Financial Engineering, E-commerce and Supply Chain

Transcription

1 Financial Engineering, E-commerce and Supply Chain

2 Applied Optimization Volume 70 Series Editors: Panos M. Pardalos University of Florida, U.S.A. Donald Hearn University of Florida, U.S.A. The titles published in this series are listed at the end of this volume.

3 Financial Engineering, E-cotnmerce and Supply Chain Edited by Panos M. Pardalos University of Florida, Gainesville, Florida, U.S.A. and Vassilis K. Tsitsiringos Deal-Fx, Athens, Greece SPRJNGER-SCIENCE+BUSINESS MEDIA, B.V.

4 A C.I.P. Catalogue record for this book is available from the Library of Congress. ISBN ISBN (ebook) DOI / Printed an acid-free paper AH Rights Reserved 2002 Springer Science+Business Media Dordrecht Originally published by Kluwer Academic Publishers in 2002 No part of this work may be reproduced, stored in a retrieval system, or transmitted in any forrn Of by any means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without written permis sion from the Publisher, with the exception of any material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work.

5 Contents Preface xi The Threshold Accepting Heuristic for Index Tracking Manfred Gil/i, Evis Kifllezi 1.1 Introduction 2 I.2 The optimization problem Implementation of theta algorithm for the index tracking problem Computational results Conclusions 16 2 Algorithms for Optimization of Value-at-Risk 19 Nicklas Larsen, Helmut Mausser and Stanislav Uryasev 2.1 Introduction Problem statement and algorithms Application of the VaR-minimization algorithms to Credit Risk Analysis Conclusion Appendix: Bond Portfolio 4 I 3 Empirical Bayes Estimation of Securities Price Parameters Leonard C. MacLean, Michael E. Foster and William T. Ziemba 3.1 Introduction 3.2 The pricing model 3.3 The truncation estimator 3.4 Empirical test 3.5 Discussion 4 The Value of Integrative Risk Management for Insurance Products with Guarantees 59 Andrea Consiglio, Flavio Cocco and Stavros A. Zenios 4.1 Introduction The traditional approach: Efficient portfolios An integrative approach based on scenario optimization Designing competitive policies Conclusions v

6 Vl FINANCIAL ENGINEERING, -COMMERCE AND SUPPLY CHAIN Appendix: The scenario optimization model a-quantile Option in a Jump-Diffusion Economy Laura Ballotta a-quantile option and Levy processes 5.2 Pricing the a-quantile option in a jump-diffusion economy 5.3 Conclusion On Optimality Condition of Interacting Agents in Financial Markets 89 Victor Korotkich 6.1 Introduction On optimality condition of agents best performance Representation of fitness landscapes in terms of structural complexity Optimality condition of interacting agents Conclusion Searching for the Optimal Defence Expenditure A.S. Andreou, K.E. Parsopou/os, M.N. Vrahatis and G.A. Zombanakis 8 7.l Introduction 7.2 Literature overview 7.3 The algorithms 7.4 The model 7.5 Policy considerations 7.6 Conclusions The Efficiency of Capital Market Microstructure in Greece Harilaos V. Mertzanis Introduction 8.2 The capital market microstructure 8.3 Data and econometric methodology 8.4 Empirical results 8.5 Summary and conclusions A Multiobjective Methodology for Bank Asset Liability Management K.Kosmidou, C. Zopounidis Introduction 9.2 Previous research 9.3 Methodology 9.4 Analysis of results 9.5 Conclusions 9.6 Appendix Post Tax Optimal Investments Maria A. Osorio, Reuben Settergren, Here Rustem, Nalan Gulpinar I 0.1 Financial investment terminology

7 Contents Vll 10.2 Post tax portfolio model 10.3 Computational results 10.4 Conclusions Random Matrix Theory and a Definition of Correlations in Financial 175 Markets Galina Korotkikh 11.1 Introduction Linear correlations and problems of using variance-covariance matrix Variance-covariance matrix and random matrix theory Understanding properties of variance-co variances by using RMT Structural correlations and symmetries in eigenvector distributions Conclusion The Simulation of the Implied Distribution and Other Smile Consistent Stochastic Volatility Models: An Overview 189 George Skiadopoulos 12.1 Introduction The concept of smile consistency Smile consistent stochastic volatility models The simulation of the implied distribution: the general idea Skiadopoulos and Hodges (2001) Conclusions and topics for further research e-comrnerce in the Agribusiness Sector: Present Situation and Future 213 Trends G. Baourakis and G. Daian 13.1 Introduction Definitions The initial stages ofthe electronic age in agriculture and their effects on food retail chains New era of the agribusiness sector e-commerce opportunities and barriers e-commerce future trends Conclusion Identifying Patterns in Internet Retail Store Layouts 231 Adam P. Vrechopoulos, Georgios P. Papamichail and Georgios I. Doukidis 14.1 Introduction Store atmosphere and virtual retailing dynamics Research methodology The results of the survey Conclusions, implications and future research perspectives A Dynamic Slope Scaling Procedure for the Fixed-Charge Cost Multi- 247 Commodity Network Flow Problem

