• Journal of Distribution Science
• /
• v.13 no.2
• /
• pp.15-24
• /
• 2015

Purpose - Foreign exchange risk control is in an important component in the international supply chain management. This study shows the importance of the reference period in forecasting future exchange rates with a specific illustration of KIKO currency option contracts, and suggests feasible preventive measures. Research design, data, and methodology - Using monthly Won-Dollar exchange rate data for January 1995~July 2007, I evaluate the statistical characteristics of the exchange rate for two sub-periods; 1) a shorter period after the East Asian financial crisis and 2) a longer period including the financial crisis. The key instrument of analysis is the basic normal distribution theory. Results - The difference in the reference period could lead to an unexpected development in contract implementation and a consequent financial loss. We may avoid foreign exchange loss by using derivatives such as forwards or currency options. Conclusions - We should consider not only level values but also the volatilities of financial variables in making a binding financial contract. Appropriate measures may differ depending on the specific supply chain pattern. We may extend the study with surveys on actual risk measures.

• Proceedings of the IEEK Conference
• /
• 2003.11b
• /
• pp.3-6
• /
• 2003

In this paper, we conduct a performance analysis for the composite scheme that is obtained by combining the data distribution and the data replication schemes usually used for the implementation of distributed directory service systems. The analysis results reveal that the composite model is a viable option to overcome the performance trade-off between the data distribution and the data replication model. In this paper, we present the performance model developed for the composite model by appling queuing modelling. Using the performance model, performance values for a variety of system execution environments are suggested which enable us to bring an efficient design for high performance distributed directories.

• Journal of the Korean Data and Information Science Society
• /
• v.23 no.2
• /
• pp.365-374
• /
• 2012

Weather derivatives designed to manage casual changes of weather, as opposed to catastrophic risks of weather, are relatively a new class of financial instruments. There are still many theoretical and practical challenges to the effective use of these instruments. The objective of this paper is to develop a pricing approach for valuing weather derivatives and presents a case study that is practical enough to be used by the risk managers of electrical utility firms. Utilizing daily average temperature data of Guangzhou, China from $1^{st}$ January 1978 to $31^{st}$ December 2010, this paper adopted a univariate time series model to describe weather behavior dynamics and calculates equilibrium prices for weather futures and options for an electrical utility firm in the region. The results imply that the risk premium is an important part of derivatives prices and the market price of risk affects option values much more than forward prices. It also demonstrates that weather innovation as well as weather risk management significantly affect the utility's financial outcomes.

• The Korean Journal of Financial Management
• /
• v.21 no.1
• /
• pp.205-229
• /
• 2004

The deviation from put-call parity condition may affect market prices since it provides an opportunity of arbitrage to many participants. This study uses the KOSPI200 index data and examines the interdependence among spot, futures, and options contracts by examining whether the deviations from the parity have significant roles in price formation. Whenever the parity condition is violated, the deviation tends to affect the prices significantly in most markets. The results show that positive values of deviation are associated with the fall of the prices in the spot and put option contracts and the rise of the call option premiums, thus decreasing the deviations. Also, the decreasing impact of deviations lasts for at Beast an hour in most markets. Futures prices, however, do not show clear relations with the deviations, which suggests the possibility that futures markets lead other markets.

• Journal of Korea Port Economic Association
• /
• v.28 no.3
• /
• pp.235-257
• /
• 2012

Recently the role of ports has been changed to satisfy flexibly needs of demands in global economy. A new concept for ports is not just a place for international trade but an important nodal point in logistics chain. The changing environment like this trend creates a high degree of uncertainty and leaves port managers confused with the question how to respond effectively to dynamic market. The latest studies provide that the port must have a good hinterland to achieve competitive advantages in a logistics chain. Korean Government announced "The Master Development Plan for Port Logistics Parks in Korea" in 2006. This contains the plan of hinterland construction of Busan New Port to achieve the status of logistics hub in Asian market. Previous studies rely solely on traditional DCF(discounted cash flow) analysis for investment of hinterland. However DCF method does not include irreversibility, uncertainty and the choice of timing for investment project. This thesis introduces a ROPM(real options pricing model) which overcomes the limitations of traditional valuation methods. The option valuations in this study utilize the Black-Scholes model, the binomial model and the MonteCarlo simulation to value investment opportunity of a port hinterland. In this thesis, an attempt is made to modify the NPV criterion by incorporating the real options approach, and its application is demonstrated in a hinterland construction investment plan. This research has conducted an empirical analysis by calculating economic value of the investment for a hinterland of Busan New Port.

