Risk Management in the Allocation of Sales for Salmon Farming Companies

Abstract

This thesis describes the implementation of two new distinct decision tools for risk management for salmon farming companies. There are few tools salmon farming companies use when allocating sales between spot and forward contracts. Most decisions on the allocation of sales are based on “expert opinion” and loose policies. The aim of this thesis is to develop a decision tool which improve risk management in the allocation of sales for salmon farming companies. The focus is mainly on price risk. The thesis develops a Single-Period model in which practicability and usability has been emphasized. A framework for obtaining a policy regarding the allocation of sales between spot and one- through six-month forward contracts has been developed. In addition to the Single-Period model, the thesis develops a more complex MultiStage Stochastic Recourse model. The Multi-Stage model provide the salmon farming companies with a potential dynamic decision tool which can be incorporated into larger lifecycle optimization programs.