Table of Content

20 September 2014, Volume 22 Issue 9 Previous Issue    Next Issue

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VaR and ES Measurements based on ARCH-Expectile Model XIE Shang-yu, YAO Hong-wei, ZHOU Yong 2014, 22 (9):  1-9.  Abstract ( 2433 )   PDF (1461KB) ( 2209 )   Save Determining contributions to an asset or portfolio of assets risk is an important topic in risk management. A downside risk is of primary concern during the last decade. Value at risk and expected shortfall have become two popular downside risk measurements associated with portfolio of assets. Kuan et al[1].proposed an expectile-based VaR for various CARE model. In this paper, a linear ARCH-Expectile model is proposed to extend Kuan et al. CARE models by introducing an ARCH effect modeling financial data with heteroscedasticity. Based on the coefficient estimates of the proposed expectile model, not only the contribution to portfolio downside risk of risk factors can be analyzed the magnitude of downside risk can also be evaluated. Meanwhile, a two-step estimating procedure is provided and the asymptotic properties of estimators are extablished. Finally, the proposed method is applied to analysis the risk of a company's stock from three aspects of market liquidity, company fundamentals and micro fundamentals. The empirical results find that the risk factors and their magnitude and direction, which impact on return of the stock, are varying with the level of tail losses. References | Related Articles | Metrics

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Information Structure and Cost of Equity—When Information Cost Presents YAN Yan-yang, ZHOU Zhi 2014, 22 (9):  10-17.  Abstract ( 1875 )   PDF (890KB) ( 1768 )   Save Relaxing the assumption that information is free,a information structure model is developed adding a new factor—information cost, under the theoretical framework of information structure model created by Easley and O'Hara. The equilibrium model is established between information structure and four aspects of information structure, including information cost, information risk, quality of information disclosure and prior information.The results are concluded in four propositions. In empirical research, by selecting adverse selection cost as the proxy of information cost and choosing probability of informed trading(PIN) to measure information risk, it is found that the relation between information cost and equity cost is an inversed U shaped curve. Higher information risk is accompanied with higher cost of equity. Better quality of information disclosure and prior information means lower equity cost. The empirical results are consistent with the former four propositions.The initiative difference from Easley and O'Hara are that adding information cost into the theoretical model and provide empirical results. References | Related Articles | Metrics

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Bidding Strategy and Expected Revenue in a Descending Pay-per-Bid Auction DU Li, LIU Li-li, JIA Jun-xiu 2014, 22 (9):  18-25.  Abstract ( 1968 )   PDF (1105KB) ( 1582 )   Save Recently, many electronic commerce websites have begun to using "pay-per-bid" auctions to sell items, from mp3 to television. In these auctions, bidders pay a fee for placing each bid. Although the winner's final purchase price is much lower than the market price of the item, the auctioneer can still profit from the bid fees.An analysis of descending pay-per-bid auctions is made in this paper. A general, full-information model is proposed and its equilibrium strategies are described. It can be found that the auctioneer's expected revenue is less than the market price. Then, the ending rules are modified to increase the auctioneer's expected revenue. A model is proposed and its equilibrium strategies are then solved. Further, the equilibrium strategies and the auctioneer's expected revenue are compared between in the ascending and descending pay-per-bid auctions. It is concluded that the probability that the descending pay-per-bid auction ends increases with its process, while the auctioneer's expected revenue in the descending pay-per-bid auction is less than that in the ascending pay-per-bid auction. Finally, the impacts of some controllable factors, i.e. the starting price, the bid fee and the bid decrement, on the expected revenue are analyzed. Utilizing numerical examples, results show that the optimal bid fee is 1 yuan and the optimal bid decrement is 0.01 yuan. Moreover, the auctioneer should set the starting price to be 4.5 percent of the market price to maximize his expected revenue. Analysis of descending pay-per-bid auctions represents a well-motivated avenue for further research and practice. References | Related Articles | Metrics

