Table of Content

20 May 2014, Volume 22 Issue 5 Previous Issue    Next Issue

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Pricing Covered Warrants in a Sub-Fractional Brownian Motion with Transaction Costs XIAO Wei-lin, ZHANG Wei-guo, XU Wei-jun 2014, 22 (5):  1-7.  Abstract ( 1502 )   PDF (932KB) ( 1788 )   Save In order to reflect the long memory property of the financial asset, the sub-fractional Brownian motion is introduced to capture the underlying asset of covered warrants. The pricing model of covered warrants is proposed by using the theory of stochastic integration and the method of partial differential equations. Moreover, the problem of parameter estimation is also discussed in this paper. Finally, an empirical study based on China's warrant market is presented. The pricing results of different models illustrate that the long memory property and the transaction costs have a significant impact on pricing results. References | Related Articles | Metrics

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Comparatively Study on Portfolio ES Models under European Debt Crisis YU Wen-hua, WEI Yu, CHUN Wei-de 2014, 22 (5):  8-15.  Abstract ( 1490 )   PDF (869KB) ( 1268 )   Save DCC-GARCH and time-varying Copula-EVT models are constructed respectively to discuss the changes of dependencies between stock markets after the outbreak of European Debt Crisis. 2-2 combinations of the stock index returns are made, the portfolio ES models are established under various models assumed, and the measurement accuracy of all ES models are compared and discussed after the crisis through backtesting analysis. China Shanghai Composite Index, the Frankfurt DAX index of Germany and S&P500 Index of the United States are used to make empirical experiment. Empirical studies show that after the crisis, the risk measure accuracy of time-varying Copula-EVT-ES models are significantly higher than DCC-GARCH-ES.Further, it is important to select marginal distribution for time-varying Copula-EVT-ES models. Finally,under extremely volatile financial market conditions, the time-varying t-Copula-AR(1)-GJR(1,1)-EVT-ES model, which is good at capturing the leverage effect and characterizing fat tails, achieves relatively better risk measure results. References | Related Articles | Metrics

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Optimal Asset Allocation Based on Dynamic Loss Aversion Portfolio Model and Empirical Research JIN Xiu, WANG Jia, GAO Ying 2014, 22 (5):  16-23.  Abstract ( 1283 )   PDF (1547KB) ( 1504 )   Save Considering the psychological characteristics of loss aversion from the perspective of behavioral finance, a dynamic loss aversion portfolio optimization model that maximizes the expected utility is constructed. Dividing China's stock market into three states including rise, decline and consolidation, we empirically study the optimal asset allocation and performance of the dynamic loss aversion portfolio model is empirically studied comparing it with static loss aversion portfolio model as well as mean-variance and CVaR portfolio models. It is found under different market conditions, dynamic loss aversion investors have different optimal asset allocation ratios. Meanwhile, dynamic loss aversion portfolio model clearly outperforms static model, mean-variance portfolio model and CVaR portfolio model. The conclusions above can provide investors with advice when making investment decisions. References | Related Articles | Metrics

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The Analytical Model of Small and Micro Enterprises’tax Rate Adjustment under the Structural Tax Cuts Policy LI Feng, YAO Shujie 2014, 22 (5):  24-32.  Abstract ( 1429 )   PDF (979KB) ( 1064 )   Save The marginal effect of structural tax cuts policy on supporting the real economy and the industrial structure adjustment is increasingly weakened. Considering the research on small and micro enterprises' tax cuts is scarce and non-systemic, an analytical model of small and micro enterprises' tax rate adjustment is set up. Through the discussion of employees, enterprises and governments' goals, the expressions of key indicators are gotten, and the relationship model of the government' goal and enterprises' tax rate is established with nice propositions are deduced. It shows that tax rate adjustment is the replacement of national preferences of welfare and employment in essence. There isn't any optimal tax rate of small micro enterprises but only the worst one. The current rate is lower than the worst one, and belongs to the left-side tax rate. The evaluation criteria of tax rate depends on its deviation from the worst tax rate, rather than its absolute value. It is also found that under the premise of maintaining the current left-side tax rate, the government can also achieve the effect of structural tax cuts through increasing investment in the fields of vocational training and social health insurance. The foundation of model and the introduction of propositions related enrich the theoretical system of structural tax cuts policy while having certain practical significance on small and micro enterprises' tax rate adjustment. References | Related Articles | Metrics

