Publication: Minimum-variance hedging for managing risks in inventory models with price fluctuations
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We consider the financial hedging of a random operational cash flow that arises in inventory operations with price and demand uncertainty. We use a variance minimization approach to find a financial portfolio that would minimize the total variance of operational and financial returns. For inventory models that involve continuous price fluctuations and price-dependent demand that arrives in continuous time, we characterize the minimum-variance hedging policies and numerically illustrate their effectiveness.
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Now Publishers
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Management science, Operations research
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Foundations and Trends in Technology, Information and Operations Management
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10.1561/0200000073
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