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Study on Oligopoly Power Producer’s Capacity Investment under Policy Uncertainty ZHANG Xin-hua, YE Ze 2014, 22 (9):  26-32.  Abstract ( 2024 )   PDF (1463KB) ( 1547 )   Save Investment policy is a major element influencing capacity investment strategy,but is uncertain to power producers. In order to investigate the influence, a capacity investment model is proposed under demand and policy uncertainties based on real option theory. The model is solved, and the two investment thresholds are simulated with some basic data of existing literature numerically. The results indicate that power producer will delay investing if the ratio of subsidy is lower, and will preempt investing if the ratio of subsidy is higher, with higher expectation of cancelling investment subsidy, and the highest investment enthusiasm will appear when the subsidy will be cancelled immediately. Moreover, power producer will delay investing with larger possibility of implementing investment subsidy, and will delay investing as far as possible when the subsidy will be implemented immediately. The paper provides a theoretical way to explore the optimal investment policies in basic industries to some extent. References | Related Articles | Metrics

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Research on Profits Allocation between Supplier and Buyer with Risk-aversion in Multi-attribute Reverse Auctions TIAN Jian, CHEN Qu 2014, 22 (9):  33-39.  Abstract ( 1765 )   PDF (1116KB) ( 1799 )   Save The profits allocation and conditions of building the cooperative relationship between buyer and supplier with risk reverse in multi-attribute reverse auctions are explored in this paper. Non-cooperative and the cooperative game models are constructed to analyze the risk attitudes of both sides how to impact the result of profits allocation, attain the conditions to build the cooperative relationship and determine the optimal ratio of profits allocation. Combined with the simulation experiment, it is concluded that the factors affecting both sides' non-cooperative profits include the supplier's cost parameters and the number of bidders. The ratio of the cooperative profits allocation is affected by the coefficients of risk aversion for both parties. The subsidy that the buyer provides to the supplier is affected by the parties' coefficients of risk aversion and their bargaining power. The basic conditions of establishing cooperative relationship include collective rationality and individual rationality, which are captured by the information sharing between both sides and the incremental profits allocation. Finally, the necessary condition of maintaining and developing a long-term cooperative relationship is an optimal distribution ratio, which maximizes utility for both sides. References | Related Articles | Metrics

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A Class of Network Bottleneck Capacity Expansion Problem with Constraints LIU Hui, YANG Chao, YANG Jun 2014, 22 (9):  40-48.  Abstract ( 1893 )   PDF (1037KB) ( 1599 )   Save Established infrastructure makes a great impact on demand changes in particular physical network. It is necessary to adjust the capacities of arcs to improve the service of the network when demand increases. The process of adjusting and optimizing should possible to minimize influences on people's daily life, by considering not only the expansion cost but also the total edges adjustment. In this paper, a network G, the initial capacity of edge ei and the cost for increasing per unit capacity of ei are initially set. Two factors: the improvement cost and the total edges adjustment are considered in this problem. The task is to determine new capacities xi so that the capacity of the network can be increased to the maximum extent, i.e. max{ minei∈T xi,T is the spanning tree of network G }. Firstly two related models are solved instead of the original model. The relations and differences between the two related models and the original problem are analyzed. Then an algorithm is present to solve the original problem in polynomial time. Finally, an example is computed to illustrate the steps of the algorithm and analyze the impacts of parameters to the capacity of the system. References | Related Articles | Metrics

