Arbitrage Pricing, Capital Asset Pricing, and Agricultural Assets
Louise M. Arthur; Colin A. Carter; Fay Abizadeh
1988-01-01
A new asset pricing model, the arbitrage pricing theory, has been developed as an alternative to the capital asset pricing model. The arbitrage pricing theory model is used to analyze the relationship between risk and return for agricultural assets. The major conclusion is that the arbitrage pricing theory results support previous capital asset pricing model findings that the estimated risk associated with agricultural assets is low. This conclusion is more robust for the arbitrage pricing th...
Asset Pricing - A Brief Review
Li, Minqiang
2010-01-01
I first introduce the early-stage and modern classical asset pricing and portfolio theories. These include: the capital asset pricing model (CAPM), the arbitrage pricing theory (APT), the consumption capital asset pricing model (CCAPM), the intertemporal capital asset pricing model (ICAPM), and some other important modern concepts and techniques. Finally, I discuss the most recent development during the last decade and the outlook in the field of asset pricing.
Improving the asset pricing ability of the Consumption-Capital Asset Pricing Model?
DEFF Research Database (Denmark)
Rasmussen, Anne-Sofie Reng
This paper compares the asset pricing ability of the traditional consumption-based capital asset pricing model to models from two strands of literature attempting to improve on the poor empirical results of the C-CAPM. One strand is based on the intertemporal asset pricing model of Campbell (1993...... able to price assets conditionally as suggested by Cochrane (1996) and Lettau and Ludvigson (2001b). The unconditional C-CAPM is rewritten as a scaled factor model using the approximate log consumptionwealth ratio cay, developed by Lettau and Ludvigson (2001a), as scaling variable. The models...... and composite. Thus, there is no unambiguous solution to the pricing ability problems of the C-CAPM. Models from both the alternative literature strands are found to outperform the traditional C-CAPM on average pricing errors. However, when weighting pricing errors by the full variance-covariance matrix...
An asset pricing approach to liquidity effects in corporate bond markets
Bongaerts, Dion; de Jong, Frank; Driessen, Joost
We use an asset pricing approach to compare the effects of expected liquidity and liquidity risk on expected U.S. corporate bond returns. Liquidity measures are constructed for bond portfolios using a Bayesian approach to estimate Roll’s measure. The results show that expected bond liquidity and
Rational Asset Pricing Bubbles Revisited
Jan Werner
2012-01-01
Price bubble arises when the price of an asset exceeds the asset's fundamental value, that is, the present value of future dividend payments. The important result of Santos and Woodford (1997) says that price bubbles cannot exist in equilibrium in the standard dynamic asset pricing model with rational agents as long as assets are in strictly positive supply and the present value of total future resources is finite. This paper explores the possibility of asset price bubbles when either one of ...
Assessing Asset Pricing Anomalies
W.A. de Groot (Wilma)
2017-01-01
markdownabstractOne of the most important challenges in the field of asset pricing is to understand anomalies: empirical patterns in asset returns that cannot be explained by standard asset pricing models. Currently, there is no consensus in the academic literature on the underlying causes of
The pricing of illiquidity and illiquid assets : Essays on empirical asset pricing
Tuijp, Patrick
2016-01-01
This dissertation studies the pricing of liquidity and illiquid assets. For this thesis, liquidity will generally refer to the ease with which an asset can be traded. The first chapter investigates the role of the investment horizon in the impact of illiquidity on stock prices. We obtain a clientele
Initial cash/asset ratio and asset prices: an experimental study.
Caginalp, G; Porter, D; Smith, V
1998-01-20
A series of experiments, in which nine participants trade an asset over 15 periods, test the hypothesis that an initial imbalance of asset/cash will influence the trading price over an extended time. Participants know at the outset that the asset or "stock" pays a single dividend with fixed expectation value at the end of the 15th period. In experiments with a greater total value of cash at the start, the mean prices during the trading periods are higher, compared with those with greater amount of asset, with a high degree of statistical significance. The difference is most significant at the outset and gradually tapers near the end of the experiment. The results are very surprising from a rational expectations and classical game theory perspective, because the possession of a large amount of cash does not lead to a simple motivation for a trader to bid excessively on a financial instrument. The gradual erosion of the difference toward the end of trading, however, suggests that fundamental value is approached belatedly, offering some consolation to the rational expectations theory. It also suggests that there is a time scale on which an evolution toward fundamental value occurs. The experimental results are qualitatively compatible with the price dynamics predicted by a system of differential equations based on asset flow. The results have broad implications for the marketing of securities, particularly initial and secondary public offerings, government bonds, etc., where excess supply has been conjectured to suppress prices.
Nazliben, Kamil
2015-01-01
The dissertation consists of three chapters that represent separate papers in the area of asset pricing. The ﬁrst chapter studies investors optimal asset allocation problem in which mean reversion in stock prices is captured by explicitly modeling transitory and permanent shocks. The second chapter
Regret Theory and Equilibrium Asset Prices
Directory of Open Access Journals (Sweden)
Jiliang Sheng
2014-01-01
Full Text Available Regret theory is a behavioral approach to decision making under uncertainty. In this paper we assume that there are two representative investors in a frictionless market, a representative active investor who selects his optimal portfolio based on regret theory and a representative passive investor who invests only in the benchmark portfolio. In a partial equilibrium setting, the objective of the representative active investor is modeled as minimization of the regret about final wealth relative to the benchmark portfolio. In equilibrium this optimal strategy gives rise to a behavioral asset priciting model. We show that the market beta and the benchmark beta that is related to the investor’s regret are the determinants of equilibrium asset prices. We also extend our model to a market with multibenchmark portfolios. Empirical tests using stock price data from Shanghai Stock Exchange show strong support to the asset pricing model based on regret theory.
Asset Pricing in Markets with Illiquid Assets
Longstaff, Francis A
2005-01-01
Many important classes of assets are illiquid in the sense that they cannot always be traded immediately. Thus, a portfolio position in these types of illiquid investments becomes at least temporarily irreversible. We study the asset-pricing implications of illiquidity in a two-asset exchange economy with heterogeneous agents. In this market, one asset is always liquid. The other asset can be traded initially, but then not again until after a â€œblackoutâ€ period. Illiquidity has a dramatic e...
Fractional-moment Capital Asset Pricing model
International Nuclear Information System (INIS)
Li Hui; Wu Min; Wang Xiaotian
2009-01-01
In this paper, we introduce the definition of the 'α-covariance' and present the fractional-moment versions of Capital Asset Pricing Model,which can be used to price assets when asset return distributions are likely to be stable Levy (or Student-t) distribution during panics and stampedes in worldwide security markets in 2008. Furthermore, if asset returns are truly governed by the infinite-variance stable Levy distributions, life is fundamentally riskier than in a purely Gaussian world. Sudden price movements like the worldwide security market crash in 2008 turn into real-world possibilities.
The Q theory of investment, the capital asset pricing model, and asset valuation: a synthesis.
McDonald, John F
2004-05-01
The paper combines Tobin's Q theory of real investment with the capital asset pricing model to produce a new and relatively simple procedure for the valuation of real assets using the income approach. Applications of the new method are provided.
Prediction of future asset prices
Seong, Ng Yew; Hin, Pooi Ah; Ching, Soo Huei
2014-12-01
This paper attempts to incorporate trading volumes as an additional predictor for predicting asset prices. Denoting r(t) as the vector consisting of the time-t values of the trading volume and price of a given asset, we model the time-(t+1) asset price to be dependent on the present and l-1 past values r(t), r(t-1), ....., r(t-1+1) via a conditional distribution which is derived from a (2l+1)-dimensional power-normal distribution. A prediction interval based on the 100(α/2)% and 100(1-α/2)% points of the conditional distribution is then obtained. By examining the average lengths of the prediction intervals found by using the composite indices of the Malaysia stock market for the period 2008 to 2013, we found that the value 2 appears to be a good choice for l. With the omission of the trading volume in the vector r(t), the corresponding prediction interval exhibits a slightly longer average length, showing that it might be desirable to keep trading volume as a predictor. From the above conditional distribution, the probability that the time-(t+1) asset price will be larger than the time-t asset price is next computed. When the probability differs from 0 (or 1) by less than 0.03, the observed time-(t+1) increase in price tends to be negative (or positive). Thus the above probability has a good potential of being used as a market indicator in technical analysis.
Asset Pricing and Monetary Policy
Bingbing Dong
2014-01-01
This paper examines the role of money in understanding the behavior of asset prices and whether and how monetary policy should react to asset prices such as stock prices and equity premiums. To do so, I introduce money via the form of transaction cost into a production economy with limited stock market participation where agents with lower inter-temporal elasticity of substitution (IES), called non-stockholders, have no access to stock market. In addition to facilitating transactions of consu...
The Earnings/Price Risk Factor in Capital Asset Pricing Models
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Rafael Falcão Noda
2015-01-01
Full Text Available This article integrates the ideas from two major lines of research on cost of equity and asset pricing: multi-factor models and ex ante accounting models. The earnings/price ratio is used as a proxy for the ex ante cost of equity, in order to explain realized returns of Brazilian companies within the period from 1995 to 2013. The initial finding was that stocks with high (low earnings/price ratios have higher (lower risk-adjusted realized returns, already controlled by the capital asset pricing model's beta. The results show that selecting stocks based on high earnings/price ratios has led to significantly higher risk-adjusted returns in the Brazilian market, with average abnormal returns close to 1.3% per month. We design asset pricing models including an earnings/price risk factor, i.e. high earnings minus low earnings, based on the Fama and French three-factor model. We conclude that such a risk factor is significant to explain returns on portfolios, even when controlled by size and market/book ratios. Models including the high earnings minus low earnings risk factor were better to explain stock returns in Brazil when compared to the capital asset pricing model and to the Fama and French three-factor model, having the lowest number of significant intercepts. These findings may be due to the impact of historically high inflation rates, which reduce the information content of book values, thus making the models based on earnings/price ratios better than those based on market/book ratios. Such results are different from those obtained in more developed markets and the superiority of the earnings/price ratio for asset pricing may also exist in other emerging markets.
Asset prices and priceless assets
Penasse, J.N.G.
2014-01-01
The doctoral thesis studies several aspects of asset returns dynamics. The first three chapters focus on returns in the fine art market. The first chapter provides evidence for the existence of a slow-moving fad component in art prices that induces short-term return predictability. The article has
Entropy-based financial asset pricing.
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Mihály Ormos
Full Text Available We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing model. For asset pricing we define the continuous entropy as an alternative measure of risk. Our results show that entropy decreases in the function of the number of securities involved in a portfolio in a similar way to the standard deviation, and that efficient portfolios are situated on a hyperbola in the expected return-entropy system. For empirical investigation we use daily returns of 150 randomly selected securities for a period of 27 years. Our regression results show that entropy has a higher explanatory power for the expected return than the capital asset pricing model beta. Furthermore we show the time varying behavior of the beta along with entropy.
Entropy-based financial asset pricing.
Ormos, Mihály; Zibriczky, Dávid
2014-01-01
We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing model. For asset pricing we define the continuous entropy as an alternative measure of risk. Our results show that entropy decreases in the function of the number of securities involved in a portfolio in a similar way to the standard deviation, and that efficient portfolios are situated on a hyperbola in the expected return-entropy system. For empirical investigation we use daily returns of 150 randomly selected securities for a period of 27 years. Our regression results show that entropy has a higher explanatory power for the expected return than the capital asset pricing model beta. Furthermore we show the time varying behavior of the beta along with entropy.
Incomplete Financial Markets and Jumps in Asset Prices
DEFF Research Database (Denmark)
Crès, Hervé; Markeprand, Tobias Ejnar; Tvede, Mich
A dynamic pure-exchange general equilibrium model with uncertainty is studied. Fundamentals are supposed to depend continuously on states of nature. It is shown that: 1. if financial markets are complete, then asset prices vary continuously with states of nature, and; 2. if financial markets...... are incomplete, jumps in asset prices may be unavoidable. Consequently incomplete financial markets may increase volatility in asset prices significantly....
Higher Order Expectations in Asset Pricing
Philippe BACCHETTA; Eric VAN WINCOOP
2004-01-01
We examine formally Keynes' idea that higher order beliefs can drive a wedge between an asset price and its fundamental value based on expected future payoffs. Higher order expectations add an additional term to a standard asset pricing equation. We call this the higher order wedge, which depends on the difference between higher and first order expectations of future payoffs. We analyze the determinants of this wedge and its impact on the equilibrium price. In the context of a dynamic noisy r...
Asset Pricing Implications of Firms' Financing Constraints
Gomes, Joao F; Yaron, Amir; Zhang, Lu
2002-01-01
We incorporate costly external finance in a production based asset pricing model and investigate whether financing frictions are quantitatively important for pricing a cross-section of expected returns. We show that the common assumptions about the nature of the financing frictions are captured by a simple ‘financing cost’ function, equal to the product of the financing premium and the amount of external finance. This approach provides a tractable framework to examine the role of financing fr...
Essays on International Finance and Asset Pricing
Eiling, E.
2007-01-01
The second part of this dissertation takes a more general asset pricing perspective. In particular, it investigates the impact of human capital on asset pricing. Investors' portfolio decisions may be affected by their human capital. For instance, an investor who works in the IT sector may want to
Bayesian Analysis of Bubbles in Asset Prices
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Andras Fulop
2017-10-01
Full Text Available We develop a new model where the dynamic structure of the asset price, after the fundamental value is removed, is subject to two different regimes. One regime reflects the normal period where the asset price divided by the dividend is assumed to follow a mean-reverting process around a stochastic long run mean. The second regime reflects the bubble period with explosive behavior. Stochastic switches between two regimes and non-constant probabilities of exit from the bubble regime are both allowed. A Bayesian learning approach is employed to jointly estimate the latent states and the model parameters in real time. An important feature of our Bayesian method is that we are able to deal with parameter uncertainty and at the same time, to learn about the states and the parameters sequentially, allowing for real time model analysis. This feature is particularly useful for market surveillance. Analysis using simulated data reveals that our method has good power properties for detecting bubbles. Empirical analysis using price-dividend ratios of S&P500 highlights the advantages of our method.
Asset pricing restrictions on predictability : Frictions matter
de Roon, F.A.; Szymanowska, M.
2012-01-01
U.S. stock portfolios sorted on size; momentum; transaction costs; market-to-book, investment-to-assets, and return-on-assets (ROA) ratios; and industry classification show considerable levels and variation of return predictability, inconsistent with asset pricing models. This means that a
Essays in Empirical Asset Pricing
DEFF Research Database (Denmark)
Rzeznik, Aleksandra
This thesis consists of three essays investigating financial and real estate markets and identifying a relationship between them. A 2008 financial crises provides a perfect example of sizeable interactions between US housing market and equity prices, where a negative shock to house prices trigger...... a word-wide recession. Therefore, understanding forces driving investors behaviour and preferences, which in turn affect asset prices in both equity and housing market are of great interest....
The estimation of time-varying risks in asset pricing modelling using B-Spline method
Nurjannah; Solimun; Rinaldo, Adji
2017-12-01
Asset pricing modelling has been extensively studied in the past few decades to explore the risk-return relationship. The asset pricing literature typically assumed a static risk-return relationship. However, several studies found few anomalies in the asset pricing modelling which captured the presence of the risk instability. The dynamic model is proposed to offer a better model. The main problem highlighted in the dynamic model literature is that the set of conditioning information is unobservable and therefore some assumptions have to be made. Hence, the estimation requires additional assumptions about the dynamics of risk. To overcome this problem, the nonparametric estimators can also be used as an alternative for estimating risk. The flexibility of the nonparametric setting avoids the problem of misspecification derived from selecting a functional form. This paper investigates the estimation of time-varying asset pricing model using B-Spline, as one of nonparametric approach. The advantages of spline method is its computational speed and simplicity, as well as the clarity of controlling curvature directly. The three popular asset pricing models will be investigated namely CAPM (Capital Asset Pricing Model), Fama-French 3-factors model and Carhart 4-factors model. The results suggest that the estimated risks are time-varying and not stable overtime which confirms the risk instability anomaly. The results is more pronounced in Carhart’s 4-factors model.
Pricing of path dependent derivatives with discretely monitored underlying assets
Choi, Hyomin
This dissertation presents two different approaches to path dependent option pricing with discrete sampling. Provided the underlying asset of a path dependent derivative contract follows an affine process, we use the forward characteristic method to evaluate its fair price. Our study shows that the valuation method is numerically accessible as long as the contract payoff is a linear combination of log return of its underlying asset price. We compute various examples of such contracts and give contract-tailored formulas that we use in these examples. In the second part, we consider variance options under stochastic volatility model. We analyze the difference between variance option prices with discrete and continuous sampling as a function of N, the number of observations made in the former. We find the series expansion of the difference with respect to 1/N and find its leading term. By adding this leading term to the value of continuously sampled variance option, we obtain a simple and well-understood approximation of discretely sample variance option price.
Efficient Pricing of Derivatives on Assets with Discrete Dividends
Vellekoop, M.H.; Nieuwenhuis, J.W.
2006-01-01
It is argued that due to inconsistencies in existing methods to approximate the prices of equity options on assets which pay out fixed cash dividends at future dates, a new approach to this problem may be useful. Logically consistent methods which are guaranteed to exclude arbitrage exist, but they
Application of quantum master equation for long-term prognosis of asset-prices
Khrennikova, Polina
2016-05-01
This study combines the disciplines of behavioral finance and an extension of econophysics, namely the concepts and mathematical structure of quantum physics. We apply the formalism of quantum theory to model the dynamics of some correlated financial assets, where the proposed model can be potentially applied for developing a long-term prognosis of asset price formation. At the informational level, the asset price states interact with each other by the means of a ;financial bath;. The latter is composed of agents' expectations about the future developments of asset prices on the finance market, as well as financially important information from mass-media, society, and politicians. One of the essential behavioral factors leading to the quantum-like dynamics of asset prices is the irrationality of agents' expectations operating on the finance market. These expectations lead to a deeper type of uncertainty concerning the future price dynamics of the assets, than given by a classical probability theory, e.g., in the framework of the classical financial mathematics, which is based on the theory of stochastic processes. The quantum dimension of the uncertainty in price dynamics is expressed in the form of the price-states superposition and entanglement between the prices of the different financial assets. In our model, the resolution of this deep quantum uncertainty is mathematically captured with the aid of the quantum master equation (its quantum Markov approximation). We illustrate our model of preparation of a future asset price prognosis by a numerical simulation, involving two correlated assets. Their returns interact more intensively, than understood by a classical statistical correlation. The model predictions can be extended to more complex models to obtain price configuration for multiple assets and portfolios.
Brownian motion model with stochastic parameters for asset prices
Ching, Soo Huei; Hin, Pooi Ah
2013-09-01
The Brownian motion model may not be a completely realistic model for asset prices because in real asset prices the drift μ and volatility σ may change over time. Presently we consider a model in which the parameter x = (μ,σ) is such that its value x (t + Δt) at a short time Δt ahead of the present time t depends on the value of the asset price at time t + Δt as well as the present parameter value x(t) and m-1 other parameter values before time t via a conditional distribution. The Malaysian stock prices are used to compare the performance of the Brownian motion model with fixed parameter with that of the model with stochastic parameter.
DEFF Research Database (Denmark)
Dreyer, Johannes Kabderian; Schneider, Johannes; T. Smith, William
2013-01-01
This paper explores the implications of a novel class of preferences for the behavior of asset prices. Following a suggestion by Marshall (1920), we entertain the possibility that people derive utility not only from consumption, but also from the very act of saving. These ‘‘saving-based’’ prefere...
The capital-asset-pricing model and arbitrage pricing theory: a unification.
Ali Khan, M; Sun, Y
1997-04-15
We present a model of a financial market in which naive diversification, based simply on portfolio size and obtained as a consequence of the law of large numbers, is distinguished from efficient diversification, based on mean-variance analysis. This distinction yields a valuation formula involving only the essential risk embodied in an asset's return, where the overall risk can be decomposed into a systematic and an unsystematic part, as in the arbitrage pricing theory; and the systematic component further decomposed into an essential and an inessential part, as in the capital-asset-pricing model. The two theories are thus unified, and their individual asset-pricing formulas shown to be equivalent to the pervasive economic principle of no arbitrage. The factors in the model are endogenously chosen by a procedure analogous to the Karhunen-Loéve expansion of continuous time stochastic processes; it has an optimality property justifying the use of a relatively small number of them to describe the underlying correlational structures. Our idealized limit model is based on a continuum of assets indexed by a hyperfinite Loeb measure space, and it is asymptotically implementable in a setting with a large but finite number of assets. Because the difficulties in the formulation of the law of large numbers with a standard continuum of random variables are well known, the model uncovers some basic phenomena not amenable to classical methods, and whose approximate counterparts are not already, or even readily, apparent in the asymptotic setting.
A Robust Rational Route to in a Simple Asset Pricing Model
Hommes, C.H.; Huang, H.; Wang, D.
2002-01-01
We investigate asset pricing dynamics in an adaptive evolutionary asset pricing model with fundamentalists, trend followers and a market maker. Agents can choose between a fundamentalist strategy at positive information cost or choose a trend following strategy for free. Price adjustment is proportional to the excess demand in the asset market. Agents asynchronously update their strategy according to realized net profits in the recent past. As agents become more sensitive to differences in st...
Expectations and bubbles in asset pricing experiments
Hommes, C.; Sonnemans, J.; Tuinstra, J.; van de Velden, H.
2008-01-01
We present results on expectation formation in a controlled experimental environment. In each period subjects are asked to predict the next price of a risky asset. The realized market price is derived from an unknown market equilibrium equation with feedback from individual forecasts. In most
The pricing of European options on two underlying assets with delays
Lin, Lisha; Li, Yaqiong; Wu, Jing
2018-04-01
In the paper, the pricing of European options on two underlying assets with delays is discussed. By using the approach of equivalent martingale measure transformation, the market is proved to be complete. With exchange option as a particular example, we obtain the explicit pricing formula in a subinterval of option period. The robust Euler-Maruyama method is combined with the Monte Carlo simulation to compute exchange option prices within the whole option period. Numerical experiments indicate that there is an increasing possibility of the difference between the delayed and Black-Scholes option prices with the increase of delay.
"Overreaction" of Asset Prices in General Equilibrium
Aiyagari, S.R.; Gertler, M.
1998-01-01
We attempt to explain the overreaction of asset prices to movements in short-term interest rates, dividends, and asset supplies. The key element of our explanation is a margin constraint that traders face which limits their leverage to a fraction of the value of their assets. Traders may lever themselves, further, either directly by borrowing short term or indirectly by engaging in futures and options trading, so that the scenario is relevant to contemporary financial markets. When some shock...
Pricing Volatility Referenced Assets
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Alan De Genaro Dario
2006-12-01
Full Text Available Volatility swaps are contingent claims on future realized volatility. Variance swaps are similar instruments on future realized variance, the square of future realized volatility. Unlike a plain vanilla option, whose volatility exposure is contaminated by its asset price dependence, volatility and variance swaps provide a pure exposure to volatility alone. This article discusses the risk-neutral valuation of volatility and variance swaps based on the framework outlined in the Heston (1993 stochastic volatility model. Additionally, the Heston (1993 model is calibrated for foreign currency options traded at BMF and its parameters are used to price swaps on volatility and variance of the BRL / USD exchange rate.
Price Manipulation in an Experimental Asset Market
Veiga Helena; Vorsatz Marc
2006-01-01
We analyze in the laboratory whether an uninformed trader is able to manipulate the price of a financial asset. To do so, we compare the results of two different experimental treatments. In the Benchmark Treatment, twelve subjects trade a common value asset that takes either a high or a low value. Information is distributed asymmetrically, only three outof twelve subjects know the actual value of the asset. The Manipulation Treatment is identical to the Benchmark Treatment apart from the fact...
Using an inflation-augmented price-earnings ratio to guide tactical asset allocation
Adrian Saville
2011-01-01
Asset allocation plays a central role in determining investment outcomes, and available evidence shows that portfolio results can be enhanced through tactical asset allocation if managers use the simple price-earnings ratio as a predictor of equity returns. Recently, some international evidence has emerged which shows that, by augmenting the price-earnings metric with information about consumer price inflation, further enhancements can be achieved in tactical asset allocation. This study rev...
Testing multi-factor asset pricing models in the Visegrad countries
Czech Academy of Sciences Publication Activity Database
Morgese Borys, Magdalena
2011-01-01
Roč. 61, č. 2 (2011), s. 118-139 ISSN 0015-1920 R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:AV0Z70850503 Keywords : capital asset pricing model * macroeconomic factor models * asset pricing Subject RIV: AH - Economics Impact factor: 0.346, year: 2011 http://journal.fsv.cuni.cz/mag/article/show/id/1208
Theoretical and Empirical Review of Asset Pricing Models: A Structural Synthesis
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Saban Celik
2012-01-01
Full Text Available The purpose of this paper is to give a comprehensive theoretical review devoted to asset pricing models by emphasizing static and dynamic versions in the line with their empirical investigations. A considerable amount of financial economics literature devoted to the concept of asset pricing and their implications. The main task of asset pricing model can be seen as the way to evaluate the present value of the pay offs or cash flows discounted for risk and time lags. The difficulty coming from discounting process is that the relevant factors that affect the pay offs vary through the time whereas the theoretical framework is still useful to incorporate the changing factors into an asset pricing models. This paper fills the gap in literature by giving a comprehensive review of the models and evaluating the historical stream of empirical investigations in the form of structural empirical review.
THE ASSET PRICE CHANNEL AND ITS ROLE IN MONETARY POLICY TRANSMISSION
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Dan Horatiu
2013-07-01
Full Text Available his paper addresses the subject of the monetary policy transmission mechanism by focusing on the asset price channel, which is the monetary transmission channel responsible for the propagation of the effects induced by the monetary policy decisions made by the central bank that affect the price of assets. We will analyze the asset price channel by taking a close look at its structure, internal processes and the way it delivers monetary policy throughout the economy, ultimately influencing key variables such as the unemployment rate and the levels of consumption and production. After an introduction dealing with the entire monetary transmission mechanism, its role and purposes, we will focus on the particularities of the asset price channel and the two main ways in which it delivers monetary policy decision effects: through changes in Tobin’s q value, which is the ratio between the market value of a given company and its replacement cost of capital, and through the effect of wealth, both of financial and housing nature, on consumption. In our study, we will consider theoretical aspects and observations, but also empirical evidence that highlights that the exact way in which the asset price channel functions may differ from one economy to another due to differences in the structures of the respective economies and differences in psychology and cultural values of consumers. The deep understanding of the asset price transmission channel is very important for any central bank, as this is the channel that governs key aspects of monetary policy transmission linked to the market value of assets and individual wealth. These values have, as we will see in more detail throughout the paper, an important impact on both consumption and investment, two economic actions that can help the economy, but can also prove to be a crucial element in starting and perpetuating an economic crisis.
Ambiguity and Volatility : Asset Pricing Implications
Pataracchia, B.
2011-01-01
Using a simple dynamic consumption-based asset pricing model, this paper explores the implications of a representative investor with smooth ambiguity averse preferences [Klibano¤, Marinacci and Mukerji, Econometrica (2005)] and provides a comparative analysis of risk aversion and ambiguity aversion.
Using an inflation-augmented price-earnings ratio to guide tactical asset allocation
Directory of Open Access Journals (Sweden)
Adrian Saville
2011-08-01
Full Text Available Asset allocation plays a central role in determining investment outcomes, and available evidence shows that portfolio results can be enhanced through tactical asset allocation if managers use the simple price-earnings ratio as a predictor of equity returns. Recently, some international evidence has emerged which shows that, by augmenting the price-earnings metric with information about consumer price inflation, further enhancements can be achieved in tactical asset allocation. This study reviews these arguments as they apply to South Africa, and finds that an inflation-augmented price-earnings ratio is more successful in forecasting equity returns than is the simple price-earnings ratio. Moreover, the metric is found to be significant in explaining relative asset class returns. On a risk-adjusted basis, however, the tool fails to improve the portfolio results when compared to a buy-and-hold strategy.
Using an inflation-augmented price-earnings ratio to guide tactical asset allocation
Directory of Open Access Journals (Sweden)
Adrian Saville
2011-04-01
Full Text Available Asset allocation plays a central role in determining investment outcomes, and available evidence shows that portfolio results can be enhanced through tactical asset allocation if managers use the simple price-earnings ratio as a predictor of equity returns. Recently, some international evidence has emerged which shows that, by augmenting the price-earnings metric with information about consumer price inflation, further enhancements can be achieved in tactical asset allocation. This study reviews these arguments as they apply to South Africa, and finds that an inflation-augmented price-earnings ratio is more successful in forecasting equity returns than is the simple price-earnings ratio. Moreover, the metric is found to be significant in explaining relative asset class returns. On a risk-adjusted basis, however, the tool fails to improve the portfolio results when compared to a buy-and-hold strategy.
Prediction future asset price which is non-concordant with the historical distribution
Seong, Ng Yew; Hin, Pooi Ah
2015-12-01
This paper attempts to predict the major characteristics of the future asset price which is non-concordant with the distribution estimated from the price today and the prices on a large number of previous days. The three major characteristics of the i-th non-concordant asset price are the length of the interval between the occurrence time of the previous non-concordant asset price and that of the present non-concordant asset price, the indicator which denotes that the non-concordant price is extremely small or large by its values -1 and 1 respectively, and the degree of non-concordance given by the negative logarithm of the probability of the left tail or right tail of which one of the end points is given by the observed future price. The vector of three major characteristics of the next non-concordant price is modelled to be dependent on the vectors corresponding to the present and l - 1 previous non-concordant prices via a 3-dimensional conditional distribution which is derived from a 3(l + 1)-dimensional power-normal mixture distribution. The marginal distribution for each of the three major characteristics can then be derived from the conditional distribution. The mean of the j-th marginal distribution is an estimate of the value of the j-th characteristics of the next non-concordant price. Meanwhile, the 100(α/2) % and 100(1 - α/2) % points of the j-th marginal distribution can be used to form a prediction interval for the j-th characteristic of the next non-concordant price. The performance measures of the above estimates and prediction intervals indicate that the fitted conditional distribution is satisfactory. Thus the incorporation of the distribution of the characteristics of the next non-concordant price in the model for asset price has a good potential of yielding a more realistic model.
Downside Risk And Empirical Asset Pricing
P. van Vliet (Pim)
2004-01-01
textabstractCurrently, the Nobel prize winning Capital Asset Pricing Model (CAPM) celebrates its 40th birthday. Although widely applied in financial management, this model does not fully capture the empirical riskreturn relation of stocks; witness the beta, size, value and momentum effects. These
Essays on banking and asset pricing
Roscovan, V.
2008-01-01
This dissertation contains three studies on banking and asset pricing. It analyzes questions related to informational content of bank loan announcements and trading activity. The first two chapters examine theoretically and empirically how stock and bond holders react to bank loan announcements as a
The capital-asset-pricing model and arbitrage pricing theory: A unification
Khan, M. Ali; Sun, Yeneng
1997-01-01
We present a model of a financial market in which naive diversification, based simply on portfolio size and obtained as a consequence of the law of large numbers, is distinguished from efficient diversification, based on mean-variance analysis. This distinction yields a valuation formula involving only the essential risk embodied in an asset’s return, where the overall risk can be decomposed into a systematic and an unsystematic part, as in the arbitrage pricing theory; and the systematic component further decomposed into an essential and an inessential part, as in the capital-asset-pricing model. The two theories are thus unified, and their individual asset-pricing formulas shown to be equivalent to the pervasive economic principle of no arbitrage. The factors in the model are endogenously chosen by a procedure analogous to the Karhunen–Loéve expansion of continuous time stochastic processes; it has an optimality property justifying the use of a relatively small number of them to describe the underlying correlational structures. Our idealized limit model is based on a continuum of assets indexed by a hyperfinite Loeb measure space, and it is asymptotically implementable in a setting with a large but finite number of assets. Because the difficulties in the formulation of the law of large numbers with a standard continuum of random variables are well known, the model uncovers some basic phenomena not amenable to classical methods, and whose approximate counterparts are not already, or even readily, apparent in the asymptotic setting. PMID:11038614
The Pricing of Options on Assets with Stochastic Volatilities.
Hull, John C; White, Alan D
1987-01-01
One option-pricing problem which has hitherto been unsolved is the pricing of European call on an asset which has a stochastic volatility. This paper examines this problem. The option price is determined in series form for the case in which the stochastic volatility is independent of the stock price. Numerical solutions are also produced for the case in which the volatility is correlated with the stock price. It is found that the Black-Scholes price frequently overprices options and that the ...
Directory of Open Access Journals (Sweden)
Chi Xie
2017-01-01
Full Text Available With the quick development of the Internet, online platforms that provide financial news and opinions have attracted more and more attention from investors. The question whether investor sentiment expressed on the Internet platforms has an impact on asset return has not been fully addressed. To this end, this paper uses the Baidu Searching Index as the agent variable to detect the effect of online investor sentiment on the asset price movement in the Chinese stock market. The empirical study shows that although there is a cointegration relationship between online investor sentiment and asset return, the sentiment has a poor ability to predict the price, return, and volatility of asset price. Meanwhile, the structural break points of online investor sentiment do not lead to changes in the asset price movement. Based on the empirical mode decomposition of online investor sentiment, we find that high frequency components of online investor sentiment can be used to predict the asset price movement. Thus, the obtained results could be useful for risk supervision and asset portfolio management.
Land of Addicts? An Empirical Investigation of Habit-Based Asset Pricing Behavior
Xiaohong Chen; Sydney C. Ludvigson
2004-01-01
This paper studies the ability of a general class of habit-based asset pricing models to match the conditional moment restrictions implied by asset pricing theory. We treat the functional form of the habit as unknown, and to estimate it along with the rest of the model's finite dimensional parameters. Using quarterly data on consumption growth, assets returns and instruments, our empirical results indicate that the estimated habit function is nonlinear, the habit formation is better described...
Willem H. Buiter
1987-01-01
Excess volatility tests for financial market efficiency maintain the hypothesis of risk-neutrality. This permits the specification of the benchmark efficient market price as the present discounted value of expected future dividends. By departing from the risk-neutrality assumption in a stripped-down version of Lucas's general equilibrium asset pricing model, I show that asset prices determined in a competitive asset market and efficient by construction can nevertheless violate the variance bo...
