Hedging the Uncertainty of Temporary Worker Demand by Applying the Compound Options on Temporary Workers

摘要

Today we are faced with a management environment with minimum profit margin, increasing labor costs, uncertain investment environment, aggressive competitions and constantly changing economic conditions. To cut labor costs and enhance its profit, many businesses have started to use temporary labor in place of official labors. At the same time, these temporary workers evolved from non-technical labors to technical. The so called temporary labors not only helps a business during its business season to attain the appropriate man power, when the economic conditions are down, they are able to assign none technical or portions of technical work to outside labor sources, to decrease costs associated to employing fixed labors. This research not only presents the introduction to compound option on temporary workers but also offers an appropriate evaluation method and provides factual numerical samples to verify the options' reasonability and applicability.