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The Effect of Investor Sentiment on Return and Volatility of Stock Market—Based on Empirical Study of Net Flow of Open-end Equity Funds WANG Chun 2014, 22 (9):  49-56.  Abstract ( 2575 )   PDF (984KB) ( 2383 )   Save Investor sentiment make a better explanation of the sharp fluctuations of the stock market based on the the investor irrationality. Domestic research analysis of the open-end equity funds based on investor sentiment is still blank. In this paper, equity mutual fund flow is used as investor sentiment, and GARCH-M model is applied to analyse the effect of investor sentiment on stock market. Results show that there is positive feedback relations between investor sentiment and stock return.And in a stock market value for classification combination, it can be found that conditional volatility of large cap portfolio becomes higher, expected return become larger; and that conditional volatility of small cap portfolio becomes higher, expected return become smaller. This study makes a contribution for the further development of the indirect indicators of investor sentiment. References | Related Articles | Metrics

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Third-party Electronic Market’s Pricing Strategies in the Early Stage——An Empirical Study of Online Peer-to-Peer Lending Marketplace QIU Jia-xian, LIN Zhang-xi, TONG Mu 2014, 22 (9):  57-65.  Abstract ( 1867 )   PDF (1344KB) ( 2149 )   Save According to the development of internet economy, the third-party electronic platform's pricing strategy plays a very important role in the early stage of the platform's development. However, there is little related empirical research based on the theory of two-sided market because of the lack of data. Based on the monopoly model built by Armstrong, the weighted two-stage least square method is used to empirically investigate how the users' inter-and intra-group network externalities and pricing strategies influence on the platform's profit from July 13th 2009 to March 7th 2011 on Prosper.com. The main results show that lenders and borrowers have both positive inter and intra-group network externalities.Further, user's price elasticity would be influenced by the pricing strategies and platform's development.And platform's profit has a negative relationship with user's price elasticity. The results show some characteristics of the third-party electronic market, as well as some shortages of current research about two-sided market. References | Related Articles | Metrics

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Study on Critical Infrastructure Network Risk with Natural Disaster LI Jun, LI Xiang-yang, ZHANG Bai-shang 2014, 22 (9):  66-73.  Abstract ( 1896 )   PDF (1926KB) ( 1803 )   Save Critical infrastructure protecting is an important part of emergency management, and determining risk and protecting order is the basis of protection mechanism. With the threat of natural disaster, exceeding probability of information diffusion theory is introduced into the risk model to study the cascade effect risk of network about trans-regional critical infrastructure. Further a method is propased to determine the degree of risk and protect order about critical infrastructure network. Taking power grid with ice disasters for example, the risk of network cascade effect is studied, and the rationality of regarding this kind of risk to be as protection reference is verifed. References | Related Articles | Metrics

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Research on the Equitable Apportionment of Marine Salvage Reward Based on Collaborative Rescue at Sea WANG Jun, WANG Mei-rong, QU Ran-lin 2014, 22 (9):  74-81.  Abstract ( 1886 )   PDF (1212KB) ( 1573 )   Save Marine salvage reward aims to encourage volunteers to rescue properties in distress at sea following by "no cure no pay principle". Based on the equitable apportionment of the rewards,the effective rescue is benefited with sufficient collaboration by all salvors. In practice, the apportionment of rewards is normally calculated on the capital input of the co-salvors, neglecting the contribution of non-capital inputs. In this paper, a solution is present which compensates the capital input of each salvor firstly, then evaluates the contribution of non-capital inputs with two dimensions, which are the importance of the participants and the non-substitutable roles of their resources measured by the algorithm of Shapley value and re-purchase costs separately. This solution can be used for both external and interior apportionment of rewards among salvors and meeting the requests of the relevant international conventions and domestic law of each country thoroughly. References | Related Articles | Metrics

