Option contracts

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Option contracts in a vertical industry

Option contracts in a vertical industry

Given that neither the supply-chain management literature nor the research on forward markets consider the potential strategic role played by option contract, our primary goal in this paper is to fill this gap by extending the analysis on the strategic role of forward markets to option contracts. 1 In particular, we want to examine the strategic effects of option contracts in a framework in which a dominant firm competing with a fringe of price-taking firms have to acquire an essential input from imperfectly competitive upstream suppliers to produce a final good. Our objective is to investigate how subcontracting production by the dominant firm to the competitive fringe through option contracts and forward contracts may facilitate the acquisition of inputs at more favorable marginal prices. Put differently, how these contracts regarding subcontracting downstream production to the fringe has a potential to gain strategic benefits in the upstream market. This is because these contracts strengthen the bargaining position of the contractor firm in dealing with the supplier, by creating a more valuable alternative in case of a breakdown in negotiations.

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Option contracts in fresh produce supply chain with circulation loss

Option contracts in fresh produce supply chain with circulation loss

Originality/value: Agricultural products especially fresh produce’s characteristics such as circulation loss and high risk are considered. Option contracts and game theory are combined to manage the fresh produce supply chain’s risk. The proposed tool and models are hoped to shed light to the future works in the field of supply chain risk management.

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Option Contracts for Supermarket Fruit Supply Chains: Theory and Practice

Option Contracts for Supermarket Fruit Supply Chains: Theory and Practice

Quality standards influence order quantity and pricing processes. Maintaining quality up to standard specifications generates costs- both preventive and rejection costs- to the whole supply chain and each player. It is critical to consider the role of quality and its associated costs to the supply chain in option contracts for supermarket fruit supply chains. The immediate suggestion is to add the quality term and its conditions to the contract and exercise the contract subject to providing the desired quality. However, this term would shift the power towards the supermarket - which may not be acceptable to the growers. In addition, quality costs must be added in the cost function in order to find the optimal order quantity and prices of option contracts. This research suggests that one important cost is the rejection cost that needs to be added into the cost functions when calculating the optimal option price for the supplier (seller), because these costs are borne by the supplier. Rejection costs for one order delivery have been reported to vary between zero for no rejection and the total value of the order for 100% rejection.

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Supplier competition with option contracts for discrete blocks of capacity

Supplier competition with option contracts for discrete blocks of capacity

Procurement of commodities plays a pivotal role in the success of global firms but brings with it the challenges of dealing with different sources of risk, such as supply unavailability, demand uncertainty, and price volatil- ity. To manage these commodity risks, firms will use a portfolio of procurement arrangements. Buying from a spot market offers flexibility but is characterized by great price uncertainty (Seifert et al. 2004). An alterna- tive is to use supply options to hedge against future price rises and low demand (Martínez-de-Albéniz and Simchi-Levi 2005, Kleindorfer 2008). Supply option contracts allow firms to adjust their procurement costs based on realized demand and spot price, but an upfront fee has to be paid to suppliers. By signing option contracts, the buyer’s demand risk is mitigated by freely choosing the executed capacity after she knows the actual demand, and the supplier’s finan- cial risk is also diminished by receiving the reservation payment from the buyer in the early period. The under- lying assumption is that the supplier only prepares the amount of capacity that is reserved, so this becomes the limit for later production.

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A Stackelberg Game Model with Supply Chain Option Contracts under Random Yield and Stochastic Demand

A Stackelberg Game Model with Supply Chain Option Contracts under Random Yield and Stochastic Demand

can improve both the buyer’s profit and supplier’s revenue while it provide flexibility for the buyer to respond to uncertain demand. Different with Barnes’s study, Xu (2010) and Li (2017) assumed that both the output and demand are all uncertain, and studied the production plan of the supplier and the procurement strategy of the manufacturer through option contracts. Besides, they also considered the instantaneous purchase of the manufacturer and the emergency production of the supplier. Arani (2016) introduced option contracts and revenue-sharing contract simultaneously to the supply chain. Built game models respectively from retailer-led and manufacturer-led supply chains, and derived the optimal production input and purchasing strategies of the supply chain members. Cai (2017) introduced the option contract to the vendor-managed inventory (VMI) supply chain. Under the precondition of yield uncertainty, he analysed the relationship between option contract and the subsidy contract under deterministic demand. Further more, he studied option contract with replenishment tactic can coordinate supply chain and improve the performance of the supply chain under uncertain demand. Chen and Xiao (2015) introduced backup sourcing strategy into a supply chain with random yield and stochastic demand, developed a game model and analysed the value of backup contracts in the retailer dominant supply chain. However, there is still a small amount of research on random yield and stochastic demand with option contracts.

