The Supply Chain's Risk Evasion Strategy Considering the Forward Contracts with Structure of Floating Rate

Abstract

The forward contracts have recently emerged for a broad range of commodities and many companies have started to utilize them in addition to their traditional procurement via spot market. This kind of procurement makes the most of the convenience of spot market and risk evasion function of risk evasion via forward contracts. We develop and solve mathematical models that determine the optimal order quantity to purchase via forward contracts and the optimal quantity to purchase via spot markets in different spot market distribution. Considering the time value of the fund, this paper analyzes the pricing of the forward contract in the floating interest rate. Based on the research on pricing of the forward contracts, we can make further study on the decision model of the enterprises' procurement strategy.