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Lead Time Determination in a Make-to-order Remanufacturing System with Limited Distribution Information LIU Bi-yu, CHEN Wei-da 2014, 22 (9):  82-89.  Abstract ( 1960 )   PDF (1498KB) ( 2005 )   Save A make-to-order remanufacturing system which is driven by customer orders is considered in this paper. In this system, in order to reassemble a finished product, two parts, one of which is from outside supplier and the other one is from reprocessing workshop, are needed. The remanufacturing time to obtain a reusable remanufactured part is random due to the different quality of the disassembled parts and the distribution f is not known but only the first and second moment. The objective is to examine the remanufacturing time to determine the planned lead time of this remanufacturing system. This considered problem is described as a moment problem. A min-max model is developed to minimize the inventory holding cost and stockout cost and further solved by duality theorem, which provides better results when compared to the traditional Normal and Uniform approximation through numerical examples. The results of this study capture well all distributions with the same first and second moment and accords with practice more and are helpful to the production planning and scheduling of remanufacturing in practice. References | Related Articles | Metrics

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Logistics Coordination Contract under the Mode of Competing TPLSPs WANG Yong, ZHANG Xiao-juan 2014, 22 (9):  90-97.  Abstract ( 1888 )   PDF (887KB) ( 1619 )   Save In this paper,a model is proposed to study a system,which consists of one client enterprise and two competing third party logistics service providers(TPLSPs).Meanwhile, the effort level of two TPLSPs affect the stochastic demand simultaneously. Using the game theory, the optimal decisions are given, the dynamic relations are studied among the optimal effort level of two TPLSPs and their share of market, service price and unit cost, in the two cases of centralized decision-making and decentralized decision-making. In order to coordinate the model, a combined contract is introduced in which the client enterprise should share its revenue with both TPLSPs, and need to take part of the effort cost of both TPLSPs, discuss the conditions of the contract could coordinate the system. It can be found that heavier share of market, more easily the TPLSP accept a contrace with a lower share of enterprise's revenue. Results prove that competition of TPLSPs can not only improve both TPLSPs's effort level, but also promote the enterprise's optimal order quantity. References | Related Articles | Metrics

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The Optimal Cost-Sharing Incentive Strategy of Main Manufacturer-Suppliers for Complex Product CHEN Hong-zhuan, FANG Zhi-geng, LIU Si-feng, HE Li-fang 2014, 22 (9):  98-105.  Abstract ( 1857 )   PDF (937KB) ( 2168 )   Save At present, the "main manufacturer-suppliers" collaborative model becomes the main production model of complex products. Compared with the traditional collaborative model, the "main manufacturer-suppliers" collaborative model pays more attention on supplier's effort level rather than cooperation stimulation between manufacturers and suppliers. The effort level of suppliers determines the level of complex production's production quality and efficiency. In order to promote the effort level of supplies and establish the long-term strategic partner, some research are conducted as follows: to design the parameters of effort level and propose the motivation strategy which involve the effort cost-sharing issue between the manufacture and suppliers; to establish the optimal cost-sharing model based on the effort level of suppliers; to discuss the motivation model under the two kinds of structure (Nash equilibrium and Stackelberg equilibrium). According to the cost-sharing issues between the manufacture and suppliers,the optimal cost-sharing ratio, optimal effort level and optimal reward are given. Results show that, when the effort level is equal or greater than the effort threshold value, the main manufacturer need to share the effort cost of the suppliers. On this occasion, there exists the optimal cost-sharing ratio. At the same time, the size of cost-sharing, influenced by unit gain coefficient and effort gain influence coefficient, is proportional to the square of the effort level of suppliers. Meanwhile, when the suppliers adopt the optimal effort strategy, they can achieve the optimal performance. In the meantime, this study shows that under the "main manufacturer -suppliers" collaborative model, Stackelberg equilibrium game which contains the master-slave relationship is superior to Nash equilibrium game. Furthering study by examples shows that the main manufacturer can adopt the motivation strategy about cost-sharing of suppliers to stimulate the effort level of suppliers and ensure the both sides' benefit growth so that they can achieve the pareto improvement. This article reveals the optimal cost-sharing issue about the main manufacturer stimulating the suppliers systematically, and it has an important guiding significance for the long-term strategic cooperation between the main manufacturer and suppliers of complex products. References | Related Articles | Metrics