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Influence of transaction costs on foreign exchange option contracts: intra-daily tests

Influence of transaction costs on foreign exchange option contracts: intra-daily tests

Three measures of transaction costs were considered: (i) minimum transaction costs that involve only initial bid-ask spreads, (ii) transaction costs associated with trades closed out prior to expiration; and (iii) a total transaction costs measure. Even using minimum transaction costs calculated with closing spot FX and interest rate quotes, less than 1% (3%) of call (put) option prices involve deviations from the LBC. The LBC deviations are measured in fractions of a percent as alternative, more expensive, measures of transaction costs are employed. In contrast, PCP deviations for the conversion and reversal trades are 33.86% and 23.43%, respectively, for all currencies jointly. Using round trip transactions costs, the PCP deviations are reduced on average, to 13.32% and 12.60% percent, respectively; reducing to 4.99 and 3.09 percent of all put-call pairs when total transaction costs are taken into account.

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ROE as a performance measure in performance-vested stock option contracts in China

ROE as a performance measure in performance-vested stock option contracts in China

Recently, studies have begun to focus on the use of specific performance measures, and their impact on managerial decisions. Performance measures adopted in executive compensation contracts are important in communicating corporate objectives and in- fluencing managerial decisions (e.g., Marquardt and Wiedman, 2005; Young and Yang, 2011; Huang et al., 2014). For example, previous research documents that, when man- agerial compensation contracts are explicitly tied to EPS, managers have an incentive to influence the denominator, the number of shares outstanding used in EPS calcula- tions through share repurchases (e.g., Young and Yang, 2011), contingently convertible debt issuances (Marquardt and Wiedman, 2005), and corporate financing decisions (Huang et al., 2014) in order to avoid EPS dilution. EPS dilution refers to the reduction in reported EPS numbers due to the issuance of additional common shares.

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Ranking of Hedging Tools from the Perspective of Tehran Stock Exchange Investors

Ranking of Hedging Tools from the Perspective of Tehran Stock Exchange Investors

This paper prioritized the hedging tools using Analytical Hierarchy Process. The research is an applied research in terms of purpose and is kind of heuristic research in terms of method. In this research, opinions of Tehran Stock Exchange experts were collected using a questionnaire that was organized based on methods of Delphi and Analytical Hierarchy Process. In the questionnaire, experts assessed hedging tools (Forward contracts, Futures contracts, Option contracts, Swap contracts and Mutual Funds) and their evaluation criteria. Data has been analyzed using Expert Choice software. Final analysis of the most appropriate hedging tool showed that future contracts and then option contracts had the highest importance, respectively. Mutual funds, swap contracts and forward contracts placed in next ranks.

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Study on Chinese Rural Drinking Water Option and Its Pricing

Study on Chinese Rural Drinking Water Option and Its Pricing

At present, Chinese rural population has attained 650 million, according to the 2011 major macroeconomic data announced by China National Bureau of Statistics on January 17, 2012. The problems of Chinese rural drinking water exist for a long time, because of the large population, the growing problem of water pollution and many other constraints from society. With the ad- vocacy of establishing water-saving society, it’s necessary to construct water-conservation countryside. This is an important guarantee for peasants to acquire sufficient and safe drinking water timely and conveniently. Besides, it’s also beneficial to improve quality of life and promote rural economic develop- ment. Although the problems of the water-wasting and low use efficiency exist widely, there is huge space for saving rural drinking water resources. However, it lacks effective distribu- tion mechanism which can reduce the risk of water rights trad- ing and achieve the rational allocation of rural drinking water. The study of rural drinking water option and its pricing is one of the important parts of the mechanism, which plays an indis- pensable role in alleviating current problem of rural drinking water. Water option is a financial derivative product, which set- tlement object is one or more water factors such as the price of water, rainfall, water demand and inflow et al. It’s caused by hedging the risk of water supply and demand. Using mature options theories to manage the risk of water market has made it a new research focus.