8 vm FINANCIAL ENGINEERING, -COMMERCE AND SUPPLY CHAIN Sandra Duni Elqioglu, Panos M. Pardalos and H. Edwin Romeijn Introduction Problem description and formulation A Dynamic Slope Scaling Procedure Application to a supply chain optimization problem Computational results Concluding remarks Inventory Management 271 Athanasia Karakitsiou & Athanasios Migdalas 16.1 Introduction Supply Chain- Supply Chain Management The importance of inventories Quantitative inventory models and methods New trends in the inventory management- Just in Time method The future of inventory management in the era of e-commerce Conclusion Non-Linear Pricing in Single Period Supply Contracts with Asymmetric 295 Demand Information Apostolos Burnetas, Stephen M. Gilbert and Craig Smith 17.1 Introduction Related literature The model Numerical analysis Conclusions and extensions The Optimization of the Distribution System in the Context of Supply 321 Chain Management Development G. Baourakis and M. Stroe Introduction The six dynamics of Supply Chain Management Future trends Supply Chain in agriculture - the case of Greek olive oil From Logistics to Collaborative Logistics - a Theoretical Approach Athanasia Mavrommati & Athanasios Migda/as 19.1 Introduction 19.2 Main concept of logistics 19.3 Logistics strategy and planning 19.4 Collaborative logistics 19.5 Logistics network 19.6 Implementations of collaborative logistics 19.7 Conclusions 20 Supply Chain Management: A Business Approach to Some Actual Aspects

9 Contents IX Ines Alves de Queiroz, MSc Introduction Information Technology components How to reach Global SC Collaborative product commerce (CPC) Future research Conclusion Failure Discrimination by Semi-Definite Programming 379 Hiroshi Konno, Jun-ya Gotoh, Stanislav Uryasev and Atsushi Yuki 21.1 Introduction Mathematical formulation of hyperplane, quadratic and ellipsoidal separation A cutting plane algorithm for SDP Quality of discrimination Concluding remarks and future direction of research 394

10 Preface Fueled by an explosive growth of computer and information technology, telecommunications, globalization, and extraordinary theoretical advances, Financial engineering, E- commerce and Supply Chain, have become the core activities oftoday's economies. Financial Engineering focuses upon the fundamental principles of corporate finance and investment science such as cash flow streams, arbitrage, risk aversion, pricing of firms and finance instruments, interest rate term structure, fixed income instruments duration, bond portfolio immunization, and the Markowitz mean-variance portfolio theory. One of the fastest growing elements of the Internet is electronic commerce, which refers to the use of electronic means to conduct business transactions within or across business entities. Nearly 80 percent of all Fortune 500 companies have been doing their core business through the Internet. Many issues, such as the impact of electronic commerce on the efficiency of the economy and market structure, and societal implications of electronic commerce, are the subject of recent research. A supply chain consists of all of the entities and activities that enable the production, distribution, and delivery of products and services to consumers. Research in designing and managing supply chains has rapidly expanded during the last decade. In addition, increased and accessible computing power and modeling capabilities have spurred this growth, enabling researchers to simultaneously consider the many interrelated variables and decisions of a supply chain in a single tractable model. This book contains refereed invited papers submitted at the international conference on Financial Engineering, -commerce, and Supply Chain held at Athens, Greece (May 24-27, 200 I). The conference brought together the most active researchers in computational finance, supply chain, e-commerce and related topics. In addition, many people from information technology companies xi

11 xn FINANCIAL ENGINEERING, -COMMERCE AND SUPPLY CHAIN and financial entrpricies participated in the conference. The conference provided a foundation for joint research cooperation, exchange of ideas among theoreticians and practitioners, and stimulation for future research. The three themes of Financial Engineering, E-Commerce, and Supply Chain pervade this book. We feel that this book will be a valuable scientific source of information to faculty, students, and researchers in finance, business, operations research, as well as for practioners in these fields. We would like to take the opportunity to thank the authors of the papers, the anonymous referees, and the sponsors for supporting this effort. Special thanks and appreciation go to S. Butenko for assisting us in the preparation of the camera ready Jb.T:EX form of this book. Finally, we would like to thank the Kluwer Academic Publishers for their assistance. P. M. Pardalos and V.K. Tsitsiringos