optimal pricing shipment and payment policy for an integrated supplier buyer inventory model with two part trade credit abstract in this article we develop an integrated supplier buyer inventory model with the assumption that the market demand is sensitive to the retail price and the supplier adopts a trade credit policy the trade credit policy discussed in this paper is a two part strategy cash discount and delayed payment that is if the buyer pays within m1 the buyer receives a cash discount otherwise the full purchasing price must be paid before m2 where m 2 m 1 0 the objective of this research is to determine the optimal pricing ordering shipping and payment policy to maximize the joint expected total profit per unit time an iterative algorithm is established to obtain the optimal strategy furthermore numerical examples and sensitivity analysis are presented to illustrate the results of the proposed model and to draw managerial insights

inventory and credit decisions for time varying deteriorating items with up stream and down stream trade credit financing by discounted cash flow analysis abstract in today s competitive markets most firms in united kingdom and united states offer their products on trade credit to stimulate sales and reduce inventory trade credit is calculated based on time value of money on the purchase cost i e discounted cash flow analysis recently many researchers use discounted cash flow analysis only on the purchase cost but not on the revenue which is significantly larger than the purchase cost and the other costs for a sound and rigorous analysis we should use discounted cash flow analysis on revenue and costs in addition expiration date for a deteriorating item e g bread milk and meat is an important factor in consumer s purchase decision however little attention has been paid to the effect of expiration date hence in this paper we establish a supplier retailer customer supply chain model in which a the retailer receives an up stream trade credit from the supplier while grants a down stream trade credit to customers b the deterioration rate is non decreasing over time and near 100 percent particularly close to its expiration date and c discounted cash flow analysis is adopted for calculating all relevant factors revenue and costs the proposed model is an extension of more than 20 previous papers we then demonstrate that the retailer s optimal credit period and cycle time not only exist but also are unique thus the search of the optimal solution reduces to a local one finally we run several numerical examples to illustrate the problem and gain managerial insights

optimal production lot with imperfect production process under permissible delay in payments and complete backlogging abstract the traditional economic production quantity epq model assumes that the production products are all perfect it is not always true in the real production system due to imperfect production process or other factors imperfect quality items may be produced furthermore it is well known that the total production inventory costs can be reduced by reworking the imperfect quality items produced with a relatively smaller additional reworking and holding costs in addition the permissible delay in payments offered by the supplier is widely adopted in the practical business market in this study we explore the effects of the reworking imperfect quality items and trade credit on the epq model with imperfect production processes and complete backlogging a mathematical model which includes the reworking and shortage costs interest earned and interest charged is presented besides an arithmetic geometric mean inequality approach is employed and an algorithm is developed to find the optimal production policy furthermore some numerical examples and sensitivity analysis are provided to demonstrate the proposed model

the benefits of advance booking discount programs model and analysis consider a retailer who sells perishable seasonal products with uncertain demand due to the short sales season and long replenishment lead times associated with such products the retailer is unable to update demand forecasts by using actual sales data generated from the early part of the season and to respond by replenishing stocks during the season to overcome this limitation we examine the case in which the retailer develops a program called the advance booking discount abd program that entices customers to commit to their orders at a discount price prior to the selling season the time between placement and fulfillment of these precommitted orders provides an opportunity for the retailer to update demand forecasts by utilizing information generated from the precommitted orders and to respond by placing a cost effective order at the beginning of the selling season in this paper we evaluate the benefits of the abd program and characterize the optimal discount price that maximizes the retailer s expected profit

interconnectedness in the cds market concentrated risks in the market for credit default swaps cdss are widely considered to have contributed significantly to the 2007 08 financial crisis we examine the structure of the cds market using a network based approach that allows us to capture the interconnectedness between dealers and nondealers of cds contracts we find a high degree of interconnectivity among major market participants our work helps assess the stability of the cds market and the potential contagion among market participants our findings are of practical importance because even after central clearing becomes mandatory counterparty risk will remain a relevant systemic consideration owing to the long term nature of cds contracts

integrated inventory models considering the two level trade credit policy and a price negotiation scheme abstract this paper develops the integrated inventory models with permissible delay in payment in which customers demand is sensitive to the buyer s price the models consider the two level trade credit policy in the vendor buyer and buyer customer relationships in supply chain management a simple recursive solution procedure is proposed for the integrated models to determine the buyer s optimal pricing and production order strategy although the total profit from the buyer and vendor increases together the buyer s share lessens to compensate the buyer s loss due to the cooperative relationship a negotiation system is presented in order to allocate the profit increase to the vendor and buyer to determine the pricing and production order strategy a numerical example and sensitivity analysis are provided to illustrate the proposed model the results indicate that the total profit from the buyer and vendor together can increase although a price discount is given to the buyer in the proposed models

practice prize report an assortmentwide decision support system for dynamic pricing and promotion planning in diy retailing the main objective of this report is to describe a decision support system for dynamic retail pricing and promotion planning our weekly demand model incorporates price reference price effects seasonality article availability information features and discounts building on previous research we quantify demand interdependencies and integrate the resulting profit lifting effects into the optimal pricing model the methodology was developed and implemented at baumax an austrian do it yourself retailer along with the practical requirements an objective function was employed that can be used as a vehicle for implementing a retailer s strategy eight pricing rounds with thousands of different stock keeping units have each served as a testing ground for our approach based on various benchmarking methods a positive impact on profit was reported the currently implemented marketing decision support system increased gross profit on average by 8 1 and sales by 2 1

