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Operational flexibility and financial hedging / Jiri Chod in Management science, Vol. 56 N° 6 (Juin 2010) 

Public ISBD [article]  in Management science > Vol. 56 N° 6 (Juin 2010) . - pp. 1030-1045 Titre : Operational flexibility and financial hedging : Complements or substitutes? Type de document : texte imprimé Auteurs : Jiri Chod, Auteur ; Nils Rudi, Auteur ; Jan A. Van Mieghem, Auteur Année de publication : 2010 Article en page(s) : pp. 1030-1045 Note générale : Management Langues : Anglais (eng) Mots-clés : Financial  hedging  Postponement  Flexibility  Risk  management Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : We consider a firm that invests in capacity under demand uncertainty and thus faces two related but distinct types of risk: mismatch between capacity and demand and profit variability. Whereas mismatch risk can be mitigated with greater operational flexibility, profit variability can be reduced through financial hedging. We show that the relationship between these two risk mitigating strategies depends on the type of flexibility: Product flexibility and financial hedging tend to be complements (substitutes)—i.e., product flexibility tends to increase (decrease) the value of financial hedging, and, vice versa, financial hedging tends to increase (decrease) the value of product flexibility—when product demands are positively (negatively) correlated. In contrast to product flexibility, postponement flexibility is a substitute to financial hedging as intuitively expected. Although our analytical results assume perfect flexibility and perfect hedging and rely on a linear approximation of the value of hedging, we validate their robustness in an extensive numerical study. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/56/6.toc [article] Operational flexibility and financial hedging : Complements or substitutes? [texte imprimé] / Jiri Chod, Auteur ; Nils Rudi, Auteur ; Jan A. Van Mieghem, Auteur . - 2010 . - pp. 1030-1045. Management Langues : Anglais (eng) in Management science > Vol. 56 N° 6 (Juin 2010) . - pp. 1030-1045 Mots-clés : Financial  hedging  Postponement  Flexibility  Risk  management Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : We consider a firm that invests in capacity under demand uncertainty and thus faces two related but distinct types of risk: mismatch between capacity and demand and profit variability. Whereas mismatch risk can be mitigated with greater operational flexibility, profit variability can be reduced through financial hedging. We show that the relationship between these two risk mitigating strategies depends on the type of flexibility: Product flexibility and financial hedging tend to be complements (substitutes)—i.e., product flexibility tends to increase (decrease) the value of financial hedging, and, vice versa, financial hedging tends to increase (decrease) the value of product flexibility—when product demands are positively (negatively) correlated. In contrast to product flexibility, postponement flexibility is a substitute to financial hedging as intuitively expected. Although our analytical results assume perfect flexibility and perfect hedging and rely on a linear approximation of the value of hedging, we validate their robustness in an extensive numerical study. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/56/6.toc