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Linear Optimization Model for Life Insurance Pricing WANG Bo 2014, 22 (5):  33-41.  Abstract ( 1556 )   PDF (1240KB) ( 1303 )   Save There are various interest rates of different terms in the actual financial markets. In order to calculate the life insurance rates under the condition of multiple interest rates, a linear programming model which is called "Income-outcome problem(IOP)" was established on the basis of the definition of maximum accumulation function, and its optimal value describes the maximum level of insurance payment that can be achieved through the rational arrangement of investment term of premium funds. Using local optimization method, two properties of the optimal solution of IOP are proved, and these properties show that the premium income fund should gives priority to the investment which has longer term (that is, larger interest rates) on the condition of meeting the insurance expenditures. For some typical life insurance product model, we give the structure of the optimal solution and list the calculated results of premium rate of two specific examples. The results show that the main factor in the calculation of premium rates is the longest term interest rate, followed by an comprehensive level of the different interest rates. The model of this paper also provides the basis for creating generalized theory of interest under the condition of multiple interest rates. References | Related Articles | Metrics

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Housing Price Fluctuation, Monetary Policy and the Social Welfare Loss in China CHEN Li-feng, FAN Hong-zhong 2014, 22 (5):  42-50.  Abstract ( 1467 )   PDF (2213KB) ( 1977 )   Save A dynamic stochastic general equilibrium (DSGE) model including ordinary consumption goods and housing sector is constructed to analyze the housing price inflation and the welfare loss in China. The result of impulse response function and Bayesian shock decomposition shows that monetary policy plays the most significant role in promoting the housing price fluctuation in China. The Based on the social welfare loss function with is introduced by the method of Woodford[1],policy experiment is carried out. The result reveals that the policy regime targeting housing sector supply and housing price inflation may cause much less welfare loss, that is, increase the housing supply and regulate the housing price, which is helpful for the regulation of housing market. Furthermore, the actual social welfare loss is computed, which may be useful to quest for the optimal policy for regulating the housing market. References | Related Articles | Metrics

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A Location and Distribution Model with Hierarchical Capacities under Different Carbon Emission Policies YANG Jun, LU Wei 2014, 22 (5):  51-60.  Abstract ( 1469 )   PDF (2667KB) ( 1100 )   Save Environmental protection issues are getting a shift of focus with economics development. In this article, the impact of different emission policies on the logistics and distribution modes in supply chain is studied by constructing distribution centers location model with hierarchical capacities under different carbon emission policies. Then the data from OR lab and Carbon Trust is used to study the effect of four carbon emission polices on logistics model, operational cost and carbon emission. It is found that the dimension of facilities is small-scale and relatively scattered under high emission cap while it is large-scale and relatively centralized under low emission cap. Furthermore, the government can restrain the emission of corporations by implementing appropriate strategies. Finally, it is also suggested that companies have more incentive to reduce carbon emission under carbon trade mechanism among these policies, and they are most likely to accept the carbon trade mechanism. References | Related Articles | Metrics

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Contract Design for Coordination Conflict of Dual Channels Supply Chain based on E-Market ZHAO Li-qiang, XU Jia-wang 2014, 22 (5):  61-68.  Abstract ( 1502 )   PDF (856KB) ( 1924 )   Save With the rapid development of e-commerce, the manufacturer sell its product directly to the customer through Web-based channel while keeping the traditional retail channel. In general, electronic channel widens the market scope, decreases the operation cost, and satisfies the individual requirement. However, it always hurts the retailers profit, leads to retailers' resistances and gives rise to the channel conflict. Previous researches have mainly discussed the dual channel coordination based on the modified contract of traditional channel. In order to overcomes the weakness of previous studies to design the contract to focus on both the dual channel coordination and channel conflict, a channel structure is considered where a manufacturer opens up a direct Internet channel to competition with the traditional channel directly and sells a single product via its retailers' traditional channels and Internet direct channels. Further,the aggregate demand function with demand depending on price under dual channel is developed based on consumer's utility theory, and the decision model is constructed based on the Game Theory.At last, the equilibrium results of decentralized and centralized dual-channel supply chain are discussed based on profit maximization and Stackelberg game. The equilibrium results show that when manufacturer opened an e-direct channel and operated dual channels distribution system which makes the retail's profit decrease and lead to the channel conflict. In order to coordinate the dual channel supply chain, a modified contract of wholesale price added e-channel price is designed, which can coordinate the dual channel and remove double marginalization effect. In order to explore whether the designed contact can resolve the channel conflict, a modified revenue sharing contract added e-channel price and lower wholesale that coordinated the dual channel and solved the channel conflict is proposed, which make the members of supply chain realize the Pareto improvement. In summary, not only the dual channel coordination and the dual margin effect based on the modified contract of wholesale price added e-channel price, but also the channel conflict based on a modified revenue sharing contact are resolved. The designed contract can guarantee that the profit of members under dual channel is better than in single traditional channel. That is to say, the contact is effective and executable. References | Related Articles | Metrics