a dynamic marketing operations interface model of new product updates abstract two critical success factors for nearly any firm are the introduction of new products and the integration of the marketing and operations functions within the business enterprise the series of products being considered are associated with sequential non disruptive innovations in technology but disruptive in fashion the study presents a model that integrates and builds upon the popular dynamic bass model for new product diffusion in marketing and the wagner and whitin dynamic lot sizing model a seminal model in operations management the end result is a model that simultaneously determines the optimal timing for the introduction of new product generations pricing production timing and produced quantities this model is then used to examine the impact of variations in marketing and operations parameters on both optimal profit and optimal product lifecycle length the study finds that larger profit and a faster pace of new product introductions are generally associated with faster diffusion lower price elasticity larger market potential lower new product introduction cost and more costly consumer products

multi item quick response system with budget constraint quick response mechanisms based on effective use of up to date demand information help retailers to reduce their inventory management costs we formulate a single period inventory model for multiple products with dependent multivariate normal demand distributions and a given overall procurement budget after placing orders based on an initial demand forecast new market information is gathered and demand forecast is updated using this more accurate second forecast the retailer decides the total stocking level for the selling season the second order is based on an improved demand forecast but it also involves a higher unit supply cost to determine the optimal ordering policy we use a computational procedure that entails solving capacitated multi item newsboy problems embedded within a dynamic programming model various numerical examples illustrate the effects of demand variability and financial constraint on the optimal policy it is found that existence of a budget constraint may lead to an increase in the initial order size it is also observed that as the budget available decreases the products with more predictable demand make up a larger share of the procurement expenditure

optimal strategy for an integrated system with variable production rate when the freight rate and trade credit are both linked to the order quantity abstract this paper presents an integrated inventory model with variable production rate and price sensitive demand rate the buyer s purchases trade credit linked to the order quantity offered by the supplier in addition the buyer pays the freight charge according to a weight schedule this paper attempts to offer a best policy that aims at maximizing the joint total profit while the trade credit and freight rate are simultaneously linked to the order quantity the same policy also incorporates considerations on the optimal retail price order quantity and delivery decision we provide possible solutions for the buyer and the supplier to collaboratively agree on inventory control warehouse management transportation logistics delivery and billing our study demonstrates that significant profit increase for the entire supply chain can be achieved by linking both trade credit policy and freight rate policy to order quantities an algorithm is furnished to determine the optimal solution in addition numerical examples and sensitivity analysis are presented to illustrate the theoretical results

production planning in the case of uncertain individual demand extension for an mrp ii concept abstract to gain competitive advantage firms have increased their number of variants in recent years but as a consequence it has become more and more difficult to forecast demand data at the level of individual products over the planning horizon however practical experience shows that forecasts of aggregate demand are quite accurate exact data for individual products can be determined for the current but not for the remaining periods for the remaining periods only upper and lower bounds of the demand data for individual products can be predicted with certainty in many cases this means that production planning should follow a hierarchical planning concept first production planning should be conducted at the aggregate level over the planning horizon to determine simultaneously the resource requirements regular capacity and overtime and the quantities of the product groups in order to satisfy aggregate demand second for the immediate scheduling period the detailed planning level should determine how available production resources have to be allocated to the individual products subject to some constraints imposed by the aggregate plan mrp ii manufacturing resource planning is a production planning system which is based on a hierarchical concept and has been developed for such complex production situations the paper concludes that the mrp ii concept is only partially suited to production planning in the case of uncertain demand a hierarchical model which can be incorporated into the mrp ii concept is therefore proposed for uncertain demand an alternative method for uncertainty reduction is also briefly discussed

optimal policies for multiechelon inventory problems with markov modulated demand this paper considers a multistage serial inventory system with markov modulated demand random demand arises at stage 1 stage 1 orders from stage 2 etc and stage n orders from an outside supplier with unlimited stock the demand distribution in each period is determined by the current state of an exogenous markov chain excess demand is backlogged linear holding costs are incurred at every stage and linear backorder costs are incurred at stage 1 the ordering costs are also linear the objective is to minimize the long run average costs in the system the paper shows that the optimal policy is an echelon base stock policy with state dependent order up to levels an efficient algorithm is also provided for determining the optimal base stock levels the results can be extended to serial systems in which there is a fixed ordering cost at stage n and to assembly systems with linear ordering costs

investigating the sensitivity of equilibrium profits to advertising dynamics and competitive effects the author investigates the validity of the flat maximum principle the insensitivity of a firm s profits to changes in its optimal advertising level in a duopolistic market in which advertising by the two firms has carryover effects two alternative competitive scenarios are examined i in which total industry sales are allowed to vary over time and ii where firms are engaged in market share rivalry for i the open loop nash equilibrium advertising strategies for the firms are derived assuming a specific sales response function and an infinite time horizon a numerical analysis of the sensitivity of firms profit functions to advertising expenditures is performed at different levels of the a discount rate b advertising elasticity and c advertising decay rate an empirical illustration from the pharmaceutical industry is provided special cases of the model formulation are examined analytically in order to highlight the intuition behind the flatness of the maximum and to study the sensitivity of results obtained to choice of equilibrium strategy closed loop vs open loop for the market share game closed loop policies are considered and the flat maximum principle is illustrated in the context of coke pepsi rivalry in the soft drinks market