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The Career Path of Expatriates at Repatriation

The Career Path of Expatriates at Repatriation

For employees that are from 45 years to 55 years, Liu (2002) suggested that they view the psychological contracts with their organizations as balanced [10]. In this career stage, the characteristics of them are that, compared with promotion, most of them prefer keeping what they have achieved. They tend to maintain a kind of career stability and expect attractive welfare. From the perspective of organization, it needs to reserve some potential employees to bring them up to the leaders of it. In this case, it may view the psychological contract with these employees as relational. On the other hand, Some of the employees‟ performance are not very satisfactory, although they have served in the organization for a long period. In this case, the organization may view the psychological contract as transactional. Therefore, for expatriates that are from 45 years to 55 years, when they look out on repatriation, the four kinds of psychological contracts and four kinds of repatriation success are all possible. Expatriates of degree I may come back as scheduled to the headquarters to continue their career path to become respectable directors or managers. It is possible for expatriates of degree II to be headhunted by some middle-sized company and then quit to work in the new company and grow to its director or manager. This leads to some loss of the multinational corporations. Regarding to expatriates of degree III, after they come back to headquarter as scheduled at repatriation, maybe they will find there is no suitable position for them. This raises some problems to the expatriates‟ career and families. For expatriates of degree IV, at the timing of repatriation, they may quit to some other company. In this case, the organization faces some loss and meanwhile the expatriate has career problems such as demotion. But it is better than misalignment.

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The Contracting State

The Contracting State

200. Again, the devolution of welfare reform offers a useful analogue. Although welfare “privatization” could cut costs and improve service delivery, we might also be concerned that states will avoid responsibility for cutting welfare rolls by shifting blame to private ac- tors. Resorting to traditional constraints, one could argue that private parties ought to be considered “state actors” when they administer benefits or, instead, seek to invalidate delegations of power to them. See Kennedy, supra note 31, at 283-85 (applying the balanc- ing test used in Mathews v. Eldridge, 424 U.S. 319, 334-35 (1976), and arguing that gov- ernment interest is minimized where the cost of adding procedure falls to private contrac- tors). Given current state action doctrine, these efforts will likely prove fruitless or achieve only minimal due process protections. Again, however, the contractual mechanisms them- selves could present opportunities for structuring the public-private arrangement. Con- tracts could require private companies to retain professional social workers, for example. Contracts, speculatively, could enable alliances to develop among private companies, pro- fessional groups, and poverty advocates.

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Uniformity of laws: a reality or just a myth?

Uniformity of laws: a reality or just a myth?

Abstract: This paper attempts to show that the greatest impediment to a reduction in the transaction cost consists of two factors. First, the problem of the choice of laws makes contracting a hazardous enterprise for those who have an information disadvantage. Second, the reluctance of the legal profession to embrace and familiarise themselves with uniform international laws does not enhance a client’s expectation to be able to access the ‘best’ law. It is argued that the inclusion of international uniform laws such as the United Nations Convention on Contracts for the International Sale of Goods (CISG, 1980) will reduce the transactions costs either at trial or when a problem arises as both parties operate in essence under the same law and, hence, a negotiated settlement is more likely. The paper specifically addresses the problem which can emerge when a contract is silent as to which law will govern the legal relationship. Close attention is given to a possibility of overcoming choice of laws problems by applying the CISG, instead of explicitly excluding the CISG. This paper also investigates the inclusions of soft laws into contracts and the ability of such an inclusion to reduce transaction costs. The conclusion is that the inclusion of uniform laws reduces uncertainty and is, furthermore, merely recognition of a development which is gathering speed.