Fractal asset returns, arbitrage and option pricing
International Nuclear Information System (INIS)
Potgieter, Petrus H.
2009-01-01
In the discrete-time fractional random walk model a market with one risky asset affords an arbitrage opportunity as described by Cutland et al. [Cutland NJ, Kopp PE, Willinger W. Stock price returns and the Joseph effect: a fractional version of the Black-Scholes model. In: Russo Francesco, Bolthausen Erwin, Dozzi Marco, editors. Seminar on 6 stochastic analysis, random fields and applications, pp. 327-351. Seminar on stochastic analysis, random fields and applications. Ascona: Centro Stefano Franscini; 1993, Progress in probability 36. Birkhauser Verlag; 1995.] and Sottinen [Sottinen Tommi. Fractional Brownian motion, random walks and binary market models. Finance Stoch 2001;5(3):343-355]. We briefly discuss these results and compute a numerical example in a fractional binomial model as illustration and mention an option pricing model for assets the returns of which are driven by a fractional Brownian motion [Yaozhong Hu, Bernt Oksendal. Fractional white noise calculus and applications to finance. Infin Dimens Anal Quant Probability Rel Top 2003;6:1-32, ISSN 0219-0257; Fajardo J, Cajueiro DO. Volatility estimation and option pricing with fractional Brownian motion, October 2003. Available from: (http://ideas.repec.org/p/ibm/finlab/flwp53.html)].
Asset Prices and Trading Volume under Fixed Transactions Costs.
Lo, Andrew W.; Mamaysky, Harry; Wang, Jiang
2004-01-01
We propose a dynamic equilibrium model of asset prices and trading volume when agents face fixed transactions costs. We show that even small fixed costs can give rise to large "no-trade" regions for each agent's optimal trading policy. The inability to trade more frequently reduces the agents' asset demand and in equilibrium gives rise to a…
Brock, W.A.; Hommes, C.H.
2001-01-01
This paper discusses dynamic evolutionary multi-agent systems, as introduced by Brock and Hommes (1997). In particular the heterogeneous agent dynamic asset pricing model of Brock and Hommes (1998) is extended by introducing derivative securities by means of price contingent contracts. Numerical
Assessing Asset Pricing Models Using Revealed Preference
Jonathan B. Berk; Jules H. van Binsbergen
2014-01-01
We propose a new method of testing asset pricing models that relies on using quantities rather than prices or returns. We use the capital flows into and out of mutual funds to infer which risk model investors use. We derive a simple test statistic that allows us to infer, from a set of candidate models, the model that is closest to the model that investors use in making their capital allocation decisions. Using this methodology, we find that of the models most commonly used in the literature,...
Empirical Asset Pricing: Eugene Fama, Lars Peter Hansen, and Robert Shiller
Campbell, John Y.
2016-01-01
The Nobel Memorial Prize in Economic Sciences for 2013 was awarded to Eugene Fama, Lars Peter Hansen, and Robert Shiller for their contributions to the empirical study of asset pricing. Some observers have found it hard to understand the common elements of the laureates research, preferring to highlight areas of disagreement among them. This paper argues that empirical asset pricing is a coherent enterprise, which owes much to the laureates seminal contributions, and that important themes in ...
Directory of Open Access Journals (Sweden)
Felipe Dias Paiva
2005-06-01
Full Text Available This study analyzed the Capital Asset Pricing Model CAPM as well as the Downside Capital Asset Pricing Model D-CAPM and evaluated the latter as an efficient alternative asset pricing model. The returns of 40 companies on the São Paulo Stock Exchange BOVESPA were studied between December 1996 and August 2002. To test the models the study used as variables the Interbank Deposit Certificate CDI as a risk free asset and the Index of São Paulo Stock Exchange IBOVESPA as a proxy of the market portfolio. The D-CAPM was shown to be more useful in explaining the return of the stock market than the CAPM.O objetivo deste estudo é analisar o capital asset pricing model (CAPM e o downside capital asset pricing model (D-CAPM, bem como avaliar se este último modelo é uma eficiente alternativa de modelo de precificação de ativos. Os dados da pesquisa referem-se a 40 retornos de companhias listadas na Bolsa de Valores de São Paulo, de dezembro de 1996 a agosto de 2002. O artigo utilizou, para testar os modelos, as variáveis Certificado de Depósito Interbancário (CDI, como um ativo livre de risco, e o índice da Bolsa de Valores de Sao Paulo (Ibovespa, como proxy do portfólio de mercado. Conclui-se, então, que o D-CAPM possui uma maior capacidade explicativa dos retornos dos ativos se comparado ao CAPM.
Loss Aversion, Adaptive Beliefs, and Asset Pricing Dynamics
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Kamal Samy Selim
2015-01-01
Full Text Available We study asset pricing dynamics in artificial financial markets model. The financial market is populated with agents following two heterogeneous trading beliefs, the technical and the fundamental prediction rules. Agents switch between trading rules with respect to their past performance. The agents are loss averse over asset price fluctuations. Loss aversion behaviour depends on the past performance of the trading strategies in terms of an evolutionary fitness measure. We propose a novel application of the prospect theory to agent-based modelling, and by simulation, the effect of evolutionary fitness measure on adaptive belief system is investigated. For comparison, we study pricing dynamics of a financial market populated with chartists perceive losses and gains symmetrically. One of our contributions is validating the agent-based models using real financial data of the Egyptian Stock Exchange. We find that our framework can explain important stylized facts in financial time series, such as random walk price behaviour, bubbles and crashes, fat-tailed return distributions, power-law tails in the distribution of returns, excess volatility, volatility clustering, the absence of autocorrelation in raw returns, and the power-law autocorrelations in absolute returns. In addition to this, we find that loss aversion improves market quality and market stability.
Some Divergence Properties of Asset Price Models
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Wolfgang Stummer
2001-12-01
Full Text Available Abstract: We consider asset price processes Xt which are weak solutions of one-dimensional stochastic differential equations of the form (equation (2 Such price models can be interpreted as non-lognormally-distributed generalizations of the geometric Brownian motion. We study properties of the IÃŽÂ±-divergence between the law of the solution Xt and the corresponding drift-less measure (the special case ÃŽÂ±=1 is the relative entropy. This will be applied to some context in statistical information theory as well as to arbitrage theory and contingent claim valuation. For instance, the seminal option pricing theorems of Black-Scholes and Merton appear as a special case.
Pareto Improving Price Regulation when the Asset Market is Incomplete
Herings, P.J.J.; Polemarchakis, H.M.
1999-01-01
When the asset market is incomplete, competitive equilibria are constrained suboptimal, which provides a scope for pareto improving interventions. Price regulation can be such a pareto improving policy, even when the welfare effects of rationing are taken into account. An appealing aspect of price
Does Central Bank Tone Move Asset Prices?
DEFF Research Database (Denmark)
Schmeling, Maik; Wagner, Christian
the next press conference. Moreover, we find that positive tone changes are associated with increasing government bond yields, lower implied equity volatility, lower variance risk premia, and lower corporate credit spreads. Since we also show that tone changes are unrelated to current and future economic...... fundamentals, these results support the conjecture that central bank tone matters for asset prices through a risk-based channel. Our main findings also apply to U.S. markets, where stock prices and Treasury yields increase when the Fed chair’s tone in the Congressional Testimony becomes more positive....
Excess co-movement in asset prices: The case of South Africa
Ocran, Mathew; Mlambo, Chipo
2009-01-01
The paper investigates excess co-movement in asset prices in South Africa between 1995 and 2005 using the definition of excess comovement as correlation between two asset prices beyond what could be explained by key economic fundamentals. The results of the study suggest that there is excess co-movement between returns on equities and bonds in South Africa. The findings suggest that there are considerable noise traders on the financial market in South Africa. The result of this behaviour woul...
Neoclassical and Behavioural Asset Pricing Models : The Case of Sri Lanka
Perera, Shenali Anne
2013-01-01
This study aims to provide a better understanding of the Sri Lankan stock market in terms of asset pricing models. In order to achieve this goal this research evaluates the Fama and French three-factor model and a behavioural asset pricing model to investigate which framework is better suited for security valuation in Sri Lanka. Accordingly findings reveal that small stocks with low book-to-market equity generate high realized returns. But results indicate that superior returns on these stock...
Habit-based Asset Pricing with Limited Participation Consumption
DEFF Research Database (Denmark)
Bach, Christian; Møller, Stig Vinther
We calibrate and estimate a consumption-based asset pricing model with habit formation using limited participation consumption data. Based on survey data of a representative sample of American households, we distinguish between assetholder and non-assetholder consumption, as well as the standard...
Habit-based asset pricing with limited participation consumption
DEFF Research Database (Denmark)
Møller, Stig Vinther; Bach, Christian
2011-01-01
We calibrate and estimate a consumption-based asset pricing model with habit formation using limited participation consumption data. Based on survey data of a representative sample of American households, we distinguish between assetholder and non-assetholder consumption, as well as the standard...
Modelling of capital asset pricing by considering the lagged effects
Sukono; Hidayat, Y.; Bon, A. Talib bin; Supian, S.
2017-01-01
In this paper the problem of modelling the Capital Asset Pricing Model (CAPM) with the effect of the lagged is discussed. It is assumed that asset returns are analysed influenced by the market return and the return of risk-free assets. To analyse the relationship between asset returns, the market return, and the return of risk-free assets, it is conducted by using a regression equation of CAPM, and regression equation of lagged distributed CAPM. Associated with the regression equation lagged CAPM distributed, this paper also developed a regression equation of Koyck transformation CAPM. Results of development show that the regression equation of Koyck transformation CAPM has advantages, namely simple as it only requires three parameters, compared with regression equation of lagged distributed CAPM.
International asset pricing under segmentation and PPP deviations
Chaieb, I.; Errunza, V.
2007-01-01
We analyze the impact of both purchasing power parity (PPP) deviations and market segmentation on asset pricing and investor's portfolio holdings. The freely traded securities command a world market risk premium and an inflation risk premium. The securities that can be held by only a subset of
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Fakhri Husein
2017-03-01
Full Text Available Shariah Compliant Asset Pricing Model (SCAPM is a modification of the model Capital Asset Pricing Model (CAPM. This research is quantitative descriptive study of theories of optimal portfolio analysis applied to trading stocks, especially in stocks Jakarta Islamic Index. Sampling technique used was purposive sampling and obtained 26 shares. The analysis tool used is MatLab R2010a. The results of this study are not prove theMarkowitz portfolio theory. This is explained by the amount of Beta market (β_m a value beta below 1 indicates that the fluctuation of stocks returns do not follow the movement of market fluctuations. Investors are likely to want a high profit, the investors are advised to choose a second portfolio groups, with rate of 0.176722% and investors are likely to enjoy a substantial risk in the investment portfolio are advised to choose the first group with a great risk of 0.8501%.
Learning about rare disasters: implications for consumption and asset prices
Czech Academy of Sciences Publication Activity Database
Gillman, Max; Kejak, Michal; Pakoš, Michal
2015-01-01
Roč. 19, č. 3 (2015), s. 1053-1104 ISSN 1572-3097 Institutional support: RVO:67985998 Keywords : rare diasasters * asset prices * consumption Subject RIV: AH - Economics Impact factor: 2.080, year: 2015
Essays on Empirical Asset Pricing : Essays over het empirisch prijzen van financiele producten
R.W.M. Verbeek (Roy)
2017-01-01
textabstractThis dissertation consists of three essays on empirical asset pricing. In the first essay, I investigate whether common risk factors are priced across investment horizons. I show that only the market and size factors are priced, but only up to sixteen months. The results highlight the
Intangible Capital, Corporate Valuation and Asset Pricing
Danthine, Jean-Pierre; Jin, Xiangrong
2006-01-01
Recent studies have found unmeasured intangible capital to be large and important. In this paper we observe that by nature intangible capital is also very different from physical capital. We find it plausible to argue that the accumulation process for intangible capital differs significantly from the process by which physical capital accumulates. We study the implications of this hypothesis for rational firm valuation and asset pricing using a two-sector general equilibrium model. Our main fi...
Intangible asset valuation, damages, and transfer price analyses in the health care industry.
Reilly, Robert F
2010-01-01
Most health care industry participants own and operate intangible assets. These intangible assets can be industry-specific (e.g., patient charts and records, certificates of need, professional and other licenses), or they can be general commercial intangible assets (e.g., trademarks, systems and procedures, an assembled workforce). Many industry participants have valued their intangible assets for financial accounting or other purposes. This article summarizes the intangible assets that are common to health care industry participants. This article describes the different types of intangible asset analyses (including valuation, transfer price, damages estimates, etc.), and explains the many different transaction, accounting, taxation, regulatory, litigation, and other reasons why industry participants may wish to value (or otherwise analyze) health care intangible assets.
Corporate sustainability and asset pricing models: empirical evidence for the Brazilian stock market
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Vitor Gonçalves de Azevedo
2016-01-01
Full Text Available Abstract The paper investigates the impact of corporate sustainability on asset prices. For that purpose, we develop a novel corporate sustainability factor and test the extent to which this factor is priced in an augmented four-factor version of the traditional Fama & French (1993 asset pricing model. The corporate sustainability factor is based on a zero-investment portfolio which is long in stocks with high sustainability and short in stocks with low sustainability. We use data on the Brazilian stock market to estimate alternative model specifications with different combinations of four explanatory variables: the corporate sustainability premium, the market risk factor premium, the size factor premium and the book-to-market factor premium. Our results indicate that corporate sustainability is priced and helps to explain the variability in the cross-section of expected stock returns.
Asset Pricing Model and the Liquidity Effect: Empirical Evidence in the Brazilian Stock Market
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Otávio Ribeiro de Medeiros
2011-09-01
Full Text Available This paper is aims to analyze whether a liquidity premium exists in the Brazilian stock market. As a second goal, we include liquidity as an extra risk factor in asset pricing models and test whether this factor is priced and whether stock returns were explained not only by systematic risk, as proposed by the CAPM, by Fama and French’s (1993 three-factor model, and by Carhart’s (1997 momentum-factor model, but also by liquidity, as suggested by Amihud and Mendelson (1986. To achieve this, we used stock portfolios and five measures of liquidity. Among the asset pricing models tested, the CAPM was the least capable of explaining returns. We found that the inclusion of size and book-to-market factors in the CAPM, a momentum factor in the three-factor model, and a liquidity factor in the four-factor model improve their explanatory power of portfolio returns. In addition, we found that the five-factor model is marginally superior to the other asset pricing models tested.
Adaptive wavelet method for pricing two-asset Asian options with floating strike
Černá, Dana
2017-12-01
Asian options are path-dependent option contracts which payoff depends on the average value of the asset price over some period of time. We focus on pricing of Asian options on two assets. The model for pricing these options is represented by a parabolic equation with time variable and three state variables, but using substitution it can be reduced to the equation with only two state variables. For time discretization we use the θ-scheme. We propose a wavelet basis that is adapted to boundary conditions and use an adaptive scheme with this basis for discretization on the given time level. The main advantage of this scheme is small number of degrees of freedom. We present numerical experiments for the Asian put option with floating strike and compare the results for the proposed adaptive method and the Galerkin method.
Consumption-based macroeconomic models of asset pricing theory
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Đorđević Marija
2016-01-01
Full Text Available The family of consumptionbased asset pricing models yields a stochastic discount factor proportional to the marginal rate of intertemporal substitution of consumption. In examining the empirical performance of this class of models, several puzzles are discovered. In this literature review we present the canonical model, the corresponding empirical tests, and different extensions to this model that propose a resolution of these puzzles.
Distributor pricing approaches enabled in Smart Grid to differentiate delivery service quality
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Zhongwei Jake Zhang
2014-12-01
Full Text Available Industry practitioners who advocate retail competition and Demand-side Participation now look for approaches to link both initiatives through distributor pricing. As distributors incrementally convert more traditional assets into Smart Grid assets, they also need to consider different pricing approaches to recover the investment costs and meet the regulatory business requirements. Small electricity consumers need incentives to take part in these initiatives but their delivery service quality should also be closely guarded. Hence this paper addresses the above needs as a whole and investigates a set of distributor pricing approaches with Smart Grid technologies. Pricing of network and non-network based solutions should follow the incremental basis, such as the long run average incremental cost (LRAIC. The benefit of deferring network investment is calculated and should be passed to consumers as peak pricing rebate. A concept of reliability premium (RP based on load point reliability index is proposed, through which customers can express their preference of service quality and adjust their network tariff payment accordingly. A service delivery model is also proposed to utilize the savings from wholesale market trading to compensate for the downgraded service when loads are controlled. The IEEE 123-node distribution test feeder and the IEEE distribution system for RBTS Bus No. 2 are simulated, and solved using General Algebraic Modeling System (GAMS to demonstrate the proposed distributor pricing approaches in Smart Grid.
DEFF Research Database (Denmark)
Busato, Francesco; Addessi, William
The paper investigates the nexus between labor and financial markets, focusing on the interaction between labor union behavior in setting wages, firms' investment strategy and asset prices. The way unions set wage claims after observing firm's financial performance increases the volatility of firms......' returns and the riskiness of corporate ownership. To remunerate this higher volatility and stronger risk, firms' equities have to grant high return. This mechanism is able to offer an explanation of for the "equity puzzle", that is it can explain the difference between equity returns and the risk free...... rate. It is a welcome result that the simulated excess return is about the empirical estimate and this result is obtained with a logarithmic specification of the shareholders preferences....
Learning about rare disasters: implications for consumption and asset prices
Czech Academy of Sciences Publication Activity Database
Gillman, M.; Kejak, Michal; Pakoš, Michal
2015-01-01
Roč. 19, č. 3 (2015), s. 1053-1104 ISSN 1572-3097 R&D Projects: GA ČR(CZ) GBP402/12/G097 Institutional support: PRVOUK-P23 Keywords : rare diasasters * asset prices * consumption Subject RIV: AH - Economics Impact factor: 2.080, year: 2015
PEMILIHAN SAHAM YANG OPTIMAL MENGGUNAKAN CAPITAL ASSET PRICING MODEL (CAPM
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Dioda Ardi Wibisono
2017-08-01
Full Text Available Optimal portfolio is the basis for investors to invest in stock. Capital Asset Pricing Model (CAPM is a method to determine the value of the risk and return of a company stock. This research uses a secondary data from the closing price of the monthly stock price (monthly closing price, Stock Price Index (SPI, and the monthly SBI rate. The samples of this research are 41 stocks in LQ45 February-July 2015 on the Indonesian Stock Exchange (ISE. The study period is during 5 year from October 2010 - October 2015. The result of analysis shows that the optimal portfolio consists of 18 companies. The average return of the optimal portfolio is higher than the average risk-free return (SBI rate and the average market return. This proves that investing in stocks is more profitable than a risk-free investment. � Keywords: Stock, CAPM, return, risk�
Testing multi-factor asset pricing models in the Visegrad countries
Czech Academy of Sciences Publication Activity Database
Morgese Borys, Magdalena
-, č. 323 (2007), s. 1-40 ISSN 1211-3298 R&D Projects: GA MŠk LC542 Institutional research plan: CEZ:AV0Z70850503 Keywords : capital asset pricing model * macroeconomic factor models * cost of capital Subject RIV: AH - Economics http://www.cerge-ei.cz/pdf/wp/Wp323.pdf
26 CFR 1.338-4 - Aggregate deemed sale price; various aspects of taxation of the deemed asset sale.
2010-04-01
... 26 Internal Revenue 4 2010-04-01 2010-04-01 false Aggregate deemed sale price; various aspects of taxation of the deemed asset sale. 1.338-4 Section 1.338-4 Internal Revenue INTERNAL REVENUE SERVICE... Aggregate deemed sale price; various aspects of taxation of the deemed asset sale. (a) Scope. This section...
Dynamic Relationships between Price and Net Asset Value for Asian Real Estate Stocks
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Kim Hiang LIOW
2018-03-01
Full Text Available This paper examines short- and long-term behavior of the price-to net asset value ratio in six Asian public real estate markets. We find mean-reverting behavior of the ratio and spillover effects, where each of the examined public real estate markets correlates with other markets. Additionally, the unexpected shock correlating with the price-to-net asset value ratio in one market has a positive or negative correlation with the ratios of other markets. Our results offer fresh insights to portfolio managers, policymakers, and academic researchers into the regional and country market dynamics of public real estate valuation and cross-country interaction from the long-term and short-term perspectives.
Portfolio choice and asset pricing with endogenous beliefs and skewness preference
Karehnke, P.
2014-01-01
This thesis studies portfolio choice and asset pricing with preferences which go beyond the standard expected utility and mean-variance preferences. The first part of this thesis analyses a decision model in which the decision maker forms endogenous beliefs given his anticipation utility and his
THE EQUITY PREMIUM PUZZLE AND EMOTIONAL ASSET PRICING
MARC GÜRTLER; NORA HARTMANN
2007-01-01
"Since the equity premium as well as the risk-free rate puzzle question the concepts central to financial and economic modeling, we apply behavioral decision theory to asset pricing in view of solving these puzzles. U.S. stock market data for the period 1960-2003 and German stock market data for the period 1977-2003 show that emotional investors who act in accordance to Bell's (1985) disappointment theory -a special case of prospect theory- and additionally administer mental accounts demand a...
Directory of Open Access Journals (Sweden)
Adriana Bruscato Bortoluzzo
Full Text Available ABSTRACT This article examines three models for pricing risky assets, the capital asset pricing model (CAPM from Sharpe and Lintner, the three factor model from Fama and French, and the four factor model from Carhart, in the Brazilian mark et for the period from 2002 to 2013. The data is composed of shares traded on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA on a monthly basis, excluding financial sector shares, those with negative net equity, and those without consecutive monthly quotations. The proxy for market return is the Brazil Index (IBrX and for riskless assets savings accounts are used. The 2008 crisis, an event of immense proportions and market losses, may have caused alterations in the relationship structure of risky assets, causing changes in pricing model results. Division of the total period into pre-crisis and post-crisis sub-periods is the strategy used in order to achieve the main objective: to analyze the effects of the crisis on asset pricing model results and their predictive power. It is verified that the factors considered are relevant in the Brazilian market in both periods, but between the periods, changes occur in the statistical relevance of sensitivities to the market premium and to the value factor. Moreover, the predictive ability of the pricing models is greater in the post-crisis period, especially for the multifactor models, with the four factor model able to improve predictions of portfolio returns in this period by up to 80%, when compared to the CAPM.
Lectures on financial mathematics discrete asset pricing
Anderson, Greg
2010-01-01
This is a short book on the fundamental concepts of the no-arbitrage theory of pricing financial derivatives. Its scope is limited to the general discrete setting of models for which the set of possible states is finite and so is the set of possible trading times--this includes the popular binomial tree model. This setting has the advantage of being fairly general while not requiring a sophisticated understanding of analysis at the graduate level. Topics include understanding the several variants of "arbitrage", the fundamental theorems of asset pricing in terms of martingale measures, and applications to forwards and futures. The authors' motivation is to present the material in a way that clarifies as much as possible why the often confusing basic facts are true. Therefore the ideas are organized from a mathematical point of view with the emphasis on understanding exactly what is under the hood and how it works. Every effort is made to include complete explanations and proofs, and the reader is encouraged t...
Skewed Normal Distribution Of Return Assets In Call European Option Pricing
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Evy Sulistianingsih
2011-12-01
Full Text Available Option is one of security derivates. In financial market, option is a contract that gives a right (notthe obligation for its owner to buy or sell a particular asset for a certain price at a certain time.Option can give a guarantee for a risk that can be faced in a market.This paper studies about theuse of Skewed Normal Distribution (SN in call europeanoption pricing. The SN provides aflexible framework that captures the skewness of log return. We obtain aclosed form solution forthe european call option pricing when log return follow the SN. Then, we will compare optionprices that is obtained by the SN and the Black-Scholes model with the option prices of market.Â Keywords: skewed normaldistribution, log return, options.
Transfer pricing file- a contextualized Approach. Case Study
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M. Boiţă
2013-12-01
Full Text Available The transfer price is basically the price used for transfer of tangible and intangible assets between related parties and it should be determined on the basis of market value without being influenced by the relationship of affiliation. However, if for services or tangible assets, the comparison of the transfer price to the market one is relatively easy to achieve, for the intangible ones, quantifying future benefits waived by the affiliated person compared to the situation in which it would be independent is harder to be established.
Efficiently Inefficient Markets for Assets and Assets Management
DEFF Research Database (Denmark)
Garleanu, Nicolae; Heje Pedersen, Lasse
We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more easily......, more money is allocated to active management, fees are lower, and asset prices are more efficient. Informed managers outperform after fees, uninformed managers underperform after fees, and the net performance of the average manager depends on the number of "noise allocators." Finally, we show why large...
Game Options approach in bankruptcy triggering asset value
Directory of Open Access Journals (Sweden)
Abdelmajid El hajaji
2019-07-01
Full Text Available In this paper, we develop a new numerical method, game theory and option pricing to compute a bankruptcy triggering asset value. we will draw our attention to determining a the numerical asset value, or price of a share, at which a bankruptcy is triggered. This paper develops and analyze a cubic spline collocation method for approximating solutions of the problem. This method converges quadratically. In addition, this article also provides with a real-life case study of the investment bank, and the optimal bankruptcy strategy in this particular case. As we will observe, the bankruptcy trigger computed in this example could have served as a good guide for predicting fall of this investment bank.
Real Implications of Bursting Asset Price Bubbles in Economies with Bank Credit
Czech Academy of Sciences Publication Activity Database
Derviz, Alexis
2011-01-01
Roč. 61, č. 1 (2011), s. 92-116 ISSN 0015-1920 Institutional research plan: CEZ:AV0Z10750506 Keywords : bank * credit * asset price * bubble * macroprudential policy Subject RIV: AH - Economics Impact factor: 0.346, year: 2011
Directory of Open Access Journals (Sweden)
Sayed H. Saghaian
2014-04-01
Full Text Available In this study, we evaluate the effects of the recent Federal Reserve’s purchases of longterm assets on prices of agricultural commodities. The first large-scale asset purchases began at the end of 2008, after the Great Recession, and the second purchases began in November of 2010. The commodities included in this analysis are meats (beef, pork, and broilers, cereal grains (corn, soybeans, wheat, and rice, and softs (sugar, coffee, cocoa, and cotton. Using historical decompositions, we find significant increases in the nominal agricultural prices of ten out of 12 agricultural commodities under investigation from the second large-scale asset purchases (in 2010 but the first set large-scale asset purchases had only two positive effects.
Empirical test of Capital Asset Pricing Model on Selected Banking Shares from Borsa Istanbul
Directory of Open Access Journals (Sweden)
Fuzuli Aliyev
2018-03-01
Full Text Available In this paper we tested Capital Asset Pricing Model (shortly CAPM hereafter on the selected banking stocks of Borsa Istanbul. Here we tried to explain how to price financial assets based on their risks in the case of BIST-100 index. CAPM is an important model in the portfolio management theory used by economic agents for the selection of financial assets. We used 12 random banking stocks’ monthly return data for 2001–2010 periods. To test the validity of the CAPM, we first derived the regression equation for the risk-free interest rate and risk premium relationship using January 2001–December 2009 data. Then, estimated January–December 2010 returns with the equation. Comparing forecasted return with the actual return, we concluded that the CAPM is valid for the portfolio consisting of the 12 banks traded in the ISE, i.e. The model could predict the overall outcome of portfolio of selected banking shares
Ambiguity Aversion, Asset Prices, and the Welfare Costs of Aggregate Fluctuations
DEFF Research Database (Denmark)
Alonso, Irasema; Prado, Mauricio
2015-01-01
with a representative agent facing consumption fluctuations calibrated to match U.S. data from 1889 to 2008. Our experiment is to restrict preference parameters in order to as well as possible match some asset-price facts—the average returns on equity and a short-term risk-free bond—and then compute the welfare...
Essays on Empirical Asset Pricing
DEFF Research Database (Denmark)
Gormsen, Niels Joachim
that the expected return to the distant-future cash flows increases by more in bad times than the expected return to near-future cash flows does. This new stylized fact is important for understanding why the expected return on the market portfolio as a whole varies over time. In addition, it has strong implications...... for which economic model that drives the return to stocks. Indeed, I find that none of the canonical asset pricing models can explain this new stylized fact while also explaining the previously documented facts about stock returns. The second chapter, called Conditional Risk, studies how the expected return...... on individual stocks is influenced by the fact that their riskiness varies over time. We introduce a new ”conditional-risk factor”, which is a simple method for determining how much of the expected return to individual stocks that can be explained by time variation in their market risk, i.e. market betas. Using...
The capital-asset pricing model reconsidered: tests in real terms on ...
African Journals Online (AJOL)
This paper extends previous work of the authors to reconsider the capital-asset pricing model (CAPM) in South Africa in real terms. As in that work, the main question this study aimed to answer remains: Can the CAPM be accepted in the South African market for the purposes of the stochastic modelling of investment returns ...
Directory of Open Access Journals (Sweden)
Charles P. Kindleberger
2009-12-01
Full Text Available L’inflazione degli asset, a differenza dell’inflazione ordinaria, che si riferisce a l'aumento dei prezzi dei beni di consumo, merci all'ingrosso, o il deflatore del reddito nazionale, è un termine che non è in uso in occidente, ma corrente in Giappone. Ci sono momenti in cui gli assets aumenteranno di prezzo in modo inflazionistico, un boom o anche una bolla, mentre i prezzi dell’output sono relativamente stabili o addirittura in calo. Asset inflation, as distinguished from ordinary inflation, the latter referring to rising prices of consumer goods, wholesale commodities, or the national-income deflator, is a phrase not in use in the west, but current in Japan. There are times when assets rise in price in an inflationary way, a boom or even a bubble, while output prices are relatively stable or even declining. JEL Codes: F3, G1, N1, B5
A behavioral asset pricing model with a time-varying second moment
International Nuclear Information System (INIS)
Chiarella, Carl; He Xuezhong; Wang, Duo
2006-01-01
We develop a simple behavioral asset pricing model with fundamentalists and chartists in order to study price behavior in financial markets when chartists estimate both conditional mean and variance by using a weighted averaging process. Through a stability, bifurcation, and normal form analysis, the market impact of the weighting process and time-varying second moment are examined. It is found that the fundamental price becomes stable (unstable) when the activities from both types of traders are balanced (unbalanced). When the fundamental price becomes unstable, the weighting process leads to different price dynamics, depending on whether the chartists act as either trend followers or contrarians. It is also found that a time-varying second moment of the chartists does not change the stability of the fundamental price, but it does influence the stability of the bifurcations. The bifurcation becomes stable (unstable) when the chartists are more (less) concerned about the market risk characterized by the time-varying second moment. Different routes to complicated price dynamics are also observed. The analysis provides an analytical foundation for the statistical analysis of the corresponding stochastic version of this type of behavioral model
Asset price and trade volume relation in artificial market impacted by value investors
Tangmongkollert, K.; Suwanna, S.
2016-05-01
The relationship between return and trade volume has been of great interests in a financial market. The appearance of asymmetry in the price-volume relation in the bull and bear market is still unsettled. We present a model of the value investor traders (VIs) in the double auction system, in which agents make trading decision based on the pseudo fundamental price modelled by sawtooth oscillations. We investigate the system by two different time series for the asset fundamental price: one corresponds to the fundamental price in a growing phase; and the other corresponds to that in a declining phase. The simulation results show that the trade volume is proportional to the difference between the market price and the fundamental price, and that there is asymmetry between the buying and selling phases. Furthermore, the selling phase has more significant impact of price on the trade volume than the buying phase.
Efficiently Inefficient Markets for Assets and Asset Management
DEFF Research Database (Denmark)
Garleanu, Nicolae; Pedersen, Lasse Heje
We consider a model where investors can invest directly or search for an asset manager, information about assets is costly, and managers charge an endogenous fee. The efficiency of asset prices is linked to the efficiency of the asset management market: if investors can find managers more easily......, more money is allocated to active management, fees are lower, and asset prices are more efficient. Informed managers outperform after fees, uninformed managers underperform after fees, and the net performance of the average manager depends on the number of "noise allocators." Small investors should...... be passive, but large and sophisticated investors benefit from searching for informed active managers since their search cost is low relative to capital. Hence, managers with larger and more sophisticated investors are expected to outperform....
Fabozzi, F.; Vink, D.
2012-01-01
In this paper, we empirically investigate what credit factors investors rely upon when pricing the spread at issue for European asset-backed securities. More specifically, we investigate how credit factors affect new issuance spreads after taking into account credit rating. We do so by investigating
Global Asset Pricing: Is There a Role for Long-run Consumption Risk?
DEFF Research Database (Denmark)
Rangvid, Jesper; Schmelling, Maik; Schrimpf, Andreas
We estimate long-run consumption-based asset pricing models using a comprehensive set of international test assets, including broad equity market portfolios, international value/growth portfolios, and international bond portfolios. We find that differences in returns across assets within a countr...... that consumption growth is more predictable over short to medium-run horizons than over longer horizons and that empirical evidence of a de- clining risk aversion parameter estimate in long-run risk models has to be interpreted with care....... are sometimes (and most prominently for the U.S.) better captured by the assets' exposure to long-run consumption risk as opposed to their exposure to one-period changes in consumption (the canonical consumption CAPM). Across countries, however, exposure to long-run consumption risk does not provide a better...... fit than the canonical consumption CAPM. Thus, when characterizing the cross-country distribution of returns, long-run consumption risk does not seem to play any particular role, even if long-run risk is important for explaining the cross section of expected returns in the U.S. Furthermore, we show...
Three-dimensional GIS approach for management of assets
Lee, S. Y.; Yee, S. X.; Majid, Z.; Setan, H.
2014-02-01
Assets play an important role in human life, especially to an organization. Organizations strive and put more effort to improve its operation and assets management. The development of GIS technology has become a powerful tool in management as it is able to provide a complete inventory for managing assets with location-based information. Spatial information is one of the requirements in decision making in various areas, including asset management in the buildings. This paper describes a 3D GIS approach for management of assets. An asset management system was developed by integrating GIS concept and 3D model assets. The purposes of 3D visualization to manage assets are to facilitate the analysis and understanding in the complex environment. Behind the 3D model of assets is a database to store the asset information. A user-friendly interface was also designed for more easier to operate the application. In the application developed, location of each individual asset can be easily tracked according to the referring spatial information and 3D viewing. The 3D GIS approach described in this paper is certainly would be useful in asset management. Systematic management of assets can be carried out and this will lead to less-time consuming and cost-effective. The results in this paper will show a new approach to improve asset management.