• Journal of Industrial Convergence
• /
• v.22 no.6
• /
• pp.13-23
• /
• 2024

In this study, the optimal level of CER issuance price in the energy industry was estimated using a real options considering the uncertainty of emission price. As a result of the analysis, the break-even point for CDM projects in the energy industry registered by UNFCCC from December 2012 to the end of 2021 was 0.64-36.69 euros per ton of CO2 for each individual project. More closely, the emission permit price that reaches the break-even point when NPVw/o CER+ NPVCER ≥ 0 is estimated to be 12.10 euros on average, and the emission permit price that reaches the break-even point when NPVw/o CER + NPVCER ≥ option value is estimated to be 12.63 euros on average. Meanwhile, the option value using real options to reduce business uncertainty is about 19% at the 1-5 euro per ton level, about 11% at the 5-10 euro per ton level, and about 5% at the 10-15 euro per ton level. It was analyzed that there was an effect of increasing emissions prices due to uncertainty reduction. The results of this study may be useful to greenhouse gas reduction project entities, including investors, project operators, and companies with potential mandatory reductions.

• International Journal of Advanced Culture Technology
• /
• v.8 no.3
• /
• pp.300-306
• /
• 2020

This study analyzes the distributor's inventory model in a two-stage supply chain consisting of the supplier, the distributor and the end customer. The supplier will allow a credit period before the distributor settles the account with him in order to stimulate the demand for the product he produces. It is also assumed that the distributor pays the shipping cost for the order and hence, the distributor's ordering cost consists of a fixed ordering cost and the shipping cost that depend on the order quantity. The availability of the delay in payments from the supplier enables discount of the distributor's selling price from a wider range of the price option in anticipation of increased customer's demand. As a result, the availability of a credit transaction leads to an increase in inventory levels. On the other hand, in the case of deteriorating products in which the utility of the product perish over time, the deterioration rate with time plays a role in reducing inventory levels. In this regard, we analyze the effect of the length of the credit period and the degree of product deterioration on the distributor's inventory level. For the analysis, we formulate the distributor's annual net profit and analyze the effect of the length of credit period and deterioration rate of the product on inventory policy numerically.

• Journal of Arbitration Studies
• /
• v.22 no.3
• /
• pp.71-92
• /
• 2012

The significant increase in international trade over the last few decades has been accompanied by an increase in the number of commercial disputes between Korea and India. Understanding the Indian dispute resolution system, including arbitration, is necessary for successful business operation with Indian companies. This article investigates characteristics of India's Arbitration and Conciliation Act in order to help then traders who enter into business with Indian companies to settle their disputes efficiently. The Arbitration and Conciliation Act(1996) based on the 1985 UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976, has a number of characteristics including the following: (i) this act covers ad hoc arbitration and institutional arbitration (ii) parties to the arbitration agreement have no option except arbitration in case of any dispute (iii) the parties can choose their own laws, places, procedures, and arbitrators (iv) the decision of the arbitrators is final and binding (v)role of the court has been minimized and (vi) enforcement of foreign awards is recognized. However, there have been some court decisions that have not been in tune with the spirit and provisions of the Act. Therefore, Korean companies insert the KCAB's standard arbitration clause into their contracts and use India's ADR(Alternative Dispute Resolution) Methods to strategically resolve their disputes. Additionally, Korean companies investigate Indian companies' credit standing before entering into business relations with them.

• International Commerce and Information Review
• /
• v.9 no.2
• /
• pp.65-86
• /
• 2007

This paper reviews the properties and application methods of widely used types of risk measures, identifies the rationale and business-side effects of hedging, derives the theoretical formula of optimal hedging ratio, and analyzes the various functional aspects of VaR(Value-at-risk) as a risk measure and a hedging tool. Especially this paper focuses on the characteristics of VaR compared with other risk measures in terms of their own principal determinants and identifies its stronger aspects in the dimension of hedging strategy tools. As well, this paper provides the detailed processes deriving the optimal hedge ratios based on the distributional parameters and risk factors. In addition, this paper presents the detailed and substantial processes of estimating the minimum variance hedge ratio and minimum-VaR hedge ratio using the actual data and shows that the minimum variance hedge ratio proves helpful for many cases although it is not appropriate for the non-linear portfolio including the option contracts. We demonstrate the trade-off relationship between the minimum variance hedge strategy and the minimum-VaR hedge strategy in their hedging costs and performances through calculation of the respective VaRs and variances of unhedged and hedged portfolios and the optimal hedge ratio and hedging effectiveness values for the given long position in US Dollar with the short position in Euro.

• Environmental and Resource Economics Review
• /
• v.14 no.3
• /
• pp.655-672
• /
• 2005

In recent years, the state of the water quality of Han river has been among the top public concerns. This paper measures economic value of multiple environmental impacts of improved water quality of Han river using a choice experiments approach. The choice works that take into account trade-offs between price and environmental attributes for a preferred option turned out to be within respondent' ability to reveal their preferences, and the willingness to pay estimates were statistically significant. This study allows policy-makers to provide useful quantitative information that can be referred to as a benchmark for upcoming water projects.