reducing the cost of demand uncertainty through accurate response to early sales traditionally fashion products have incurred high losses due to stockouts and inventory obsolence because long lead times coupled with a concentrated selling season force all or at least most production to be committed before demand information is available under a quick response system lead times are shortened sufficiently to allow a greater portion of production to be scheduled in response to initial demand we model and analyze the decisions required under quick response and give a method for estimating the demand probability distributions needed in our model we applied these procedures with a major fashion skiwear firm and found that cost relative to the current informal response system was reduced by enough to increase profits by 60 relative to the cost that would have been incurred if no response were used optimized response reduces cost by enough to roughly quadruple profits

forecasting and inventory management of short life cycle products in this paper we provide an integrated framework for forecasting and inventory management of short life cycle products the literature on forecasting and inventory management does not adequately address issues relating to short life cycle products we first propose a growth model that can be used to obtain accurate monthly forecasts for the entire life cycle of the product the model avoids limiting data requirements of traditional methods instead it extracts relevant information from past product histories and utilizes the information on total life cycle sales and the peak sales timing using disguised demand data from a personal computer pc manufacturer we validate the model next we model the inventory management problem for the short life cycle environment the uncertainty in demand is modeled through the uncertainty in the realized values of the parameters of the forecasting model the high cost of terminal inventory shortages and rapidly changing procurement costs are all included in the model extensions to the basic model are also developed using optimal control theory we derive a solution that provides valuable information on procurement cutoff time and terminal service levels a detailed example explains the characteristics of the policy and its relevance in decision making many of the issues covered in the models were brought to our attention while implementing a forecasting model at a pc manufacturer the benchmark monthly forecasts and the associated inventory levels provide information that can be very helpful in planning and controlling marketing sales and production

securitization and bank performance theory suggests that securitization provides financial institutions with an opportunity to lower the cost of funding improve credit risk management and increase profitability in practice however it might lead to adverse consequences through a number of indirect channels therefore the net impact of securitization on bank performance is ambiguous this study aims to evaluate whether banks improve their performance through the use of the securitization market by applying a propensity score matching approach in other words we build a counterfactual group of banks to assess what would have happened to the securitizing banks had they not securitized using us commercial banking data from 2001 to 2008 we first test these hypotheses using univariate analysis and find that securitizing banks are on average more profitable institutions with higher credit risk exposure and higher cost of funding however the propensity score matching analysis does not provide evidence of significant causal effects of securitization on the performance of banks therefore securitization does not seem to outperform alternative funding risk management and profitability improvement techniques used by banks that have ex ante similar characteristics to those securitizing our evidence raises important questions about the motives for banks increasing securitization activities and consequent implications for the banking system

a decision support framework for exploring supply chain tradeoffs abstract producers of retail products continually need to determine how much of a particular product to produce the difficulty of judging correctly is compounded when the product has a short production sales interval and is made primarily for sale during the big winter shopping season e g around christmas holiday in an effort to minimize production and distribution costs decision makers would like to produce as early as possible but doing so would increase the risk of producing the wrong quantity good forecasting mitigates this problem and the use of agile supply chains allows the firm to produce later in the production sales interval both however add to the cost of production if the external environment is volatile then there would be increased uncertainty as to a desirable course of action this paper presents a simulation based decision support framework for exploring the tradeoffs in producing different quantities under a variety of supply chain configurations and alternate forecasting options given uncertain demand environments we provide an illustrative example to highlight these tradeoffs

small business loan securitization and interstate risk sharing do credit risk transfers in general and loan sales and securitizations in particular by financial institutions enhance credit availability and financial stability or do they allow assets of poor credit quality to spread to unprotected investors and thus create financial crises and destroy values in this paper we contribute to the continuing debate by examining the effect of small business loan securitizations on interstate personal income insurance using data of u s banks for the period 1995 2008 we find that small business loans securitizations contribute to the smoothening of state personal income volatility and that this contribution is stronger in states where small businesses play a more important role in the local economy

a bayesian approach to determine the value of information in the newsboy problem abstract the potential benefits of demand forecasting in a newsboy problem are to decrease the risk of overstocking or shortage but forecasting is usually not free in this paper a model to help the decision maker in a newsboy problem to assess the value of information is presented first two cases on available demand information are considered to develop an upper bound of the cost that the decision maker would spend on forecasting then a bayesian approach to forecasting is proposed and evai the expected value of additional information is computed to help the decision maker in deciding whether to use the extra information finally the relationship between the evai and model parameters is discussed

off balance sheet activity under adverse selection the european experience abstract in the crisis that started in 2007 banks off balance sheet activity has been blamed for flooding the market with low quality assets and contributing to spreading risk throughout the economic system nevertheless this view is hardly sustainable within the context of sophisticated markets this paper puts forward an alternative interpretation of the off balance sheet market the so called adverse selection hypothesis according to this hypothesis an adverse selection problem characterizes the relation between banks and their counterparties in off balance sheet deals empirically this implies that off balance sheet activity is expected to be negatively related to failure risk whereas it is expected to be positively related to the quality of the assets used for off balance sheet operations we test the adverse selection hypothesis for a sample of banks in the 27 member countries of the european union during the pre crisis period 1996 2006 and the crisis period 2007 2009 in addition we check for possible differences between banks in the first 15 members of the european union and those in the 12 new members