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Revenue-Sharing Contract of Supply Chain Based on Consumer’s Preference for Low Carbon Products WANG Qin-peng, ZHAO Dao-zhi 2014, 22 (9):  106-113.  Abstract ( 2661 )   PDF (1159KB) ( 2504 )   Save In the case where consumers prefer to low carbon products and the supplier reduces its carbon emissions voluntarily, the questions of how to determine the optimum order quantity and in which situation the supplier should choose to reduce carbon emission are investigated. In addition, profits of the retailer and the supplier between cases of the non-carbon reduction and the carbon reduction are compared. It can be found that if the carbon emissions per unit product is too high, the supplier will not choose the carbon reduction strategy; when the carbon emission per unit product is low enough, choosing carbon reduction strategy can present a Pareto improvement; when the carbon emissions per unit product between the former two, the supplier's profit status becomes worse, but both the retailer and the supply chain channel's profits improve. In this case, there is space for improving the supply chain channel's earning status, but the improvement can't be realized in the absence of the supplier's support. To solve this problem, a revenue-sharing contract for coordinating the supply chain is designed. With this contract, both the supplier and the retailer achieve the Pareto improvement. Finally, how to determine the revenue sharing ration is analyzed with the Rubinstein bargaining model. References | Related Articles | Metrics

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Optimization Model and Algorithm Considers Carbon-capped Difference in the Collaboration of Location-Routing-Inventory Problem TANG Jin-huan, JI Shou-feng, ZHU Bao-lin 2014, 22 (9):  114-122.  Abstract ( 2500 )   PDF (1462KB) ( 1731 )   Save Recent years the great effect of economic activity on environmental degradation has been witnessed. Many policies have been made to control the carbon emissions, and the best-known is the Kyoto Protocol, The carbon emissions are gradually translated into regulations, which will put some press on the supply chain members. For another, some enterprises with social responsibility have engaged in the voluntary emission reduction programs, for example, company such as BP and Nike have took some actions on reducing emissions to improve their public image. However, reducing the carbon emissions of supply chain's operations provides a huge opportunity. As we know, location, routing and inventory are the key drives of cost and carbon emissions; the collaboration of them is the focus of this paper. The 3-stage supply chain network consists of plants, potential RDCs, and DCs. The carbon cap CCAP is from the regulatory organization, and the actually emissions are CEL,CERand CEIfrom location, routing and inventory, respectively. So the carbon-capped difference (CCD) is CEL+CER+CER-CCAP. If the CCD is negative, the supply chain members must buy the carbon credit from the carbon market to make up the shortage; else, they can make a profit on the redundant carbon cap. The buying carbon emissions e+ and selling carbon emissions e- must satisfyCEL+CER+CEI+e-≤CCAP+e+. When the cap and trade mechanism conducts, the CCD can translate into money. Given that premise, the collaboration of location-routing-inventory model is presented. The aim of this paper is to find an optimal decision minimizing the cost and emissions in supply chain operations. The combinatorial optimization BFA-PSO algorithm is presented to obtain the optimal solution of the proposed model. The case study from part of the northeast petrochemical sales company of CNPC has verified the validity and practicability of the model and algorithm. To compare the effect of CCD on the results, the solutions of joint optimization are also developed without carbon emissions. It can be seen that the joint optimization of location-routing-inventory with CCD considering is superior to the pure one without carbon emissions considering when the carbon emissions can be trade on the carbon market. Even though the carbon emissions are worthless on a commercial footing, the cost of CCD situation is slightly more, but it has a tremendously abatement. That is to say, it is possible to significantly reduce emissions with slightly increasing cost by supply chain operation management. It can be foreseen that the regulatory policy about carbon emissions will be more and more severe in future, this model and algorithm solved in this article shed a light on the trade-off between the cost and emissions, and also provide a way to reduce carbon emissions by operation adjustment. References | Related Articles | Metrics

