Put Option Contracts in Newsvendor Model with Bankruptcy Risk

Pooya Hedayatinia (1) , David Lemoine (2, 3) , Guillaume Massonnet (2, 3) , Jean-Laurent Viviani (1)

1 CREM - Centre de recherche en économie et management
2 LS2N - équipe SLP - Systèmes Logistiques et de Production
3 IMT Atlantique - DAPI - Département Automatique, Productique et Informatique

This paper studies a newsvendor problem in which the retailer can mix two contracts, a wholesale price and a put option contract. We consider that the newsvendor is financially constrained and may need to contract a loan to cover her ordering costs, with a probability that she becomes bankrupted. We show that when a put option contract is available, the retailer’s order quantity increases, while the bankruptcy risk and therefore the loan’s interest rate decrease. We illustrate these results with numerical experiments on a simple example for different demand sizes and variability.

Mots clés: Newsvendor; Finance; Bankruptcy; Put option contracts

Domaines: Informatique [cs]; Recherche opérationnelle [math.OC]

Pooya Hedayatinia, David Lemoine, Guillaume Massonnet, Jean-Laurent Viviani. Put Option Contracts in Newsvendor Model with Bankruptcy Risk. APMS 2021: IFIP International Conference on Advances in Production Management Systems, Sep 2021, Nantes, France. pp.167-174, ⟨10.1007/978-3-030-85906-0_19⟩. ⟨hal-03337506⟩