review of inventory systems with deterioration since 2001 abstract this paper presents an up to date review of the advances made in the field of inventory control of perishable items deteriorating inventory the last extensive review on this topic dates back to 2001 goyal s k and giri b c recent trends in modeling of deteriorating inventory european journal of operational research 134 1 16 since then over two hundred articles on this subject have been published in the major journals on inventory control indicating the need for a new review we use the classification of goyal and giri based on shelf life characteristics and demand characteristics contributions are highlighted by discussing main system characteristics including price discounts backordering or lost sales single or multiple items one or two warehouses single or multi echelon average cost or discounted cash flow and payment delay

the price elasticity of selective demand a meta analysis of econometric models of sales the author describes a meta analysis of econometric studies that estimated the elasticity of selective sales or market share to price the literature review yielded 367 suitable price elasticities

efficient supply contracts for fashion goods with forecast updating and two production modes we examine the problem of developing supply contracts that encourage proper coordination of forecast information and production decisions between a manufacturer and distributor of high fashion seasonal products operating in a two mode production environment the first production mode is relatively cheap but requires a long lead time while the second is expensive but offers quick turnaround we focus on contracts of the form w1 w2 b wherewi is the wholesale price offered for production modei andb is a return price offered for items left over at the end of the season we find that such a contract can coordinate the manufacturer and distributor to act in the best interest of the channel the pricing conditions needed to ensure an efficient solution vary depending on the degree of demand forecast improvement between periods and the manufacturer s access to forecast information we also examine whether these conditions ensure a pareto optimal solution with respect to two traditional production settings

reflections on northern rock the bank run that heralded the global financial crisis in september 2007 television viewers and newspaper readers around the world saw pictures of what looked like an old fashioned bank run that is depositors waiting in line outside the branch offices of a united kingdom bank called northern rock to withdraw their money the previous u k bank run before northern rock was in 1866 at overend gurney a london bank that overreached itself in the railway and docks boom of the 1860s bank runs were not uncommon in the united states up through the 1930s but they have been rare since the start of deposit insurance backed by the federal deposit insurance corporation in contrast deposit insurance in the united kingdom was a partial affair funded by the banking industry itself and insuring only a part of the deposits at the time of the run u k bank deposits were fully insured only up to 2 000 pounds and then only 90 percent of the deposits up to an upper limit of 35 000 pounds when faced with a run the incentive to withdraw one s deposits from a u k bank was therefore very strong for economists the run on northern rock at first seemed to offer a rare opportunity to study at close quarters all the elements involved in their theoretical models of bank runs the futility of public statements of reassurance the mutually reinforcing anxiety of depositors as well as the power of the media in galvanizing and channeling that anxiety through the power of television images however the storyline of the northern rock bank run does not fit the conventional narrative on september 13 2007 the bbc s evening television news broadcast first broke the news that northern rock had sought the bank of england s support the next morning the bank of england announced that it would provide emergency liquidity support it was only after that announcement that is after the

pre season stocking and pricing decisions for fashion retailers with multiple information updating abstract motivated by the industrial practice we investigate in this paper the pre season inventory and pricing decisions for fashion retailers before the selling season a retailer can place orders for a seasonal fashion product from her supplier at two distinct stages via two different delivery modes market information from the sales of a pre seasonal product is collected and used to update the demand forecast of the seasonal product at the succeeding stages by using bayesian approach we formulate a dynamic optimization problem and obtain the optimal stocking policy after the ordered seasonal product has arrived and just before the start of the selling season the retailer can determine the optimal selling price of the product with respect to the latest demand information and the amount of product on hand we study the pricing policy under different objectives sensitivity analysis is carried out and the features of the policies are revealed managerial insights are generated

international diversification an extreme value approach abstract international diversification has costs and benefits depending on the degree of asset dependence we study international diversification with two dependence measures correlations and extreme dependence we discover that dependence has typically increased over time and document mixed evidence on heavy tails in individual countries moreover we uncover three additional findings related to dependence first the timing of downside risk differs depending on the region surprisingly recent latin american returns exhibit little downside risk second latin america exhibits a great deal of correlation complexity third according to the empirical results correlation does not vary with returns but extreme dependence does vary monotonically with regional returns our results are consistent with a tradeoff between international diversification and systemic risk they also suggest international limits to diversification and that international investors demand some compensation for joint downside risk during extreme events

inventory control in a fluctuating demand environment we present an inventory model where the demand rate varies with an underlying state of the world variable this variable can represent economic fluctuations or stages in the product life cycle for example we derive some basic characteristics of optimal policies and develop algorithms for computing them in addition we show that certain monotonicity patterns in the problem data are reflected in the optimal policies

the simplified solution algorithm for an integrated supplier buyer inventory model with two part trade credit in a supply chain system abstract ho et al ho c h ouyang l y su c h 2008 optimal pricing shipment and payment policy for an integrated supplier buyer inventory model with two part trade credit european journal of operational research 187 496 510 discussed the integrated inventory model with two part trade credit and presented an algorithm to solve it basically ho et al s inventory model is correct and interesting however this paper indicates that the solution algorithm described in ho et al 2008 can be simplified further so this paper can not only derive the optimally closed form formulations for the optimal numbers of shipments but also develop different algorithms to improve those in ho et al 2008 numerical examples illustrate that the algorithm to locate the optimal solution is rather accurate and rapid

