Downside expected profit

Downside expected profit (DEP) For a confidence level p (Barbaro and Bagajewicz, 2004a), this is defined formally as the expectation of profit below a target corresponding to a certain level of risk p, that is, DEP(x, pjj) = E[y x, ft)], where... 

The paper [36] su ests that balancing expected profit with downside risk causes capacity choices to value the benefit of flexible resources in the supply network. 

Our work so far assumes that both the supplier and the retailer in the supply chain adopt the satisficing objectives. However, there are other types of objectives formanagers and/orcompanies in business practice. These objectives include expected profit maximization (EPM), expected utility maximization, and expectedprofit maximization subjectto downside-risk constraint (Gan et al., 2005). If this is the case, how could we design Pareto-optimal and/or coordinating contracts for such a supply chain ... 

The price risk can be defined and understood in alternative ways. One can view the risk as the probable fluctuation of the price around its expected level (i.c., the mean). The larger the deviation around the mean the larger is the perceived price risk. The volatility around the mean can be measured by standard deviation and be used as a quantitative measure for price risk. At the same time, in the industry it is common to define risk referring only to a price movement that would have an adverse effect on the profitability. Thus, one would talk about an upward potential and downside risk. ... 

Capital structure is concerned with the ratio of borrowed capital to owner s equity. When inflation is low and the economy is stable, it is frequently cheaper to use borrowed money, if a company can secure lenders. However, a highly leveraged company—that is, one with a high debt-to-equity ratio—faces downside risk when business is bad. Stockholders receive high dividends when profits are good but bondholders expect the interest and principal to be paid on time, with the threat to a firm of insolvency and bankruptcy. Section 8.4.3 shows the effect of debt-to-equity ratio on company operations. Financial officers of companies are concerned with the optimum debt-to-equity ratio. 

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