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Supply Portfolio Selection and Execution with Demand Information Updates

In: Stochastic Processes, Optimization, and Control Theory: Applications in Financial Engineering, Queueing Networks, and Manufacturing Systems

Author

Listed:
  • Haifeng Wang

    (Tsinghua University)

  • Houmin Yan

    (Chinese University of Hong Kong)

Abstract

This paper considers a problem of multi-period supply portfolio selection and execution with demand information updates. A supply portfolio specifies a buyer’s decision on selecting sourcing mix from among a group of suppliers. We develop a framework for optimal supply portfolio selection and execution. Further, we demonstrate that the optimal portfolio selection follows a base-stock policy and the option execution follows a modified base-stock policy. We also develop the structural properties of the optimal policy with respect to option contracts and inventories.

Suggested Citation

  • Haifeng Wang & Houmin Yan, 2006. "Supply Portfolio Selection and Execution with Demand Information Updates," International Series in Operations Research & Management Science, in: Houmin Yan & George Yin & Qing Zhang (ed.), Stochastic Processes, Optimization, and Control Theory: Applications in Financial Engineering, Queueing Networks, and Manufacturing Systems, chapter 0, pages 249-279, Springer.
    • Handle: RePEc:spr:isochp:978-0-387-33815-6_13
    DOI: 10.1007/0-387-33815-2_13
    as

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