a periodic review inventory model with demand influenced by promotion decisions in this paper we use a markov decision process mdp to model the joint inventorypromotion decision problem the state variable of the mdp represents the demand state brought about by changing environmental factors as well as promotion decisions the demand state in a period determines the distribution of the random demand in that period optimal inventory and promotion decision policies in the finite horizon problem are obtained via dynamic programming under certain conditions we show that there is a threshold inventory level p for each demand state such that if the threshold is exceeded then it is desirable to promote the product for the proportional ordering cost case the optimal inventory replenishment policy is a base stock type policy with the optimal base stock level dependent on the promotion decision

an inventory model with deteriorating items under inflation when a delay in payment is permissible abstract this study develops an inventory model for initial stock dependent consumption rate when a delay in payment is permissible in the inventory model shortages are not allowed the effect of the inflation rate deterioration rate initial stock dependent consumption rate and delay in payment are discussed in the study mathematical models are also derived under two different circumstances i e case i the credit period is less than or equal to the cycle time for settling the account and case ii the credit period is greater than the cycle time for settling the account besides expressions for an inventory system s total cost are derived for these two cases moreover a computational procedure and gino lasdon et al acm transactions mathematical software 4 1978 34 50 are proposed to obtain the optimal order size and cycle time the results can help managers determine the optimal total cost finally a numerical example demonstrates the applicability of the proposed model

booms and banking crises banking crises are rare events that break out in the midst of credit intensive booms and bring about deep and long lasting recessions this paper presents a textbook dynamic stochastic general equilibrium model to explain these phenomena the model features a nontrivial banking sector where bank heterogeneity gives rise to an interbank market moral hazard and asymmetric information in this market may lead to sudden market freezes banking crises credit crunches and severe financial recessions those recessions follow credit booms and are not necessarily triggered by large exogenous adverse shocks

optimal ordering policies when the supplier provides a progressive interest scheme abstract in fact most credit card issuers or home equity banks frequently offer cardholders or customers a teaser interest rate say i 1 which is significantly lower than the regular interest rate of i 2 with i 2 i 1 for only 6 months or a year say m 2 to lure new customers from their competitors consequently the customer faces a progressive interest charge from the bank if the customer pays the outstanding balance by the grace period say m 1 which is generally 25 days then the bank does not charge any interest if the outstanding amount is paid after m 1 but by m 2 with m 2 m 1 then the bank charges the customer the teaser interest rate of i 1 on the unpaid balance if the customer pays the outstanding amount after m 2 then the bank charges the regular interest rate of i 2 in this paper we first establish an appropriate eoq model for a retailer when the bank or the supplier offers a progressive interest charge and then provide an easy to use closed form solution to the problem

inventory decisions for emergency supplies based on hurricane count predictions abstract this paper addresses a stochastic inventory control problem for manufacturing and retail firms who face challenging procurement and production decisions associated with hurricane seasons specifically the paper presents a control policy in which stocking decisions are based on a hurricane forecast model that predicts the number of landfall hurricanes for an ensuing hurricane season the multi period inventory control problem is formulated as a stochastic programming model with recourse where demand during each pre hurricane season period is represented as a convolution of the current period s demand and an updated estimate of demand for the ensuing hurricane season due to the computational challenges associated with solving stochastic programming problems recent scenario reduction techniques are discussed and illustrated through an example problem the proposed model specifies cost minimizing inventory strategies for simultaneously meeting stochastic demands that occur prior to the hurricane season while proactively preparing for potential demand surge during the season

securitization risk transferring and financial instability the case of spain abstract the 2007 2010 financial crisis has hit a variety of countries asymmetrically the case of spain is particularly illustrative as it exemplifies in a vivid manner most of the core issues largely responsible for the crisis this country experienced a pronounced housing bubble partly funded via spectacular developments in its securitization markets leading to looser credit standards and subsequent financial stability problems we analyze the sequential deterioration of credit in spain considering rating changes in securitized deals using a sample of 20 286 observations on securities and rating changes from 2000q1 to 2010q1 we build a model in which loan growth on balance sheet credit quality and rating changes are estimated simultaneously our results suggest that loan growth significantly affects on balance sheet loan performance with a lag of at least two years additionally loan performance is found to explain rating changes with a lag of four quarters importantly bank characteristics in particular observed solvency cash flow generation and cost efficiency also affect ratings considerably additionally these other bank characteristics seem to a higher weight in the rating changes of securities issued by savings banks as compared with commercial banks

hierarchical model for production planning in the case of uncertain demand the paper deals with hierarchical production planning for a multiperiod model consisting of an aggregate planning level and a detailed planning level in the case of uncertain demand at the beginning the detailed demand for the actual planning period is known whereas for future planning periods only upper and lower bounds of detailed demand are known on the other hand the aggregate demand on the product group level is supposed to be deterministic at each planning period over the whole planning horizon for the aggregate planning level robust production plans i e aggregate production plans which can be disaggregated to a feasible detailed plan for every possible detailed demand are proposed and a consistent disaggregation is executed for the detailed planning level two sets static and dynamic of sufficient conditions for robustness of the aggregate plan as well as dynamic disaggregation conditions are derived these sufficient conditions are a generalization of the results of lasserre and merce the performance of the sufficient conditions are demonstrated by a computational study which shows the potential advantage of the approach