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Impact of end of lease contracts’ option on joint pricing and inventory decisions of remanufacturable leased products   Pages 191-204
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Impact of end of lease contracts’ option on joint pricing and inventory decisions of remanufacturable leased products Pages 191-204 Download PDF

individual and corporate consumers. In some articles, the authors considered the end options at the end of lease period. Gamba and Rigon (2008) studied previous designs and options of pricing models; an assumption that simply cancels the lease contracts for the purchase of fixed interest rate and proposed a model with stochastic interest rates, which significantly expands the cancellation options with the existence of a penalty. The lease contract is influenced by some sources of uncertainty such as the inflation rate and the depreciation of the vehicle dynamics. These were the results of the previous models used to develop the lease contracts set. Mon et al. (2006) studied the use of baby prams that identified the services provided through the sales and lease check where potential obstacles or changes in the product design and supply chain were handled. Reverse logistics and remanufacturing system with various levels of refurbishment baby pram by retailers make up a product service system. Due to the necessity of customers for baby pram in a period and in the end, it should be sold as second- hand goods. They considered a model where the objective of this study was to gain interest by considering environmental issues. Fees covered the costs of negative cash flow in the beginning of lease plan in the first month. Therefore, potential solutions and other potential bottlenecks in the rental scheme were studied. They explained that higher-income leasing and reconditioning could deliver to normal sales and reduce environmental factors.

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Online Full Text

Online Full Text

Along with the hindrances and challenging problems were removed, based on IGTASC, ICHO has been constructed as the feasible framework for supporting the whole self-organization process. By developing the mechanisms of institution-govern, Contract-ensured, and Hierarchical self-Organization and the key techniques for achieving those mechanisms, ICHO can support effectively each phrase in the 4-phrase process of self-organization of service providing-requiring cooperation and VOs, find accurately applicable service providers by executing the ACDP-based method, achieving contract-ensured self-organization by creating role-enacting and service contracts, and reduce the complexity of large-scale VO creation by implementing hierarchical cooperation self-organization. In the same time, by executing policy-driven self-management, agents can make their own behaviors in VO self-organization always conform to cooperation behavior norms formulated in e-institutions and the business instructions sent over by agents’ owners.

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Annual report of the instrument for structural policy for pre-accession (ISPA) 2000. Report from the Commission. COM (2001) 616 final, 31 October 2001

Annual report of the instrument for structural policy for pre-accession (ISPA) 2000. Report from the Commission. COM (2001) 616 final, 31 October 2001

Total 1 058 000 000 1 016 287 447 2 542 026 The Commission committed € 11 270 941 from the budgetary line B-7020A for technical assistance projects (see section 5). An amount of € 7.4 million was transferred to budgetary line B7-020 and made available for investment measures in the beneficiary countries, and € 7.5 million of the commitment appropriations were used for the Community contribution to the International Fund “Clearance of the Fairway of the Danube” (Council Decision of 17/7/2000, OJ L 187, 26/7/2000). The projects that ISPA finances are large infrastructure projects that are implemented over several years and require a certain lead time for preparatory work so as to ensure efficient and proper project implementation. The implementation phase of projects whose funding was decided in 2000 started in 2001, and the signing of the first main (works) contracts is expected for 2001. Consequently, there were no payments to the 75 ISPA measures that were decided in 2000.

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Guarantees in with-profit and unitized with-profit life insurance contracts: Fair valuation problem in presence of the default option

Guarantees in with-profit and unitized with-profit life insurance contracts: Fair valuation problem in presence of the default option

As mentioned earlier in the paper, the focus is on the fair design of these contracts when surrender opportunities are ignored. The option to surren- der would give the policyholder the possibility to leave the policy scheme before maturity if this suits his/her needs; therefore, as shown by the theory of American options, a participating contract offering such an opportunity should be more valuable. However, it is common practice for life insurance companies to apply penalties when the policyholder decides to leave the scheme before the end of its term. Such charges could compensate for the added value generated by the American-type feature.

