Researchers at Royal Melbourne Institute of Technology University Release New Data on Management Science (Commodity options purchasing and credit financing under capital constraint)
By a News Reporter-Staff News Editor at Science Letter -- New research on Science is the subject of a report. According to news reporting originating from Melbourne, Australia, by NewsRx correspondents, research stated, "This paper investigates a purchasing contract with options under capital constraint and credit support from a financial institution. The buyer, who has limited capital, can buy commodity options and a fixed order, and choose to exercise all or part of the options at a later time."
Our news editors obtained a quote from the research from the Royal Melbourne Institute of Technology University, "We characterize the buyer's optimal ordering strategy with limited capital. There is one critical value for the capital; that is, the buyer will only purchase a fixed order when the capital is less than the value. With more capital, the buyer will reduce the fixed order quantity and increase the option orders until the capital is used up or the global optimization is reached. This result implies that the option is a risk-hedging tool only for easy finance companies. Furthermore, we find that when the buyer obtains funding from a financial institution such as a bank, the buyer's profit will be increased with bank financing, and the buyer's optimal purchasing decision will follow the similar policy and order less options and more fixed orders compared with the case when there is sufficient capital."
According to the news editors, the research concluded: "Numerical examples are provided to demonstrate the theoretical results."
For more information on this research see: Commodity options purchasing and credit financing under capital constraint. International Journal of Production Economics, 2014;153():230-237. International Journal of Production Economics can be contacted at: Elsevier Science Bv, PO Box 211, 1000 Ae Amsterdam, Netherlands. (Elsevier - www.elsevier.com; International Journal of Production Economics - www.elsevier.com/wps/product/cws_home/505647)
The news editors report that additional information may be obtained by contacting Y. Feng, RMIT Univ, Sch Aerosp Mech & Mfg Engn, Melbourne, Vic 3000, Australia. Additional authors for this research include Y.P. Mu, B.Y. Hu and A. Kumar (see also Science).
Keywords for this news article include: Science, Melbourne, Investment and Finance, Australia and New Zealand
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