Three-dimensional GIS approach for management of assets
International Nuclear Information System (INIS)
Lee, S Y; Yee, S X; Majid, Z; Setan, H
2014-01-01
Assets play an important role in human life, especially to an organization. Organizations strive and put more effort to improve its operation and assets management. The development of GIS technology has become a powerful tool in management as it is able to provide a complete inventory for managing assets with location-based information. Spatial information is one of the requirements in decision making in various areas, including asset management in the buildings. This paper describes a 3D GIS approach for management of assets. An asset management system was developed by integrating GIS concept and 3D model assets. The purposes of 3D visualization to manage assets are to facilitate the analysis and understanding in the complex environment. Behind the 3D model of assets is a database to store the asset information. A user-friendly interface was also designed for more easier to operate the application. In the application developed, location of each individual asset can be easily tracked according to the referring spatial information and 3D viewing. The 3D GIS approach described in this paper is certainly would be useful in asset management. Systematic management of assets can be carried out and this will lead to less-time consuming and cost-effective. The results in this paper will show a new approach to improve asset management
Current approaches to assessing intangible assets
Урусова, Зінаїда Петрівна
2013-01-01
The article analyzes methods of assessing intangible assets in Ukraine as well as in accordance with International Financial Reporting Standards. Contemporary approaches to assessing intangible assets have been researched.
Compensation schemes, liquidity provision, and asset prices: An experimental analysis
Baghestanian, Sascha; Gortner, Paul; Massenot, Baptiste
2015-01-01
In an experimental setting in which investors can entrust their money to traders, we investigate how compensation schemes affect liquidity provision and asset prices. Investors face a trade-off between risk and return. At the benefit of a potentially higher return, they can entrust their money to a trader. However this investment is risky, as the trader might not be trustworthy. Alternatively, they can opt for a safe but low return. We study how subjects solve this trade-off when traders are ...
Asset life and pricing the use of electricity transmission infrastructure in Chile
International Nuclear Information System (INIS)
Raineri, Ricardo
2010-01-01
Beyond the different approaches to set regulated prices for the use of infrastructure, a key parameter to determine regulated tariffs is the concept of asset life and how it changes with changes in the economic and regulatory context, which determines the optimal infrastructure investment and replacement policies. In this paper we look at the effects that changes in demand, the presence of substitutes and complements, the regulatory framework - both a pro or an anticompetitive framework -, scale economies, and the investment planning horizon, have on the economic service life of an asset and the tariffs for its use. We find that as the electric industry becomes more competitive, a negative effect on the economic service life of electric electricity transmission should be expected. Also, numerical experiments illustrate an inverse relation between scale economies on investment and the ESL of electricity transmission infrastructure. Further, we look at the biases on optimal investment that happen when optimal plans do not observe the life cycle of the investments and the ESL of the equipment, as well as the inconsistency and biases on optimal investment and replacement policies that might result when the Social Planner optimal investment plan lacks of a long-term commitment. (author)
Asset life and pricing the use of electricity transmission infrastructure in Chile
Energy Technology Data Exchange (ETDEWEB)
Raineri, Ricardo [Pontificia Universidad Catolica de Chile, Av. Vicuna Mackenna 4860, Santiago (Chile)
2010-01-15
Beyond the different approaches to set regulated prices for the use of infrastructure, a key parameter to determine regulated tariffs is the concept of asset life and how it changes with changes in the economic and regulatory context, which determines the optimal infrastructure investment and replacement policies. In this paper we look at the effects that changes in demand, the presence of substitutes and complements, the regulatory framework - both a pro or an anticompetitive framework -, scale economies, and the investment planning horizon, have on the economic service life of an asset and the tariffs for its use. We find that as the electric industry becomes more competitive, a negative effect on the economic service life of electric electricity transmission should be expected. Also, numerical experiments illustrate an inverse relation between scale economies on investment and the ESL of electricity transmission infrastructure. Further, we look at the biases on optimal investment that happen when optimal plans do not observe the life cycle of the investments and the ESL of the equipment, as well as the inconsistency and biases on optimal investment and replacement policies that might result when the Social Planner optimal investment plan lacks of a long-term commitment. (author)
International Asset Pricing, Currency Risk and Integration of Markets
Directory of Open Access Journals (Sweden)
Sema BAYRAKTAR
2014-11-01
Full Text Available This study attempts to test the conditional version of the international asset-pricing model proposed in Bayraktar (2000, 2009 by using a parsimonious multivariate GARCH process. The theoretical model, contrary to previous empirical studies that have used random selection of currency risks, determines which currencies should be included in an empirical test, thus avoids this kind of random selection bias. The results from both full and sub-samples regressions provide some weak evidence for the existence of exchange rate risks, thus partially support the theory. However, exchange rate risks' premia are found considerably smaller than that of market risk.
Retrading, production, and asset market performance.
Gjerstad, Steven D; Porter, David; Smith, Vernon L; Winn, Abel
2015-11-24
Prior studies have shown that traders quickly converge to the price-quantity equilibrium in markets for goods that are immediately consumed, but they produce speculative price bubbles in resalable asset markets. We present a stock-flow model of durable assets in which the existing stock of assets is subject to depreciation and producers may produce additional units of the asset. In our laboratory experiments inexperienced consumers who can resell their units disregard the consumption value of the assets and compete vigorously with producers, depressing prices and production. Consumers who have first participated in experiments without resale learn to heed their consumption values and, when they are given the option to resell, trade at equilibrium prices. Reproducibility is therefore the most natural and most effective treatment for suppression of bubbles in asset market experiments.
DEFF Research Database (Denmark)
Stadtmann, Georg; Moritzen; Jörgensen
2012-01-01
According to the news model of asset price determination, only the unexpected component of an information should drive the stock price. We use the Danish publicly listed football club Brøndby IF to analyse how match outcome impacts the stock price. To disentangle gross news from net news, betting...
Was Bernanke right? Targeting asset prices may not be a good idea after all
Assenza, T.; Berardi, M.; Delli Gatti, D.
2011-01-01
Should the central bank prevent "excessive" asset price dynamics or should it wait until the boom spontaneously turns into a crash and intervene only afterwards? The debate over this issue goes back at least to the exchange between Bernanke-Gertler (BG) and Cecchetti but has not settled yet. In
Cost approach of health care entity intangible asset valuation.
Reilly, Robert F
2012-01-01
In the valuation synthesis and conclusion process, the analyst should consider the following question: Does the selected valuation approach(es) and method(s) accomplish the analyst's assignment? Also, does the selected valuation approach and method actually quantify the desired objective of the intangible asset analysis? The analyst should also consider if the selected valuation approach and method analyzes the appropriate bundle of legal rights. The analyst should consider if there were sufficient empirical data available to perform the selected valuation approach and method. The valuation synthesis should consider if there were sufficient data available to make the analyst comfortable with the value conclusion. The valuation analyst should consider if the selected approach and method will be understandable to the intended audience. In the valuation synthesis and conclusion, the analyst should also consider which approaches and methods deserve the greatest consideration with respect to the intangible asset's RUL. The intangible asset RUL is a consideration of each valuation approach. In the income approach, the RUL may affect the projection period for the intangible asset income subject to either yield capitalization or direct capitalization. In the cost approach, the RUL may affect the total amount of obsolescence, if any, from the estimate cost measure (that is, the intangible reproduction cost new or replacement cost new). In the market approach, the RUL may effect the selection, rejection, and/or adjustment of the comparable or guideline intangible asset sale and license transactional data. The experienced valuation analyst will use professional judgment to weight the various value indications to conclude a final intangible asset value, based on: The analyst's confidence in the quantity and quality of available data; The analyst's level of due diligence performed on that data; The relevance of the valuation method to the intangible asset life cycle stage and
Energy Technology Data Exchange (ETDEWEB)
Pinto, Rinaldo Caldeira; Parente, Virginia [Universidade de Sao Paulo (USP), SP (Brazil)], emails: rinaldo@iee.usp.br, vparente@iee.usp.br
2010-07-01
The aim of this paper is to analyse the use of Capital Asset Pricing Model (CAPM) Beta in the Brazilian electric distribution sector tariffs review. The betas applied by the Regulatory Agency are defined using data from the American, English and Brazilian markets. These betas will then be compared to the betas obtained in the domestic market. The betas were directly obtained from an economic-financial databank largely employed by the market. The sample is composed of companies' shares, priced at Sao Paulo Stock Market. Their main activity is the distribution of electric energy between July 2002 and July 2007. The results of mean betas obtained for the distribution segment, with values close to the ones applied by the regulatory agency for the cycle of tariff reviews between 2007-2010. (author)
Energy Technology Data Exchange (ETDEWEB)
Pinto, Rinaldo Caldeira; Parente, Virginia, E-mail: rinaldo@iee.usp.br, E-mail: vparente@iee.usp.br [Universidade de Sao Paulo (USP), SP (Brazil)
2010-07-01
The aim of this paper is to analyse the use of Capital Asset Pricing Model (CAPM) Beta in the Brazilian electric distribution sector tariffs review. The betas applied by the Regulatory Agency are defined using data from the American, English and Brazilian markets. These betas will then be compared to the betas obtained in the domestic market. The betas were directly obtained from an economic-financial databank largely employed by the market. The sample is composed of companies' shares, priced at Sao Paulo Stock Market. Their main activity is the distribution of electric energy between July 2002 and July 2007. The results of mean betas obtained for the distribution segment, with values close to the ones applied by the regulatory agency for the cycle of tariff reviews between 2007-2010. (author)
Nuclear industry strategic asset management: Managing nuclear assets in a competitive environment
International Nuclear Information System (INIS)
Mueller, H.; Hunt, E.W. Jr.; Oatman, E.N.
1999-01-01
The former Electric Power Research Institute took the lead in developing an approach now widely known as strategic asset management (SAM). The SAM methodology applies the tools of decision/risk analysis used in the financial community to clarify effective use of physical assets and resources to create value: to build a clear line of sight to value creation. SAM processes have been used in both the power and other industries. The rapid change taking place in the nuclear business creates the need for competitive decision making regarding the management of nuclear assets. The nuclear industry is moving into an era in which shareholder value is determined by the net revenues earned on power marketed in a highly competitive and frequently low-priced power market environment
Monetary Policy and Financial Asset Prices: Empirical Evidence from Pakistan
Directory of Open Access Journals (Sweden)
Imran Umer Chhapra
2018-03-01
Full Text Available Monetary transmission mechanism assumed to be significantly influenced by the effect of policy decisions on financial markets. However, various previous studies have come up with different outcomes. The purpose of this study is to examine the impact of monetary policy on different asset classes (shares and bonds in Pakistan. This study using stock price and bond yield as dependent variable and discount rate, money supply, inflation, and exchange rate are independent variables. Data of all variables have collected from 2010 to 2016, and Vector Autoregressive (VAR technique has applied. The empirical results indicate that there is an impact of monetary policy components on both stock and bond market as an increase in policy rate causes decline in stocks prices and bonds yields. The findings of this study will help the potential investors in making long-term (in general and short-term (in particular investment strategies concerning monetary policy.DOI: 10.15408/sjie.v7i2.7099
Land of Addicts? An Empirical Investigation of Habit-Based Asset Pricing Models
Sydney Ludvigson; Xiaohong Chen
2004-01-01
A leading explanation of aggregate stock market behavior suggests that assets are priced as if there were a representative investor whose utility is a power function of the difference between aggregate consumption and a "habit" level, where the habit is some function of lagged and (possibly) contemporaneous consumption. But theory does not provide precise guidelines about the parametric functional relationship between the habit and aggregate consumption. This makes formal estimation and testi...
Discounted Cash Flow and Modern Asset Pricing Methods - Project Selection and Policy Implications
Energy Technology Data Exchange (ETDEWEB)
Emhjellen, Magne; Alaouze, Chris M
2002-07-01
We examine the differences in the net present values (NPV's) of North Sea oil projects obtained using the Weighted Average Cost of Capital (WACC) and a Modern Asset Pricing (MAP) method which involves the separate discounting of project cash flow components. NPV differences of more than $1 Om were found for some oil projects. Thus, the choice of valuation method will affect the development decisions of oil companies. The results of the MAP method are very sensitive to the choice of parameter values for the stochastic process used to model oil prices. Further research is recommended before the MAP method is used as the sole valuation model. (author)
Discounted Cash Flow and Modern Asset Pricing Methods - Project Selection and Policy Implications
Energy Technology Data Exchange (ETDEWEB)
Emhjellen, Magne; Alaouze, Chris M.
2002-07-01
We examine the differences in the net present values (NPV's) of North Sea oil projects obtained using the Weighted Average Cost of Capital (WACC) and a Modern Asset Pricing (MAP) method which involves the separate discounting of project cash flow components. NPV differences of more than $1 Om were found for some oil projects. Thus, the choice of valuation method will affect the development decisions of oil companies. The results of the MAP method are very sensitive to the choice of parameter values for the stochastic process used to model oil prices. Further research is recommended before the MAP method is used as the sole valuation model. (author)
Discounted Cash Flow and Modern Asset Pricing Methods - Project Selection and Policy Implications
International Nuclear Information System (INIS)
Emhjellen, Magne; Alaouze, Chris M.
2002-01-01
We examine the differences in the net present values (NPV's) of North Sea oil projects obtained using the Weighted Average Cost of Capital (WACC) and a Modern Asset Pricing (MAP) method which involves the separate discounting of project cash flow components. NPV differences of more than $1 Om were found for some oil projects. Thus, the choice of valuation method will affect the development decisions of oil companies. The results of the MAP method are very sensitive to the choice of parameter values for the stochastic process used to model oil prices. Further research is recommended before the MAP method is used as the sole valuation model. (author)
A Dealer Model of Foreign Exchange Market with Finite Assets
Hamano, Tomoya; Kanazawa, Kiyoshi; Takayasu, Hideki; Takayasu, Misako
An agent-based model is introduced to study the finite-asset effect in foreign exchange markets. We find that the transacted price asymptotically approaches an equilibrium price, which is determined by the monetary balance between the pair of currencies. We phenomenologically derive a formula to estimate the equilibrium price, and we model its relaxation dynamics around the equilibrium price on the basis of a Langevin-like equation.
Directory of Open Access Journals (Sweden)
Zainul Hasan Quthbi
2017-10-01
Artikel ini bermaksud untuk menganalisis saham syariah yang tergolong efisien untuk keputusan investasi dengan menggunakan SCAPM (Shari’a Compliant Asset Pricing Model. SCAPM adalah bentuk modifikasi dari CAPM (Capital Asset Pricing Model yang bertujuan agar kerangka model analisis masih dalam kerangka syariah. Teknik pengumpulan data adalah dokumentasi dari data yang bersifat sekunder. Digunakan 13 sampel saham syariah pada penelitian ini dengan kriteria saham syariah yang konsisten masuk pada JII (Jakarta Islamic Index periode penelitian Desember 2013 hingga November 2016 dan memiliki pengembalian saham individual positif. Hasil dari penelitian menunjukkan terdapat 9 saham syariah yang tergolong efisien dan 4 sisanya tidak efisien. Saham PT. Adaro Energy memiliki nilai RVAR terbesar yang berarti memiliki kinerja saham paling baik.
A boundary PDE feedback control approach for the stabilization of mortgage price dynamics
Rigatos, G.; Siano, P.; Sarno, D.
2017-11-01
Several transactions taking place in financial markets are dependent on the pricing of mortgages (loans for the purchase of residences, land or farms). In this article, a method for stabilization of mortgage price dynamics is developed. It is considered that mortgage prices follow a PDE model which is equivalent to a multi-asset Black-Scholes PDE. Actually it is a diffusion process evolving in a 2D assets space, where the first asset is the house price and the second asset is the interest rate. By applying semi-discretization and a finite differences scheme this multi-asset PDE is transformed into a state-space model consisting of ordinary nonlinear differential equations. For the local subsystems, into which the mortgage PDE is decomposed, it becomes possible to apply boundary-based feedback control. The controller design proceeds by showing that the state-space model of the mortgage price PDE stands for a differentially flat system. Next, for each subsystem which is related to a nonlinear ODE, a virtual control input is computed, that can invert the subsystem's dynamics and can eliminate the subsystem's tracking error. From the last row of the state-space description, the control input (boundary condition) that is actually applied to the multi-factor mortgage price PDE system is found. This control input contains recursively all virtual control inputs which were computed for the individual ODE subsystems associated with the previous rows of the state-space equation. Thus, by tracing the rows of the state-space model backwards, at each iteration of the control algorithm, one can finally obtain the control input that should be applied to the mortgage price PDE system so as to assure that all its state variables will converge to the desirable setpoints. By showing the feasibility of such a control method it is also proven that through selected modification of the PDE boundary conditions the price of the mortgage can be made to converge and stabilize at specific
CAPM (Capital Asset Pricing Model) and regulation in Brazilian electric distribution sector
International Nuclear Information System (INIS)
Pinto, Rinaldo Caldeira; Parente, Virginia
2010-01-01
The aim of this paper is to analyse the use of Capital Asset Pricing Model (CAPM) Beta in the Brazilian electric distribution sector tariffs review. The betas applied by the Regulatory Agency are defined using data from the American, English and Brazilian markets. These betas will then be compared to the betas obtained in the domestic market. The betas were directly obtained from an economic-financial databank largely employed by the market. The sample is composed of companies' shares, priced at Sao Paulo Stock Market. Their main activity is the distribution of electric energy between July 2002 and July 2007. The results of mean betas obtained for the distribution segment, with values close to the ones applied by the regulatory agency for the cycle of tariff reviews between 2007-2010. (author)
Higher-order co-moments in asset pricing on the stock exchange in Brazil
Directory of Open Access Journals (Sweden)
Paulo Vitor Jordão da Gama Silva
2015-12-01
Full Text Available This study seeks to identify the behavior of systemic asymmetry (coskewness and systemic kurtosis (cokurtosis in asset pricing on the Brazilian stock exchange (in BM&F Bovespa. The methodology explored by Harvey and Siddique (2000 was used to estimate the degree of coskewness and cokurtosis for stocks in each month t, following the CAPM regression. The three-factor model was used according to Fama and French (1993, with modifications to the calculation of the factors following the methodology exploited by Neves (2003. The results show that for the Brazilian market, assets with negative coskewness and cokurtosis tend to yield more than assets with positive coskewness and cokurtosis. According to observations in the American and London markets, as investors expect higher returns for the high risk, a preference was found for negative coskewness and positive cokurtosis. In Brazil, it was found that in the case of coskewness, it repeats itself, but not for cokurtosis, where the reverse is true, which can lead to the conclusion of a typically risk-averse behavior.
Creator of the capital asset pricing model
Directory of Open Access Journals (Sweden)
Pantelić Svetlana
2014-01-01
Full Text Available Harry M. Markowite, Merton H. Miller and William F. Sharpe were awarded the Nobel Prize in Economic Sciences in 1990, for their pioneering work in the theory of financial economics. Harry Markowite gave the most significant contribution in portfolio selection, William Sharpe in establishing the equilibrium theory of capital asset pricing (CAPM, and Merton Miller in corporate finance. Their work revolutionized finance through the introduction and implementation of quantitative methods in financial analysis. Sharpe was born in 1934 in Boston, Massachusetts. He received the Bachelor of Arts degree in 1955, the Master of Arts degree in 1956, and PhD degree in Economics in 1961 at the UCLA. In his doctoral dissertation he explored a series of aspects of portfolio analysis, based on a model proposed by Markowite. He spent his working career as a lecturer and professor, taking active part in numerous research projects. He authored many scientific papers and books, having won several awards and being a member of many institutions. He established his own financial consulting firm in 1989.
Explaining Asset Prices with Low Risk Aversion and Low Intertemporal Substitution
DEFF Research Database (Denmark)
Andreasen, Martin Møller; Jørgensen, Kasper
model to explain asset prices with a low relative risk aversion (RRA) of 9.8 and a low intertemporal elasticity of substitution (IES) of 0:11. We also show that the proposed preferences allow an otherwise standard New Keynesian model to match the equity premium, the bond premium, and the risk-free rate......This paper extends the class of Epstein-Zin-Weil preferences with a new utility kernel that disentangles uncertainty about the consumption trend (long-run risk) from short-term variation around this trend (cyclical risk). Our estimation results show that these preferences enable the long-run risk...
Inflation risk and international asset returns
G.A. Moerman (Gerard); M.A. van Dijk (Mathijs)
2010-01-01
textabstractWe show that inflation risk is priced in international asset returns. We analyze inflation risk in a framework that encompasses the International Capital Asset Pricing Model (ICAPM) of Adler and Dumas (1983). In contrast to the extant empirical literature on the ICAPM, we relax the
Financial derivative pricing under probability operator via Esscher transfomation
Energy Technology Data Exchange (ETDEWEB)
Achi, Godswill U., E-mail: achigods@yahoo.com [Department of Mathematics, Abia State Polytechnic Aba, P.M.B. 7166, Aba, Abia State (Nigeria)
2014-10-24
The problem of pricing contingent claims has been extensively studied for non-Gaussian models, and in particular, Black- Scholes formula has been derived for the NIG asset pricing model. This approach was first developed in insurance pricing{sup 9} where the original distortion function was defined in terms of the normal distribution. This approach was later studied6 where they compared the standard Black-Scholes contingent pricing and distortion based contingent pricing. So, in this paper, we aim at using distortion operators by Cauchy distribution under a simple transformation to price contingent claim. We also show that we can recuperate the Black-Sholes formula using the distribution. Similarly, in a financial market in which the asset price represented by a stochastic differential equation with respect to Brownian Motion, the price mechanism based on characteristic Esscher measure can generate approximate arbitrage free financial derivative prices. The price representation derived involves probability Esscher measure and Esscher Martingale measure and under a new complex valued measure φ (u) evaluated at the characteristic exponents φ{sub x}(u) of X{sub t} we recuperate the Black-Scholes formula for financial derivative prices.
Financial derivative pricing under probability operator via Esscher transfomation
International Nuclear Information System (INIS)
Achi, Godswill U.
2014-01-01
The problem of pricing contingent claims has been extensively studied for non-Gaussian models, and in particular, Black- Scholes formula has been derived for the NIG asset pricing model. This approach was first developed in insurance pricing 9 where the original distortion function was defined in terms of the normal distribution. This approach was later studied6 where they compared the standard Black-Scholes contingent pricing and distortion based contingent pricing. So, in this paper, we aim at using distortion operators by Cauchy distribution under a simple transformation to price contingent claim. We also show that we can recuperate the Black-Sholes formula using the distribution. Similarly, in a financial market in which the asset price represented by a stochastic differential equation with respect to Brownian Motion, the price mechanism based on characteristic Esscher measure can generate approximate arbitrage free financial derivative prices. The price representation derived involves probability Esscher measure and Esscher Martingale measure and under a new complex valued measure φ (u) evaluated at the characteristic exponents φ x (u) of X t we recuperate the Black-Scholes formula for financial derivative prices
Financial derivative pricing under probability operator via Esscher transfomation
Achi, Godswill U.
2014-10-01
The problem of pricing contingent claims has been extensively studied for non-Gaussian models, and in particular, Black- Scholes formula has been derived for the NIG asset pricing model. This approach was first developed in insurance pricing9 where the original distortion function was defined in terms of the normal distribution. This approach was later studied6 where they compared the standard Black-Scholes contingent pricing and distortion based contingent pricing. So, in this paper, we aim at using distortion operators by Cauchy distribution under a simple transformation to price contingent claim. We also show that we can recuperate the Black-Sholes formula using the distribution. Similarly, in a financial market in which the asset price represented by a stochastic differential equation with respect to Brownian Motion, the price mechanism based on characteristic Esscher measure can generate approximate arbitrage free financial derivative prices. The price representation derived involves probability Esscher measure and Esscher Martingale measure and under a new complex valued measure φ (u) evaluated at the characteristic exponents φx(u) of Xt we recuperate the Black-Scholes formula for financial derivative prices.
International Nuclear Information System (INIS)
Emhjellen, Magne; Alaouze, Chris M.
2003-01-01
We examine the differences in the net present values (NPVs) of North Sea oil projects obtained using the weighted average cost of capital and a modern asset pricing (MAP) method which involves the separate discounting of project cashflow components. NPV differences of more than $10 million were found for some oil projects. Thus, the choice of valuation method will affect the development decisions of oil companies and could influence tax policy. The results of the MAP method are very sensitive to the choice of parameter values for the stochastic process used to model oil prices. Further research is recommended before the MAP method is used as the sole valuation model
Asymptotic approach to the pricing of geometric asian options under the CEV model
International Nuclear Information System (INIS)
Lee, Min-Ku
2016-01-01
This paper studies the pricing of Asian options whose payoffs depend on the average value of an underlying asset during the period to a maturity. Since the Asian option is not so sensitive to the value of underlying asset, the possibility of manipulation is relatively small than the other options such as European vanilla and barrier options. We derive the pricing formula of geometric Asian options under the constant elasticity of variance (CEV) model that is one of local volatility models, and investigate the implication of the CEV model for geometric Asian options.
DEFF Research Database (Denmark)
Christensen, Bent Jesper; van der Wel, Michel
of the risk premium is associated with the slope factor, and individual risk prices depend on own past values, factor realizations, and past values of other risk prices, and are significantly related to the output gap, consumption, and the equity risk price. The absence of arbitrage opportunities is strongly...... is tested, but in addition to the standard bilinear term in factor loadings and market prices of risk, the relevant mean restriction in the term structure case involves an additional nonlinear (quadratic) term in factor loadings. We estimate our general model using likelihood-based dynamic factor model...... techniques for a variety of volatility factors, and implement the relevant likelihood ratio tests. Our factor model estimates are similar across a general state space implementation and an alternative robust two-step principal components approach. The evidence favors time-varying market prices of risk. Most...
Modeling the coupled return-spread high frequency dynamics of large tick assets
Curato, Gianbiagio; Lillo, Fabrizio
2015-01-01
Large tick assets, i.e. assets where one tick movement is a significant fraction of the price and bid-ask spread is almost always equal to one tick, display a dynamics in which price changes and spread are strongly coupled. We present an approach based on the hidden Markov model, also known in econometrics as the Markov switching model, for the dynamics of price changes, where the latent Markov process is described by the transitions between spreads. We then use a finite Markov mixture of logit regressions on past squared price changes to describe temporal dependencies in the dynamics of price changes. The model can thus be seen as a double chain Markov model. We show that the model describes the shape of the price change distribution at different time scales, volatility clustering, and the anomalous decrease of kurtosis. We calibrate our models based on Nasdaq stocks and we show that this model reproduces remarkably well the statistical properties of real data.
Generation unit selection via capital asset pricing model for generation planning
Energy Technology Data Exchange (ETDEWEB)
Romy Cahyadi; K. Jo Min; Chung-Hsiao Wang; Nick Abi-Samra [College of Engineering, Ames, IA (USA)
2003-11-01
The USA's electric power industry is undergoing substantial regulatory and organizational changes. Such changes introduce substantial financial risk in generation planning. In order to incorporate the financial risk into the capital investment decision process of generation planning, this paper develops and analyses a generation unit selection process via the capital asset pricing model (CAPM). In particular, utilizing realistic data on gas-fired, coal-fired, and wind power generation units, the authors show which and how concrete steps can be taken for generation planning purposes. It is hoped that the generation unit selection process will help utilities in the area of effective and efficient generation planning when financial risks are considered. 20 refs., 14 tabs.
Reasons to value the health care intangible asset valuation.
Reilly, Robert F
2012-01-01
There are numerous individual reasons to conduct a health care intangible asset valuation. This discussion summarized many of these reasons and considered the common categories of these individual reasons. Understanding the reason for the intangible asset analysis is an important prerequisite to conducting the valuation, both for the analyst and the health care owner/operator. This is because an intangible asset valuation may not be the type of analysis that the owner/operator really needs. Rather, the owner/operator may really need an economic damages measurement, a license royalty rate analysis, an intercompany transfer price study, a commercialization potential evaluation, or some other type of intangible asset analysis. In addition, a clear definition of the reason for the valuation will allow the analyst to understand if (1) any specific analytical guidelines, procedures, or regulations apply and (2) any specific reporting requirement applies. For example, intangible asset valuations prepared for fair value accounting purposes should meet specific ASC 820 fair value accounting guidance. Intangible asset valuations performed for intercompany transfer price tax purposes should comply with the guidance provided in the Section 482 regulations. Likewise, intangible asset valuations prepared for Section 170 charitable contribution purposes should comply with specific reporting requirements. The individual reasons for the health care intangible asset valuation may influence the standard of value applied, the valuation date selected, the valuation approaches and methods applied, the form and format of valuation report prepared, and even the type of professional employed to perform the valuation.
Double hedge aids commercial terms of upstream asset purchase
International Nuclear Information System (INIS)
Wood, D.
1993-01-01
In recent years many major oil companies have elected to rationalize their producing assets. Mature production--particularly onshore in developed countries, associated with high costs and small profit margins--has been the major target. The current weakness in oil prices has resulted in many such properties being on the market. However, much production marginal to a major can be highly profitable to a cost-effective independent, particularly if the production fits strategically with the independent's asset portfolio. Although many independents recognize that some of the producing assets on the market could be of potential value to them, in a period of volatile prices two important valuations have to be technically justified and negotiated to enable or persuade them to conclude a purchase agreement for a specific asset. These are: A purchase value for an asset that is acceptable to both seller and buyer; and A loan value for the asset to establish the level of debt that the asset can support for the buyer. In defining these two important values (both of which are usually established as ranges rather than single values) the independent has to protect itself against a downturn in commodity prices and exposing itself to an unserviceable level of debt. The paper discusses reducing risks, purchase price hedge, an example of a hedged purchase price, price elements, loan value analysis, agreement structure, loan value hedge, and an example of a hedged loan value
Testing option pricing with the Edgeworth expansion
Balieiro Filho, Ruy Gabriel; Rosenfeld, Rogerio
2004-12-01
There is a well-developed framework, the Black-Scholes theory, for the pricing of contracts based on the future prices of certain assets, called options. This theory assumes that the probability distribution of the returns of the underlying asset is a Gaussian distribution. However, it is observed in the market that this hypothesis is flawed, leading to the introduction of a fudge factor, the so-called volatility smile. Therefore, it would be interesting to explore extensions of the Black-Scholes theory to non-Gaussian distributions. In this paper, we provide an explicit formula for the price of an option when the distributions of the returns of the underlying asset is parametrized by an Edgeworth expansion, which allows for the introduction of higher independent moments of the probability distribution, namely skewness and kurtosis. We test our formula with options in the Brazilian and American markets, showing that the volatility smile can be reduced. We also check whether our approach leads to more efficient hedging strategies of these instruments.
Basel III and Asset Securitization
Directory of Open Access Journals (Sweden)
M. Mpundu
2013-01-01
Full Text Available Asset securitization via special purpose entities involves the process of transforming assets into securities that are issued to investors. These investors hold the rights to payments supported by the cash flows from an asset pool held by the said entity. In this paper, we discuss the mechanism by which low- and high-quality entities securitize low- and high-quality assets, respectively, into collateralized debt obligations. During the 2007–2009 financial crisis, asset securitization was seriously inhibited. In response to this, for instance, new Basel III capital and liquidity regulations were introduced. Here, we find that we can explicitly determine the transaction costs related to low-quality asset securitization. Also, in the case of dynamic and static multipliers, the effects of unexpected negative shocks such as rating downgrades on asset price and input, debt obligation price and output, and profit will be quantified. In this case, we note that Basel III has been designed to provide countercyclical capital buffers to negate procyclicality. Moreover, we will develop an illustrative example of low-quality asset securitization for subprime mortgages. Furthermore, numerical examples to illustrate the key results will be provided. In addition, connections between Basel III and asset securitization will be highlighted.
Sun, Ou; Liu, Zhixin
2016-01-01
We examine the different effects of monetary policy actions and central bank communication on China's stock market bubbles with a Time-varying Parameter SVAR model. We find that with negative responses of fundamental component and positive responses of bubble component of asset prices, contractionary monetary policy induces the observed stock prices to rise during periods of large bubbles. By contrast, central bank communication acts on the market through expectation guidance and has more significant effects on stock prices in the long run, which implies that central bank communication be used as an effective long-term instrument for the central bank's policymaking.
Risk and return in oilfield asset holdings
International Nuclear Information System (INIS)
Kretzschmar, Gavin L.; Kirchner, Axel; Reusch, Hans
2008-01-01
Convention suggests that emerging market investment should provide commensurately lower risk or higher returns than comparable assets in developed countries. This study demonstrates that emerging markets contain regulatory specificities that challenge asset valuation model convergence and potentially invert risk return convention. 292 oilfield assets are used to provide evidence that, under upward oil prices, emerging markets are characterized by progressive state participation in oilfield cash flows. Specifically, this work advances the low oil price paradigm of prior oil and gas asset valuation studies and provides evidence that emerging market state participation terms limit the corporate value of globalization for the sector. (author)
Risk and return in oilfield asset holdings
Energy Technology Data Exchange (ETDEWEB)
Kretzschmar, Gavin L.; Kirchner, Axel; Reusch, Hans [University of Edinburgh, College of Humanities and Social Sciences, The Management School (United Kingdom)
2008-11-15
Convention suggests that emerging market investment should provide commensurately lower risk or higher returns than comparable assets in developed countries. This study demonstrates that emerging markets contain regulatory specificities that challenge asset valuation model convergence and potentially invert risk return convention. 292 oilfield assets are used to provide evidence that, under upward oil prices, emerging markets are characterized by progressive state participation in oilfield cash flows. Specifically, this work advances the low oil price paradigm of prior oil and gas asset valuation studies and provides evidence that emerging market state participation terms limit the corporate value of globalization for the sector. (author)
Just value of the Tactebel energy: an valuation from the main models of pricing asset
Directory of Open Access Journals (Sweden)
Renato Campos
2010-01-01
Full Text Available This study aimed to determine the current fair value of Tractebel Energia, from the main asset pricing models. The company was taken as the object due to its stable growth and the ease of obtaining data, since it is located in the city of Florianopolis. Nevertheless, the volatility in its shares has been priced aroused interest. Therefore, this study intended to provide subsidy for the decision making of investors regarding the purchase or sale of company stock. For this, the theoretical treat on the concept of asset valuation and the main models available, emphasizing their applications and limitations, which are: assessment book on, discounted dividend model and discounted cash flow. Regarding the methodological aspect, the research fits into exploratory, descriptive, highly quantitative field study and case. Moreover, it was made use of desk research, literature, interview and program Economática. Thus, the analysis of data initially sought to raise the assumptions demanded by each of the models surveyed ad apply them. The results were then compared and adjusted so that there is consistency. He was later adopted an arithmetic mean to assign a fair value to the company. From this average was defined as an acceptance range, depending on the variability of results and uncertainty in the estimates.