the optimal retailer s ordering policies for deteriorating items with limited storage capacity under trade credit financing abstract under permissible delay in payments all previously published models implicitly assumed that the supplier would offer the retailer a delay period but the retailer would not offer the trade credit period to his her customer huang 2003 journal of the operational research society 54 1011 1015 developed a retailer s replenishment model to reflect the real life situations by assuming that the retailer also adopts the trade credit policy to stimulate his her customer demand in huang s model it is assumed that the goods are not perishable and the storage capacity is unlimited based upon the above argument we propose a two warehouse inventory model for deteriorating items under permissible delay in payments three theorems are developed to determine the optimal cycle time and numerical examples are given to illustrate these theorems finally the results in this paper generalize the results presented by huang 2003 journal of the operational research society 54 1011 1015

determining the production order of two seasonal products under capacity constraint abstract in this paper the production sequence of two seasonal products is analyzed when the parameters of demand forecasts are not certainly known in advance the accuracy of these forecasts improves as the season is approached however the expected demand remains a probability variable when production decisions are made on the production order and volume of the products at the beginning of the planning horizon the novel side of the approach applied in this paper is a capacity constraint inserted into the analyses in which the production volume depends on a probability variable namely on the expected demand

emergence of a core periphery structure in a simple dynamic model of the interbank market abstract this paper studies a simple dynamic model of interbank credit relationships starting from a given balance sheet structure of a banking system with a realistic distribution of bank sizes the necessity of establishing interbank credit connections emerges from idiosyncratic liquidity shocks banks initially choose potential trading partners randomly but over time form preferential relationships via an elementary reinforcement learning algorithm as it turns out the dynamic evolution of this system displays a formation of a core periphery structure with mainly the largest banks assuming the roles of money center banks mediating between the liquidity needs of many smaller banks statistical analysis shows that this evolving interbank market shares the majority of the salient characteristics of interbank credit relationship that have been put forth in recent literature preferential interest rates for borrowers with strong attachment to a lender may prevent the system from becoming extortionary and guarantee the survival of the small peripherical banks

securitization and lending competition we study the eects of securitization on interbank lending competition when banks see private signals of local applicants repayment chances if banks cannot securitize the outcome is e cient they lend to their most creditworthy local applicants with securitization banks lend also to remote applicants with strong observables in order to lessen the lemons problem they face in selling their securities this reliance on observables is ine cient raises the mean default risk and may lead to a deceptive rise in credit scores

optimal pricing and ordering policy under permissible delay in payments abstract many researchers have assumed that the selling price is the same as the purchase cost and developed various eoq models for a retailer when the supplier offers a permissible delay in payments in this paper we complement the shortcoming of their models by considering the difference between the selling price and the purchase cost we then develop an algorithm for a retailer to determine its optimal price and lot size simultaneously when the supplier offers a permissible delay in payments our theoretical result contradicts to their conclusion that the economic replenishment interval and order quantity generally increases marginally under the permissible delay in payments

joint pricing and inventory policies for make to stock products with deterministic price sensitive demand abstract in this paper we focus on a firm selling a single make to stock product to price sensitive end customers we develop an integrated operations marketing model that can help determine the relevant profit maximizing decision variable values for two pricing policies that the firm might follow price as a decision variable which is advocated by academicians and mark up pricing used by most practitioners we first consider an eoq based model with price and order quantity as independent decision variables we then develop an analogous model where price is a mark up over operating costs per unit and order quantity becomes the sole decision variable we are able to ascertain the optimal decision variable values for each model for log linear and linear demand functions we prove that for such profit maximizing models the optimal batch size is not necessarily monotone increasing in set up cost interestingly our numerical analytical evidence suggests that from a profit perspective it is better for managers to be aggressive on price rather than reducing price too much especially for highly price sensitive and non linear demand moreover we establish that in general the profit penalty for not including inventory costs in determining the optimal batch size or ignoring the batch size optimization issue in a mark up price model is not significant only when the set up cost is quite high and or the firm faces non linear demand from highly price sensitive end consumers does it become crucial for managers to determine the exact optimal batch size and base the mark up price on the entire unit operating cost not only the unit variable production cost

on the risk based aggregate planning for seasonal products in this paper a model is developed to analyze the effect of risk incurring at companies producing highly seasonal products according to observations the closer to the season we are the better our knowledge on demand distribution this fact is reflected by a learning effect in demand distribution applied in the model where the aim is to minimize the risk connected costs originating from the unpredictable behavior of demand the paper confirms that unpredictability is only one of the decisive factors in sequencing products and other elements play an important role too the paper presents forward and backward procedures for determining the production quantities and sequencing of the products in an aggregate planning horizon

shadow banks and macroeconomic instability we develop a macroeconomic model in which in which commercial banks can o oad risky loans to a highly levered shadow banking sector and financial intermediaries trade in securitized assets we highlight the liquidity creation role played by securitization we show how an endogenous tightening of credit constraints can exacerbate the e ect of shocks by limiting the ability of shadow banks to supply collateral and of banks to securitize the model is able to reproduce the cyclical behavior of bank and non bank credit and leverage macroeconomic shocks that directly impact the worth of financial sector are particularly harmful to economic activity but purely redistributive intra financial shocks can also generate recessions we discuss how government policy can stabilize the securitization market when the shadow banking system becomes impaired