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Licensing contracts and the number of licenses under screening

Licensing contracts and the number of licenses under screening

Proposition 6 states that non-exclusive licensing—and the resulting Cournot competitionis more likely to be used under asymmetric than symmetric information. For an issuing cost at which the marginal effect of a second license on the patent holder’s profit is zero under symmetric information, that effect is positive for a wide range of the ( 𝜇𝜇 , 𝑐𝑐 )-space under asymmetric information. For high values of the 𝜇𝜇 and 𝑐𝑐 parameters, the patent holder chooses shut-down contracts for both exclusive and non-exclusive licensing. Competition, then, does not reduce the profits of a patent holder operating under a shut-down contract because the royalties charged have two benefits: they replicate the monopolistic outcome; and they make it more likely that the producer will be efficient (sampling effect), which becomes more valuable as uncertainty increases. This sampling effect is high enough to compensate for the costs of issuing two licenses, but only for intermediate values of 𝜇𝜇 and 𝑐𝑐 . Thus non-exclusive licensing through shut-down contracts is of no interest to the patent holder when both 𝜇𝜇 and 𝑐𝑐 take high values, because in that case the sampling effect tends to be lower and the issuing costs higher. For low values of 𝜇𝜇 and 𝑐𝑐 , the patent holder prefers separating contracts under exclusive and non-exclusive licensing both. In this case, the patent holder is obliged to pay informational rents to the efficient user; hence it cannot replicate the monopoly outcome when issuing several licenses. Since, moreover, the sampling effect is also low for low values of 𝜇𝜇 , it follows that monopoly profits are preferred by the patent holder despite the low issuing costs in this case.

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The Relevance of the Consumer Decision-making Theory to Construction Projects in Malaysia

The Relevance of the Consumer Decision-making Theory to Construction Projects in Malaysia

Construction projects usually cover a wide spectrum of activity, with the involvement of many stakeholders with divergent and even competing interests coming together into achieve project completion. Hence, construction contracts can be quite complicated, and the finalization of the contract can take an extended period of time. As a result, customized contracts can be daunting tasks for smaller or more inexperienced employer organizations and even larger organizations with no functional expertise on construction contracts. This leaves the adoption of a standard form contract as the more popular option for most construction projects since it is “one of the key methods of ameliorating a potentially fractious relationship to achieve a common end” (Tay, 2006. p. v).

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Legal Protection of Trade Secrets as stipulated within Jordanian Laws

Legal Protection of Trade Secrets as stipulated within Jordanian Laws

Contracts are just dependent on parties; the contractual liability cannot be an option for the other civil liabilities that approved trade secret defending, if we understand concerning some criminal trade secrets matters committed by individuals who hold not contractual dealings with the individual legally in charge of trade secret. Like previously discussed, the contract just protects broadly in parties' conflict. The civil law might give rules whose issue could be dependent on in case trade secret is offended, for example tort liability; it serves a major role in defending others in case they were not parties within contract of defense. 43 Tort liability is a contravention of duty obliged by law. Three components must be accessible to fulfill tort liability of revelation trade secrets: damaging act, harm and Causation. 44 Absolutely, harmful act caused by the revelation of trade secret by third party or employed without authorization by right holder is considered damaging act; since those trade secrets are deemed as insubstantial property with financial worth. 45 The damage is the subsequent element of tort liability stipulations. The wrongdoer's liability toward sustaining trade secrets merely is done if determined.

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The Meaning of Marriage: State Efforts to Facilitate Friendship, Love, and Childrearing

The Meaning of Marriage: State Efforts to Facilitate Friendship, Love, and Childrearing

Suppose that a society permits polygamous marriage and that a significant number of persons exercise this option by entering into one husband-many wives marriages. Would the consequences of such a regime of legal polygamy be expectably bad, in a way that would warrant withdrawal of the legal permission? I find the concern that leads Donagan to regard polygyny as impermissible to be important, and in principle this consideration could amount to a good reason for the prioritarian to demand a legal ban on such marriages. What is much harder to discern is the likelihood that bad consequences would indeed ensue. If polygyny is permitted, one might expect that males with greater than average wealth will make marriage offers that some women will find attractive. The main expectable result might be that the pool of eligible women available for marriage shrinks for less wealthy males. So the historical motivation for banning polygyny might have been democratic patriarchy rather than any sort of concern for women’s equality.

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