【主讲】哥伦比亚大学教授、清华经管学院特聘教授姚大卫

【题目】Production with Risk Hedging -- Optimal Policy and Efficient Frontier

【时间】2015年7月6日（周一）14.30-16.30

【地点】清华经管学院伟伦楼453

【语言】英文

【主办】管理科学与工程系

【简历】姚大卫老师的简历

David Yao, Professor of Columbia University/Tsinghua University: Production with Risk Hedging -- Optimal Policy and Efficient Frontier

【Speaker】David Yao, Professor of Columbia University/Tsinghua University

【Title】Production with Risk Hedging -- Optimal Policy and Efficient Frontier

【Time】Monday, July 6, 14.30-16.30

【Venue】Room 453, Weilun Building, Tsinghua SEM

【Language】English

【Organizer】Department of Management Science and Engineering

【Abstract】Demand for many products may depend on the price of a tradable asset or on the economy in general. For example, demand for equipment that plants or harvests corn correlates with the corn price on the commodity market; and discount stores experienced increased sales revenue during the last recession. Thus, we model demand as a stochastic process with two components: in addition to the usual Gaussian component reflecting demand volatility, there is a drift component taking the form of a function of a tradable asset price. (In the case of dependence on the general economy, the asset price can be a broad market index, such as the S&P500 index.) With this demand model, we study the one-time production quantity decision along with a real-time risk-hedging strategy over a given planning horizon (the production cycle). Pursuing a mean-variance formulation, we derive the optimal solution to both production and hedging decisions. We give a complete characterization of the efficient frontier, and quantify the improvement in risk-return tradeoff achieved by the hedging strategy. Furthermore, we show that the hedging strategy is self-financing in the sense that the expected total wealth from both production and hedging stays non-negative at all times. (Joint work with Liao Wang, a Phd student at Columbia IEOR.)