production planning of style goods with high setup costs and forecast revisions in this paper we study a problem common to a wide variety of manufacturing companies of determining the production schedule of style goods such as clothing and consumer durables under capacity constraints demand for items is stochastic and occurs in the last season of the planning horizon demand estimates are revised in each period we exploit the problem s two level hierarchical structure which is characterized by families and items production changeover costs from one family to another are high compared to other costs however changeover costs between items in the same family are negligible we first formulate this problem as a difficult to solve stochastic mixed integer programming problem then exploiting the problem s hierarchical structure we formulate a deterministic mixed integer programming problem and solve it by means of an algorithm that provides an approximate solution a lower bound is obtained by applying generalized linear programming to the approximate problem we illustrate the procedure using the disguised data of a consumer electronics company the computational results demonstrate the effectiveness of the proposed approach in a practical setting

international diversification a copula approach abstract the viability of international diversification involves balancing benefits and costs this balance hinges on the degree of asset dependence in light of theoretical research linking diversification and dependence we examine international diversification using two measures of dependence correlations and copulas we document several findings first dependence has increased over time second we find evidence of asymmetric dependence or downside risk in latin america but less in the g5 the results indicate very little downside risk in east asia third east asian and latin american returns exhibit some correlation complexity interestingly the regions with maximal dependence or worst diversification do not command large returns our results suggest international limits to diversification they are also consistent with a possible tradeoff between international diversification and systemic risk

leveraged network based financial accelerator abstract in this paper we build on the network based financial accelerator model of delli gatti et al 2010 modelling the firms financial structure following the dynamic trade off theory instead of the packing order theory moreover we allow for multiperiodal debt structure and consider multiple bank firm links based on a myopic preferred partner choice in case of default we also consider the loss given default rate lgdr we find many results i if leverage increases the economy is riskier ii a higher leverage pro cyclicality has a destabilizing effect iii a pro cyclical leverage weakens the monetary policy effect iv a central bank that wants to increase the interest rate should previously check if the banking system is well capitalized v an increase of the reserve coefficient has an impact similar to that produced by raising the policy rate but for the enlargement of bank reserves that improves the resilience of the banking system to shocks

optimal ordering and pricing in a quick response system quick response systems enable retailers to estimate customer demand more accurately and improve stocking decisions for perishable products with uncertain demand retailers place separate orders for a product at two different times before the selling season following the initial order additional market information is obtained and the second order amount is decided based on an improved demand forecast in some cases purchase cost associated with the second order is uncertain and demand for the product during the season depends on the selling price we present a solution procedure for finding the optimal order quantity and selling price in this setting we also study the case where any desired portion of the initial order can be cancelled after updating the demand forecast in the numerical study the optimal price is observed to be relatively insensitive to changes in demand variability

a simulation framework for forecasting uncertain lumpy demand abstract managing uncertainty when the demand is irregular and sporadic i e lumpy is a complex issue as well as an unexplored one this study analyses the behaviour of forecasting techniques when dealing with lumpy demand at the master production scheduling level in particular three forecasting techniques exponentially weighted moving average early sales and order overplanning are considered it is argued that demand lumpiness is a multidimensional phenomenon generated by different market characteristics namely numerousness of customers heterogeneity of customers frequency of order placing variety of each customer s request and correlation between customers behaviour hence the performances of the three forecasting methods are compared through simulation experiments with different values of the sources of lumpiness a framework is then proposed that indicates the domain of applicability of each forecasting technique according to the prevailing source of lumpiness in the market

systemic risk in financial systems we consider default by firms that are part of a single clearing mechanism the obligations of all firms within the system are determined simultaneously in a fashion consistent with the priority of debt claims and the limited liability of equity we first show via a fixed point argument that there always exists a clearing payment vector that clears the obligations of the members of the clearing system under mild regularity conditions this clearing vector is unique next we develop an algorithm that both clears the financial system in a computationally efficient fashion and provides information on the systemic risk faced by the individual system firms finally we produce qualitative comparative statics for financial systems these comparative statics imply that in contrast to single firm results even unsystematic nondissipative shocks to the system will lower the total value of the system and may lower the value of the equity of some of the individual system firms

the solvency of financial institutions in spain lessons from securitization on analysing a sample of spanish banks we find that securitization has a slightly negative impact on the soundness of the issuing entity an unbalanced dynamic panel model was estimated using the forward orthogonal deviations gmm method and used to analyse 537 traditional securitizations issued by 61 banks between 1998 and 2012 the analysis revealed that the entities soundness became weaker immediately prior to the crisis but this effect became insignificant after 2007 securitization has facilitated a process of regulatory capital arbitrage leading to lower capital requirements while at the same time giving rise to a slight worsening of the quality of the originators portfolios it was found that profitability liquidity and inflation positively affect solvency while changes in short term interest rates affect it negatively

a stochastic sequencing problem for style goods with forecast revisions and hierarchical structure this paper addresses the problem of simultaneously determining a production sequence and production volumes of style goods style goods have one selling season per year during the rest of the year manufacturers of style goods build up the inventory while continuously reestimating the demand in the final selling season in this problem products have a two stage hierarchy items and families the production of a family is assumed to be nonpreemptive exploiting the hierarchical structure we formulate the problem as a two stage stochastic sequencing problem the stochastic aggregate sequencing problem and the stochastic disaggregation problem to solve the stochastic aggregate sequencing problem a simple heuristic solution procedure is developed that accounts for the forecast revisions and provides a lower bound on the optimal value the heuristic is tested using the disguised data obtained from a consumer electronics company the computational results demonstrate the applicability of the proposed procedure