Directory of Open Access Journals (Sweden)
Jacek Lipiec
2014-07-01
Full Text Available In this article, we test the capital asset pricing model (CAPM on the Warsaw Stock Exchange (WSE by measuring the performance of two portfolios composed of construction firms: family-controlled and nonfamily controlled. These portfolios were selected from the WIG-Construction (WIG—Warszawski Indeks Giełdowy—Warsaw Stock Exchange Index. The performance of both portfolios was measured in the period from 2006 to 2012 with respect to three sub-periods: (1 pre-crisis period: 2006–2007; (2 crisis period: 2008–2009; and (3 post-crisis period: 2010–2012. This division was constructed in this way to find out how family firms performed in crisis times in relation to nonfamily firms. In addition, the construction portfolio was chosen due to its sensitivity to recessions. When an economy faces a downturn, construction firms are among the first to be exposed to risk. The performance was measured by using the capital asset pricing model with statistical inference. We find that public family firms significantly outperformed non-family peers in the crisis times.
Directory of Open Access Journals (Sweden)
Helen Higgs
2014-03-01
Full Text Available This paper models the price and income elasticity of retail finance in Australia using aggregate quarterly data and an autoregressive distributed lag (ARDL approach. We particularly focus on the impact of the global financial crisis (GFC from 2007 onwards on retail finance demand and analyse four submarkets (period analysed in brackets: owneroccupied housing loans (Sep 1985–June 2010, term loans (for motor vehicles, household goods and debt consolidation, etc. (Dec 1988–Jun 2010, credit card loans (Mar 1990–Jun 2010, and margin loans (Sep 2000–Jun 2010. Other than the indicator lending rates and annual full-time earnings respectively used as proxies for the price and income effects, we specify a large number of other variables as demand factors, particularly reflecting the value of the asset for which retail finance demand is derived. These variously include the yield on indexed bonds as a proxy for inflation expectations, median housing prices, consumer sentiment indices as measures of consumer confidence, motor vehicle and retail trade sales, housing debt-to-housing assets as a measure of leverage, the proportion of protected margin lending, the available credit limit on credit cards, and the All Ordinaries Index. In the long run, we find significant price elasticities only for term loans and margin loans, and significant income elasticities of demand for housing loans, term loans and margin loans. We also find that the GFC only significantly affected the longrun demand for term loans and margin loans. In the short run, we find that the GFC has had a significant effect on the price elasticity of demand for term loans and margin loans. Expected inflation is also a key factor affecting retail finance demand. Overall, most of the submarkets in the analysis indicate that retail finance demand is certainly price inelastic but more income elastic than conventionally thought.
A Note on the Fundamental Theorem of Asset Pricing under Model Uncertainty
Directory of Open Access Journals (Sweden)
Erhan Bayraktar
2014-10-01
Full Text Available We show that the recent results on the Fundamental Theorem of Asset Pricing and the super-hedging theorem in the context of model uncertainty can be extended to the case in which the options available for static hedging (hedging options are quoted with bid-ask spreads. In this set-up, we need to work with the notion of robust no-arbitrage which turns out to be equivalent to no-arbitrage under the additional assumption that hedging options with non-zero spread are non-redundant. A key result is the closedness of the set of attainable claims, which requires a new proof in our setting.
Measuring Risk Structure Using the Capital Asset Pricing Model
Directory of Open Access Journals (Sweden)
Zdeněk Konečný
2015-01-01
Full Text Available This article is aimed at proposing of an inovative method for calculating the shares of operational and financial risks. This methodological tool will support managers while monitoring the risk structure. The method is based on the capital asset pricing model (CAPM for calculation of equity cost, namely on determination of the beta coefficient, which is the only variable, that is dependent on entrepreneurial risk. There are combined both alternative approaches for calculation betas, which means, that there are accounting data used and there is distinguished unlevered beta and levered beta. The novelty of the proposed method is based on including of quantities for measuring operational and financial risks in beta calculation. The volatility of cash flow, as a quantity for measuring of operational risk, is included in the unlevered beta. Return on equity based on the cash flow and the indebtedness are variables used in calculation of the levered beta. This modification makes it possible to calculate the share of operational risk as the proportion of the unlevered/levered beta and the share of financial risk, which is the remainder of levered beta. The modified method is applied on companies from two sectors of the Czech economy. In the data set there are companies from one cyclical sector and from one neutral sector to find out potential differences in the risk structure. The findings show, that in both sectors the share of operational risk is over 50%, however, in the neutral sector is this more dominant.
Hedging electricity price volatility using nuclear power
International Nuclear Information System (INIS)
Mari, Carlo
2014-01-01
Highlights: • Nuclear power is an important asset to reduce the volatility of electricity prices. • Unpredictability of fossil fuels and carbon prices makes power prices very volatile. • The dynamics of fossil fuels and carbon prices is described by Brownian motions. • LCOE values, volatilities and correlations are obtained via Monte Carlo simulations. • Optimal portfolios of generating technologies are get using a mean–variance approach. - Abstract: The analysis presented in this paper aims to put in some evidence the role of nuclear power as hedging asset against the volatility of electricity prices. The unpredictability of natural gas and coal market prices as well as the uncertainty in environmental policies may affect power generating costs, thus enhancing volatility in electricity market prices. The nuclear option, allowing to generate electricity without carbon emissions, offers the possibility to reduce the volatility of electricity prices through optimal diversification of power generating technologies. This paper provides a methodological scheme to plan well diversified “portfolios” of generating capacity that minimize the electricity price risk induced by random movements of fossil fuels market prices and by unpredictable fluctuations of carbon credits prices. The analysis is developed within a stochastic environment in which the dynamics of fuel prices as well as the dynamics of carbon credits prices is assumed to evolve in time according to well defined Brownian processes. Starting from market data and using Monte Carlo techniques to simulate generating cost values, the hedging argument is developed by selecting optimal portfolio of power generating technologies using a mean–variance approach
Generation unit selection via capital asset pricing model for generation planning
Energy Technology Data Exchange (ETDEWEB)
Cahyadi, Romy; Jo Min, K. [College of Engineering, Ames, IA (United States); Chunghsiao Wang [LG and E Energy Corp., Louisville, KY (United States); Abi-Samra, Nick [Electric Power Research Inst., Palo Alto, CA (United States)
2003-07-01
The electric power industry in many parts of U.S.A. is undergoing substantial regulatory and organizational changes. Such changes introduce substantial financial risk in generation planning. In order to incorporate the financial risk into the capital investment decision process of generation planning, in this paper, we develop and analyse a generation unit selection process via the capital asset pricing model (CAPM). In particular, utilizing realistic data on gas-fired, coal-fired, and wind power generation units, we show which and how concrete steps can be taken for generation planning purposes. It is hoped that the generation unit selection process developed in this paper will help utilities in the area of effective and efficient generation planning when financial risks are considered. (Author)
Directory of Open Access Journals (Sweden)
Meelis Angerma
2013-09-01
Full Text Available Developments in the real world depends on human reaction to economic events which is also determined by dominating economic thought. Dominance of neoliberal and monetarist thinking was the main cause of ignoring asset price bubbles and their effects on real economy. New keynesian economic thinking provides an alternative. Hyman Minsky’s model of financial instability was more effectively able to explain super-bubbles in US economy and subsequent ‚Great Recession’. Ignorance of momentum-bias of traders and banks contributed to this crises. Emerging markets and Baltic countries were strongly influenced by credit oversupply in US. Instabilities were so sizeable that IMF approved using capital control and proposal for tax on financial transactions was made. Policymakers and individuals should abandon ignorance of speculative asset price bubbles and improve their analytical skills to recognize bubbles and change their behaviour
The Cross-Section of Crypto-Currencies as Financial Assets: An Overview
Elendner, Hermann; Trimborn, Simon; Ong, Bobby; Lee, Teik Ming
2016-01-01
Crypto-currencies have developed a vibrant market since bitcoin, the first crypto-currency, was created in 2009. We look at the properties of cryptocurrencies as financial assets in a broad cross-section. We discuss approaches of altcoins to generate value and their trading and information platforms. Then we investigate crypto-currencies as alternative investment assets, studying their returns and the co-movements of altcoin prices with bitcoin and against each other. We evaluate their additi...
Enhanced capital-asset pricing model for the reconstruction of bipartite financial networks
Squartini, Tiziano; Almog, Assaf; Caldarelli, Guido; van Lelyveld, Iman; Garlaschelli, Diego; Cimini, Giulio
2017-09-01
Reconstructing patterns of interconnections from partial information is one of the most important issues in the statistical physics of complex networks. A paramount example is provided by financial networks. In fact, the spreading and amplification of financial distress in capital markets are strongly affected by the interconnections among financial institutions. Yet, while the aggregate balance sheets of institutions are publicly disclosed, information on single positions is mostly confidential and, as such, unavailable. Standard approaches to reconstruct the network of financial interconnection produce unrealistically dense topologies, leading to a biased estimation of systemic risk. Moreover, reconstruction techniques are generally designed for monopartite networks of bilateral exposures between financial institutions, thus failing in reproducing bipartite networks of security holdings (e.g., investment portfolios). Here we propose a reconstruction method based on constrained entropy maximization, tailored for bipartite financial networks. Such a procedure enhances the traditional capital-asset pricing model (CAPM) and allows us to reproduce the correct topology of the network. We test this enhanced CAPM (ECAPM) method on a dataset, collected by the European Central Bank, of detailed security holdings of European institutional sectors over a period of six years (2009-2015). Our approach outperforms the traditional CAPM and the recently proposed maximum-entropy CAPM both in reproducing the network topology and in estimating systemic risk due to fire sales spillovers. In general, ECAPM can be applied to the whole class of weighted bipartite networks described by the fitness model.
Directory of Open Access Journals (Sweden)
Erol Muzır
2010-09-01
Full Text Available This paper is prepared to test the common opinion that the multifactor asset pricing models produce superior predictions as compared to the single factor models and to evaluate the performance of Arbitrage Pricing Theory (APT and Capital Asset Pricing Model (CAPM. For this purpose, the monthly return data from January 1996 and December 2004 of the stocks of 45 firms listed at Istanbul Stock Exchange were used. Our factor analysis results show that 68,3 % of the return variation can be explained by five factors. Although the APT model has generated a low coefficient of determination, 28,3 %, it proves to be more competent in explaining stock return changes when compared to CAPM which has an inferior explanation power, 5,4 %. Furthermore, we have observed that APT is more robust also in capturing the effects of any economic crisis on return variations.
Option price calibration from Renyi entropy
International Nuclear Information System (INIS)
Brody, Dorje C.; Buckley, Ian R.C.; Constantinou, Irene C.
2007-01-01
The calibration of the risk-neutral density function for the future asset price, based on the maximisation of the entropy measure of Renyi, is proposed. Whilst the conventional approach based on the use of logarithmic entropy measure fails to produce the observed power-law distribution when calibrated against option prices, the approach outlined here is shown to produce the desired form of the distribution. Procedures for the maximisation of the Renyi entropy under constraints are outlined in detail, and a number of interesting properties of the resulting power-law distributions are also derived. The result is applied to efficiently evaluate prices of path-independent derivatives
Pricing Liquidity Risk with Heterogeneous Investment Horizons
Beber, A.; Driessen, J.; Tuijp, P.F.A.
2012-01-01
We develop a new asset pricing model with stochastic transaction costs and investors with heterogenous horizons. Short-term investors hold only liquid assets in equilibrium. This generates segmentation effects in the pricing of liquid versus illiquid assets. Specifically, the liquidity (risk) premia
An empirical examination of restructured electricity prices
International Nuclear Information System (INIS)
Knittel, C.R.; Roberts, M.R.
2005-01-01
We present an empirical analysis of restructured electricity prices. We study the distributional and temporal properties of the price process in a non-parametric framework, after which we parametrically model the price process using several common asset price specifications from the asset-pricing literature, as well as several less conventional models motivated by the peculiarities of electricity prices. The findings reveal several characteristics unique to electricity prices including several deterministic components of the price series at different frequencies. An 'inverse leverage effect' is also found, where positive shocks to the price series result in larger increases in volatility than negative shocks. We find that forecasting performance in dramatically improved when we incorporate features of electricity prices not commonly modelled in other asset prices. Our findings have implications for how empiricists model electricity prices, as well as how theorists specify models of energy pricing. (author)
Asset Return Dynamics and Learning
William A. Branch; George W. Evans
2010-01-01
This article advocates a theory of expectation formation that incorporates many of the central motivations of behavioral finance theory while retaining much of the discipline of the rational expectations approach. We provide a framework in which agents, in an asset pricing model, underparameterize their forecasting model in a spirit similar to Hong, Stein, and Yu (2007) and Barberis, Shleifer, and Vishny (1998), except that the parameters of the forecasting model and the choice of predictor a...
Self-consistent asset pricing models
Malevergne, Y.; Sornette, D.
2007-08-01
We discuss the foundations of factor or regression models in the light of the self-consistency condition that the market portfolio (and more generally the risk factors) is (are) constituted of the assets whose returns it is (they are) supposed to explain. As already reported in several articles, self-consistency implies correlations between the return disturbances. As a consequence, the alphas and betas of the factor model are unobservable. Self-consistency leads to renormalized betas with zero effective alphas, which are observable with standard OLS regressions. When the conditions derived from internal consistency are not met, the model is necessarily incomplete, which means that some sources of risk cannot be replicated (or hedged) by a portfolio of stocks traded on the market, even for infinite economies. Analytical derivations and numerical simulations show that, for arbitrary choices of the proxy which are different from the true market portfolio, a modified linear regression holds with a non-zero value αi at the origin between an asset i's return and the proxy's return. Self-consistency also introduces “orthogonality” and “normality” conditions linking the betas, alphas (as well as the residuals) and the weights of the proxy portfolio. Two diagnostics based on these orthogonality and normality conditions are implemented on a basket of 323 assets which have been components of the S&P500 in the period from January 1990 to February 2005. These two diagnostics show interesting departures from dynamical self-consistency starting about 2 years before the end of the Internet bubble. Assuming that the CAPM holds with the self-consistency condition, the OLS method automatically obeys the resulting orthogonality and normality conditions and therefore provides a simple way to self-consistently assess the parameters of the model by using proxy portfolios made only of the assets which are used in the CAPM regressions. Finally, the factor decomposition with the
Directory of Open Access Journals (Sweden)
Nila Cahyati
2015-04-01
Full Text Available Investasi mempunyai karakteristik antara return dan resiko. Pembentukan portofolio optimal digunakan untuk memaksimalkan keuntungan dan meminimumkan resiko. Liquidity Adjusted Capital Asset Pricing Model (LCAPM merupakan metode pengembangan baru dari CAPM yang dipengaruhi likuiditas. Indikator likuiditas apabila digabungkan dengan metode CAPM dapat membantu memaksimalkan return dan meminimumkan resiko. Tujuan penelitian adalah membandingkan expected retun dan resiko saham serta mengetahui proporsi pada portofolio optimal. Sampel yang digunakan merupakan saham JII (Jakarta Islamic Index periode Januari 2013 – November 2014. Hasil penelitian menunjukkan bahwa expected return portofolio LCAPM sebesar 0,0956 dengan resiko 0,0043 yang membentuk proporsi saham AALI (55,19% dan saham PGAS (44,81%.
Sun, Ou; Liu, Zhixin
2016-01-01
We examine the different effects of monetary policy actions and central bank communication on China’s stock market bubbles with a Time-varying Parameter SVAR model. We find that with negative responses of fundamental component and positive responses of bubble component of asset prices, contractionary monetary policy induces the observed stock prices to rise during periods of large bubbles. By contrast, central bank communication acts on the market through expectation guidance and has more significant effects on stock prices in the long run, which implies that central bank communication be used as an effective long-term instrument for the central bank’s policymaking. PMID:27851796
Elvira, Nasika
2014-01-01
The objective of research is to explain the analysis against the performance of stocks of the companies listed in Indonesia Stock Exchange based on their return and risk, and to explain the analysis of the determination of efficient stock group based on Capital Asset Pricing Model (CAPM) over the stocks of the companies listed in Indonesia Stock Exchange for portfolio establishment in period 2010-2012. The USAge of Capital Asset Pricing Model (CAPM) in this research is that CAPM method can ex...
Paul D. McNelis
1993-01-01
This paper is a data-analytic study of the relationships among international asset price volatilities and the time-varying correlations of asset returns in a small open economy (Australia) with international asset returns. Making use of recent developments in time-series approaches to volatility estimation, impulse response functions, variance decomposition, and Kalman filtering, I show that the Australian stock market volatility is most closely linked with volatility in the UK stock market, ...
The Multi-Frequency Correlation Between Eua and sCER Futures Prices: Evidence from the Emd Approach
Zhang, Yue-Jun; Huang, Yi-Song
2015-05-01
Currently European Union Allowances (EUA) and secondary Certified Emission Reduction (sCER) have become two dominant carbon trading assets for investors and their linkage attracts much attention from academia and practitioners in recent years. Under this circumstance, we use the empirical mode decomposition (EMD) approach to decompose the two carbon futures contract prices and discuss their correlation from the multi-frequency perspective. The empirical results indicate that, first, the EUA and sCER futures price movements can be divided into those triggered by the long-term, medium-term and short-term market impacts. Second, the price movements in the EUA and sCER futures markets are primarily caused by the long-term impact, while the short-term impact can only explain a small fraction. Finally, the long-term (short-term) effect on EUA prices is statistically uncorrelated with the short-term (long-term) effect of sCER prices, and there is a medium or strong lead-and-lag correlation between the EUA and sCER price components with the same time scales. These results may provide some important insights of price forecast and arbitraging activities for carbon futures market investors, analysts and regulators.
Behavioral heterogeneity in stock prices
Boswijk, H.P.; Hommes, C.H.; Manzan, S.
2007-01-01
We estimate a dynamic asset pricing model characterized by heterogeneous boundedly rational agents. The fundamental value of the risky asset is publicly available to all agents, but they have different beliefs about the persistence of deviations of stock prices from the fundamental benchmark. An
Olga Klinkowska
2009-01-01
In this paper I develop the asset pricing model in which the wealth portfolio is enriched with human capital and housing capital. These two types of capital account for a significant portion of the total wealth. Additionally I introduce dynamics into the model and represent conditioning information by common factors estimated with dynamic factor methodology. In this way I can use more accurate representative of the unobservable information set of the investors. Obtained results prove that ind...
Hozman, J.; Tichý, T.
2017-12-01
Stochastic volatility models enable to capture the real world features of the options better than the classical Black-Scholes treatment. Here we focus on pricing of European-style options under the Stein-Stein stochastic volatility model when the option value depends on the time, on the price of the underlying asset and on the volatility as a function of a mean reverting Orstein-Uhlenbeck process. A standard mathematical approach to this model leads to the non-stationary second-order degenerate partial differential equation of two spatial variables completed by the system of boundary and terminal conditions. In order to improve the numerical valuation process for a such pricing equation, we propose a numerical technique based on the discontinuous Galerkin method and the Crank-Nicolson scheme. Finally, reference numerical experiments on real market data illustrate comprehensive empirical findings on options with stochastic volatility.
The Capital Asset Pricing Model: An Evaluation of its Potential as a Strategic Planning Tool
Thomas H. Naylor; Francis Tapon
1982-01-01
In this paper we provide a summary of the capital asset pricing model (CAPM) and point out how it might possibly be used as a tool for strategic planning by corporations that own a portfolio of businesses. We also point out some of the assumptions underlying the CAPM which must be satisfied if it is to be used for strategic planning. Next we include a critical appraisal of the CAPM as a strategic planning tool. Finally, we state the case for linking competitive strategy models, CAPM models, a...
A statistical analysis of product prices in online markets
Mizuno, T.; Watanabe, T.
2010-08-01
We empirically investigate fluctuations in product prices in online markets by using a tick-by-tick price data collected from a Japanese price comparison site, and find some similarities and differences between product and asset prices. The average price of a product across e-retailers behaves almost like a random walk, although the probability of price increase/decrease is higher conditional on the multiple events of price increase/decrease. This is quite similar to the property reported by previous studies about asset prices. However, we fail to find a long memory property in the volatility of product price changes. Also, we find that the price change distribution for product prices is close to an exponential distribution, rather than a power law distribution. These two findings are in a sharp contrast with the previous results regarding asset prices. We propose an interpretation that these differences may stem from the absence of speculative activities in product markets; namely, e-retailers seldom repeat buy and sell of a product, unlike traders in asset markets.
Aggregated Marcoeconomic News and Price Discovery
J. Brazys (Justinas)
2015-01-01
markdownabstract__Abstract__ Is there a link between asset prices and economic fundamentals? Many studies fail to find a convincing link and conclude that asset prices and economic fundamentals are disconnected. A famous example of the disconnect between exchange rates and macroeconomic
An Asset-Based Approach to Tribal Community Energy Planning
Energy Technology Data Exchange (ETDEWEB)
Gutierrez, Rachael A. [Pratt Inst., Brooklyn, NY (United States). City and Regional Planning; Martino, Anthony [Sandia National Lab. (SNL-NM), Albuquerque, NM (United States). Materials, Devices, and Energy Technologies; Begay, Sandra K. [Sandia National Lab. (SNL-NM), Albuquerque, NM (United States). Materials, Devices, and Energy Technologies
2016-08-01
Community energy planning is a vital component of successful energy resource development and project implementation. Planning can help tribes develop a shared vision and strategies to accomplish their energy goals. This paper explores the benefits of an asset-based approach to tribal community energy planning. While a framework for community energy planning and federal funding already exists, some areas of difficulty in the planning cycle have been identified. This paper focuses on developing a planning framework that offsets those challenges. The asset-based framework described here takes inventory of a tribe’s capital assets, such as: land capital, human capital, financial capital, and political capital. Such an analysis evaluates how being rich in a specific type of capital can offer a tribe unique advantages in implementing their energy vision. Finally, a tribal case study demonstrates the practical application of an asset-based framework.
Pricing and hedging of arithmetic Asian options via the Edgeworth series expansion approach
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Weiping Li
2016-03-01
Full Text Available In this paper, we derive a pricing formula for arithmetic Asian options by using the Edgeworth series expansion. Our pricing formula consists of a Black-Scholes-Merton type formula and a finite sum with the estimation of the remainder term. Moreover, we present explicitly a method to compute each term in our pricing formula. The hedging formulas (greek letters for the arithmetic Asian options are obtained as well. Our formulas for the long lasting question on pricing and hedging arithmetic Asian options are easy to implement with enough accuracy. Our numerical illustration shows that the arithmetic Asian options worths less than the European options under the standard Black-Scholes assumptions, verifies theoretically that the volatility of the arithmetic average is less than the one of the underlying assets, and also discovers an interesting phenomena that the arithmetic Asian option for large fixed strikes such as stocks has higher volatility (elasticity than the plain European option. However, the elasticity of the arithmetic Asian options for small fixed strikes as trading in currencies and commodity products is much less than the elasticity of the plain European option. These findings are consistent with the ones from the hedgings with respect to the time to expiration, the strike, the present underlying asset price, the interest rate and the volatility.
Heterogeneity and option pricing
Benninga, Simon; Mayshar, Joram
2000-01-01
An economy with agents having constant yet heterogeneous degrees of relative risk aversion prices assets as though there were a single decreasing relative risk aversion pricing representative agent. The pricing kernel has fat tails and option prices do not conform to the Black-Scholes formula.
Variable capacity utilization, ambient temperature shocks and generation asset valuation
Energy Technology Data Exchange (ETDEWEB)
Tseng, Chung-Li; Dmitriev, Alexandre [Australian School of Business, University of New South Wales, Sydney NSW 2052 (Australia); Zhu, Wei [Optim Energy, 225 E. John Carpenter Freeway, Irving, TX 75062 (United States)
2009-11-15
This paper discusses generation asset valuation in a framework where capital utilization decisions are endogenous. We use real options approach for valuation of natural gas fueled turbines. Capital utilization choices that we explore include turning on/off the unit, operating the unit at increased firing temperatures (overfiring), and conducting preventive maintenance. Overfiring provides capacity enhancement which comes at the expense of reduced maintenance interval and increased costs of part replacement. We consider the costs and benefits of overfiring in attempt to maximize the asset value by optimally exercising the overfire option. In addition to stochastic processes governing prices, we incorporate an exogenous productivity shock: ambient temperature. We consider how variation in ambient temperature affects the asset value through its effect on gas turbine's productivity. (author)
Rypdal, Martin; Sirnes, Espen; Løvsletten, Ola; Rypdal, Kristoffer
2013-08-01
Maximum likelihood estimation techniques for multifractal processes are applied to high-frequency data in order to quantify intermittency in the fluctuations of asset prices. From time records as short as one month these methods permit extraction of a meaningful intermittency parameter λ characterising the degree of volatility clustering. We can therefore study the time evolution of volatility clustering and test the statistical significance of this variability. By analysing data from the Oslo Stock Exchange, and comparing the results with the investment grade spread, we find that the estimates of λ are lower at times of high market uncertainty.
A tree-based method to price American options in the Heston model
Vellekoop, M.; Nieuwenhuis, H.
2009-01-01
We develop an algorithm to price American options on assets that follow the stochastic volatility model defined by Heston. We use an approach which is based on a modification of a combined tree for stock prices and volatilities, where the number of nodes grows quadratically in the number of time
The capital asset pricing model versus the three factor model: A United Kingdom Perspective
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Chandra Shekhar Bhatnagar
2013-07-01
Full Text Available The Sharpe (1964, Lintner (1965 and Black (1972 Capital Asset Pricing Model (CAPM postulates that the equilibrium rates of return on all risky assets are a linear function of their covariance with the market portfolio. Recent work by Fama and French (1996, 2006 introduce a Three Factor Model that questions the “real world application” of the CAPM Theorem and its ability to explain stock returns as well as value premium effects in the United States market. This paper provides an out-of-sample perspective to the work of Fama and French (1996, 2006. Multiple regression is used to compare the performance of the CAPM, a split sample CAPM and the Three Factor Model in explaining observed stock returns and value premium effects in the United Kingdom market. The methodology of Fama and French (2006 was used as the framework for this study. The findings show that the Three Factor Model holds for the United Kingdom Market and is superior to the CAPM and the split sample CAPM in explaining both stock returns and value premium effects. The “real world application” of the CAPM is therefore not supported by the United Kingdom data.
What have we learned from asset sales?
International Nuclear Information System (INIS)
Falk, J.
1999-01-01
The author has created a database of 33 sales of generating assets and has the characteristics of those sales to estimate the value of generating assets. The authors conclusion so far is negative: the sales observed to date have varied so widely in characteristics and price that observed sales data cannot be usefully employed to forecast with any reliability the price at which some other asset is likely to sell in a subsequent auction. The author concludes this does not mean that the auction method is in any way inferior to an administrative method for determining stranded costs. It simply means that there are at present no reliable inferences which can be drawn from this process to inform the administrative process. While this situation might change as more and more assets are auctioned, there are reasons to think that this may not be the case
A Multiperiod Equilibrium Pricing Model
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Minsuk Kwak
2014-01-01
Full Text Available We propose an equilibrium pricing model in a dynamic multiperiod stochastic framework with uncertain income. There are one tradable risky asset (stock/commodity, one nontradable underlying (temperature, and also a contingent claim (weather derivative written on the tradable risky asset and the nontradable underlying in the market. The price of the contingent claim is priced in equilibrium by optimal strategies of representative agent and market clearing condition. The risk preferences are of exponential type with a stochastic coefficient of risk aversion. Both subgame perfect strategy and naive strategy are considered and the corresponding equilibrium prices are derived. From the numerical result we examine how the equilibrium prices vary in response to changes in model parameters and highlight the importance of our equilibrium pricing principle.
Robert Gallagher; Niall O’ Sullivan
2011-01-01
This paper contributes to the behavioural finance literature that examines the asset pricing impact of mood altering events such as sports results, sunshine levels, daylight hours, public holidays, temperature etc. Specifically, we investigate whether variations in investor mood arising from wins and losses in major sporting events have an impact on stock market returns. We examine the case of Ireland. Ireland is an interesting case because its people are passionate about sport, the domestic ...
Money illusion and nominal inertia in experimental asset markets
Noussair, C.N.; Richter, G.; Tyran, J.R.
2012-01-01
We test whether large but purely nominal shocks affect real asset market prices. We subject a laboratory asset market to an exogenous shock, which either inflates or deflates the nominal fundamental value of the asset while holding the real fundamental value constant. After an inflationary shock,
Money Illusion and Nominal Inertia in Experimental Asset Markets
DEFF Research Database (Denmark)
Noussair, Charles N.; Richter, Gregers; Tyran, Jean-Robert
We test whether large but purely nominal shocks affect real asset market prices. We subject a laboratory asset market to an exogenous shock, which either inflates or deflates the nominal fundamental value of the asset, while holding the real fundamental value constant. After an inflationary shock...
Using Partial Differential Equations for Pricing of Goods and Services
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Traykov Metodi
2016-06-01
Full Text Available This article is based on the methodology of comparative analysis, using an innovative approach for pricing of various goods and services. Benchmarking is the continuous search to find and adapt better pricing methods that leading to increased profits. We will consider the numerical solution of partial differential equations, based on Black-Scholes model for pricing of goods and services within European option. Also, we will present formulation and numerical behavior of explicit and implicit methods that can be use in pricing for company assets within European option.
Asset pricing under rational learning about rare disasters
Koulovatianos, Christos; Wieland, Volker
2011-01-01
This paper proposes a new approach for modeling investor fear after rare disasters. The key element is to take into account that investors’ information about fundamentals driving rare downward jumps in the dividend process is not perfect. Bayesian learning implies that beliefs about the likelihood of rare disasters drop to a much more pessimistic level once a disaster has occurred. Such a shift in beliefs can trigger massive declines in price-dividend ratios. Pessimistic beliefs persist for s...
Looking for Synergy with Momentum in Main Asset Classes
Lukas Macijauskas; Dimitrios I. Maditinos
2014-01-01
As during turbulent market conditions correlations between main asset-classes falter, classical asset management concepts seem unreliable. This problem stimulates search for non-discretionary asset allocation methods. The aim of the paper is to test weather the concept of Momentum phenomena could be used as a stand alone investment strategy using all main asset classes. The study is based on exploring historical prices of various asset classes; statistical data analysis method is used. Result...
Financial Super-Markets: Size Matters for Asset Trade.
Philippe Martin and Hélène Rey.
2000-01-01
This paper presents a new theoretical framework to analyze financial markets in an international context. We build a two-country macroeconomic model in which agents are risk averse, assets are imperfect substitutes, the number of financial assets is endogenous, and cross-border asset trade entails transaction costs. We show that demand effects have important implications for the link between market size, asset prices and financial market development. These effects are consistent with the exis...
Back to the Future Betas: Empirical Asset Pricing of US and Southeast Asian Markets
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Jordan French
2016-07-01
Full Text Available The study adds an empirical outlook on the predicting power of using data from the future to predict future returns. The crux of the traditional Capital Asset Pricing Model (CAPM methodology is using historical data in the calculation of the beta coefficient. This study instead uses a battery of Generalized Auto Regressive Conditional Heteroskedasticity (GARCH models, of differing lag and parameter terms, to forecast the variance of the market used in the denominator of the beta formula. The covariance of the portfolio and market returns are assumed to remain constant in the time-varying beta calculations. The data spans from 3 January 2005 to 29 December 2014. One ten-year, two five-year, and three three-year sample periods were used, for robustness, with ten different portfolios. Out of sample forecasts, mean absolute error (MAE and mean squared forecast error (MSE were used to compare the forecasting ability of the ex-ante GARCH models, Artificial Neural Network, and the standard market ex-post model. Find that the time-varying MGARCH and SGARCH beta performed better with out-of-sample testing than the other ex-ante models. Although the simplest approach, constant ex-post beta, performed as well or better within this empirical study.
Coordination between offshore transmission assets - A third way approach
DEFF Research Database (Denmark)
Silva, Filipe Miguel Faria da
2014-01-01
of coordination between assets. This paper analyses the Ofgem’s document ”Consultation on a proposed framework to enable coordination of offshore transmission” and summarises its proposals. The developer-lead approach used in UK is compared with the TSO-lead approach used in Denmark, regarding potential...
Susanti, Ariska Yuli
2014-01-01
This research aims to classify efficient stocks and inefficient stock using the Capital Asset Pricing Model approach (CAPM), it really helps the investors to make the right investment decisions. The object of research is done in the manufacturing sector shares which are listed in the Stock Exchange 2009-2012 . Based on the research result and the analysis that have been done, it can be seen that from the 11 manufacturing company shares which are used as the research sample, there are two comp...
Static and dynamic factors in an information-based multi-asset artificial stock market
Ponta, Linda; Pastore, Stefano; Cincotti, Silvano
2018-02-01
An information-based multi-asset artificial stock market characterized by different types of stocks and populated by heterogeneous agents is presented. In the market, agents trade risky assets in exchange for cash. Beside the amount of cash and of stocks owned, each agent is characterized by sentiments and agents share their sentiments by means of interactions that are determined by sparsely connected networks. A central market maker (clearing house mechanism) determines the price processes for each stock at the intersection of the demand and the supply curves. Single stock price processes exhibit volatility clustering and fat-tailed distribution of returns whereas multivariate price process exhibits both static and dynamic stylized facts, i.e., the presence of static factors and common trends. Static factors are studied making reference to the cross-correlation of returns of different stocks. The common trends are investigated considering the variance-covariance matrix of prices. Results point out that the probability distribution of eigenvalues of the cross-correlation matrix of returns shows the presence of sectors, similar to those observed on real empirical data. As regarding the dynamic factors, the variance-covariance matrix of prices point out a limited number of assets prices series that are independent integrated processes, in close agreement with the empirical evidence of asset price time series of real stock markets. These results remarks the crucial dependence of statistical properties of multi-assets stock market on the agents' interaction structure.
