Risk–reward models for on-line leasing of depreciable equipment

Abstract: In this paper, we generalize the traditional on-line leasing problem to the case where the equipment is depreciable and the investor can always sell the used equipment for a positive price, which is an essential feature of many practical leasing problems. The traditional risk–reward model for the case with a certain forecast has been discussed for the on-line leasing of depreciable equipment. On the basis of this, an improved risk–reward model with a probability forecast is obtained here and presented as the main result. A relationship between the two risk–reward models, in which the latter includes the former as a special case, is proved. Numerical analysis shows that the competitive performance is significantly improved in the risk–reward models. [Copyright &y& Elsevier]