of Operations Research. - : Springer Science and Business Media LLC. - 0254-5330 .- 1572-9338. ; 235:1, s. 177-201
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Tidskriftsartikel (refereegranskat)abstract
- Firms that use an emerging technology often face uncertainty in both the arrival of new versions and the revenue that may be earned from their deployment. Via a sequential decision-making framework, we determine the value of the investment opportunity and the optimal replacement rule under three different strategies: compulsive, laggard, and leapfrog. In the first one, a firm invests sequentially in every version that becomes available, whereas in the second and third ones, it first waits for a new version to arrive and then either invests in the older or the newer version, respectively. We show that, under a compulsive strategy, technological uncertainty has a non-monotonic impact on the optimal investment decision. In fact, uncertainty regarding the availability of future versions may actually hasten investment. By comparing the relative values of the three strategies, we find that, under a low output price the compulsive strategy always dominates, whereas, at a high output price, the incentive to wait for a new version and adopt either a leapfrog or a laggard strategy increases as the rate of innovation increases. By contrast, high price uncertainty mitigates this effect, thereby increasing the relative attraction of a compulsive strategy.
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| 8. |
- Cong, Rong Gang, et al.
(författare)
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Managing soil natural capital : a prudent strategy for adapting to future risks
- 2017
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Ingår i: Annals of Operations Research. - : Springer Science and Business Media LLC. - 0254-5330 .- 1572-9338. ; 255:1-2, s. 439-463
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Tidskriftsartikel (refereegranskat)abstract
- Farmers are exposed to substantial weather and market related risks. Rational farmers seek to avoid large losses. Future climate change and energy price fluctuations therefore make adaptating to increased risks particularly important for them. Managing soil natural capital—the capacity of the soil to generate ecosystem services of benefit to farmers—has been proven to generate the double dividend: increasing farm profit and reducing associated risk. In this paper we explore whether managing soil natural capital has a third dividend: reducing the downside risk (increasing the positive skewness of profit). This we refer to as the prudence effect which can be viewed as an adaptation strategy for dealing with future uncertainties through more prudent management of soil natural capital. We do this by developing a dynamic stochastic portfolio model to optimize the stock of soil natural capital—as indicated by soil organic carbon (SOC) content—that considers the mean, variance and skewness of profits from arable farming. The SOC state variable can be managed by the farmer only indirectly through the spatial and temporal allocation of land use. We model four cash crops and a grass ley that generates no market return but replenishes SOC. We find that managing soil natural capital can, not only improve farm profit while reducing the risk, but also reduce the downside risk. Prudent adaptation to future risks should therefore consider the impact of current agricultural management practices on the stock of soil natural capital.
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| 9. |
- Holm, Åsa, et al.
(författare)
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Heuristics for Integrated Optimization of Catheter Positioning and Dwell Time Distribution in Prostate HDR Brachytherapy
- 2016
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Ingår i: Annals of Operations Research. - : Springer. - 0254-5330 .- 1572-9338. ; 236:2, s. 319-339
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Tidskriftsartikel (refereegranskat)abstract
- High dose-rate (HDR) brachytherapy is a kind of radiotherapy used to treat, among others, prostate cancer. When applied to prostate cancer a radioactive source is moved through catheters implanted into the prostate. For each patient a treatment plan is constructed that decide for example catheter placement and dwell time distribution, that is where to stop the radioactive source and for how long.Mathematical optimization methods has been used to find quality plans with respect to dwell time distribution, however few optimization approaches regarding catheter placement have been studied. In this article we present an integrated optimization model that optimize catheter placement and dwell time distribution simultaneously. Our results show that integrating the two decisions yields greatly improved plans, from 15% to 94% improvement.Since the presented model is computationally demanding to solve we also present three heuristics: tabu search, variable neighbourhood search and genetic algorithm. Of these variable neighbourhood search is clearly the best, outperforming a state-of-the-art optimization software (CPLEX) and the two other heuristics.
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| 10. |
- Johansson, Lina, et al.
(författare)
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Quantifying sustainable control of inventory systems with non-linear backorder costs
- 2017
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Ingår i: Annals of Operations Research. - : Springer Science and Business Media LLC. - 0254-5330 .- 1572-9338. ; 259:1-2, s. 217-239
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Tidskriftsartikel (refereegranskat)abstract
- Traditionally, when optimizing base-stock levels in spare parts inventory systems, it is common to base the decisions either on a linear shortage cost or on a certain target fill rate. However, in many practical settings the shortage cost is a non-linear function of the customer waiting time. In particular, there may exist contracts between the spare parts provider and the customer, where the provider is obliged to pay a fixed penalty fee if the spare part is not delivered within a certain time window. We consider a two-echelon inventory system with one central warehouse and multiple local sites. Focusing on spare parts products, we assume continuous review base stock policies. We first consider a fixed backorder cost whenever a customer’s time in backorder exceeds a prescribed time limit, second a general non-linear backorder cost as a function of the customer waiting time, and third a time window service constraint. We show from a sustainability perspective how our model may be used for evaluating the expected (Formula presented.) emissions associated with not satisfying the customer demands on time. Finally, we generalize some known inventory models by deriving exact closed form expressions of inventory level distributions.
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