Financial Super-Markets: Size Matters for Asset Trade
Philippe Martin; Helene Rey
2001-01-01
This paper presents a new theoretical framework to analyze=20 financial markets in an international context. We build a two-country=20 macroeconomic model in which agents are risk averse, assets are imperfect=20 substitutes, the number of financial assets is endogenous, and cross-border= =20 asset trade entails transaction costs. We show that demand effects have=20 important implications for the link between market size, asset prices and=20 financial market development. These effects are cons...
Numeraire Invariance and application to Option Pricing and Hedging
Jamshidian, F.; Vanmaele, Michèle; Deelstra, Griselda; De Schepper, Ann; Dhaene, Jan; Reynaerts, Huguette; Schoutens, Wim; Van Goethem, Paul
2008-01-01
Numeraire invariance is a well-known technique in option pricing and hedging theory. It takes a convenient asset as the numeraire, as if it were the medium of exchange, and expresses all other asset and option prices in units of this numeraire. Since the price of the numeraire relative to itself is
European Option Pricing with Transaction Costs in Lévy Jump Environment
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Jiayin Li
2014-01-01
Full Text Available The European option pricing problem with transaction costs is investigated for a risky asset price model with Lévy jump. By the aid of arbitrage pricing theory and the generalized Itô formula (which includes Poisson jump, the explicit solution to the risk asset price model is given. According to arbitrage-free principle, we first discretize the continuous-time model. Then, in each small time interval, the transaction costs are introduced. By using the Δ-hedging strategy, the explicit solutions of the European options pricing formula with transaction costs are given for the risky asset price model with Lévy jump.
Pricing and Hedging Quanto Options in Energy Markets
DEFF Research Database (Denmark)
Benth, Fred Espen; Lange, Nina; Myklebust, Tor Åge
approach we derive a closed form option pricing formula for energy quanto options, under the assumption that the underlying assets are log-normally distributed. Our approach encompasses several interesting cases, such as geometric Brownian motions and multifactor spot models. We also derive delta and gamma......In energy markets, the use of quanto options have increased significantly in the recent years. The payoff from such options are typically written on an underlying energy index and a measure of temperature and are suited for managing the joint price and volume risk in energy markets. Using an HJM...... expressions for hedging. Furthermore, we illustrate the use of our model by an empirical pricing exercise using NYMEX traded natural gas futures and CME traded Heating Degree Days futures for New York....
Bayesian Option Pricing Framework with Stochastic Volatility for FX Data
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Ying Wang
2016-12-01
Full Text Available The application of stochastic volatility (SV models in the option pricing literature usually assumes that the market has sufficient option data to calibrate the model’s risk-neutral parameters. When option data are insufficient or unavailable, market practitioners must estimate the model from the historical returns of the underlying asset and then transform the resulting model into its risk-neutral equivalent. However, the likelihood function of an SV model can only be expressed in a high-dimensional integration, which makes the estimation a highly challenging task. The Bayesian approach has been the classical way to estimate SV models under the data-generating (physical probability measure, but the transformation from the estimated physical dynamic into its risk-neutral counterpart has not been addressed. Inspired by the generalized autoregressive conditional heteroskedasticity (GARCH option pricing approach by Duan in 1995, we propose an SV model that enables us to simultaneously and conveniently perform Bayesian inference and transformation into risk-neutral dynamics. Our model relaxes the normality assumption on innovations of both return and volatility processes, and our empirical study shows that the estimated option prices generate realistic implied volatility smile shapes. In addition, the volatility premium is almost flat across strike prices, so adding a few option data to the historical time series of the underlying asset can greatly improve the estimation of option prices.
The impact of asset repurchases and issues in an experimental market
Haruvy, E.; Noussair, C.N.; Powell, O.R.
We create an experimental asset market in which the value of the shares is independent of the quantity outstanding, and find that (i) repurchases increase, whereas share issues decrease, the price of the asset. These effects are consistent with downward-sloping demand for the asset. (ii) This
VALUE-BASED APPROACH TO MANAGING CURRENT ASSETS OF CORPORATE CONSTRUCTION COMPANIES
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Galyna Shapoval
2017-09-01
Full Text Available In modern conditions of management, the value of an enterprise becomes the main indicator, which is learned not only by scientists, but also by owners of enterprise and potential investors. Current assets take a very important place among the factors that affect the value of an enterprise, so management of current assets becomes more acute from the point of their impact on enterprise value. The purpose of the paper is to develop a system of value-based management of corporate construction companies’ current assets. The main tasks are: the study of current assets impact on the value of corporate construction companies, the definition of value-based approach to managing current assets of corporate enterprises and development of value-based management system of corporate construction companies’ current assets by elements. General scientific and special research methods were used while writing the work. Value-based management of current assets involves value-based management of the elements of current assets. The value-based inventory management includes the following stages of management: the assessment of reliability and choice of supplier according to the criterion of cash flow maximization, the classification of stocks in management accounting according to the rhythm of supply and the establishment of periodicity of supplies in accordance with the needs of the construction process. The value-based management of accounts receivable includes the following stages of management: assessment of the efficiency of investment of working capital into accounts receivable, the assessment of customers' loyalty and the definition of credit conditions and monitoring of receivables by construction and debt instruments. Value-based cash management involves determining the required level of cash to ensure the continuity of the construction process, assessing the effectiveness of cash use according to the criterion of maximizing cash flow, as well as budget
The Influence of Fundamental and Macroeconomic Analysis on Stock Price
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Hari Gursida
2017-12-01
Full Text Available The purpose of this research is to analyze the effect of fundamental and macroeconomic analysis on stock price. The research was conducted at a coal company listed on the Indonesia Stock Exchange. Fundamental analysis measured by current ratio, debt to equity ratio (DER, earning per share (EPS, return on assets (ROA, and total assets turnover (TATO, while macroeconomic analysis is measured by inflation and exchange rate. Current ratio (CR has a positive effect on Stock Price. Strengthening this level of liquidity can provide information to investors to decide to buy shares of companies that tend to be healthy and stable. Return on assets (ROA has a positive and significant influence on stock price. Efforts to maximize the level of profitability by increasing the value of return on assets can provide information to investors that investments invested in the company will provide good profit. The impact of stock prices will rise. While debt to equity ratio (DER, earning per share (EPS and total assets turnover (TATO have no effect on Stock Price. Macroeconomic analysis shows: (a Inflation rate has no effect on stock price of coal company. This can be because the inflation rate in Indonesia is at the level of 6% -7% per year and included in the category of mild inflation. Mild inflation resulted in very slow economic growth, not affecting stock prices. The exchange rate has a negative and significant effect on coal company stock price. If the Rupiah is depreciated then the stock price of the coal company will decrease.
Pricing and Hedging Quanto Options in Energy Markets
DEFF Research Database (Denmark)
Benth, Fred Espen; Lange, Nina; Myklebust, Tor Åge
2015-01-01
–Jarrow–Morton approach, we derive a closed-form option pricing formula for energy quanto options under the assumption that the underlying assets are lognormally distributed. Our approach encompasses several interesting cases, such as geometric Brownian motions and multifactor spot models. We also derive Delta and Gamma......In energy markets, the use of quanto options has increased significantly in recent years. The payoff from such options are typically written on an underlying energy index and a measure of temperature. They are suited to managing the joint price and volume risk in energy markets. Using a Heath...... expressions for hedging. Further, we illustrate the use of our model by an empirical pricing exercise using NewYork Mercantile Exchange-traded natural gas futures and Chicago Mercantile Exchange-traded heating degree days futures for NewYork....
Cruise tourism: a hedonic pricing approach
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Josep Maria Espinet-Rius
2018-03-01
Full Text Available Purpose - The purpose of this paper is to examine the effect on price of different cruise industry characteristics from the point of view of actual prices. The analysis is carried out from the supply side but taking into account the real prices paid by customers. Design/methodology/approach - This paper uses the hedonic price methodology. To develop this research, a database of more than 36,000 prices paid by cruise passengers and different characteristics of ships in 2013 was built. To obtain the results, ten models have been developed with significant adjusted R2 of between 0.85 and 0.93 making the models and results robust. Findings - The results show that the main attributes affecting prices are the number of nights of the itinerary, the departure date, the number of days before departure the booking is made, the accommodation type and some facilities, such as casinos, cinemas and swimming pools. The results also yield a ranking of ship companies based on price and quality dimensions. Finally, the authors suggest some implications for management and new research. Originality/value - This paper offers a new approach in the academic literature of the cruise industry in two respects. First, in its use of a broad database of actual prices paid by passengers – more than 36,000 observations. Second, in the application of the hedonic pricing methodology, widely used in the tourism sector (see the Methodology and Database section but until now not in the cruising segment.
Penalty methods for the numerical solution of American multi-asset option problems
Nielsen, Bjørn Fredrik; Skavhaug, Ola; Tveito, Aslak
2008-12-01
We derive and analyze a penalty method for solving American multi-asset option problems. A small, non-linear penalty term is added to the Black-Scholes equation. This approach gives a fixed solution domain, removing the free and moving boundary imposed by the early exercise feature of the contract. Explicit, implicit and semi-implicit finite difference schemes are derived, and in the case of independent assets, we prove that the approximate option prices satisfy some basic properties of the American option problem. Several numerical experiments are carried out in order to investigate the performance of the schemes. We give examples indicating that our results are sharp. Finally, the experiments indicate that in the case of correlated underlying assets, the same properties are valid as in the independent case.
Sylvain M. Prado
2009-01-01
In the leasing industry, the risk of loss on sales at the end of the contract term, as well as pricing are critically impacted by the forecasted resale price of the asset (residual value). We apply the Hedonic methodology to European auto lease portfolios, in order to estimate the resale price distribution. The Hedonic approach estimates the price of a good through the valuation of its attributes. Following a discussion on Hedonic prices, we propose an operational model for the automobile res...
A hybrid linked data approach to support asset management
Luiten, G.T.; Bohms, H.M.; O'Keeffe, A.; Nederveen, S. van; Bakker, J.; Wikstrom, L.
2016-01-01
This paper evaluates experiences with applying a linked data approach for coping with the many challenges for information management in asset management from the perspective of National Road Authorities (NRAs). As influential players, NRAs are often the initiators of innovation in the civil
Pricing of Contracts for Difference in the Nordic market
International Nuclear Information System (INIS)
Kristiansen, T.
2004-01-01
The purpose of this paper is to give an introduction to, and a pricing analysis of a new forward locational price differential product, Contracts for Difference (CfD), introduced the 17th of November 2000 at Nord Pool - the Nordic electricity exchange. To our knowledge there is no literature available of how the Nordic CfDs are priced. The CfD is a forward market product with reference to the difference between the future seasonal Area Price and System Price. By using available historical trading prices and spot prices for four seasonal contracts and one yearly contract, we analyze the relationships between the contract prices and the value of the underlying asset. For the first four seasonal contracts it appears that CfDs traded at Nord Pool are mostly over-priced relative to the underlying asset. Pricing theory for forward contracts explains this by the presence of a majority of risk-averse consumers who are willing to pay a risk premium for receiving the future price differential. We utilize statistical analysis with regard to the contract prices and the underlying asset, and find some interesting relationships. The analysis is preliminary due to the fact that the CfD market is relatively new. (Author)
Testing Capital Asset Pricing Model: Empirical Evidences from Indian Equity Market
Directory of Open Access Journals (Sweden)
Kapil CHOUDHARY
2010-11-01
Full Text Available The present study examines the Capital Asset Pricing Model (CAPM for the Indian stock market using monthly stock returns from 278 companies of BSE 500 Index listed on the Bombay stock exchange for the period of January 1996 to December 2009. The findings of this study are not substantiating the theory’s basic result that higher risk (beta is associated with higher levels of return. The model does explain, however, excess returns and thus lends support to the linear structure of the CAPM equation. The theory’s prediction for the intercept is that it should equal zero and the slope should equal the excess returns on the market portfolio. The results of the study lead to negate the above hypotheses and offer evidence against the CAPM. The tests conducted to examine the nonlinearity of the relationship between return and betas bolster the hypothesis that the expected return-beta relationship is linear. Additionally, this study investigates whether the CAPM adequately captures all-important determinants of returns including the residual variance of stocks. The results exhibit that residual risk has no effect on the expected returns of portfolios.
Accounting of Long-Term Biological Assets
Valeriy Mossakovskyy; Vasyl Korytnyy
2015-01-01
The article is devoted to generalization of experience in valuation of long-term biological assets of plant-growing and animal-breeding, and preparation of suggestions concerning improvement of accounting in this field. Recommendations concerning accounting of such assets are given based on the study of accounting practice at specific agricultural company during long period of time. Authors believe that fair value is applicable only if price level for agricultural products is fixed by the gov...
APPROACHES CONCERNING ACCOUNTING OF INTANGIBLE ASSETS
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Gheorghe MOROSAN
2016-02-01
Full Text Available Given the importance of intangible assets in the company the paper aims to establish criteria for recognizing and measuring these assets through which the company can not only reflect the true value and its carrying amount. The main objective is to formulate a logical definition of intangible assets in accounting terms that allows their recognition in financial reporting to help build an accurate image of the company. It will demonstrate how important intangible assets for a successful company are and how they can help develop the economy and especially the Romanian economy. The secondary objectives are: - Setting limits in the valuation of intellectual capital from the point of view of internal control and external - Create a new post in the balance sheet to include this related value
Problems with Cash and Other Non-Operating Assets Value in the Process of Valuing Company
Directory of Open Access Journals (Sweden)
Piotr Szczepankowski
2007-12-01
Full Text Available In economic practice the process of valuing enterprises is based on potential earnings from companies operating assets ñ operating fixed assets and operating working capital. Cash and other non-operating assets (mainly financial are treated as unproductive, non-income assets. Eventually, in process of pricing their current, accounting value is added to income value of enterprise or cash is treated as source for quick covering the debts of firm, what of course indirectly improve for better value of equity (the lower financial risk. Not taking into account the profitable influence of cash value and other non-operating assets can negatively affect on result of final value of enterprise, reducing it. In the article two alternative approaches (separate and inclusive of cash value is presented. Also main determinants of estimating value of cash are described as well as potential threats of its valuation.
Do crypto-currencies form a new asset class?
Mayr, Samuel
2015-01-01
This paper examines statistical properties of crypto-currencies' price variations in comparison with statistical properties of price variations in common financial markets. Price data of Bitcoin, ripple and Litecoin have been directly compared with price data of euro currency and stock index S&P500. Additionally, and compared with set of stylized facts of asset returns. The properties in scope of this work include an autocorrelation of day-to-day returns, a shape of return distributions, a vo...
Challenging the myths: the mid-stream asset provider's view
International Nuclear Information System (INIS)
Findlay, R.
1996-01-01
The term 'mid-stream asset business' implies custom processing and gathering, meaning that a gas producer sells his gas at the wellhead, thereby transferring the business of gathering, processing and marketing of the gas and liquids to a third party. The concept is popular in the United States, but is not yet common in Canada. In Canada, producers own the gas gathering and processing systems. The mid-stream asset business was claimed to be more user friendly than the old custom processing business. Three myths about the mid-stream asset business were challenged: (1) all the risk is on the producer, the processor takes no risk, (2) the mid-stream asset business is an expensive means of financing further exploration, and (3) owning and operating gathering and processing facilities is an integral part of a producer's business. Arguments were brought forth to dispel these myths and to emphasize that a processor should be prepared to accept risks associated with the commodity, prices, production and operations. To be operationally effective, the producer's flexibility and strategic advantages must approach the same level as if he were the owner of the facility
The valuation of health care intangible assets.
Reilly, R F; Rabe, J R
1997-01-01
Health care entities (and especially medical practices) are valued for a number of reasons: sale transaction pricing and structuring, merger formation and dissolution, taxation and regulatory compliance, and litigation support and dispute resolution. The identification and quantification of the entity's intangible assets are often the most important aspects of the valuation. This article illustrates the generally accepted methods for valuing health care-related intangible assets.
Approaches of Improving University Assets Management Efficiency
Wang, Jingliang
2015-01-01
University assets management, as an important content of modern university management, is generally confronted with the issue of low efficiency. Currently, to address the problems exposed in university assets management and take appropriate modification measures is an urgent issue in front of Chinese university assets management sectors. In this…
International Nuclear Information System (INIS)
Coudert, V.; Mignon, V.; Penot, A.
2007-01-01
Oil prices and the United States (US) dollar exchange rate are driving the evolution of the world economy. This paper investigated long-term relationships between oil prices and the US effective exchange rate. An empirical study was performed on oil prices and the dollar real effective exchange rate between 1974 to 2004. The impact of the dollar exchange rate was also explored, and the effects of oil prices on supply and demand were considered. A dynamic partial equilibrium framework study was evaluated in order to compare how other countries used revenues from oil exports in dollars. The study showed that both variables had similar evolutions when price fluctuations were low. Strong increases in the dollar were associated with lower oil prices. However, adjustment speeds of the dollar real effective exchange rate was slow. Co-integration and causality tests showed that oil prices influenced the exchange rate, and that the link between the 2 variables was transmitted through the country's net foreign asset position. It was concluded that higher oil prices improved US net foreign asset position in relation to other countries, and had a positive impact on dollar appreciation. 24 refs., 6 tabs., 1 fig
Stock Market Effects of ECB’s Asset Purchase Programmes
DEFF Research Database (Denmark)
Henseler, Kai; Rapp, Marc Steffen
2018-01-01
How do stock prices react to ECB’s Asset Purchase Programmes? Using an event-study approach, we find substantial cross-sectional variation in a sample of 2625 non-financial firms in the Euro-zone. Announcement returns are positively correlated with leverage and negatively with size, consistent wi...... with a credit channel. Furthermore, announcement returns are negatively correlated with the market-to-book ratio, suggesting different exposures of value and growth stocks. These patterns are more pronounced once we only examine programme initiation announcements....
Stock Market Effects of ECB’s Asset Purchase Programmes
DEFF Research Database (Denmark)
Henseler, Kai; Rapp, Marc Steffen
2018-01-01
How do stock prices react to ECB’s Asset Purchase Programmes? Using an event-study approach, we find substantial cross-sectional variation in a sample of 2625 non-financial firms in the Euro-zone. Announcement returns are positively correlated with leverage and negatively with size, consistent...... with a credit channel. Furthermore, announcement returns are negatively correlated with the market-to-book ratio, suggesting different exposures of value and growth stocks. These patterns are more pronounced once we only examine programme initiation announcements....
Integrasi Manajemen Asset dan Liabilitas Perbankan Syari’ah
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Parmujianto Parmujianto
2017-04-01
Full Text Available Asset management focus and liability is to coordinate asset-liability portfolio of the bank in order to maximize profits for the banks and the results are distributed to the shareholders in the long term by taking into account liquidity needs and prudence. Prastimoyo (1997 says that the focus or objectives of management of assets and liabilities is to optimize revenue and keep the risk does not exceed the tolerable limit, while also maximizing the market price of the company's equity, while according to Bambang (2000, the management of assets and liabilities has a function and kenijakan in implementing a pricing strategy, both in the areas of lending and funding, in general, the responsibility of ALCO is to manage positions and allocation of funds that banks provided liquidity, maximize profit and minimize risk. On the other hand, Islamic banking has the characteristics berbada with conventional banks which do not recognize interest but for the results except that there are some business activities that exist only on Islamic banking such as trade and pawn so that it impacts extensive technical on banking activities one of which is the management asset-liabilit. So this paper will describe how the ALM policy applied to Islamic banking.
Sticky continuous processes have consistent price systems
DEFF Research Database (Denmark)
Bender, Christian; Pakkanen, Mikko; Sayit, Hasanjan
Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi-asset price process has a consistent price system, under...
The Diversification Benefits of Including Carbon Assets in Financial Portfolios
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Yinpeng Zhang
2017-03-01
Full Text Available Carbon allowances traded in the EU-Emission Trading Scheme (EU-ETS were initially designed as an economic motivation for efficiently curbing greenhouse as emissions, but now it mimics quite a few characteristics of financial assets, and have now been used as a candidate product in building financial portfolios. In this study, we examine the time-varying correlations between carbon allowance prices with other financial indices, during the third phase of EU-ETS. The results show that, at the beginning of this period, carbon price was still strongly corrected with other financial indices. However, this connection was weakened over time. Given the relative independence of carbon assets from other financial assets, we argue for the diversification benefits of including carbon assets in financial portfolios, and building such portfolios, respectively, with the traditional global minimum variance (GMV strategy, the mean-variance-OGARCH (MV-OGARCH strategy, and the dynamic conditional correlation (DCC strategy. It is shown that the portfolio built with the MV-OGARCH strategy far out-performs the others and that including carbon assets in financial portfolios does help reduce investment risks.
Heterogeneous traders, price-volume signals, and complex asset price dynamics
Directory of Open Access Journals (Sweden)
Frank H. Westerhoff
2005-01-01
model reveal that interactions between fundamentalists and chartists may cause intricate endogenous price fluctuations. Contrary to the intuition, we find that chart trading may increase market stability.
International Nuclear Information System (INIS)
1990-11-01
The IAEA Assessment of Safety Significant Events Team (ASSET) Service provides advice and assistance to Member States to enhance the overall level of plant safety while dealing with the policy of prevention of incidents at nuclear power plants. The ASSET programme, initiated in 1986, is not restricted to any particular group of Member States, whether developing or industrialized, but is available to all countries with nuclear power plants in operation or approaching commercial operation. The IAEA Safety Series publications form common basis for the ASSET reviews, including the Nuclear Safety Standards (NUSS) and the Basic Safety Principles (Recommendations of Safety Series No. 75-INSAG-3). The ASSET Guidelines provide overall guidance for the experts to ensure the consistency and comprehensiveness of their review of incident investigations. Additional guidance and reference material is provided by the IAEA to complement the expertise of the ASSET members. ASSET reviews accept different approaches that contribute to ensuring an effective prevention of incidents at plants. Suggestions are offered to enhance plant safety performance. Commendable good practices are identified and generic lessons are communicated to other plants, where relevant, for long term improvement
Directory of Open Access Journals (Sweden)
Suripto Suripto
2017-03-01
Full Text Available This research tested the influence of characteristics of the firms and of EVA (Eco-nomic Value Added to stock of returns. This Research sample was company Self-100 ValueCreator of year 2001 until 2006. Result of research indicated that company size measure,profitability, capital structure (characteristics of the firms and EVA by stimulant had aneffect on significant to stock of returns, but by partial only characteristics company. Condi-tion of company fundamentals had an effect on significance to stock of returns. This indica-tion that investor still considered factors of fundamentals was having investment. EVA didnot have an effect on significant to stock of returns. This finding indicated that Model deter-mination of stock of returns (CAPM Irrelevant determined the level of EVA and also indicatedthat CAPM (Capital Assets Pricing Model was not relevant in determining stock of returns inIndonesian Stock Exchange.
Electricity spot price dynamics: Beyond financial models
International Nuclear Information System (INIS)
Guthrie, Graeme; Videbeck, Steen
2007-01-01
We reveal properties of electricity spot prices that cannot be captured by the statistical models, commonly used to model financial asset prices, that are increasingly used to model electricity prices. Using more than eight years of half-hourly spot price data from the New Zealand Electricity Market, we find that the half-hourly trading periods fall naturally into five groups corresponding to the overnight off-peak, the morning peak, daytime off-peak, evening peak, and evening off-peak. The prices in different trading periods within each group are highly correlated with each other, yet the correlations between prices in different groups are lower. Models, adopted from the modeling of security prices, that are currently applied to electricity spot prices are incapable of capturing this behavior. We use a periodic autoregression to model prices instead, showing that shocks in the peak periods are larger and less persistent than those in off-peak periods, and that they often reappear in the following peak period. In contrast, shocks in the off-peak periods are smaller, more persistent, and die out (perhaps temporarily) during the peak periods. Current approaches to modeling spot prices cannot capture this behavior either. (author)
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Dionigi Gerace
2015-06-01
Full Text Available Despite the capital asset pricing model being one of the most inﬂuential mod¬els in modern portfolio theory, it has also been a victim of criticism in numerous academic papers. Its assumptions which seem to be rather unre¬alistic, have caused many academics to improve the model by relaxing some of its restrictive statements. In this journal article, we compare the performance of an optimal portfolio of securities in the Australian securities market by constructing two theoretical portfolios; one using the capital asset pricing model which uses a single beta throughout a static investment horizon; and another, which allows the op¬timal portfolio to be rebalanced each week with an adjusted beta. The performance of the two theoretical portfolios is compared to determine the superior model. Overall, findings showed that due to rebalancing of the portfolio, the multiple period model was the superior model based on before and after transaction cost returns.
The asset pricing model of musharakah factors
Simon, Shahril; Omar, Mohd; Lazam, Norazliani Md
2015-02-01
The existing three-factor model developed by Fama and French for conventional investment was formulated based on risk-free rates element in which contradict with Shariah principles. We note that the underlying principles that govern Shariah investment were mutual risk and profit sharing between parties, the assurance of fairness for all and that transactions were based on an underlying asset. In addition, the three-factor model did not exclude stock that was not permissible by Shariah such as financial services based on riba (interest), gambling operator, manufacture or sale of non-halal products or related products and other activities deemed non-permissible according to Shariah. Our approach to construct the factor model for Shariah investment was based on the basic tenets of musharakah in tabulating the factors. We start by noting that Islamic stocks with similar characteristics should have similar returns and risks. This similarity between Islamic stocks was defined by the similarity of musharakah attributes such as business, management, profitability and capital. These attributes define factor exposures (or betas) to factors. The main takeaways were that musharakah attributes we chose had explain stock returns well in cross section and were significant in different market environments. The management factor seemed to be responsible for the general dynamics of the explanatory power.
Determinants Of Equity Prices In The Stock Market
Directory of Open Access Journals (Sweden)
Muhammad Usman Javaid
2010-12-01
Full Text Available This study examines the effect of market variables on the movement stock prices in Pakistan. Asset pricing is considered as efficient if the asset prices reflect all available market information. This study examined the extent to which some "information factors" or market indices affect the stock price. A simple regression model has been used to develop a relation between the variables (stock prices, earnings per share, gross domestic product, dividend, inflation and KIBOR after testing for multi-collinearity among the independent variables. All the variables have shown positive correlation with stock prices with some exceptions of GDP and inflation. This study has enriched the existing literature while it would help policy makers who are interested in deploying instruments of monetary policy and other economic indices for the growth of the capital market.
Demography, Capital Flows and Asset Allocation over the Life-cycle
Mann, Katja; Davenport, Margaret
2016-01-01
This paper studies the effect of population aging on portfolio choice, asset prices and international asset trades. In a multi-period OLG model, we analyze how an increase in longevity or a decrease in fertility in a country affects the demand for safe and risky assets. In a closed economy, given a fixed supply, the riskfree rate falls and the risk premium rises, because retirees prefer to hold a larger share of safe assets in their portfolio than working-age households. In a financially inte...
Optimal Dynamic Pricing for Perishable Assets with Nonhomogeneous Demand
Wen Zhao; Yu-Sheng Zheng
2000-01-01
We consider a dynamic pricing model for selling a given stock of a perishable product over a finite time horizon. Customers, whose reservation price distribution changes over time, arrive according to a nonhomogeneous Poisson process. We show that at any given time, the optimal price decreases with inventory. We also identify a sufficient condition under which the optimal price decreases over time for a given inventory level. This sufficient condition requires that the willingness of a custom...
Directory of Open Access Journals (Sweden)
Gulnara REJEPOVA
2007-01-01
Full Text Available This article attempts to test the validity of CAPM (Capital Asset Pricing Model in Turkey by regressing the weekly risk premiums (rj - rf against the beta coefficients of 20 portfolios, each including 10 stocks, over the period of 1995-2004.ISE 100 index and US T-Bill rate, adjusted for the difference between Turkish and US inflation rates were used as the proxies to the market portfolio, and the risk-free rate respectively. Following an in-depth literature survey, Fama and MacBeth (1973, and Pettengil et. al. (1995 approaches were selected as two alternative methods to be used in the research. Research findings based on Fama&MacBeth approach indicated no meaningful relationship between beta coefficients and ex-post risk premiums of the selected portfolios. With Pettengill et al. methodology, on the other hand, strong beta-risk premium relationships were discovered.
Itkin, Andrey
2017-01-01
This monograph presents a novel numerical approach to solving partial integro-differential equations arising in asset pricing models with jumps, which greatly exceeds the efficiency of existing approaches. The method, based on pseudo-differential operators and several original contributions to the theory of finite-difference schemes, is new as applied to the Lévy processes in finance, and is herein presented for the first time in a single volume. The results within, developed in a series of research papers, are collected and arranged together with the necessary background material from Lévy processes, the modern theory of finite-difference schemes, the theory of M-matrices and EM-matrices, etc., thus forming a self-contained work that gives the reader a smooth introduction to the subject. For readers with no knowledge of finance, a short explanation of the main financial terms and notions used in the book is given in the glossary. The latter part of the book demonstrates the efficacy of the method by solvin...
Directory of Open Access Journals (Sweden)
Francis M HUTABARAT
2016-08-01
Full Text Available The industry in Indonesia is an interesting business to capitalize. In Indonesia many companies were established since it is profitable. The capital market serves as an economic pillar in most countries. Indonesia is a rich country, rich in many ways especially in natural resources. However, the industry has its ups and downs in the stock market. It is interesting to see the performance of the companies listed in the Indonesia Stock Exchange. This study aimed to measure and analyze companies listed in Pefindo25 at Indonesian Stock Exchange using Capital Asset Pricing Model. The sample used is 25 companies listed at Pefindo25 index. Based on the results of the study, it can conclude that after analyzing the companies listed in the Indonesian Stock Exchange using Capital Asset Pricing Model that based on Beta analysis, the companies have the type of stocks that are aggressive and defensive. With positive and negative return. The company with aggressive beta shows that the company tend to face higher risk, as JPFA find itself with positif return 15.47% expected return. And companies with defensive type of stocks tend to have positive return such as: FISH, STTP, AISA, APLN, and others since they are not sensitive to market changes. It is recommended for further research to look on this CAPM method in analyzing the stock investment.
Understanding international commodity price fluctuations
Arezki, Rabah; Loungani, Prakash; van der Ploeg, Rick; Venables, Anthony J.
An overview is provided of recent work on commodity prices, focusing on three themes: (i) "financialization" of commodity markets--commodities being considered by financial investors as a distinct asset class, (ii) trends and forecasts of commodity prices, and (iii) fracking-a shorthand for the
Crude oil prices: Speculation versus fundamentals
Kolodziej, Marek Krzysztof
Beginning in 2004, the price of crude oil fluctuates rapidly over a wide range. Large and rapid price increases have recessionary consequences and dampen long-term infrastructural investment. I investigate whether price changes are driven by market fundamentals or speculation. With regard to market fundamentals, I revisit econometric evidence for the importance of demand shocks, as proxied by dry maritime cargo rates, on oil prices. When I eliminate transportation costs from both sides of the equation, disaggregate OPEC and non-OPEC production, and allow for more than one cointegrating relation, I find that previous specifications are inconsistent with arguments that demand shocks play an important role. Instead, results confirm the importance of OPEC supply shocks. I investigate two channels by which speculation may affect oil prices; the direct effect of trader behavior and changes in oil from a commodity to a financial asset. With regard to trader behavior, I find evidence that trader positions are required to explain the spread between spot and futures prices of crude oil on the New York Mercantile Exchange. The inclusion of trader positions clarifies the process of equilibrium error correction, such that there is bidirectional causality between prices and trader positions. This creates the possibility of speculative bubbles. With regard to oil as a commodity and/or financial asset, I use a Kalman Filter model to estimate the time-varying partial correlation between returns to investments in equity and oil markets. This correlation changes from negative to positive at the onset of the 2008 financial crisis. The low interest rates used to rescue the economy depress convenience yields, which reduces the benefits of holding oil as a commodity. Instead, oil becomes a financial asset (on net) as the oil market changed from contango to backwardation. Contradicting simple political narratives, my research suggests that both market fundamentals and speculation drive
Asset Attribution Stability and Portfolio Construction: An Educational Example
Chong, James T.; Jennings, William P.; Phillips, G. Michael
2014-01-01
This paper illustrates how a third statistic from asset pricing models, the R-squared statistic, may have information that can help in portfolio construction. Using a traditional CAPM model in comparison to an 18-factor Arbitrage Pricing Style Model, a portfolio separation test is conducted. Portfolio returns and risk metrics are compared using…
The Impact of Asset Repurchases and Issues in an Experimental Market
Haruvy, E.; Noussair, C.N.; Powell, O.R.
2012-01-01
Abstract: We create an experimental asset market in which we conduct share repurchases and share issues. Although the intrinsic value of the shares is independent of the quantity outstanding, the interventions result in changes in asset price. Specifically, we find the following. (1) A repurchase of
Intraday Price Discovery in Fragmented Markets
S.R. Ozturk (Sait); M. van der Wel (Michel); D.J.C. van Dijk (Dick)
2014-01-01
textabstractFor many assets, trading is fragmented across multiple exchanges. Price discovery measures summarize the informativeness of trading on each venue for discovering the asset’s true underlying value. We explore intraday variation in price discovery using a structural model with
Pricing Liquidity Risk with Heterogeneous Investment Horizons
Beber, Alessandro; Driessen, Joost; Neuberger, A.; Tuijp, P
We develop an asset pricing model with stochastic transaction costs and investors with heterogeneous horizons. Depending on their horizon, investors hold different sets of assets in equilibrium. This generates segmentation and spillover effects for expected returns, where the liquidity (risk)
Pricing of Asian temperature risk
Benth, Fred; Härdle, Wolfgang Karl; López Cabrera, Brenda
2009-01-01
Weather derivatives (WD) are different from most financial derivatives because the underlying weather cannot be traded and therefore cannot be replicated by other financial instruments. The market price of risk (MPR) is an important parameter of the associated equivalent martingale measures used to price and hedge weather futures/options in the market. The majority of papers so far have priced non-tradable assets assuming zero MPR, but this assumption underestimates WD prices. We study the MP...
