Presentation
Option Pricing Methods for Estimating Capacity Shortages
Proceedings of the 2001 Industrial Engineering Research Conference
Document Type
Conference Proceeding
Publication Version
Published Version
Publication Date
1-1-2001
Conference Title
IIE Annual Conference
Conference Date
2001
Abstract
Uncertain demand combined with a positive lead time for adding capacity creates the risk of capacity shortage during the lead time. Accurate shortage estimation is very important to determine a capacity expansion policy. In this paper, we investigate four kinds of option pricing methods to estimate the shortage during a fixed lead time under the assumption of an exponential trend for demand growth. We compare the effect of the different shortage measures on the optimal parameters for an expansion policy over the long term.
Copyright Owner
IIE
Copyright Date
2001
Language
en
File Format
application/pdf
Citation Information
Dohyun Pak and Sarah M. Ryan. "Option Pricing Methods for Estimating Capacity Shortages" Proceedings of the 2001 Industrial Engineering Research Conference (2001) Available at: http://works.bepress.com/sarah_m_ryan/110/
This is a proceeding published as Pak, D. and S. M. Ryan (2001). “Option Pricing Methods for Estimating Capacity Shortages,” Proceedings of the 2001 Industrial Engineering Research Conference, Dallas, May 2001. Posted with permission.