A value-at-risk approach to optimisation of warranty policy

Ming Luo, Shaomin Wu

Research output: Contribution to journalArticlepeer-review

23 Citations (Scopus)


In the real world, a manufacturer may produce many products, which may have common components installed. Consequently, the frequencies of the warranty claims of those products are statistically dependent. Warranty policy optimisation in the existing research, however, has not considered such statistical dependence, which may increase bias in decision making. This paper is the first attempt to collectively optimises warranty policy for a set of different products, produced by one manufacturer, whose failures are statistically dependent, using tools borrowed from financial mathematics (i.e., value-at-risk theory and copula). We prove the existence of the optimal solutions for different scenarios. Numerical examples are used to validate the applicability of the proposed methods.
Original languageEnglish
Pages (from-to)513-522
Number of pages10
JournalEuropean Journal of Operational Research
Issue number2
Early online date6 Dec 2017
Publication statusPublished - 1 Jun 2018
Externally publishedYes


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