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A Three-Phase Synchronized Shipment Model of Two-Echelon Supply Chain System XIONG Hao, YAN Hui-li 2014, 22 (5):  69-74.  Abstract ( 1594 )   PDF (1089KB) ( 1176 )   Save The vendor-buyer integrated production-inventory system is an important component of the supply chain operation. So far, more and more literatures have been interested on this theme. However, all the shipment policies hitherto been presented have obviously defects which will lose the optimal order scheme. In this paper, the marginal analysis method is used to analyzed the relationship between the change of order quantity and system inventory cost. Firstly, the buyer's quantities of the twice adjacent orders are adjusted while keeping their whole quantity unchanged. Then, both the producer's and the buyer's inventory and their inventory cost are recalculated. Finally, a "three phase" rule of the best order strategy of this system can be deduced. First stage is the increase ordering stage during the first part of the producer's production. And the buyer needs to increase the ordering quantity according to the ratio of the productivity and the demand rate. The second stage is the equal ordering stage during the second part of the producer's production. And the buyer will make several ordering with certain equal ordering quantity in this stage. The third stage is the equal ordering stage after the vendor's production, which means the buyer will make several ordering with equal ordering quantity after production. According to this characteristic, the corresponding mathematical model of ordering strategy can be constructed by only six variables, which include the quantity and the times of ordering during the various stages. Compared with the other direct mathematical model with every possible number of the order and their ordering quantities, not only the variables of the model are reduced, but also the solution process is become relatively simple. Finally, two simulation examples commonly used in many literatures are analyzed. And the result shows that this strategy can actually find the optimal solution while other strategies lost. References | Related Articles | Metrics

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Algorithm and Model of Responsibility Relationship between Department and Post based on Business Process WANG Guang-ya, LI Xiao-ping 2014, 22 (5):  75-82.  Abstract ( 1496 )   PDF (1918KB) ( 1693 )   Save The responsibility relationship of department and post of functional management is studied and the concept model of the relationship based on business process is established. The correlative influences of business and its process, post and process node and department and its responsibility are discussed. Furthermore, the responsibility matrixes of department and post, post and business process and business process and department are analyzed and its algorithm of conversion are established in this paper. With the help of A corporation's example, the related problems about the algorithm and its application are also discussed at last. References | Related Articles | Metrics

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Equilibrium Move Order of Multi-Period R&D Game under Endogenous Timing YANG Xiao-hua, XIA Huo-song, GU Wei, CHEN Wen-lei 2014, 22 (5):  83-90.  Abstract ( 1714 )   PDF (1331KB) ( 1038 )   Save Based on endogenous timing game theory, the equilibrium move order of R&D is studied in this paper in a multi-stage game in which firms R&D are followed by competition in product market, with the assumption that in product market the demand function is linear and the move-order is simultaneously. With backward induction it is shown that, equilibrium R&D order is only decided by firms' R&D spillover. When both firms' spillover rates are low (high), the equilibrium R&D order is simultaneous play (sequential play with both leader-follower configurations). When one firm's spillover rate is low and the other's is high the equilibrium R&D order is sequential play with the low-spillover-rate-firm as the leader. When equilibrium R&D order is sequential play the total R&D level, the social welfare and the output(price) in product market are (is) higher (lower) than simultaneous R&D. References | Related Articles | Metrics

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The Incentive Compatibility Price Model of Transmission and Distribution under Asymmetric Information CAI Jian-gang, YE Ze 2014, 22 (5):  91-97.  Abstract ( 1350 )   PDF (2273KB) ( 1222 )   Save There is an asymmetric information between government and enterprise of transmission and distribution. However, government can design a set of incentive compatible mechanism to induce enterprise reporting cost honestly through introducing three policy instruments which are price, transmission capacity and transfer payment. The regulation pricing model of transmission and distribution enterprise based on incentive compatible mechanism not only safeguards the consumers' interests, but also ensures the transmission and distribution enterprise without losing. When the government regards the profit of transmission and distribution enterprise and the surplus of consumer as of equal importance, the price will be equal to marginal cost, and resources will be optimal configuration. At the same time, the enterprise will receive maximization profits. The model used in this paper provides theoretical and practical guidance for pricing mechanism of our transmission and distribution price. References | Related Articles | Metrics