On pricing futures options on random binomial tree
International Nuclear Information System (INIS)
Bayram, Kamola; Ganikhodjaev, Nasir
2013-01-01
The discrete-time approach to real option valuation has typically been implemented in the finance literature using a binomial tree framework. Instead we develop a new model by randomizing the environment and call such model a random binomial tree. Whereas the usual model has only one environment (u, d) where the price of underlying asset can move by u times up and d times down, and pair (u, d) is constant over the life of the underlying asset, in our new model the underlying security is moving in two environments namely (u 1 , d 1 ) and (u 2 , d 2 ). Thus we obtain two volatilities σ 1 and σ 2 . This new approach enables calculations reflecting the real market since it consider the two states of market normal and extra ordinal. In this paper we define and study Futures options for such models.
Taxes, Regulations, and Asset Prices
Ellen R. McGrattan; Edward C. Prescott
2001-01-01
U.S. stock prices have increased much faster than gross domestic product (GDP) in the postwar period. Between 1962 and 2000, corporate equity value relative to GDP nearly doubled. In this paper, we determine what standard growth theory says the equity value should be in 1962 and 2000, the two years for which our steady-state assumption is a reasonable one. We find that the actual valuations were close to the theoretical predictions in both years. The reason for the large run-up in equity valu...
The Impact of Transfer Pricing on Tourism Entities
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Păiuşan Luminiţa
2017-01-01
Full Text Available The purpose of this document is desired to brought a significant contribution of the controlactivity, and to discuss new methods to ensure transparency and to eliminate constant disputesbetween the public and private sector. Starting with these aspects, we are looking to highlightinternational fraud as accompanying phenomena of transnational structures and economicrelations, to explain its impact on the Romanian economy and to discus the key to finding themetholodgy to eradicate this phenomenon, and also to indicate our recommendations and opinionsto what we believe is necessary to eradicate this phenomenon. Transfer pricing is basically theprice used in the transfer of tangible and intangible assets and / or transfer of services betweenrelated parties, and this price should be based on market price without influence of the relationshipof affiliation. For services or tangible assets, the transfer price comparison with the market isrelatively easy to perform, but in the case of intangible assets, quantification of future benefits thatit gives to an affiliated person, in comparison to a situation where this would be to an independent,is difficult to determine.
International Nuclear Information System (INIS)
1996-03-01
This report presents the proceedings from the EPRI conference on innovative approaches to electricity pricing. Topics discussed include: power transmission pricing; retail pricing; price risk management; new pricing paradigms; changes from cost-based to a market-based pricing scheme; ancillary services; retail market strategies; profitability; unbundling; and value added services. This is the leading abstract. Papers are processed separately for the databases
Peaks and Valleys : Experimental Asset Markets With Non-Monotonic Fundamentals
Noussair, C.N.; Powell, O.R.
2008-01-01
We report the results of an experiment designed to measure how well asset market prices track fundamentals when the latter experience peaks and troughs. We observe greater price efficiency in markets in which fundamentals rise to a peak and then decline, than in markets in which fundamentals decline
2005-12-01
asset pricing model ( CAPM ). “According to the CAPM theory, investors determine their required return by adding a risk premium to the interest rate...NUMBER OF PAGES 77 14. SUBJECT TERMS Capital Budgeting; GAO; DOD; Capital Assets ; Risk, OMB; NPV, IRR 16. PRICE CODE 17. SECURITY...needs of the mission, as defined by the strategic plan, and limit the number of “nice to haves” (OMB, 1997). d. Alternatives to Capital Assets
Fourier and wavelet option pricing methods
S.C. Maree (Stef); L. Ortiz Gracia (Luis); C.W. Oosterlee (Cornelis); M.A.H. Dempster; J. Kanniainen (Juho); J. Keane (John); E. Vynckier (Erik)
2018-01-01
textabstractIn this overview chapter, we will discuss the use of exponentially converging option pricing techniques for option valuation. We will focus on the pricing of European options, and they are the basic instruments within a calibration procedure when fitting the parameters in asset dynamics.
The pricing of bank debt guarantees
Arping, S.
2009-01-01
We analyze the optimal pricing of government-sponsored bank debt guarantees within the context of an asset substitution framework. We show that the desirability of fair pricing of guarantees depends on the degree of transparency of the banking sector: in relatively opaque banking systems, fair
Grøm, Halvdan Alexander
2013-01-01
In this thesis I have analysed the relationship between renewable energy stocks and the price of crude oil. As a part of my analysis I have provided a basic economic overview of the research period and how the value of renewable energy stocks and crude oil is determined. In order to analyse this relationship I have utilized a Vector Autoregressive Model (VAR) in addition to a Vector Error Correction Model (VECM). My findings indicate that the aforementioned assets follow a simi...
A homotopy analysis method for the option pricing PDE in illiquid markets
E-Khatib, Youssef
2012-09-01
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading the underlying asset does not affect the underlying asset price. This can happen in perfectly liquid markets and it is evidently not viable in markets with imperfect liquidity (illiquid markets). It is well-known that markets with imperfect liquidity are more realistic. Thus, the presence of price impact while studying options is very important. This paper investigates a solution for the option pricing PDE in illiquid markets using the homotopy analysis method.
Directory of Open Access Journals (Sweden)
Rani Ramdhani
2013-03-01
Full Text Available This study aims to determine the effect of Return on Assets and Debt to Equity Ratio of Stock Price on Financial Institutions in Indonesia Stock Exchange. This study used secondary data, with samples 2 financial companies in Indonesia Stock Exchange during the study period 2004-2010. Independent variables in this study are Return on Assets and Debt to Equity Ratio. This study used purposive sampling technique. The method of data analysis used classical assumption test, hypothesis test, multiple regression analysis, the F test and t test. Based on results of the study, Return on Assets and Debt to Equity Ratio have no significant effect on stock price. Meanwhile, the F test result shows that Return on Assets and Debt to Equity Ratio jointly have no effect on stock price.
THE APPLICATION OF THE CAPITAL ASSET PRICING MODEL ON THE CROATIAN CAPITAL MARKET
Directory of Open Access Journals (Sweden)
Bojan Tomic
2013-12-01
Full Text Available The paper describes and analyzes the application of the capital asset pricing model (CAPM and the single-index model on the Zagreb stock exchange during the drop in the total trade turnover, and mostly in the trade of equity securities. This model shows through the analysis techniques used to estimate the systematic risk per share compared to the market portfolio. Also, the model quantifies the environment in which a company and its stocks exist, expressing it as risk, or a beta coefficient. Furthermore, with respect to the market stagnation, one can also discuss the usefulness of the model, especially if the quality of the input data is questionable. In this regard, the importance of the proper application and interpretation of the results obtained based on the model during the stagnation of the market, and especially during the stagnation of the trade of equity securities, is gaining even greater importance and significance. On the other hand, the results obtained through the analysis of data point to problems arising during the application of the model. It turns out the main problem of applying the CAPM model is the market index with negative returns during the observation period.
Historical development of derivatives’ underlying assets
Directory of Open Access Journals (Sweden)
Sylvie Riederová
2011-01-01
Full Text Available The derivative transactions are able to eliminate the unexpected risk arising from the price volatility of the asset. The need for risk elimination relates to the application of derivatives.This paper is focused on derivatives’ underlying assets themselves. With the plain description, supported by progressive summarization, the authors analysed the relevant theoretical sources, dealt with derivatives, their underlying assets and their development in centuries. Starting in the ancient history, 2000 BC, the first non-standard transaction, very close to today’s understanding of derivatives, becomes to be closed between counterparties. During the time, in different kingdoms and emporiums, derivatives started to play a significant role in daily life, helping to reduce the uncertainty of the future. But the real golden era for derivatives started with the so called ‘New derivative markets’ and computer supported trading. They have extended their form from simple tools to most complex structures, without changing their main purpose hedging and risk – reduction.For the main purpose of this paper it is impossible to split the development of derivatives from the very wide extension of underlying assets. The change of these assets was one of the main drivers in derivatives development. Understanding of the dynamic character of these assets helps to understand the world of derivatives.
Transfer Pricing and Intangible Assets in Cross-Border Business Restructurings
Pätäri, Heidi Maria
2012-01-01
Transfer pricing can be described as the internal price setting between multinational group companies. In recent years the issue of jurisdiction’s tax revenue flowing out of the jurisdiction has been closely related with transfer pricing and the tax authorities all over the world have increasingly began to question the arm’s length nature of the intra-group transactions of multinational enterprises. In this thesis the focus is on the transfer pricing issues arising in situations w...
The CAPM approach to materiality
Hadjieftychiou, Aristarchos
1993-01-01
Materiality is a pervasive accounting concept that has defied a precise quantitative definition. The Capital Asset Pricing Model (CAPM) approach to materiality provides a means for determining the limits that bound materiality. Also, the approach makes it possible to locate the point estimate within these limits based on certain assumptions.
Directory of Open Access Journals (Sweden)
Muhammad Iqbal
2017-06-01
Full Text Available Assorted types of market anomalies occur when stock prices deviate from the prediction of classical asset pricing theories. This study aims to examine asset growth anomaly where stocks with high asset growth will be followed by low returns in the subsequent periods. This study, using Indonesia Stock Exchanges data, finds that an equally-weighted low-growth portfolio outperforms high-growth portfolio by average 0.75% per month (9% per annum, confirming existence of asset growth anomaly. The analysis is extended at individual stock-level using fixed-effect panel regression in which asset growth effect remains significant even with controlling other variables of stock return determinants. This study also explores further whether asset growth can be included as risk factor. Employing two-stage cross-section regression in Fama and Macbeth (1973, the result aligns with some prior studies that asset growth is not a new risk factor; instead the anomaly is driven by mispricing due to investors’ overreaction and psychological bias. This result imply that asset growth anomaly is general phenomenon that can be found at mostly all stock market but in Indonesia market asset growth anomaly rise from investors’ overreaction, instead of playing as a factor of risk.
Directory of Open Access Journals (Sweden)
Muhammad Iqbal
2017-03-01
Full Text Available Assorted types of market anomalies occur when stock prices deviate from the prediction of classical asset pricing theories. This study aims to examine asset growth anomaly where stocks with high asset growth will be followed by low returns in the subsequent periods. This study, using Indonesia Stock Exchanges data, finds that an equally-weighted low-growth portfolio outperforms high-growth portfolio by average 0.75% per month (9% per annum, confirming existence of asset growth anomaly. The analysis is extended at individual stock-level using fixed-effect panel regression in which asset growth effect remains significant even with controlling other variables of stock return determinants. This study also explores further whether asset growth can be included as risk factor. Employing two-stage cross-section regression in Fama and Macbeth (1973, the result aligns with some prior studies that asset growth is not a new risk factor; instead the anomaly is driven by mispricing due to investors’ overreaction and psychological bias. This result imply that asset growth anomaly is general phenomenon that can be found at mostly all stock market but in Indonesia market asset growth anomaly rise from investors’ overreaction, instead of playing as a factor of risk.
Impacts of Variable Renewable Energy on Bulk Power System Assets, Pricing, and Costs
Energy Technology Data Exchange (ETDEWEB)
Wiser, Ryan H. [Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States); Mills, Andrew [Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States); Seel, Joachim [Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States); Levin, Todd [Argonne National Lab. (ANL), Argonne, IL (United States); Botterud, Audun [Argonne National Lab. (ANL), Argonne, IL (United States)
2017-11-29
We synthesize available literature, data, and analysis on the degree to which growth in variable renewable energy (VRE) has impacted to date or might in the future impact bulk power system assets, pricing, and costs. We do not analyze impacts on specific power plants, instead focusing on national and regional system-level trends. The issues addressed are highly context dependent—affected by the underlying generation mix of the system, the amount of wind and solar penetration, and the design and structure of the bulk power system in each region. Moreover, analyzing the impacts of VRE on the bulk power system is a complex area of research and there is much more to be done to increase understanding of how VRE impacts the dynamics of current and future electricity markets. While more analysis is warranted, including additional location-specific assessments, several high-level findings emerge from this synthesis: -VRE Is Already Impacting the Bulk Power Market -VRE Impacts on Average Wholesale Prices Have Been Modest -VRE Impacts on Power Plant Retirements Have So Far Been Limited -VRE Impacts on the Bulk Power Market will Grow with Penetration -The ’System Value’ of VRE will Decline with Penetration -Power System Flexibility Can Reduce the Rate of VRE Value Decline All generation types are unique in some respect—bringing benefits and challenges to the power system—and wholesale markets, industry investments, and operational procedures have evolved over time to manage the characteristics of a changing generation fleet. With increased VRE penetrations, power system planners, operators, regulators, and policymakers will continue to be challenged to develop methods to smoothly and cost-effectively manage the reliable integration of these new and growing sources of electricity supply.
Empirical Study on the Financial Reporting of Intangible Assets by Romanian Companies
Cristina-Ionela FĂDUR; Daniela CIOTINĂ; Marilena MIRONIUC
2011-01-01
The purpose of this paper is to identify to what extent Romanian companies quoted in the Bucharest Stock Exchange present information concerning intangible assets (IA), what the structure of the assets of the analyzed companies is, and what the difference between the accounting value of companies, computed through the net accounting asset, and their market value is, determined as the product between the number of shares and the average quotation price. We have analyzed th...
A Statistical Approach for Interval Forecasting of the Electricity Price
DEFF Research Database (Denmark)
Zhao, Jun Hua; Dong, Zhao Yang; Xu, Zhao
2008-01-01
the prediction interval is essential for estimating the uncertainty involved in the price and thus is highly useful for making generation bidding strategies and investment decisions. In this paper, a novel data mining-based approach is proposed to achieve two major objectives: 1) to accurately forecast the value......Electricity price forecasting is a difficult yet essential task for market participants in a deregulated electricity market. Rather than forecasting the value, market participants are sometimes more interested in forecasting the prediction interval of the electricity price. Forecasting...... of the electricity price series, which is widely accepted as a nonlinear time series; 2) to accurately estimate the prediction interval of the electricity price series. In the proposed approach, support vector machine (SVM) is employed to forecast the value of the price. To forecast the prediction interval, we...
Derivative pricing with liquidity risk : Theory and evidence from the credit default swap market
Bongaerts, D.; de Jong, F.C.J.M.; Driessen, J.J.A.G.
2011-01-01
We derive an equilibrium asset pricing model incorporating liquidity risk, derivatives, and short-selling due to hedging of nontraded risk. We show that illiquid assets can have lower expected returns if the short-sellers have more wealth, lower risk aversion, or shorter horizon. The pricing of
A Stochastic Flows Approach for Asset Allocation with Hidden Economic Environment
Directory of Open Access Journals (Sweden)
Tak Kuen Siu
2015-01-01
Full Text Available An optimal asset allocation problem for a quite general class of utility functions is discussed in a simple two-state Markovian regime-switching model, where the appreciation rate of a risky share changes over time according to the state of a hidden economy. As usual, standard filtering theory is used to transform a financial model with hidden information into one with complete information, where a martingale approach is applied to discuss the optimal asset allocation problem. Using a martingale representation coupled with stochastic flows of diffeomorphisms for the filtering equation, the integrand in the martingale representation is identified which gives rise to an optimal portfolio strategy under some differentiability conditions.
Heterodox surplus approach: production, prices, and value theory
Lee, Frederic
2011-01-01
In this paper I argue that that there is a heterodox social surplus approach that has its own account of output-employment and prices, and its own value theory which draws upon various heterodox traditions. Starting with the Sraffian technical definition of the social surplus and then working with a Sraffa-Leontief input-output framework, the particular distinguishing feature of the heterodox approach is the role of agency in determining prices, the social surplus, and total social product a...
The impact of oil prices on the banking system in the Gulf Cooperation Council
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Padamja Khandelwal
2017-06-01
Full Text Available This paper examines the links between global oil price movements and macroeconomic and financial developments in the Gulf Cooperation Council (GCC. The GCC economies can be adversely affected by low oil prices due to their high dependence on oil and gas exports and macro-financial linkages which can amplify the effects of oil price movements over the financial cycle. Historically, systemic financial sector risks rose in the GCC countries with the oil price upswing in the years before the global financial crisis. Against this background, a range of multivariate panel approaches, including a panel vector autoregression approach, were applied to macroeconomic and bank-level data covering the six GCC economies and span 1999–2014. The paper finds strong empirical evidence of feedback loops between oil price movements, bank balance sheets, and asset prices. Empirical evidence also suggests that bank capital and provisioning have behaved countercyclically through the cycle. That is, these ratios increase during good times. This has helped strengthen the resilience of the financial system to the oil price decline since mid-2014.
Hozman, J.; Tichý, T.
2016-12-01
The paper is based on the results from our recent research on multidimensional option pricing problems. We focus on European option valuation when the price movement of the underlying asset is driven by a stochastic volatility following a square root process proposed by Heston. The stochastic approach incorporates a new additional spatial variable into this model and makes it very robust, i.e. it provides a framework to price a variety of options that is closer to reality. The main topic is to present the numerical scheme arising from the concept of discontinuous Galerkin methods and applicable to the Heston option pricing model. The numerical results are presented on artificial benchmarks as well as on reference market data.
Fast Fourier Transform Pricing Method for Exponential Lévy Processes
Crocce, Fabian; Happola, Juho; Kiessling, Jonas; Tempone, Raul
2014-01-01
We describe a set of partial-integro-differential equations (PIDE) whose solutions represent the prices of european options when the underlying asset is driven by an exponential L´evy process. Exploiting the L´evy -Khintchine formula, we give a Fourier based method for solving this class of PIDEs. We present a novel L1 error bound for solving a range of PIDEs in asset pricing and use this bound to set parameters for numerical methods.
Fast Fourier Transform Pricing Method for Exponential Lévy Processes
Crocce, Fabian
2014-05-04
We describe a set of partial-integro-differential equations (PIDE) whose solutions represent the prices of european options when the underlying asset is driven by an exponential L´evy process. Exploiting the L´evy -Khintchine formula, we give a Fourier based method for solving this class of PIDEs. We present a novel L1 error bound for solving a range of PIDEs in asset pricing and use this bound to set parameters for numerical methods.
A Risk Management Approach to Optimal Asset Allocation
Thomas J. Flavin; Michael R. Wickens
2001-01-01
This paper extends the tactical asset allocation strategy of Flavin and Wickens(1998) to incorporate the effects of macroeconomic variables in the analysis. Using a VAR in mean with a M-GARCH error structure, we can jointly model financial asset returns and macroeconomic variables, thereby exploiting any predictability in either the first- or second-order moments. Taking a set of UK\\ financial assets and the change in domestic inflation as an illustration, we find a much stronger impact on th...
International Nuclear Information System (INIS)
Bouri, Elie
2015-01-01
Within the new developed causality-in-variance approach, this paper builds up a broad methodological framework to more accurately capture the risk spillover effects between global oil prices and Jordanian stock market returns during the period 1 March 2003–31 January 2014. The sample period is divided, on the basis of the 2008 financial crisis, into pre-crisis and post-crisis periods. Results for the pre-crisis period show a lack of risk spillovers between global oil and the Jordanian stock market. After the crisis, however, we find evidence for one-way risk spillover running from the oil market. These findings have implications for the design of appropriate asset allocation and regulatory policies to manage risk spillover effects. -- Highlights: •A broad methodological framework accurately seizes dynamic risk spillover between oil prices and Jordanian stock returns. •We find insignificant risk spillover until the start of the financial crisis. •Crude oil transmits its risk to the Jordanian stock market
KARIYA Takeaki
2006-01-01
As Robert Redfield has stated, culture is a shared common knowledge and understanding to be manifested in behavior and processed goods. Intangible assets are the fundamental source of enterprise value creation. In this paper we first aim to clarify the compound, complex and multilayered processes whereby intangible assets contribute to value creation, and then aim to formulate the framework of an effective and comprehensive management process referred to as CERM/ROIAM. This approach makes it ...
Directory of Open Access Journals (Sweden)
Theophil Assey
2017-10-01
Full Text Available Information systems are developed based on different requirements and different technologies. Integration of these systems is of vital importance as they cannot work in isolation, they need to share and exchange data with other information systems. The Information Systems handle data of different types and formats’, finding a way to make them communicate is important as they need to exchange data during transactions, communication and different aspects which may require their interactions. In Tanzanian Local Government Authorities (LGAs, fixed asset data are not centralized, individual Local Government Authority stores their own data in isolation yet accountability is required through the provision of centralized storage for easy data access and easier data integration with other Information Systems in order to enhance fixed asset accountability. The study was carried out through reviewing of literature on the existing Information System integration approaches in order to identify and propose the best approach to be used in fixed asset management systems in LGA’s in Tanzania. The different approaches which are used for systems integration such as Service Oriented Architecture (SOA, Common Object Request Broker (CORBA, Common Object Model (COM and eXtensible Markup Language (XML were evaluated under the factors considered at the LGA. The XML was preferred over SOA, CORBA and COM because of some challenges in governance, data security, availability of expertise for support, maintenance, implementation cost, performance, compliance with government changing policies and service reliability. The proposed approach integrates data for all the Local Government Authorities at a centralized location and middleware transforms the centralized data into XML so it can easily be used by other Information Systems.
Relative Pricing of Publicly Traded U.S. Electric Utility Companies
Jewczyn, Nicholas Stephen
In the financial turmoil of 2008, U.S. firms reported debt-ratios that differed from the debt-ratios calculated from balance sheets. The problem is that investors bought common stock expecting initial investment return and lost money when companies delisted. The purpose of this quantitative study was to determine sample securities pricing with the application of synthetic assets and debt accrued. Addressed in the research questions was whether those securities were (a) underpriced compared with return-on-assets (ROA), (b) overpriced compared with ROA, (c) a debt-ratio higher than 60% and also overpriced, (d) underpriced with a synthetic asset added, or (e) related by relative pricing to variant pricing and market capitalization. The study's base theory was Pan's efficient market hypothesis (EMH) of security price prediction of market prices versus model prices. The data from the financial statements of 16 publicly traded U.S. electric utility companies were analyzed via correlations and multiple regression analyses to determine securities pricing and suitability. The findings from the analyses of the sample's variables of market price, book value, market-to-book, and study constructed variables from those variable data were statistically significant. The alternate hypotheses were accepted for all 5 research questions since the analytical operationalization of the hypothetical constructs led to significant relationships. Results suggest that the use of more pricing determinants in securities evaluation may lead to investors losing less money and earning the expected returns for a more efficient capital market, leading to a stronger economy and macroeconomic stability.
Importance of Electricity Transport Pricing in Liberalised Energy Markets
International Nuclear Information System (INIS)
Wohlgemuth, N.
2001-01-01
Electricity has traditionally been supplied by vertically integrated companies providing generation, transmission and distribution services. Consumers have purchased a bundled commodity - delivered electricity - and there has been no need to price the components individually. This is no longer the case in competitive and unbundled electricity markets. One of the outstanding issues in the restructuring of the electricity markets is the way in which transmission costs are translated into tariffs. The efforts to create a single European electricity market are difficult to reconcile due to different national network pricing approaches. The European Commission's draft regulation on conditions for access to the network for cross-border exchanges of electricity sets general principles for the pricing of international electricity exchanges. Nodal pricing provides incentives for an efficient use of generation and transmission assets. Experience shows that nodal pricing is workable, and its use may be expected to increase progressively. Postage stamp pricing does not generally provide adequate incentives for efficiency. However, inefficiencies may be small under certain conditions, and postage stamp pricing has the advantage of being relatively transparent and easy to implement. This paper presents an overview of objectives related to an effective design of transmission pricing approaches, of transmission pricing models and presents recent developments in Europe in this respect. Due to the great number of institutional designs of electricity market organisations, it will be difficult to design and implement a model of cross-border transmission pricing that results in a high degree of non-discriminatory international competition in electricity markets, a key objective of the Electricity Directive.(author)
Consistent Valuation across Curves Using Pricing Kernels
Directory of Open Access Journals (Sweden)
Andrea Macrina
2018-03-01
Full Text Available The general problem of asset pricing when the discount rate differs from the rate at which an asset’s cash flows accrue is considered. A pricing kernel framework is used to model an economy that is segmented into distinct markets, each identified by a yield curve having its own market, credit and liquidity risk characteristics. The proposed framework precludes arbitrage within each market, while the definition of a curve-conversion factor process links all markets in a consistent arbitrage-free manner. A pricing formula is then derived, referred to as the across-curve pricing formula, which enables consistent valuation and hedging of financial instruments across curves (and markets. As a natural application, a consistent multi-curve framework is formulated for emerging and developed inter-bank swap markets, which highlights an important dual feature of the curve-conversion factor process. Given this multi-curve framework, existing multi-curve approaches based on HJM and rational pricing kernel models are recovered, reviewed and generalised and single-curve models extended. In another application, inflation-linked, currency-based and fixed-income hybrid securities are shown to be consistently valued using the across-curve valuation method.
International Nuclear Information System (INIS)
Tjin, T.; Buitelaar, T.
2000-02-01
July 1999 The Netherlands Electricity Regulatory Service (DtE) published an Information and Consultation Document on the subject of 'Price Cap Regulation in the Dutch Electricity Sector'. By means of price cap regulation tariffs are determined such that businesses are stimulated continuously to organize their total processes and operation as efficient as possible. In the consultation document a large number of questions with respect to the future organization and planning of the system of economic regulation of the electricity sector in the Netherlands can be found. Many reactions and answers were received, compiled and analyzed. The results are presented in the main report, which forms the framework for the DtE to shape the economic regulation of the Dutch electricity sector. In this background document attention is paid to a method to determine the Regulatory Asset Base (RAB)
Booms, busts and behavioural heterogeneity in stock prices
Hommes, C.; in 't Veld, D.
2014-01-01
The global financial crisis indicated the limitations of representative rational agent models for asset pricing solely based on economic fundamentals. We estimate a simple behavioural heterogeneous agents model with boundedly rational traders in which the fundamental value of the stock prices is
Analysis of Options Contract, Option Pricing in Agricultural Products
Directory of Open Access Journals (Sweden)
H. Tamidy
2016-03-01
Full Text Available Introduction: Risk is an essential component in the production and sale of agricultural products. Due to the nature of agricultural products, the people who act in this area including farmers and businesspersons encounter unpredictable fluctuations of prices. On the other hand, the firms that process agricultural products also face fluctuation of price of agricultural inputs. Given that the Canola is considered as one of the inputs of product processing factories, control of unpredictable fluctuations of the price of this product would increase the possibility of correct decision making for farmers and managers of food processing industries. The best available tool for control and management of the price risk is the use of future markets and options. It is evident that the pricing is the main pillar in every trade. Therefore, offering a fair price for the options will be very important. In fact, options trading in the options market create cost insurance stopped. In this way, which can reduce the risks of deflation created in the future, if the person entitled to the benefits of the price increase occurs in the future. Unlike the futures, market where the seller had to deliver the product on time, in the options market, there is no such compulsion. In addition, this is one of the strengths of this option contract, because if there is not enough product for delivery to the futures market as result of chilling, in due course, the farmers suffer, but in the options market there will be a loss. In this study, the setup options of rape, as a product, as well as inputs has been paid for industry. Materials and Methods: In this section. The selection criteria of the disposal of asset base for valuation of European put options and call option is been introduced. That for obtain this purpose, some characteristics of the goods must considered: 1-Unpredictable fluctuations price of underlying asset 2 -large underlying asset cash market 3- The possibility
Valuing natural gas power generation assets in the new competitive marketplace
Hsu, Michael Chun-Wei
1999-10-01
The profitability of natural gas fired power plants depends critically on the spread between electricity and natural gas prices. The price levels of these two energy commodities are the key uncertain variables in determining the operating margin and therefore the value of a power plant. The owner of a generation unit has the decision of dispatching the plant only when profit margins are positive. This operating flexibility is a real option with real value. In this dissertation I introduce the spark spread call options and illustrate how such paper contracts replicate the uncertain payoff space facing power asset owners and, therefore, how the financial options framework can be applied in estimating the value of natural gas generation plants. The intrinsic value of gas power plants is approximated as the sum of a series of spark spread call options with succeeding maturity dates. The Black-Scholes spread option pricing model, with volatility and correlation term structure adjustments, is utilized to price the spark spread options. Sensitivity analysis is also performed on the BS spread option formulation to compare different asset types. In addition I explore the potential of using compound and compound-exchange option concepts to evaluate, respectively, the benefits of delaying investment in new generation and in repowering existing antiquated units. The compound option designates an option on top of another option. In this case the series of spark spread call options is the 'underlying' option while the option to delay new investments is the 'overlying.' The compound-exchange option characterizes the opportunity to 'exchange' the old power plant, with its series of spark spread call options, for a set of new spark spread call options that comes with the new generation unit. The strike price of the compound-exchange option is the repowering capital investment and typically includes the purchase of new steam generators and combustion turbines, as well as other
International Nuclear Information System (INIS)
Schneider, Joachim; Gaul, Armin J.; Neumann, Claus; Hograefer, Juergen; Wellssow, Wolfram; Schwan, Michael; Schnettler, Armin
2006-01-01
Deregulation and an increasing competition in electricity markets urge energy suppliers to optimize the utilization of their equipment, focusing on technical and cost-effective aspects. As a respond to these requirements utilities introduce methods formerly used by investment managers or insurance companies. The article describes the usage of these methods, particularly with regard to asset management and risk management within electrical grids. The essential information needed to set up an appropriate asset management system and differences between asset management systems in transmission and distribution systems are discussed. The bulk of costs in electrical grids can be found in costs for maintenance and capital depreciation. A comprehensive approach for an asset management in transmission systems thus focuses on the 'life-cycle costs' of the individual equipment. The objective of the life management process is the optimal utilisation of the remaining life time regarding a given reliability of service and a constant distribution of costs for reinvestment and maintenance ensuring a suitable return. In distribution systems the high number of components would require an enormous effort for the consideration of single individuals. Therefore statistical approaches have been used successfully in practical applications. Newest insights gained by a German research project on asset management systems in distribution grids give an outlook to future developments. (author)
Energy Technology Data Exchange (ETDEWEB)
Schneider, Joachim; Gaul, Armin J. [RWE Energy AG, Assetmanagement, Dortmund (Germany); Neumann, Claus [RWE Transportnetz Strom GmbH, Dortmund (Germany); Hograefer, Juergen [SAG Energieversorgungsloesungen GmbH, Langen (Germany); Wellssow, Wolfram; Schwan, Michael [Siemens AG, Power Transmission and Distribution, Erlangen (Germany); Schnettler, Armin [RWTH-Aachen, Institut fuer Hochspannungstechnik, Aachen (Germany)
2006-11-15
Deregulation and an increasing competition in electricity markets urge energy suppliers to optimize the utilization of their equipment, focusing on technical and cost-effective aspects. As a respond to these requirements utilities introduce methods formerly used by investment managers or insurance companies. The article describes the usage of these methods, particularly with regard to asset management and risk management within electrical grids. The essential information needed to set up an appropriate asset management system and differences between asset management systems in transmission and distribution systems are discussed. The bulk of costs in electrical grids can be found in costs for maintenance and capital depreciation. A comprehensive approach for an asset management in transmission systems thus focuses on the 'life-cycle costs' of the individual equipment. The objective of the life management process is the optimal utilisation of the remaining life time regarding a given reliability of service and a constant distribution of costs for reinvestment and maintenance ensuring a suitable return. In distribution systems the high number of components would require an enormous effort for the consideration of single individuals. Therefore statistical approaches have been used successfully in practical applications. Newest insights gained by a German research project on asset management systems in distribution grids give an outlook to future developments. (author)
Ruitenburg, Richard; Braaksma, Anne Johannes Jan
2017-01-01
Asset Life Cycle Management is a strategic approach to managing physical assets over their complete life cycle. However, the literature and the recent ISO 55,000 standard do not offer guidance as to how to develop such an approach. This paper investigates the main capabilities for Asset Life Cycle
Directory of Open Access Journals (Sweden)
Muhammad Hanif
2011-12-01
Full Text Available A speedy emerging area of finance is the Shari’a compliant financial system. In first decade of 21st century Islamic financing has shown tremendous increase and global volume has reached to US $ 1,041 billion by the end of 2009. Being financial intermediaries Islamic Financial Institutions (IFIs have shown commendable progress in deposit collection under profit and loss sharing schemes however investment avenues are limited in comparison of conventional banks. Although a large number of financing modes are available to IFIs, yet maintenance of required liquidity is serious issue because money market and capital market is dominated by interest based instruments and conventional practices (some are clearly prohibited by Shari’a. Recently Al-meezan Investment Management Ltd. (AIML has started screening of Shari’a compliant stocks on KSE, and provided an avenue for Shari’a Compliant Investors/IFIs to invest in equities. This study is conducted to understand conventional asset pricing models, document any mismatching with Shari’a financial system, and suggest amendments if required. Findings suggest existing models of equity pricing (CAPM, APT/MFM are very much practicable under Shari’a framework with slight modification of risk free return because under Shari’a frame work risk free returns do not exist.
The risk of stranded assets for utilities in Canada
International Nuclear Information System (INIS)
Schroeder, W.
1998-01-01
The problems of dealing with stranded assets in Canada and the United States were discussed. Compared to the United States, the risk associated with stranded assets for utilities in Canada was considered to be relatively low because of the following factors: (1) low variable cost, (2) isolation, (3) lack of transmission interconnection capacity, (4) lack of tight synchronization in North America, (5) the likelihood of an increase in natural gas prices, (6) the absence of jurisdictional disputes such as FERC versus the states, (7) social considerations, (8) the learning curve, (9) politics, (10) weak balance sheets, (11) relatively low electricity prices, (12) the weak Canadian dollar, and (13) the possibility of refinancing at lower interest rates. Ontario Hydro, New Brunswick and Nova Scotia Power are the three Canadian utilities that may have stranded costs. For Ontario Hydro and New Brunswick Power the stranded costs would be related to nuclear generator problems, whereas for Nova Scotia Power, the stranded costs would be related to the thermal generating base, the threat from Sable Island Gas and the changing tax structure of the utility. Some other reasons why stranded assets could be created in Canada would include low variable costs and high fixed costs, over capacity of at least 30 per cent in generation, limited domestic energy growth, competitive threat from gas, reliability and safety of nuclear plants, and technology change. Five factors in terms of which stranded assets can be expressed are: (1) variable cost definition, (2) total cost definition, (3) operating profit definition, (4) wide geographic definition, and (5) free market definition. In calculating stranded assets, the number of years over which the assets are recovered and the discount rate are considered to be key factors. 26 tabs
Multi-factor energy price models and exotic derivatives pricing
Hikspoors, Samuel
The high pace at which many of the world's energy markets have gradually been opened to competition have generated a significant amount of new financial activity. Both academicians and practitioners alike recently started to develop the tools of energy derivatives pricing/hedging as a quantitative topic of its own. The energy contract structures as well as their underlying asset properties set the energy risk management industry apart from its more standard equity and fixed income counterparts. This thesis naturally contributes to these broad market developments in participating to the advances of the mathematical tools aiming at a better theory of energy contingent claim pricing/hedging. We propose many realistic two-factor and three-factor models for spot and forward price processes that generalize some well known and standard modeling assumptions. We develop the associated pricing methodologies and propose stable calibration algorithms that motivate the application of the relevant modeling schemes.
