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Seminar

Department of Systems Engineering and Engineering Management,

The Chinese University of Hong Kong

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Title: A Revenue Optimization Problem for Perishable Products Tradable in a Competitive Market

Speaker: Youyi Feng, Associate Professor

Department of Systems Engineering and Engineering Management

CUHK

Date : October 25th, 2006 (Wednesday)

Time : 4:30p.m. - 5:30p.m.

Venue : Room 513

MMW Engineering Building (Engineering Building Complex Phase 2)

CUHK

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Abstract:

We consider a revenue maximization problem of preselling a stock of

perishable product or a block of production capacity that is to be

delivered or utilized at a specific future time. Demand is influenced

by a market price (or, a reference index) of the underlying and

premiums over the market price charged by the seller. The market price

of the underlying fluctuates continuously providing a benchmark for

the opportunity cost of procuring the product from an open market at

the time of delivery. We propose a real options approach to analyze

this problem and show that the profit margin decreases with the unsold

quantity and the average premium decreases in the elapsed time. A

computational procedure is devised for characterizing the optimal

trading policy. This model can be extended to a setting with multiple

correlated commodities that addresses problems faced by natural gas

storage operators and merchant electricity producers.

This work was co-authored by Shi-Jie Deng, Youyi Feng and Xun Li.

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Biography:

Youyi Feng received his B.S degree and M.S degree in Mathematics

from Nanjing University in 1982 and 1985 respectively, and his

M.S. degree in Industrial Engineering and Ph.D. degree in

Operation Research from Columbia University in 1993 and 1994

respectively. During 1995-2000, he was an assistant professor

in the Department of Information Systems at the National

University of Singapore. Before he joined the Chinese University

of Hong Kong as an associate professor in 2001, he had held

visiting professor positions at the Kyushu Institute of

Technology and Northwestern University. Professor Feng

had also worked as a research manager in Enron North America

and a financial analyst in Baring Securities Inc.

and Lasser Marshall Inc.

************************ ALL ARE WELCOME **********************

Enquiries: Mr. Peixiang Zhao or Prof. Jeffrey Xu Yu,

Department of Systems Engineering and Engineering Management

CUHK

Website: http://www.se.cuhk.edu.hk/~seg5810

Email: seg5810@se.cuhk.edu.hk

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