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A Sample-Set based Interval Gray Target Classification and Decision-Making Model and Its Applications LIANG Yan-hua, GUO Peng, ZHU Yu-ming 2014, 22 (5):  98-103.  Abstract ( 1441 )   PDF (981KB) ( 818 )   Save Based on the analysis of gray target decision making under uncertainty, an interval gray target classification and decision-making model is put forward. In this model,the gray target decision-making is extended to uncertain circumstance in which the interval numbers serve as the decision-making information, and a method for measuring the target-center distances of the interval numbers is proposed. According to the target-center distance, a method for determining the critical values of target-center classification in the gray target classification and decision-making is presented. Besides,a determined model involving the target weights and the critical values of the classification is constructed, aiming at the minimum value of the accumulate deviation between the target-center distances in the case and the critical values.At last, classification and ranking of the new objects are conducted according to the calculated weights and the critical values of the classification. Case analysis shows the proposed model is effective and feasible. As a result, this model can be applied to multi-attribute classification decision-making problems with abundant objects and uncertain number of classification. References | Related Articles | Metrics

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Model and Method of Multiple Attribute Decision Making with Relative Variable Weights LI Chun-hao, LI Meng-jiao, MA Hui-xin, DU Yuan-wei, LI Jin-jin 2014, 22 (5):  104-114.  Abstract ( 1279 )   PDF (959KB) ( 1484 )   Save Both the multiple factor decision-making method based on variable weights (MFDMM-VW) and the Choquet integral model (CIM) for multiple attribute decision-making (MADM) cannot reflect reasonably the decision-maker's point-dependence preference in MADM. To overcome the mentioned shortcoming, a new MADM approach to evaluation and decision making, i.e., the MADM model with relative variable weights (MADMM-RVW), and its corresponding method are presented based on the swing-weighting, the analytic network process, and the relative evaluation thought embodied in data envelopment analysis. Compared with the MFDMM-VW, the MADMM-RVW is able to reflect directly the decision-maker's point-dependence preference structure, and thus overcome the arbitrariness of the MFDMM-VW in reflecting the decision-maker's point-dependence preference, resulted from decision analysts when the MFDMM-VW is applied. Compared with the CIM, the MADMM-RVW can not only reflect the decision-maker's point-dependence preference but also avoid more efficiently the CIM's large-scale estimation problem of decision parameters in many MADM cases. Applied in a case study, the MADMM-RVW is showed to give decision conclusions well consistent with objective existence and the decision-maker's qualitative opinions on preference dependence, and thus be capable of better reflecting the decision-maker's specific preference behaviors. References | Related Articles | Metrics

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Efficiency Evaluation of Parallel Systems with Two Components Based on Stackelberg Game Theory XU Hao, SUN Yan-hong, BIAN Yi-wen 2014, 22 (5):  115-120.  Abstract ( 1345 )   PDF (943KB) ( 1053 )   Save There exists a typical kind of efficiency evaluation problem for parallel systems, which has the following characteristics. Firstly, decision making unit (DMU) has two parallel components. Secondly, in any DMU, a component is in a dominant position, and another component living in a subordinate position. Lastly, some input resources are shared between two components and cannot be proportionally differentiated with each other. To address this kind of efficiency evaluation problem, a DEA approach is proposed to determine the efficiency of the overall system and internal components by analyzing the overall efficiency of the DMU and individual efficiency of each component, based on Stackelberg game theory. The proposed approach can not only evaluate the efficiencies of the whole system and its components, but also provide the allocation mechanism of the shared resources. A case of bank branches is presented to demonstrate the rationality and validity of the proposed approach. References | Related Articles | Metrics