Investor Expectations, Business Conditions, and the Pricing of Beta-Instability Risk
William Goetzmann; Akiko Watanabe; Masahiro Watanabe
2008-01-01
This paper examines the pricing implications of time-variation in assets' market betas over the business cycle in a conditional CAPM framework. We use a half century of real GDP growth expectations from economists' surveys to determine forecasted economic states. This approach largely avoids the confounding effects of econometric forecasting model error. The expectation measure forecasts the market return controlling for existing predictive variables. The loadings on the expectation measure e...
A utility theory approach for insurance pricing
Directory of Open Access Journals (Sweden)
Mohsen Gharakhani
2015-11-01
Full Text Available Providing insurance contract with “deductible” is beneficial for both insurer and insured. In this paper, we provide a utility modeling approach to handle insurance pricing and evaluate the tradeoff between discount benefit and deductible level. We analyze four different pricing problems of no insurance, full insurance coverage, insurance with β% deductible and insurance with D-dollar deductible based on a given utility function. A numerical example is also used to illustrate some interesting results.
The price level and monetary policy
Directory of Open Access Journals (Sweden)
Charles P. Kindleberger
2002-03-01
Full Text Available Most central banks are required to or choose to stabilize a price index, largely by manipulating short term interest rates. A serious problem is which index to choose among the national income deflator, wholesale prices, the cost of living, with or eliminating highly volatile commodities such as food and energy, to produce a core index, plus others such as housing, including or without imputed rent of owner-occupied houses, or assets, whether equities or houses. No obvious and widely agreed index exists. Even if there were a clear choice, there remains a question whether a central bank should carefully consider action in order to achieve other goals: full employment, adjustment of the balance of payments, of the exchange rate, prevention of bubbles in asset prices, or recovery from financial crises. If so, the question of central bank weapons remains: monetary expansion or contraction, credit controls, for overall or for particular purposes, and moral suasion.
International Nuclear Information System (INIS)
Fotouhi Ghazvini, Mohammad Ali; Faria, Pedro; Ramos, Sergio; Morais, Hugo; Vale, Zita
2015-01-01
Following the deregulation experience of retail electricity markets in most countries, the majority of the new entrants of the liberalized retail market were pure REP (retail electricity providers). These entities were subject to financial risks because of the unexpected price variations, price spikes, volatile loads and the potential for market power exertion by GENCO (generation companies). A REP can manage the market risks by employing the DR (demand response) programs and using its' generation and storage assets at the distribution network to serve the customers. The proposed model suggests how a REP with light physical assets, such as DG (distributed generation) units and ESS (energy storage systems), can survive in a competitive retail market. The paper discusses the effective risk management strategies for the REPs to deal with the uncertainties of the DAM (day-ahead market) and how to hedge the financial losses in the market. A two-stage stochastic programming problem is formulated. It aims to establish the financial incentive-based DR programs and the optimal dispatch of the DG units and ESSs. The uncertainty of the forecasted day-ahead load demand and electricity price is also taken into account with a scenario-based approach. The principal advantage of this model for REPs is reducing the risk of financial losses in DAMs, and the main benefit for the whole system is market power mitigation by virtually increasing the price elasticity of demand and reducing the peak demand. - Highlights: • Asset-light electricity retail providers subject to financial risks. • Incentive-based demand response program to manage the financial risks. • Maximizing the payoff of electricity retail providers in day-ahead market. • Mixed integer nonlinear programming to manage the risks
A bit risky? A comparison between Bitcoin and other assets using an intraday Value at Risk approach
Valstad, Ole Christian Andreas; Vagstad, Kristian
2014-01-01
The promising cryptocurrency Bitcoin has attracted a lot of attention recently, but the high volatility of the Bitcoin price has so far been a barrier to widespread adoption. Given the way Bitcoin transactions work, users will be exposed to exchange rate risk even for short intraday horizons. This paper analyzes this risk, and compares it to more traditional assets, namely Gold and the Euro/USD exchange rate. To do this we make use of the recent literature on market risk measures for ultra-hi...
International Nuclear Information System (INIS)
Zhang Shanming
1996-01-01
The ASSET philosophy for prevention of nuclear safety incident is being implemented in our nuclear power plant as the other international nuclear power plants, and the in-depth analysis of operational events in order to find out and eliminate the root causes is considered as the prioritized work in the plant safety management. Some observations are discussed which were made during the implementation of ASSET philosophy and the ASSET approach in our nuclear power plant
Energy Technology Data Exchange (ETDEWEB)
Shanming, Zhang [Dayabay NPP (China)
1997-12-31
The ASSET philosophy for prevention of nuclear safety incident is being implemented in our nuclear power plant as the other international nuclear power plants, and the in-depth analysis of operational events in order to find out and eliminate the root causes is considered as the prioritized work in the plant safety management. Some observations are discussed which were made during the implementation of ASSET philosophy and the ASSET approach in our nuclear power plant.
Ruitenburg, Richard; Braaksma, Anne Johannes Jan
2017-01-01
Asset Life Cycle Management is a strategic approach to managing physical assets over their complete life cycle. However, the literature and the recent ISO 55,000 standard do not offer guidance as to how to develop such an approach. This paper investigates the main capabilities for Asset Life Cycle Management by means of a four year Action Research project implementing Asset Life Cycle Plans. Five main capabilities emerged: 1. strategic information use; 2. alignment of operations and strategy;...
Decommissioning Cost Estimating -The ''Price'' Approach
International Nuclear Information System (INIS)
Manning, R.; Gilmour, J.
2002-01-01
Over the past 9 years UKAEA has developed a formalized approach to decommissioning cost estimating. The estimating methodology and computer-based application are known collectively as the PRICE system. At the heart of the system is a database (the knowledge base) which holds resource demand data on a comprehensive range of decommissioning activities. This data is used in conjunction with project specific information (the quantities of specific components) to produce decommissioning cost estimates. PRICE is a dynamic cost-estimating tool, which can satisfy both strategic planning and project management needs. With a relatively limited analysis a basic PRICE estimate can be produced and used for the purposes of strategic planning. This same estimate can be enhanced and improved, primarily by the improvement of detail, to support sanction expenditure proposals, and also as a tender assessment and project management tool. The paper will: describe the principles of the PRICE estimating system; report on the experiences of applying the system to a wide range of projects from contaminated car parks to nuclear reactors; provide information on the performance of the system in relation to historic estimates, tender bids, and outturn costs
Imperfect Knowledge, Asset Price Swings, and Structural Slumps
DEFF Research Database (Denmark)
Juselius, Katarina
2013-01-01
emphasizes real interest rates and real exchange rates as potentially important determinants underlying the persistent fluctuations in aggregate activities, and the latter provides the conditions under which speculative behavior in currency markets generates such persistence. The paper argues that by combing...... the two theories we can shed new light on the two-way interdependence between persistent swings in asset markets and persistent fluctuations in the real economy. In particular, we may improve our understanding of the mechanisms behind the long recurrent spells of high unemployment that continue to mar our...
Ruitenburg, Richard Jacob; Braaksma, Anne Johannes Jan; van Dongen, Leonardus Adriana Maria; Carnero, Maria Carmen; Gonzalez-Prida, Vicente
2017-01-01
Effective management of physical assets should deliver maximum business value. Therefore, Asset Management standards such as PAS 55 and ISO 55000 ask for a life cycle approach. However, most existing methods focus only on the short term of the asset's life or the estimation of its remaining life.
Bank Lending and Property Prices in Hong Kong
Gerlach, Stefan; Peng, Wensheng
2004-01-01
This paper studies the relationship between residential property prices and lending in Hong Kong. This is an interesting topic for three reasons. First, swings in property prices have been extremely large and frequent in Hong Kong. Second, under the currency board regime, monetary policy can not be used to guard against asset price swings. Third, despite the collapse in property prices since 1998, the banking sector remains sound. While the contemporaneous correlation between lending and prop...
Stock Market Integration: Are Risk Premiums of International Assets Equal?
Directory of Open Access Journals (Sweden)
Kusdhianto Setiawan
2014-02-01
Full Text Available This paper studies previous research on capital market integration and applies a simple international capital asset pricing model by considering the incompleteness in market integration and heteroscedasticity of the market returns. When we disregarded those two factors, we found that stock markets were integrated and the law of one price on risk premiums prevails. However, when the factors were considered, the markets were just partially integrated.
Optimizing asset value (OAV) -- A decision tool for mergers and acquisitions
Energy Technology Data Exchange (ETDEWEB)
Blanchard, D.; Brinsfield, W.; Franklin, E. [Tenera Energy, LLC, San Francisco, CA (United States); Turnage, J. [US Generating Co., Bethesda, MD (United States)
1999-11-01
As the energy industry restructures and realigns, companies are increasingly engaged in all aspects of mergers, acquisitions, and divestiture. Successful transactions are no accident, and new insights are emerging daily. This paper describes a tool called Optimizing Asset Value (OAV) that provides support to the Valuation phase of the merger, acquisition, and divestiture process. The methodology is based upon a quantitative, risk-based approach that is used to calculate the impact of equipment operation and operations/maintenance practices upon the ability to generate maximum revenue. By combining probabilistic reliability data with the economic consequences of plant derating, equipment can be prioritized as to its importance to revenue generation. Savvy buyers can apply OAV to plants under consideration for purchase to estimate where the plant is on its revenue generation capability curve, and thus gain a better understanding as to the risks, or opportunities for improvement, that exist. This information can be used along with other pro forma analyses to set the bid price for the asset.
Regularity of the exercise boundary for American put options on assets with discrete dividends
Jourdain, B.; Vellekoop, M.
2009-01-01
We analyze the regularity of the optimal exercise boundary for the American Put option when the underlying asset pays a discrete dividend at a known time td during the lifetime of the option. The ex-dividend asset price process is assumed to follow Black-Scholes dynamics and the dividend amount is a
Relationship between Gold and Oil Prices and Stock Market Returns
Directory of Open Access Journals (Sweden)
Muhammad Mansoor Baig
2013-10-01
Full Text Available This study objective to examine the relationship between gold prices, oil prices and KSE100 return. This study important for the investor whose want to invest in real assets and financial assets. This study helps investor to achieve the portfolio diversification. This study uses the monthly data of gold prices, KSE100, and oil prices for the period of 2000 to 2010 (monthly. This study applied Descriptive statistics, Augmented Dickey Fuller test Phillip Perron test, Johansen and Jelseluis Co-integration test, Variance Decomposition test to find relationship. This study concludes that Gold prices growth, Oil prices growth and KSE100 return have no significant relationship in the long run. This study provides information to the investors who want to get the benefit of diversification by investing in Gold, Oil and stock market. In the current era Gold prices and oil prices are fluctuating day by day and investors think that stock returns may or may not affected by these fluctuations. This study is unique because it focuses on current issues and takes the current data in this research to help the investment institutions or portfolio managers.
Interrelated factors influence of current stock market on pricing
Directory of Open Access Journals (Sweden)
Наталія Петрівна Мацелюх
2015-03-01
Full Text Available Impacts on market prices of securities are generalized. It is found that in the process of price determination and its implementation exist a system of interrelated factors of influence, which are divided into objective and subjective; internal and external; traditional and specific. It is proved that the impact of factors associated with risk pricing in financial assets
Illiquidity premium and expected stock returns in the UK: A new approach
Chen, Jiaqi; Sherif, Mohamed
2016-09-01
This study examines the relative importance of liquidity risk for the time-series and cross-section of stock returns in the UK. We propose a simple way to capture the multidimensionality of illiquidity. Our analysis indicates that existing illiquidity measures have considerable asset specific components, which justifies our new approach. Further, we use an alternative test of the Amihud (2002) measure and parametric and non-parametric methods to investigate whether liquidity risk is priced in the UK. We find that the inclusion of the illiquidity factor in the capital asset pricing model plays a significant role in explaining the cross-sectional variation in stock returns, in particular with the Fama-French three-factor model. Further, using Hansen-Jagannathan non-parametric bounds, we find that the illiquidity-augmented capital asset pricing models yield a small distance error, other non-liquidity based models fail to yield economically plausible distance values. Our findings have important implications for managing the liquidity risk of equity portfolios.
THE MAIN QUESTION OF FIXED ASSETS
Directory of Open Access Journals (Sweden)
Kogan A. B.
2015-03-01
Full Text Available The article deals with the methods of selecting the best type of fixed assets (real investment. Explore the current situation where the investor has to compare the different-parametrical alternatives (DPA. The DPA are the fixed assets which have similar functions, but different in price, durability and periodic effects. In the general case the DPA are the investment projects which have different amounts of investment, accounting periods and net cash flow. Net present value (NPV and internal rate of return (IRR are criticized. The author describes his indicator «speed index of unit value increase» (IS. The author proves on numerical examples that the economy, the subjects of which use IS instead of NPV and IRR, has accelerated the pace of development.
Population age structure and asset returns: an empirical investigation.
Poterba, J M
1998-10-01
"This paper investigates the association between population age structure, particularly the share of the population in the 'prime saving years' 45-60, and the returns on stocks and bonds. The paper is motivated by the claim that the aging of the 'Baby Boom' cohort in the United States is a key factor in explaining the recent rise in asset values. It also addresses the associated claim that asset prices will decline when this large cohort reaches retirement age and begins to reduce its asset holdings. This paper begins by considering household age-asset accumulation profiles. Data from the Survey of Consumer Finances suggest that while cross-sectional age-wealth profiles peak for households in their early 60s, cohort data on the asset ownership of the same households show a much less pronounced peak.... The paper then considers the historical relationship between demographic structure and real returns on Treasury bills, long-term government bonds, and corporate stock. The results do not suggest any robust relationship between demographic structure and asset returns.... The paper concludes by discussing factors such as international capital flows and forward-looking behavior on the part of market participants that could weaken the relationship between age structure and asset returns in a single nation." excerpt
A Heterogeneous Agent Model of Asspet Price with Three Time Delays
Directory of Open Access Journals (Sweden)
Akio Matsumoto
2016-09-01
Full Text Available This paper considers a continuous-time heterogeneous agent model ofa ...nancial market with one risky asset, two types of agents (i.e., thefundamentalists and the chartists, and three time delays. The chartistdemand is determined through a nonlinear function of the di¤erence be-tween the current price and a weighted moving average of the delayedprices whereas the fundamentalist demand is governed by the di¤erencebetween the current price and the fundamental value. The asset price dy-namics is described by a nonlinear delay di¤erential equation. Two mainresults are analytically and numerically shown:(i the delay destabilizes the market price and generates cyclic oscillationsaround the equilibrium;(ii under multiple delays, stability loss and gain repeatedly occurs as alength of the delay increases.
The Share Price and Investment: Current Footprints for Future Oil and Gas Industry Performance
Directory of Open Access Journals (Sweden)
Ionel Jianu
2018-02-01
Full Text Available The share price has become a very important indicator for shareholders, banks, and financial institutions evaluating the performance of companies. The oil and gas industry seems to be in a difficult era of development, due to the market prices for its products. Moreover, climate change and renewable energies are barriers for fossil energy. This state of affairs, and the fact that oil and gas shares are considered one of the most solid and reliable shares on the London Stock Exchange (LSE, have drawn our attention. International institutions encourage the investment in the oil and gas economic sector. This study investigates how investments of oil and gas companies in long-term assets influence the share price. Using the Ohlson share price model for a sample of 51 listed companies on the LSE proves that investments in long-term assets influence the share price in the case of companies which record losses. Investments in long-term assets are responsible for the attractiveness of the oil and gas company shares.
Saputra, Wildan Deny
2015-01-01
Capital Asset Pricing Model (CAPM) is method that used to make an estimate of the expected returns of an investment. CAPM explain about relation between expected returns and risk of shares. The research is descriptive research with the quantitative analysis which aims to know the performance of shares listed in the index kompas100 2010-2013 period based on the return and the risk of shares and know of efficient shares and inefficient shares based on CAPM method. Sample of the research are 37 ...
The Existence of Equilibrium Asset Price Under Diverse Information
Directory of Open Access Journals (Sweden)
R. Agus Sartono
2005-09-01
Our model shows that the more diverse the information, the higher the lambda coefficient which means the market becomes less liquid. The models consistent with Miller (1977 who found that the bigger the gap of private information is, the less liquid the market will be. If both informed traders have the same information they will demand the same amount of risky asset and it turns out to be similar as in the Kyle (1985 model.
The 5C model: A new approach to asset integrity management
International Nuclear Information System (INIS)
Rahim, Yousif; Refsdal, Ingbjorn; Kenett, Ron S.
2010-01-01
As organizations grow more complex in operation and more global in scope, assets and technical integrity become key success factors. A company's asset integrity business process needs to be mapped in order to 1) provide a proper overview of operation and business processes, 2) identify all critical interfaces and 3) ensure that all gaps and overlaps in processes are eliminated. Achieving asset integrity requires companies to sustain their activities and identify the hazards, weaknesses and objectives of their strategic assets. Technical integrity emphasizes a complete overview of technical conditions and related information, and the ability of the companies to document the technical state of its assets. It is based on an integrated view of the current state of operations, and the identification of all critical interfaces, in order to ensure that all gaps and unnecessary overlaps in processes are eliminated. Companies look increasingly at their asset integrity management system as a means to extend the life of their assets, beyond the original design conditions and production capacity. Establishing an asset integrity management system requires the documentation of the company's technical integrity management, a strategy and the processes for carrying it out, identifying gaps; selecting corrective interventions and conducting follow up actions. The paper discusses various aspects of asset integrity management, including its planning and implementation. We begin with an introduction to asset technical integrity, provide some theoretical backgrounds, present a model we call 5C and conclude with a summary and discussion.
The application of statistical methods to assess economic assets
Directory of Open Access Journals (Sweden)
D. V. Dianov
2017-01-01
Full Text Available The article is devoted to consideration and evaluation of machinery, equipment and special equipment, methodological aspects of the use of standards for assessment of buildings and structures in current prices, the valuation of residential, specialized houses, office premises, assessment and reassessment of existing and inactive military assets, the application of statistical methods to obtain the relevant cost estimates.The objective of the scientific article is to consider possible application of statistical tools in the valuation of the assets, composing the core group of elements of national wealth – the fixed assets. Firstly, capital tangible assets constitute the basis of material base of a new value creation, products and non-financial services. The gain, accumulated of tangible assets of a capital nature is a part of the gross domestic product, and from its volume and specific weight in the composition of GDP we can judge the scope of reproductive processes in the country.Based on the methodological materials of the state statistics bodies of the Russian Federation, regulations of the theory of statistics, which describe the methods of statistical analysis such as the index, average values, regression, the methodical approach is structured in the application of statistical tools to obtain value estimates of property, plant and equipment with significant accumulated depreciation. Until now, the use of statistical methodology in the practice of economic assessment of assets is only fragmentary. This applies to both Federal Legislation (Federal law № 135 «On valuation activities in the Russian Federation» dated 16.07.1998 in edition 05.07.2016 and the methodological documents and regulations of the estimated activities, in particular, the valuation activities’ standards. A particular problem is the use of a digital database of Rosstat (Federal State Statistics Service, as to the specific fixed assets the comparison should be carried
Option Pricing with Stochastic Volatility and Jump Diffusion Processes
Directory of Open Access Journals (Sweden)
Radu Lupu
2006-03-01
Full Text Available Option pricing by the use of Black Scholes Merton (BSM model is based on the assumption that asset prices have a lognormal distribution. In spite of the use of these models on a large scale, both by practioners and academics, the assumption of lognormality is rejected by the history of returns. The objective of this article is to present the methods that developed after the Black Scholes Merton environment and deals with the option pricing model adjustment to the empirical properties of asset returns. The main models that appeared after BSM allowed for special changes of the returns that materialized in jump-diffusion and stochastic volatility processes. The article presents the foundations of risk neutral options evaluation and the empirical evidence that fed the amendment of the lognormal assumption in the first part and shows the evaluation procedure under the assumption of stock prices following the jump-diffusion process and the stochastic volatility process.
Directory of Open Access Journals (Sweden)
Burtnyak Ivan V.
2017-06-01
Full Text Available In the paper we apply the spectral theory to find the price for derivatives of financial assets assuming that the processes described are Markov processes and such that can be considered in the Hilbert space L^2 using the Sturm-Liouville theory. Bessel diffusion processes are used in studying Asian options. We consider the financial flows generated by the Bessel diffusions by expressing them in terms of the system of Bessel functions of the first kind, provided that they take into account the linear combination of the flow and its spatial derivative. Such expression enables calculating the size of the market portfolio and provides a measure of the amount of internal volatility in the market at any given moment, allows investigating the dynamics of the equity market. The expansion of the Green function in terms of the system of Bessel functions is expressed by an analytic formula that is convenient in calculating the volume of financial flows. All assumptions are natural, result in analytic formulas that are consistent with the empirical data and, when applied in practice, adequately reflect the processes in equity markets.
Error analysis in Fourier methods for option pricing for exponential Lévy processes
Crocce, Fabian
2015-01-07
We derive an error bound for utilising the discrete Fourier transform method for solving Partial Integro-Differential Equations (PIDE) that describe european option prices for exponential Lévy driven asset prices. We give sufficient conditions for the existence of a L? bound that separates the dynamical contribution from that arising from the type of the option n in question. The bound achieved does not rely on information of the asymptotic behaviour of option prices at extreme asset values. In addition, we demonstrate improved numerical performance for select examples of practical relevance when compared to established bounding methods.
A hybrid modeling approach for option pricing
Hajizadeh, Ehsan; Seifi, Abbas
2011-11-01
The complexity of option pricing has led many researchers to develop sophisticated models for such purposes. The commonly used Black-Scholes model suffers from a number of limitations. One of these limitations is the assumption that the underlying probability distribution is lognormal and this is so controversial. We propose a couple of hybrid models to reduce these limitations and enhance the ability of option pricing. The key input to option pricing model is volatility. In this paper, we use three popular GARCH type model for estimating volatility. Then, we develop two non-parametric models based on neural networks and neuro-fuzzy networks to price call options for S&P 500 index. We compare the results with those of Black-Scholes model and show that both neural network and neuro-fuzzy network models outperform Black-Scholes model. Furthermore, comparing the neural network and neuro-fuzzy approaches, we observe that for at-the-money options, neural network model performs better and for both in-the-money and an out-of-the money option, neuro-fuzzy model provides better results.
Value focused thinking : An approach to structure company values for asset risk management
Van der Lei, T.E.; Ligtvoet, A.
2012-01-01
For public and semi public organizations the use of risk assessment matrices is becoming a standard approach for asset management decisions. The risk matrix allows companies to assess the chance and effects of different risks with respect to proposed investment decisions. When the values in the risk
Effects of Idiosyncratic Volatility in Asset Pricing
Directory of Open Access Journals (Sweden)
André Luís Leite
2016-04-01
Full Text Available This paper aims to evaluate the effects of the aggregate market volatility components - average volatility and average correlation - on the pricing of portfolios sorted by idiosyncratic volatility, using Brazilian data. The study investigates whether portfolios with high and low idiosyncratic volatility - in relation to the Fama and French model (1996 - have different exposures to innovations in average market volatility, and consequently, different expectations for return. The results are in line with those found for US data, although they portray the Brazilian reality. Decomposition of volatility allows the average volatility component, without the disturbance generated by the average correlation component, to better price the effects of a worsening or an improvement in the investment environment. This result is also identical to that found for US data. Average variance should thus command a risk premium. For US data, this premium is negative. According to Chen and Petkova (2012, the main reason for this negative sign is the high level of investment in research and development recorded by companies with high idiosyncratic volatility. As in Brazil this type of investment is significantly lower than in the US, it was expected that a result with the opposite sign would be found, which is in fact what occurred.
Pricing and Hedging of Derivatives in Contagious Markets
DEFF Research Database (Denmark)
Kokholm, Thomas
2016-01-01
It is well documented that stock markets are contagious. A negative shock to one market increases the probability of adverse shocks to other markets. We model this contagion effect by including mutually exciting jump processes in the dynamics of the indexes' log-returns. On top of this we add...... a stochastic volatility component to the dynamics. It is important to take the contagion effect into account if derivatives written on a basket of assets are to be priced or hedged. Due to the affine model specification the joint characteristic function of the log-returns is known analytically, and for two......-asset derivatives prices and show how for certain derivatives the impact is heavy. Moreover, we derive hedge ratios for European put and call options and perform a numerical experiment, which illustrates the impact of contagious jumps on option prices and hedge ratios. Mutually exciting processes have been analyzed...
Estimation of mean-reverting oil prices: a laboratory approach
International Nuclear Information System (INIS)
Bjerksund, P.; Stensland, G.
1993-12-01
Many economic decision support tools developed for the oil industry are based on the future oil price dynamics being represented by some specified stochastic process. To meet the demand for necessary data, much effort is allocated to parameter estimation based on historical oil price time series. The approach in this paper is to implement a complex future oil market model, and to condense the information from the model to parameter estimates for the future oil price. In particular, we use the Lensberg and Rasmussen stochastic dynamic oil market model to generate a large set of possible future oil price paths. Given the hypothesis that the future oil price is generated by a mean-reverting Ornstein-Uhlenbeck process, we obtain parameter estimates by a maximum likelihood procedure. We find a substantial degree of mean-reversion in the future oil price, which in some of our decision examples leads to an almost negligible value of flexibility. 12 refs., 2 figs., 3 tabs
DEFF Research Database (Denmark)
Østergaard, Jacob; Jensen, A. Norsk
2001-01-01
Asset management is emerging as a new approach on how to exploit an electric utility physical asset in the most profitable way. One of the major questions to answer by the asset management staff is when to do replacements? This is a difficult question, which require weighting of several parameter...... on Windows CE handheld computers which are presented in this paper. The calculations shown in the paper are based on this tool, and the software system is today available and used by Danish electric utilities....
Financial news predicts stock market volatility better than close price
Directory of Open Access Journals (Sweden)
Adam Atkins
2018-06-01
Full Text Available The behaviour of time series data from financial markets is influenced by a rich mixture of quantitative information from the dynamics of the system, captured in its past behaviour, and qualitative information about the underlying fundamentals arriving via various forms of news feeds. Pattern recognition of financial data using an effective combination of these two types of information is of much interest nowadays, and is addressed in several academic disciplines as well as by practitioners. Recent literature has focused much effort on the use of news-derived information to predict the direction of movement of a stock, i.e. posed as a classification problem, or the precise value of a future asset price, i.e. posed as a regression problem. Here, we show that information extracted from news sources is better at predicting the direction of underlying asset volatility movement, or its second order statistics, rather than its direction of price movement. We show empirical results by constructing machine learning models of Latent Dirichlet Allocation to represent information from news feeds, and simple naïve Bayes classifiers to predict the direction of movements. Empirical results show that the average directional prediction accuracy for volatility, on arrival of new information, is 56%, while that of the asset close price is no better than random at 49%. We evaluate these results using a range of stocks and stock indices in the US market, using a reliable news source as input. We conclude that volatility movements are more predictable than asset price movements when using financial news as machine learning input, and hence could potentially be exploited in pricing derivatives contracts via quantifying volatility. Keywords: Machine learning, Natural language processing, Volatility forecasting, Technical analysis, Computational finance
Arbitrage free pricing of forward and futures in the energy market
International Nuclear Information System (INIS)
Kloster, Kristian
2003-01-01
This thesis will describe a method for an arbitrage-free evaluation of forward and futures contracts in the Nordic electricity market. This is a market where it is not possible to hedge using the underlying asset which one normally would do. The electricity market is a relatively new market, and is less developed than the financial markets. The pricing of energy and energy derivatives are depending on factors like production, transport, storage etc. There are different approaches when pricing a forward contract in an energy market. With motivation from interest rate theory, one could model the forward prices directly in the risk neutral world. Another approach is to start out with a model for the spot prices in the physical world, and then derive theoretical forward prices, which then are fitted to observed forward prices. These and other approaches are described by Clewlow and Strickland in their book, Energy derivatives. This thesis uses the approach where I start out with a model for the spot price, and then derive theoretical forward prices. I use a generalization of the multifactor Schwartz model with seasonal trends and Ornstein Uhlenbeck processes to model the spot prices for electricity. This continuous-time model also incorporates mean-reversion, which is an important aspect of energy prices. Historical data for the spot prices is used to estimate my variables in the multi-factor Schwartz model. Then one can specify arbitrage-free prices for forward and futures based on the Schwartz model. The result from this procedure is a joint spot and forward price model in both the risk neutral and physical market, together with knowledge of the equivalent martingale measure chosen by the market. This measure can be interpreted as the market price of risk, which is of interest for risk management. In this setup both futures and forward contracts will have the same pricing dynamics, as the only difference between the two types of contracts is how the payment for the
Credit Market Distortions, Asset Prices and Monetary Policy
Pfajfar, D.; Santoro, E.
2012-01-01
Abstract: We study the conditions that ensure rational expectations equilibrium (REE) determinacy and expectational stability (E-stability) in a standard sticky-price model augmented with the cost channel. We allow for varying degrees of passthrough of the policy rate to bank-lending rates. Strong
Credit Market Distortions, Asset Prices and Monetary Policy
Pfajfar, D.; Santoro, E.
2012-01-01
Abstract: We study the conditions that ensure rational expectations equilibrium (REE) determinacy and expectational stability (E-stability) in a standard sticky-price model augmented with the cost channel. We allow for varying degrees of pass-through of the policy rate to bank-lending rates. Strong
Problems of intangible assets commercialization accounting
Directory of Open Access Journals (Sweden)
S.F. Legenchyk
2016-03-01
Full Text Available The growing role of intangible assets in conditions of global economy postindustrialization is grounded. The problems of intangible assets accounting are singled out. The basic tasks of the intangible assets accounting commercialization process are determined. The difference between the commercialization of intellectual property and intangible assets is considered. The basic approaches to understanding the essence of the intangible assets commercialization are singled out and grounded. The basic forms and methods of intangible assets commercialization researched by the author are analyzed. The order of accounting reflection of licensee royalties is considered. The factors of influence on the accounting process of intangible assets commercialization are determined. The necessity of solving the problem of accounting of lease payments for computer program by providing access to SaaS environment is grounded. The prospects of further studies of intangible assets accounting commercialization are determined.
ISO 55000: Creating an asset management system.
Bradley, Chris; Main, Kevin
2015-02-01
In the October 2014 issue of HEJ, Keith Hamer, group vice-president, Asset Management & Engineering at Sodexo, and marketing director at Asset Wisdom, Kevin Main, argued that the new ISO 55000 standards present facilities managers with an opportunity to create 'a joined-up, whole lifecycle approach' to managing and delivering value from assets. In this article, Kevin Main and Chris Bradley, who runs various asset management projects, examine the process of creating an asset management system.
A new approach for crude oil price prediction based on stream learning
Directory of Open Access Journals (Sweden)
Shuang Gao
2017-01-01
Full Text Available Crude oil is the world's leading fuel, and its prices have a big impact on the global environment, economy as well as oil exploration and exploitation activities. Oil price forecasts are very useful to industries, governments and individuals. Although many methods have been developed for predicting oil prices, it remains one of the most challenging forecasting problems due to the high volatility of oil prices. In this paper, we propose a novel approach for crude oil price prediction based on a new machine learning paradigm called stream learning. The main advantage of our stream learning approach is that the prediction model can capture the changing pattern of oil prices since the model is continuously updated whenever new oil price data are available, with very small constant overhead. To evaluate the forecasting ability of our stream learning model, we compare it with three other popular oil price prediction models. The experiment results show that our stream learning model achieves the highest accuracy in terms of both mean squared prediction error and directional accuracy ratio over a variety of forecast time horizons.
Intellectual Capital and Intangible Assets Analysis and Valuation
Directory of Open Access Journals (Sweden)
Ion Anghel
2008-03-01
Full Text Available Today the intellectual capital is a key factor in company’s profitability. Two major forces have driven the high performance workplace over the past two decades: globalization and increasing in technological changes. In this environment, the intellectual capital and intangible assets is fundamental to success. In the new economic competition, knowledge assets provide a sustainable competitive advantage. The measurement is fundamental to support management decision in allocation investment and investor’s decision regarding the value versus price. In our research we consider a group of Romanian listed companies on Bucharest Stock Exchange and analyze the importance of intangible value into the total market value of the equity. From accounting point of view the importance of intangible assets is very low but from the market evidence was indicated 47% importance of intangible value in total market value for the Romanian listed companies.
Martingale approach in pricing and hedging European options under regime-switching
Grigori N. Milstein; Vladimir Spokoiny
2011-01-01
The paper focuses on the problem of pricing and hedging a European contingent claim for an incomplete market model, in which evolution of price processes for a saving account and stocks depends on an observable Markov chain. The pricing function is evaluated using the martingale approach. The equivalent martingale measure is introduced in a way that the Markov chain remains the historical one, and the pricing function satisfies the Cauchy problem for a system of linear parabolic equations. It...
Directory of Open Access Journals (Sweden)
An Chen
2015-03-01
Full Text Available This paper compares two different types of private retirement plans from the perspective of a representative beneficiary: a defined benefit (DB and a defined contribution (DC plan. While salary risk is the main common risk factor in DB and DC pension plans, one of the key differences is that DB plans carry portability risks, whereas DC plans bear asset price risk. We model these tradeoffs explicitly in this paper and compare these two plans in a utility-based framework. Our numerical analysis focuses on answering the question of when the beneficiary is indifferent between the DB and DC plan. Most of our results confirm the findings in the existing literature, among which, e.g., portability losses considerably reduce the relative attractiveness of the DB plan. However, we also find that the attractiveness of the DB plan can decrease in the level of risk aversion, which is inconsistent with the existing literature.
