TY - JOUR A2 - Li, Xiang AU - Xue, Weili AU - Xu, Xiaolin AU - Ma, Lijun PY - 2014 DA - 2014/07/01 TI - Options Procurement Policy for Option Contracts with Supply and Spot Market Uncertainty SP - 906739 VL - 2014 AB - Supplier’s reliability is a major issue in procurement management. In this paper, we establish a decision making model from the perspective of the firm who will procure from the multiple suppliers and the spot markets. The suppliers are unreliable and provide different types of option-type supply contracts which should be made before demand realization, while the spot market can only be used after demand realization and has both the price and liquidity risks. We establish the optimal portfolio policies for the firm with conditions to find the qualified suppliers. By defining a new function which contains the demand risk, the supplier’s risk, and the liquidity risk, we find that the optimal policy is to allocate different curves of this function to different suppliers. We also study some special cases to derive some managerial insights. At last, we numerically study how the various risks affect the choice of suppliers and the value of the option contract. SN - 1026-0226 UR - https://doi.org/10.1155/2014/906739 DO - 10.1155/2014/906739 JF - Discrete Dynamics in Nature and Society PB - Hindawi Publishing Corporation KW - ER -