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Tresearch on Path Lengths Paradox and Its Characteristics Under Spliced Network KAN Zhi-nan, KONG Feng, QI Jian-xun 2014, 22 (5):  121-130.  Abstract ( 1224 )   PDF (1560KB) ( 813 )   Save A paradox in spliced network is found in this paper, that is when adding a time constraint but in two different types between activities may produce different longest path. A whole new presentation of spliced network is given by studying the paradox. The new spliced network presentation is quite simple but also unified with the classic CPM network in forms. This unification not only helps to solve the problems of how to calculate the time parameters, activity floats and how to find the critical path in spliced network, but also makes extension of the theory found in CPM network to spliced network becomes possible. For example, the activity total float Tij equals to the critical path length μ∇ minus the longest path length μij∇ through activity(ij), that is (μ∇-μij∇); the sum of activity free float of any path μ equals to the critical path lengthμ∇ minus the length of this path μ, that is (μ∇-μij∇). By using these extended theory, three convenient methods are designed to detect the difference of critical and sub-critical path lengths and to find out the sub-critical path. These methods are illustrated both effective and convenient in spliced network applications. References | Related Articles | Metrics

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Decision Model on E-waste Collecting and Recycling Considering the Leading of Government’s Premium Mechanisms YU Fu-mao, ZHONG Yong-guang, SHEN Zu-zhi 2014, 22 (5):  131-137.  Abstract ( 1472 )   PDF (1197KB) ( 1428 )   Save Most of e-waste have not been recycled and reused in an environment-friendly manner in China mainland, and there are mainly four kinds of collecting and recycling modes: manufacturers collecting (MDC-CMR), dealers collecting (MDC-CDR), third-party collecting (MDC-CTR) and registered e-waste treatment enterprises collecting (MDC-CR). Based on the practical situation, the decision-making problem about the e-waste collecting and recycling considering the leading of government's premium mechanisms is studied in this paper. Four collecting and recycling scenarios are discussed considering the government subsidy, decision models are established and the optimal parameters of the mechanism are discussed accordingly. It is found that the optimal retail price and the market demand of EEE in the four modes are equal. With the same amount of subsidies, the recycling rate of MDC-CMR mode as well as manufacturers, dealers and registered recyclers' profit does not change with government's premium mechanisms. It is also found that MDC-CDR mode and MDC-CTR mode are more desirable than MDC-CMR mode if given the manufacturer responsibility for collecting and recycling. Results of numerical simulations also shown that, the combination of EPR and MDC-CTR can achieve higher recycling rate. Therefore, it is suggested to encourage manufactures, dealers, consumers, and other collectors and recyclers to participate e-waste recycling program from the perspective of system, objectives and processes. References | Related Articles | Metrics

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The Relationship of Ownership Structure and Survival of Subsidiary Based on Evolutionary Theory：The Moderating Effect of Environmental Jolt and Slack Resources YU Fei, LIU Ming-xia 2014, 22 (5):  138-148.  Abstract ( 1579 )   PDF (986KB) ( 990 )   Save Understanding why organizations are affected so differently by environmental change is fundamental to theories of industrial organization and evolutionary. One possible explanation for differential effects is that the impact of environmental change on performance and survival depends, to some extent, on an organization's autonomy.Based on onevolutionary theory of organization, the effect of slack resources of subsidiaries and ownership structure of subsidiaries on the ability of them dealing with environmental change is studied,and the analysis of dynamic evolution in environmental change and the survival of subsidiaries is carried out by piecewise-exponential model. To investigate this problem, a model is tested that examines differences between wholly owned subsidiaries and joint ventures at founding and during environmental change, while addressing the role of resources in this process. Furthermore, empirical research is made based on the sample of 1932 non-state-owned enterprises' subsidiaries on Guangdong province in China. Most data comes from the enterprise database in Guangdong province administration for industry and commerce.It is found that the wholly ownedsubsidiaries have low mortality rates when compared to joint ventures (JVs) in the stable environment, but that their mortality rates increase more rapidly during an environmental jolt. The differences in slack resources, the utilization efficiency and ability of resources is an important factor leading to the difference of subsidiaries survival in the environment change, whereas these capabilities is influenced by subsidiary autonomy to some extent, and the autonomy is influenced by ownership structure. The results not only disentangle the effects of unobserved heterogeneity in learning, adaptation and evolution processes of subsidiaries, but also indicate that subsidiary autonomy helps cultivate their competitiveness and the ability of dealing with environmental changes, and then reduce the mortality rates of subsidiary. Going beyond the traditional focus on static analysis of the relationship between ownership structure and the survival of subsidiaries, the theory perspectives for research on the issue is enriched by this paper. References | Related Articles | Metrics