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The Software Continuous Usage Research on the Context of Fighting Between QQ and 360：the Evidence from the Revised Expectation-Confirmation Model ZHENG Da-qing, LI Jun-chao, HUANG Li-hua 2014, 22 (9):  123-132.  Abstract ( 2209 )   PDF (1244KB) ( 1920 )   Save Based on the expectation-confirmation theory, software continuous usage of QQ in the context of fighting between the two famous companies, QQ and 360 is studied. The objective of this paper is to explore the mechanism of software continuous usage under the condition of outer impact. The research model, combining the variable of attitude which belongs to the information systems adoption stream, with the expectation-confirmation model, is tested by structure equation model. The theoretical value of the research clarifies the relationship of different theoretical foundation of the information systems continuous usage field. Furthermore, two kinds of software continuous usage mechanism are also identified. The practical value of the research not only explains the phenomenon of the fighting between QQ and 360, but also provides business suggestions of managing customers expectation and improving the customers' experience during the period of software usage by customers. References | Related Articles | Metrics

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On Long-Term Incentive Optimal Combination Model of State-Owned Enterprise Managers Based on Double Reputation KONG Feng, ZHANG Wei 2014, 22 (9):  133-140.  Abstract ( 1744 )   PDF (878KB) ( 1681 )   Save Short-term behavior problem of the managers is very serious in China's state-owned enterprise (SOE). It seriously prevents the state-owned enterprise's long-term development. To make China's economic prosperity and development, the SOE managers must implement the effective long-term incentive. Under the principal-agent theory, taking the goal of principal (maximizing the company's future performance) as foothold of research, the optimal combination of long-term incentive is studied and a combined model of double reputation (market reputation and political reputation) incentive and stock options incentive for SOE managers is proposed. Combining with the characteristics of China's SOE managers with the payment form of stock options, political reputation is modelled, and long-term incentive effect of double reputation, the optimal level of reputation influence coefficient and the optimal level of profit sharing ratio is studied. On the basis, the influencing factors of the manager's behavior choices characteristics, optimal incentive level of reputation and its' influence coefficient are analyzed. Finally,some suggestions are proposed for SOE manager's long-term incentive based on research results. This paper found that the rise of incentive degree can make the manager's behavior more in line with the interests of the enterprise. And the strengthening of optimal incentive degree can be though adjusting the impact factor to realize. In reputation incentive, the reduction of political reputation influence can lower the managers' speculative behavior level. And the reduction of political reputation influence coefficient can realize through the increasing the utility coefficient of market reputation. References | Related Articles | Metrics

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Supplementary Study on “Optimal Production Policy with Emission Permits and Trading” CHEN Bo-cheng, LI Ying-jie 2014, 22 (9):  141-148.  Abstract ( 1963 )   PDF (1618KB) ( 2192 )   Save In our country, the problem of emissions permit trading (cap-and-trade) is already put on the agenda and Shenzhen city already becomes the first official run mandatory carbon market in China. But named as the "world factory" China, there is little research on the direction of the emissions trading and production optimization combined. The literature 1, with its unique model and analysis, is the only paper published in the mainland in the direction of considering emissions permit trading condition in the production optimization research. Literature 2-3 are their research extending.Model and analysis proposed in literature 1 rather special, and there seems some of its work can still do further analysis. In the paper, based on results in literature, some supplementary improvements and the corresponding analysis are given, such as the optimal revenue results simplifying, a new result deriving, relevant results analyzing and comparing, as well as sensitivity and qualitative analyzing and so on. The new result can not only reflect more about the relation between the optimal purification level, optimal quantity and optimal revenue, but also can more intuitively show the given emission cap/quota character at the optimal revenue expression in their original study. Based on the results, more corresponding analysis is given, and the analysis results also reveal the hidden trouble in the "the Government Cap" given. Results in the paper can also be promoted into its multi-phase production optimization analysis. References | Related Articles | Metrics