the ability to compensate for suboptimal capacity decisions by optimal pricing decisions abstract certain companies have high capacity cost and rather moderate production cost these companies usually assume that deciding about their capacity is quite critical frequently however they are able to adjust the demand for their products to the available capacity by setting appropriate prices that is higher lower than current prices in the presence of under capacity over capacity we argue that appropriate prices can reduce the adverse effects of non optimal capacities we analyze the sensitivity of profit in such a situation for a company in a monopolistic market selling a non storable product and facing fluctuating but interdependent demand across two time periods which allows to profitably differentiate prices therefore we state optimality conditions for prices in situations of variable and given capacities and describe a procedure to determine them the main suggestion of this analysis is that within the bounds of the normative models and specific parameters examined optimal prices can substantially reduce the adverse effects of capacity deviating from its optimum in this way profit is rather insensitive to deviations of capacity from its optimum the implications of this finding are discussed for a number of situations

retailer s optimal replenishment decisions with credit linked demand under permissible delay in payments abstract usually it is assumed that the supplier would offer a fixed credit period to the retailer but the retailer in turn would not offer any credit period to its customers which is unrealistic because in real practice retailer might offer a credit period to its customers in order to stimulate his own demand moreover it is observed that credit period offered by the retailer to its customers has a positive impact on demand of an item but the impact of credit period on demand has received a very little attention by the researchers to incorporate this phenomenon we assume that demand is linked to credit period offered by the retailer to the customers this paper incorporates the concept of credit linked demand and develops a new inventory model under two levels of trade credit policy to reflect the real life situations an easy to use algorithm is developed to determine the optimal credit as well as replenishment policy jointly for the retailer finally numerical example is presented to illustrate the theoretical results followed by the sensitivity of various parameters on the optimal solution

leverage and asset bubbles averting armageddon with chapter 11 an iconic model with high leverage and overvalued collateral assets is used to illustrate the amplification mechanism driving asset prices to overshoot equilibrium when an asset bubble bursts threatening widespread insolvency and what richard koo calls a balance sheet recession besides interest rates cuts asset purchases and capital restructuring are key to crisis resolution the usual bankruptcy procedures for doing this fail to internalise the price effects of asset fire sales to pay down debts however we discuss how official intervention in the form of super chapter 11 actions can help prevent asset price correction causing widespread economic disruption

multi level approaches to demand management in complex environments an analytical model abstract recent studies have shown that as demand becomes irregular and complex i e lumpy a possible approach for managing such uncertainty is to collect information directly from customers this implies that the sales units have to move closer to customers analyse their likely requirements and collect quantitative and structured data as well as qualitative and subjective insights however as integration with individual customers increases and data collection capabilities improve the organisational configuration of most companies becomes ever more complex and the aggregation of forecasts more difficult this paper discusses two approaches to managing demand uncertainty in complex environments in the first termed decentralised order overplanning sales units are responsible for forecasting the demand of each customer and defining requirements in the second termed centralised order overplanning forecasts provided by sales units are aggregated and further elaborated by manufacturing to define item requirements by means of an analytical model which describes the forecasting and planning process as a bayesian markovian process we show that the centralised method out performs the decentralised approach by virtue of the ability to exploit the additional information provided by commonalities between customers requests however this advantage has to be balanced against organisational costs since the centralised method splits responsibilities for forecasting and slack control between sales and manufacturing units major conflicts are likely to arise the focus and commitment on forecasting accuracy may be compromised and information may be lost when individual forecasts are sent to the manufacturing unit

securitisation and financial stability a widespread opinion before the credit crisis of 2007 8 was that securitisation enhances financial stability by dispersing credit risk after the credit crisis securitisation was blamed for allowing the hot potato of bad loans to be passed to unsuspecting investors both views miss the endogeneity of credit supply securitisation enables credit expansion through higher leverage of the financial system as a whole securitisation by itself may not enhance financial stability if the imperative to expand assets drives down lending standards the hot potato of bad loans sits in the financial system on the balance sheets of large banks rather than being sold on to final investors since the aim of financial intermediaries is to expand lending in order to utilise slack in balance sheet capacity

an economic order quantity model for deteriorating items with partially permissible delay in payments linked to order quantity abstract to attract more sales suppliers frequently offer a permissible delay in payments if the retailer orders more than or equal to a predetermined quantity w in this paper we generalize goyal s k 1985 eoq under conditions of permissible delay in payments journal of the operational research society 36 335 338 economic order quantity eoq model with permissible delay in payment to reflect the following real world situations 1 the retailer s selling price per unit is significantly higher than unit purchase price 2 the interest rate charged by a bank is not necessarily higher than the retailer s investment return rate 3 many items such as fruits and vegetables deteriorate continuously and 4 the supplier may offer a partial permissible delay in payments even if the order quantity is less than w we then establish the proper mathematical model and derive several theoretical results to determine the optimal solution under various situations and use two approaches to solve this complex inventory problem finally a numerical example is given to illustrate the theoretical results