Price Uncertainty in Linear Production Situations
Suijs, J.P.M.
1999-01-01
This paper analyzes linear production situations with price uncertainty, and shows that the corrresponding stochastic linear production games are totally balanced. It also shows that investment funds, where investors pool their individual capital for joint investments in financial assets, fit into
Transfer Pricing - An Innovative Approach
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Ramona MAXIM
2017-06-01
Full Text Available This paper presents transfer pricing and elements of drafting the transfer pricing file by the big companies. The transfer pricing procedure was founded based upon Order no. 442/2016 and the Fiscal Procedure Code and it represents a method upon which the tax base is transferred from a high tax country to a country with low taxation. This legislation outlines the conditions which companies must observe in order to draft the transfer pricing documentation and the significance thresholds. The purpose to draft a transfer pricing file is to reduce the differences between prices and market value and the actual results of company taxation. Economic double taxation occurs when tax authorities apply price adjustments because the company did not respect the principle of market value. Keeping records of transfer pricing and practicing a price aligned to market requirements contribute to an understanding of business development and the creation of appropriate tax planning. Taking into account all these aspects and the fact that any taxpayer is tempted to pay the lowest possible fees, tax havens become an option. In this context we can speak of a tax haven as a loophole in the use of the market price.
A Jump-Diffusion Model for Option Pricing
S. G. Kou
2002-01-01
Brownian motion and normal distribution have been widely used in the Black--Scholes option-pricing framework to model the return of assets. However, two puzzles emerge from many empirical investigations: the leptokurtic feature that the return distribution of assets may have a higher peak and two (asymmetric) heavier tails than those of the normal distribution, and an empirical phenomenon called "volatility smile" in option markets. To incorporate both of them and to strike a balance between ...
Operationalizing value-based pricing of medicines : a taxonomy of approaches.
Sussex, Jon; Towse, Adrian; Devlin, Nancy
2013-01-01
The UK Government is proposing a novel form of price regulation for branded medicines, which it has dubbed 'value-based pricing' (VBP). The specifics of how VBP will work are unclear. We provide an account of the possible means by which VBP of medicines might be operationalized, and a taxonomy to describe and categorize the various approaches. We begin with a brief discussion of the UK Government's proposal for VBP and proceed to define a taxonomy of approaches to VBP. The taxonomy has five main dimensions: (1) what is identified as being of value, (2) how each element is measured, (3) how it is valued, (4) how the different elements of value are aggregated, and (5) how the result is then used to determine the price of a medicine. We take as our starting point that VBP will include a measure of health gain and that, as proposed by the UK Government, this will be built on the QALY. Our principal interest is in the way criteria other than QALYs are taken into account, including severity of illness, the extent of unmet need, and wider societal considerations such as impacts on carers. We set out to: (1) identify and describe the full range of alternative means by which 'value' might be measured and valued, (2) identify and describe the options available for aggregating the different components of value to establish a maximum price, and (3) note the challenges and relative advantages associated with these approaches. We review the means by which aspects of VBP are currently operationalized in a selection of countries and place these, and proposals for the UK, in the context of our taxonomy. Finally, we give an initial assessment of the challenges, pros and cons of each approach. We conclude that identifying where VBP should lie on each of the five dimensions entails value judgements: there are no simple 'right or wrong' solutions. If a wider definition of value than incremental QALYs gained is adopted, as is desirable, then a pragmatic way to aggregate the different
Directory of Open Access Journals (Sweden)
Milošević-Avdalović Snežana
2017-01-01
Full Text Available The global financial crisis of the late 2007 has provoked unprecedented shocks to the world markets and weaken investors' confidence due to the turbulent movements and frequent changes of stock prices. Emerging capital markets suffer from unsatisfactory corporate governance, market manipulation and insider trade problems. In such circumstances, institutional investors, managers, analysts and other market participants are in constant search of the trading strategy that will outperform the market. This research is an instrument for the identification of the main determinants of stock prices on the Belgrade Stock Exchange. The panel data regression analysis includes 42 companies that represent the composition of the BelexLine index for the period from 2010 to 2014. The paper looks at the impact of specific (internal variables of companies, such as company size, return on assets, return on equity, earnings per stock, book value, price-earning ratio, price-to-book ratio and leverage and the stock price of companies that compose the BelexLine index. The results indicate that variables such as the size of the company measured by assets, return on assets, leverage, earnings per stock, book value and price-to-book ratio provide a unique contribution to a statistically significant predictor of stock prices.
Directory of Open Access Journals (Sweden)
Oosthuizen, A.V.
2013-10-01
Full Text Available Determining the price of a financial instrument is something that happens every day in the financial markets. Every price starts off with a spot price adjusted for interest until maturity of the particular instrument. The interest is usually described as risk-free interest. The price so determined is the most basic price that an investor is willing to pay if not risk is involved. Risk-free assets, then, are securities of which the future rates of return are known with certainty. An exceptional degree of confidence in the issuer of the security brings about this certainty. Risk-free assets are normally in the fixed income securities (capital markets investment category or in the liquid money market instruments such as treasury bills, category. This study attempts to determine whether the risk-free rates used by treasury managers and traders in South Africa to formulate their bond yield curves and which are used in valuation models, may be deemed risk-free. The study specifies certain criteria that an asset must satisfy in order to be used as a risk-free asset. Short term and long term South African instruments are compared to the US counterpart instruments, to gain an understanding of the South African instruments relative to the US ones. The behaviour of the risk-free instruments used in South Africa is also compared to the FTSE/JSE All Share Index and gold spot prices, which are perceived to be a risky asset classes. To gain some understanding of the behaviour of these instruments, analyses were done from different angles. The standard deviations of the daily percentage changes of the R157 were significantly lower than that of the ALSI and the gold spot price change. Compared to the ALSI and gold spot price, therefore, the R157 may be deemed a “low risk” instrument. The JIBAR was even less volatile that the R157. Interestingly, the US instruments were substantially more risky than the SA instruments over the analysis period. Also the JIBAR
Messori, Andrea
2016-08-01
Several cases of expensive drugs designed for large patient populations (e.g. sofosbuvir) have raised a complex question in terms of drug pricing. Even assuming value-based pricing, the treatment with these drugs of all eligible patients would have an immense budgetary impact, which is unsustainable also for the richest countries. This raises the need to reduce the prices of these agents in comparison with those suggested by the value-based approach and to devise new pricing methods that can achieve this goal. The present study discusses in detail the following two methods: (i) The approach based on setting nation-wide budget thresholds for individual innovative agents in which a fixed proportion of the historical pharmaceutical expenditure represents the maximum budget attributable to an innovative treatment; (ii) The approach based on nation-wide price-volume agreements in which drug prices are progressively reduced as more patients receive the treatment. The first approach has been developed in the USA by the Institute for Clinical and Economic Review and has been applied to PCSK9 inhibitors (alirocumab and evolocumab). The second approach has been designed for the Italian market and has found a systematic application to manage the price of ranibizumab, sofosbuvir, and PCSK9 inhibitors. While, in the past, price-volume agreements have been applied only on an empirical basis (i.e. in the absence of any quantitative theoretical rule), more recently some explicit mathematical models have been described. The performance of these models is now being evaluated on the basis of the real-world experiences conducted in some European countries, especially Italy.
The Financial Indicators’ and Listed Company‘s Stock Price Link Determining the Value
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Rima Tamošiūnienė
2016-06-01
Full Text Available The demand for value determination increased after rising of the Lithuanian economics. The joint-stock company value depends on the stock price and the company’s profit according to the “stock pricing for profit” method. The purpose of this scientific paper is the financial indicators’ and listed company’s stock price link determining the value. The analysis methods are: the research of scientific literature, data analysis, summarizing and graphic visualization. The link between financial indicators and the stock price is determined on the basis of correlation regression analysis. The analysis showed that listed on the stock exchange company’s stocks already have some value as they raise the capital. The research results revealed the stock price’s direct dependence on the fixed asset turnover and the debt-to-asset ratios.
Econophysics: Master curve for price-impact function
Lillo, Fabrizio; Farmer, J. Doyne; Mantegna, Rosario N.
2003-01-01
The price reaction to a single transaction depends on transaction volume, the identity of the stock, and possibly many other factors. Here we show that, by taking into account the differences in liquidity for stocks of different size classes of market capitalization, we can rescale both the average price shift and the transaction volume to obtain a uniform price-impact curve for all size classes of firm for four different years (1995-98). This single-curve collapse of the price-impact function suggests that fluctuations from the supply-and-demand equilibrium for many financial assets, differing in economic sectors of activity and market capitalization, are governed by the same statistical rule.
DEFF Research Database (Denmark)
Jakobsen, Kristian Thor
2013-01-01
to the fact that some areas facing increased level of climate-related risks lack access to productive and human capital, while other areas facing a similar situation have relatively insufficient access to financial assets. This again shows that any non-targeted policy aiming at improving households’ risk-management......The application of a livelihood asset-based approach to adaptation policy targeting is presented through the creation of maps highlighting the spatial contrasts of access to various types of livelihood assets utilizing primary household data. Thus, the livelihood maps provide policy......-makers with a tool to quickly identify areas with limited access to certain types of assets, making the latter less able to react to a changing level of climaterelated risks. In the case of Bhutan, distinct spatial patterns of asset endowments is identified using five different asset indicators drawing attention...
Estimating oil price 'Value at Risk' using the historical simulation approach
International Nuclear Information System (INIS)
David Cabedo, J.; Moya, Ismael
2003-01-01
In this paper we propose using Value at Risk (VaR) for oil price risk quantification. VaR provides an estimation for the maximum oil price change associated with a likelihood level, and can be used for designing risk management strategies. We analyse three VaR calculation methods: the historical simulation standard approach, the historical simulation with ARMA forecasts (HSAF) approach, developed in this paper, and the variance-covariance method based on autoregressive conditional heteroskedasticity models forecasts. The results obtained indicate that HSAF methodology provides a flexible VaR quantification, which fits the continuous oil price movements well and provides an efficient risk quantification
Estimating oil price 'Value at Risk' using the historical simulation approach
International Nuclear Information System (INIS)
Cabedo, J.D.; Moya, I.
2003-01-01
In this paper we propose using Value at Risk (VaR) for oil price risk quantification. VaR provides an estimation for the maximum oil price change associated with a likelihood level, and can be used for designing risk management strategies. We analyse three VaR calculation methods: the historical simulation standard approach, the historical simulation with ARMA forecasts (HSAF) approach. developed in this paper, and the variance-covariance method based on autoregressive conditional heteroskedasticity models forecasts. The results obtained indicate that HSAF methodology provides a flexible VaR quantification, which fits the continuous oil price movements well and provides an efficient risk quantification. (author)
Robust pricing of european options with wavelets and the characteristic function
Ortiz-Gracia, L.; Oosterlee, C.W.
2013-01-01
We present a novel method for pricing European options based on the wavelet approximation method and the characteristic function. We focus on the discounted expected payoff pricing formula and compute it by means of wavelets. We approximate the density function associated to the underlying asset
Error analysis in Fourier methods for option pricing for exponential Lévy processes
Crocce, Fabian; Hä ppö lä , Juho; Keissling, Jonas; Tempone, Raul
2015-01-01
We derive an error bound for utilising the discrete Fourier transform method for solving Partial Integro-Differential Equations (PIDE) that describe european option prices for exponential Lévy driven asset prices. We give sufficient conditions
Flint, Emlyn; Maré, Eben
2017-01-01
Background: Contingent claims on underlying assets are typically priced under a framework that assumes, inter alia, that the log returns of the underlying asset are normally distributed. However, many researchers have shown that this assumption is violated in practice. Such violations include the statistical properties of heavy tails, volatility clustering, leptokurtosis and long memory. This paper considers the pricing of contingent claims when the underlying is assumed to display long memor...
Modelling electricity futures prices using seasonal path-dependent volatility
International Nuclear Information System (INIS)
Fanelli, Viviana; Maddalena, Lucia; Musti, Silvana
2016-01-01
Highlights: • A no-arbitrage term structure model is applied to the electricity market. • Volatility parameters of the HJM model are estimated by using German data. • The model captures the seasonal price behaviour. • Electricity futures prices are forecasted. • Call options are evaluated according to different strike prices. - Abstract: The liberalization of electricity markets gave rise to new patterns of futures prices and the need of models that could efficiently describe price dynamics grew exponentially, in order to improve decision making for all of the agents involved in energy issues. Although there are papers focused on modelling electricity as a flow commodity by using Heath et al. (1992) approach in order to price futures contracts, the literature is scarce on attempts to consider a seasonal volatility as input to models. In this paper, we propose a futures price model that allows looking into observed stylized facts in the electricity market, in particular stochastic price variability, and periodic behavior. We consider a seasonal path-dependent volatility for futures returns that are modelled in Heath et al. (1992) framework and we obtain the dynamics of futures prices. We use these series to price the underlying asset of a call option in a risk management perspective. We test the model on the German electricity market, and we find that it is accurate in futures and option value estimates. In addition, the obtained results and the proposed methodology can be useful as a starting point for risk management or portfolio optimization under uncertainty in the current context of energy markets.
Asset protection: why a preventive approach is the best insurance against liability.
Rinaldi, Ellen; Shin, Alisa
2008-02-01
Asset-protection planning is critical for people in high-risk professions, such as dentistry. Planning requires a careful weighing of risks, such as the risk of a lawsuit versus that of relinquishing control of assets. The authors examine several lawful techniques that may protect a dentist's assets from claims of future creditors. Asset-protection planning, if done early and with the guidance of an attorney well-versed in the subject, can help deter creditors from claims resulting from malpractice suits, divorce, business partner disputes, bad investments, poor tax planning or a combination of these. Practice Implications. Careful planning can minimize the risk to a dentist's personal assets and the assets of the practice resulting from a lawsuit or other liabilities.
Johnstone, D J
2002-06-01
Investors have a proven general reluctance to realize losses. The theory of "mental accounting" suggests that losses are easier to accept when mentally integrated with either preceding losses or with compensatory gains. Mental integration is made easier when a failed asset is exchanged against a new, apparently profitable, acquisition. The alternative is to sell the existing asset on the open market before re-investing the proceeds as desired. This is emotionally less appealing than "rolling over" a losing investment into a new venture by way of an asset trade. The psychological benefits of exchanging rather than selling a failed asset come at a cost. It is typical of trade-in arrangements, e.g., where one trades an old car against a new one, that the effective sale price of the existing asset is less than current market value. Acceptance of this low price adds to the investor's total monetary loss on the existing asset but is essential to an overall package deal apart from which that asset would often remain belatedly unsold.
Operational management of offshore energy assets
Kolios, A. J.; Martinez Luengo, M.
2016-02-01
Energy assets and especially those deployed offshore are subject to a variety of harsh operational and environmental conditions which lead to deterioration of their performance and structural capacity over time. The aim of reduction of CAPEX in new installations shifts focus to operational management to monitor and assess performance of critical assets ensuring their fitness for service throughout their service life and also to provide appropriate and effective information towards requalification or other end of life scenarios, optimizing the OPEX. Over the last decades, the offshore oil & gas industry has developed and applied various approaches in operational management of assets through Structural Health and Condition Monitoring (SHM/CM) systems which can be, at a certain level, transferable to offshore renewable installations. This paper aims to highlight the key differences between offshore oil & gas and renewable energy assets from a structural integrity and reliability perspective, provide a comprehensive overview of different approaches that are available and applicable, and distinguish the benefits of such systems in the efficient operation of offshore energy assets.
Pricing Exotic Options under a High-Order Markovian Regime Switching Model
Directory of Open Access Journals (Sweden)
Wai-Ki Ching
2007-10-01
Full Text Available We consider the pricing of exotic options when the price dynamics of the underlying risky asset are governed by a discrete-time Markovian regime-switching process driven by an observable, high-order Markov model (HOMM. We assume that the market interest rate, the drift, and the volatility of the underlying risky asset's return switch over time according to the states of the HOMM, which are interpreted as the states of an economy. We will then employ the well-known tool in actuarial science, namely, the Esscher transform to determine an equivalent martingale measure for option valuation. Moreover, we will also investigate the impact of the high-order effect of the states of the economy on the prices of some path-dependent exotic options, such as Asian options, lookback options, and barrier options.
South Africa and United States stock prices and the Rand/Dollar exchange rate
Directory of Open Access Journals (Sweden)
Matthew Ocran
2010-09-01
Full Text Available This paper seeks to examine the dynamic causal relations between the two major financial assets, stock prices of the US and South Africa and the rand/US$ exchange rate. The study uses a mixed bag of time series approaches such as cointegration, Granger causality, impulse response functions and forecasting error variance decompositions. The paper identifies a bi-directional causality from the Standard & Poor’s 500 stock price index to the rand/US$ exchange rate in the Granger sense. It was also found that the Standard & Poor’s stock price index accounts for a significant portion of the variations in the Johannesburg Stock Exchange’s All Share index. Thus, while causality in the Granger sense could not be established for the relationship between the price indices of the two stock exchanges it can argued that there is some relationship between them. The results of the study have implications for both business and Government.
Kurniawan, Fauzi Adi
2015-01-01
This research purpose to determine the performance of stock based on the return and risk to determine the group of efficient stocks and inefficient stock by the use of methods of Capital Asset Pricing Model (CAPM). The sample used in this study were 15 company shares consumer goods industry sector listed in Indonesia Stock Exchange 2011-2013 that selected based on certain criteria. The analysis showed there is 1 stock companies included in the group of inefficient stock (overvalued) and 14 st...
List prices vs. bargain prices: which solution to estimate consumer price indices?
Carlo De Gregorio
2010-01-01
Alternative approaches to CPI surveys are here evaluated, in markets where final prices are based on some sort of price listing. Three types of surveys are compared: local surveys (LOC), with small samples and a local price collection; list price surveys (LIS), with huge samples and centralised collection; mixed surveys (MXD), in which LOC and LIS are jointly used. Based on a multiplicative pricing model, some conditions are derived to establish the relative efficiency of these approaches. Th...
International Nuclear Information System (INIS)
Rausch, Sebastian; Metcalf, Gilbert E.; Reilly, John M.
2011-01-01
Many policies to limit greenhouse gas emissions have at their core efforts to put a price on carbon emissions. Carbon pricing impacts households both by raising the cost of carbon intensive products and by changing factor prices. A complete analysis requires taking both effects into account. The impact of carbon pricing is determined by heterogeneity in household spending patterns across income groups as well as heterogeneity in factor income patterns across income groups. It is also affected by precise formulation of the policy (how is the revenue from carbon pricing distributed) as well as the treatment of other government policies (e.g. the treatment of transfer payments). What is often neglected in analyses of policy is the heterogeneity of impacts across households even within income or regional groups. In this paper, we incorporate 15,588 households from the U.S. Consumer and Expenditure Survey data as individual agents in a comparative-static general equilibrium framework. These households are represented within the MIT USREP model, a detailed general equilibrium model of the U.S. economy. In particular, we categorize households by full household income (factor income as well as transfer income) and apply various measures of lifetime income to distinguish households that are temporarily low-income (e.g., retired households drawing down their financial assets) from permanently low-income households. We also provide detailed within-group distributional measures of burden impacts from various policy scenarios. - Highlights: → We develop a simulation model with 15,588 households to study the distributional impacts of carbon pricing in the US. → Sources side impacts have typically been ignored in the literature biasing studies towards finding carbon pricing to be regressive. → Our general equilibrium framework allows us to capture uses and sources side impacts from carbon pricing. → We find that variation in impacts within broad socioeconomic groups may
Managing industrial price risk: a balancing act
International Nuclear Information System (INIS)
Muse, J-F.
2000-01-01
The challenge of managing industrial price risk is assessed by a senior executive of Cargill, a diversified industrial conglomerate, involved in steel manufacturing and recycling, oilseeds, cocoa, beef, pork, and poultry processing, fertilizer and fruit juice production, in addition to trading and financial risk management. Energy is a key component in many of Cargill's businesses, hence the company has good reason to be concerned about price volatility. The effects of energy risk management on the company's shareholders are demonstrated by an analysis of month-to-month price fluctuations over the Nov 1999 to Oct 2000 period, showing the monthly value of risk at the 95 per cent confidence level as $4,832,195. The effects of alternatives for an end-user such as passing on cost to customers, improving energy efficiency. fuel switching and production curtailment, are explored and limitations and problems with each of the approaches are discussed. The best options for industrial end-users of natural gas are suggested to be a proactive risk management program in the short-term and asset diversification, fuel switching, and geographic relocation of production facilities in the long-term
Short-term electricity prices forecasting in a competitive market: A neural network approach
International Nuclear Information System (INIS)
Catalao, J.P.S.; Mariano, S.J.P.S.; Mendes, V.M.F.; Ferreira, L.A.F.M.
2007-01-01
This paper proposes a neural network approach for forecasting short-term electricity prices. Almost until the end of last century, electricity supply was considered a public service and any price forecasting which was undertaken tended to be over the longer term, concerning future fuel prices and technical improvements. Nowadays, short-term forecasts have become increasingly important since the rise of the competitive electricity markets. In this new competitive framework, short-term price forecasting is required by producers and consumers to derive their bidding strategies to the electricity market. Accurate forecasting tools are essential for producers to maximize their profits, avowing profit losses over the misjudgement of future price movements, and for consumers to maximize their utilities. A three-layered feedforward neural network, trained by the Levenberg-Marquardt algorithm, is used for forecasting next-week electricity prices. We evaluate the accuracy of the price forecasting attained with the proposed neural network approach, reporting the results from the electricity markets of mainland Spain and California. (author)
Power generation assets. Energy constraints, upper bounds and hedging strategies
Energy Technology Data Exchange (ETDEWEB)
Enge, Thomas
2010-09-20
The overall topic of this thesis is the valuation of power generation assets under energy and risk constraints. Our focus is on the modeling aspect i.e. to find the right balance between accuracy and computational feasibility. We define a new not yet investigated unit commitment problem that introduces an energy constraint to a thermal power plant. We define a continuous stochastic dynamic program with a nested mixed integer program (MIP). We introduce a fast implementation approach by replacing the MIP with an efficient matrix calculation and use principal component analysis to reduce the number of risk factors. We also provide a fast heuristic valuation approach for comparison. As both models can only provide lower bounds of the asset value, we investigate the theory of upper bounds for a proper validation of our power plant results. We review the primal dual algorithm for swing options by Meinshausen and Hambly and in particular clarify their notation and implementation. Then we provide an extension for swing options with multiple exercises at the same stage that we developed together with Prof. Bender, University of Braunschweig. We outline Prof. Bender's proof and describe the implementation in detail. Finally we provide a risk analysis for our thermal power plant. In particular we investigate strategies to reduce spot price risk to which power plants are significantly exposed. First, we focus on the measurement of spot price risk and propose three appropriate risk figures (Forward delta as opposed to Futures delta, synthetic spot delta and Earnings-at-Risk) and illustrate their application using a business case. Second we suggest risk mitigation strategies for both periods, before and in delivery. The latter tries to alter the dispatch policy i.e. pick less risky hours and accept a (desirably only slightly) smaller return. We introduce a benchmark that weighs risk versus return and that we will call EaR-efficient option value. We propose a mitigation
The Long-Run Effects of the Fed’s Monetary Policy on the Dynamics among Major Asset Classes
Directory of Open Access Journals (Sweden)
Miao Jia
2016-09-01
Full Text Available It is well known that government monetary policies significantly impact financial markets. There have been numerous studies examining the relationship between monetary policy and the prices of financial assets, including equities and bonds. Little, however, has been done to explore the impact of major financial assets on changes in monetary policies.
International Nuclear Information System (INIS)
Nomikos, Nikos; Soldatos, Orestes; Tamvakis, Michael
2005-01-01
Deregulation and reforms in the electricity markets over the recent years have led to increasing volatility of electricity prices since prices in the market are now determined by the fundamental rules of supply and demand. The existence of price risk in the market leads to the increasing necessity of hedging using derivatives and the subsequent development of models to price and hedge electricity derivatives. However the non-storable nature of the market implies that ''traditional'' approaches for the pricing and hedging of commodity derivatives based on the theory of storage are not applicable to electricity markets. In this paper we propose a two-factor jump diffusion model with seasonal components in order to capture the systematic pattern in the forward curve and the volatility term structure. Our model is then calibrated for the spot and the financial contracts in the Nord Pool Exchange using Kalman filter techniques. The proposed model has several advantages. First it enables to select the risk neutral measure that best fits the term structure hence capturing the most significant distributional characteristics of both spot and forwards. Second, it explains the seasonal risk premium, and finally it provides a fit for the Volatility Term Structure. The resulting model is very promising, providing a very useful Financial Engineering tool to market participants for Risk Hedging and Derivatives Pricing in the highly volatile Power Markets. (Author)
Directory of Open Access Journals (Sweden)
M. Ghayeni
2010-12-01
Full Text Available This paper proposes an algorithm for transmission cost allocation (TCA in a large power system based on nodal pricing approach using the multi-area scheme. The nodal pricing approach is introduced to allocate the transmission costs by the control of nodal prices in a single area network. As the number of equations is dependent on the number of buses and generators, this method will be very time consuming for large power systems. To solve this problem, the present paper proposes a new algorithm based on multi-area approach for regulating the nodal prices, so that the simulation time is greatly reduced and therefore the TCA problem with nodal pricing approach will be applicable for large power systems. In addition, in this method the transmission costs are allocated to users more equitable. Since the higher transmission costs in an area having a higher reliability are paid only by users of that area in contrast with the single area method, in which these costs are allocated to all users regardless of their locations. The proposed method is implemented on the IEEE 118 bus test system which comprises three areas. Results show that with application of multi-area approach, the simulation time is greatly reduced and the transmission costs are also allocated to users with less variation in new nodal prices with respect to the single area approach.
Collaborative design of Open Educational Practices: An Assets based approach
Directory of Open Access Journals (Sweden)
Kate Helen Miller
2018-04-01
Full Text Available This paper outlines a collaborative approach to the design of open educational resources (OER with community stakeholders so they can be shared with other community practitioners openly, online and repurposed for other contexts. We view curriculum not as something that educationalists provide but rather something that emerges as learners engage with an educational context. We draw on a Project consisting of a partnership between five European Institutions of Higher Education and a range of community stakeholder groups. The partnership will develop a suite of OER for community workers who are implementing assets based approaches in different contexts. We argue that these approaches are negotiated in that one cannot decide how they might operate in a given context without engaging in deliberative discussion. The challenge for us as open education practitioners is how to turn those deliberations into OER and to highlight the important pedagogical aspect of the design process.
2012-08-30
... Discipline and Disclosure Requirements; Proposed Rule #0;#0;Federal Register / Vol. 77 , No. 169 / Thursday... Assets; Market Discipline and Disclosure Requirements AGENCY: Office of the Comptroller of the Currency... Approach NPR) includes proposed changes to the agencies' general risk-based capital requirements for...
Behavior and asset markets : Individual decisions, emotions and fundamental value trajectories
Breaban, A.G.
2014-01-01
This thesis consists of four chapters related to individual- and market- level behavior in experimental financial markets. The first three chapters analyze asset pricing and, in particular, stylized facts such as bubbles and crashes, as well as some of the factors that influence such phenomena. In
Modelling asset correlations during the recent financial crisis: A semiparametric approach
DEFF Research Database (Denmark)
Aslanidis, Nektarios; Casas, Isabel
This article proposes alternatives to the Dynamic Conditional Correlation (DCC) model to study assets' correlations during the recent financial crisis. In particular, we adopt a semiparametric and nonparametric approach to estimate the conditional correlations for two interesting portfolios....... The first portfolio consists of equity sectors SPDRs and the S&P 500 composite, while the second one contains major currencies that are actively traded in the foreign exchange market. Methodologically, our contribution is two fold. First, we propose the Local Linear (LL) estimator for the correlations...
Test Of Capital Asset Pricing Model On Stocks At Karachi Stock Exchange
Directory of Open Access Journals (Sweden)
Arbab Khalid Cheema
2010-12-01
Full Text Available This paper attempts to empirically test the single-factor CAPM developed by Sharpe (1964, Lintner (1965 and Jan Mossin (1966 and others, which proposes that the expected returns of capital assets are dependent on their risk relative to the entire market which is quantified by a correlation co-efficient between asset returns and market returns. The test of 20 stocks at Karachi Stock Exchange have shown that though, the beta co-efficients are significant, their strength is considerably weak. Therefore, other factors which are unaccounted for in this model are important in determining risk and return. In addition, betas are less relevant in a volatile emerging capital markets like the KSE. Thus, the multi-factor models are better than the classical CAPM at determining the risk-return relationship. However, the single-factor CAPM remains in practice beacause of its simplicity.
Effects of unit-based garbage pricing : A differences-in-differences approach
Allers, Maarten A.; Hoeben, Corine
Using a unique 10-year dataset of all 458 Dutch municipalities, we apply a differences-in-differences approach to estimate the effect of unit-based pricing on household waste quantities and recycling. Community-level studies of unit-based pricing typically do not include fixed effects at the local
Multivariate Option Pricing Using Dynamic Copula Models
van den Goorbergh, R.W.J.; Genest, C.; Werker, B.J.M.
2003-01-01
This paper examines the behavior of multivariate option prices in the presence of association between the underlying assets.Parametric families of copulas offering various alternatives to the normal dependence structure are used to model this association, which is explicitly assumed to vary over
"Asset Pricing With Multiplicative Habit and Power-Expo Preferences"
William T. Smith; Qiang Zhang
2006-01-01
Multiplicative habit introduces an additional consumption risk as a determinant of equity premium, and allows time preference and habit strength, in addition to risk aversion, to affect "price of risk". A model combining multiplicative habit and power-expo preferences cannot be rejected.
A Consistent Pricing Model for Index Options and Volatility Derivatives
DEFF Research Database (Denmark)
Kokholm, Thomas
to be priced consistently, while allowing for jumps in volatility and returns. An affine specification using Lévy processes as building blocks leads to analytically tractable pricing formulas for volatility derivatives, such as VIX options, as well as efficient numerical methods for pricing of European options...... on the underlying asset. The model has the convenient feature of decoupling the vanilla skews from spot/volatility correlations and allowing for different conditional correlations in large and small spot/volatility moves. We show that our model can simultaneously fit prices of European options on S&P 500 across...
A Consistent Pricing Model for Index Options and Volatility Derivatives
DEFF Research Database (Denmark)
Cont, Rama; Kokholm, Thomas
2013-01-01
to be priced consistently, while allowing for jumps in volatility and returns. An affine specification using Lévy processes as building blocks leads to analytically tractable pricing formulas for volatility derivatives, such as VIX options, as well as efficient numerical methods for pricing of European options...... on the underlying asset. The model has the convenient feature of decoupling the vanilla skews from spot/volatility correlations and allowing for different conditional correlations in large and small spot/volatility moves. We show that our model can simultaneously fit prices of European options on S&P 500 across...
Palm oil price forecasting model: An autoregressive distributed lag (ARDL) approach
Hamid, Mohd Fahmi Abdul; Shabri, Ani
2017-05-01
Palm oil price fluctuated without any clear trend or cyclical pattern in the last few decades. The instability of food commodities price causes it to change rapidly over time. This paper attempts to develop Autoregressive Distributed Lag (ARDL) model in modeling and forecasting the price of palm oil. In order to use ARDL as a forecasting model, this paper modifies the data structure where we only consider lagged explanatory variables to explain the variation in palm oil price. We then compare the performance of this ARDL model with a benchmark model namely ARIMA in term of their comparative forecasting accuracy. This paper also utilize ARDL bound testing approach to co-integration in examining the short run and long run relationship between palm oil price and its determinant; production, stock, and price of soybean as the substitute of palm oil and price of crude oil. The comparative forecasting accuracy suggests that ARDL model has a better forecasting accuracy compared to ARIMA.
Market Makers' Supply and Pricing of Financial Market Liquidity
Shen, Pu; Starr, Ross M.
2000-01-01
This study models the bid-ask spread in financial markets as a function of asset price variability and order flow. The market-maker is characterized as passively accepting orders to buy and to sell a security at the market's prevailing price (plus or minus half the bid-ask spread). The bid-ask spread adjusts to cover market-makers' average costs. The bid-ask spread then varies positively with: the security's price volatility, the volatility of order flow, and the absolute value of the market-...
THE PROBLEMS OF FIXED ASSETS CLASSIFICATION FOR ACCOUNTING
Directory of Open Access Journals (Sweden)
Sophiia Kafka
2016-06-01
Full Text Available This article provides a critical analysis of research in accounting of fixed assets; the basic issues of fixed assets accounting that have been developed by the Ukrainian scientists during 1999-2016 have been determined. It is established that the problems of non-current assets taxation and their classification are the most noteworthy. In the dissertations the issues of fixed assets classification are of exclusively particular branch nature, so its improvement is important. The purpose of the article is developing science-based classification of fixed assets for accounting purposes since their composition is quite diverse. The classification of fixed assets for accounting purposes have been summarized and developed in Figure 1 according to the results of the research. The accomplished analysis of existing approaches to classification of fixed assets has made it possible to specify its basic types and justify the classification criteria of fixed assets for the main objects of fixed assets. Key words: non-current assets, fixed assets, accounting, valuation, classification of the fixed assets. JEL:G M41
A meta-analysis of the price elasticity of gasoline demand. A SUR approach
Energy Technology Data Exchange (ETDEWEB)
Brons, Martijn; Rietveld, Piet [Department of Spatial Economics, Vrije Universiteit, De Boelelaan 1105, 1081 HV Amsterdam (Netherlands); Tinbergen Institute Amsterdam (TIA), Roetersstraat 31, 1018 WB Amsterdam (Netherlands); Nijkamp, Peter [Department of Spatial Economics, Vrije Universiteit, De Boelelaan 1105, 1081 HV Amsterdam (Netherlands); Tinbergen Institute Amsterdam (TIA), Roetersstraat 31, 1018 WB Amsterdam (Netherlands); The Netherlands Organisation of Scientific Research (NWO), postbus 93138 - 2509 AC Den Haag (Netherlands); Pels, Eric [Department of Spatial Economics, Vrije Universiteit, De Boelelaan 1105, 1081 HV Amsterdam (Netherlands)
2008-09-15
Automobile gasoline demand can be expressed as a multiplicative function of fuel efficiency, mileage per car and car ownership. This implies a linear relationship between the price elasticity of total fuel demand and the price elasticities of fuel efficiency, mileage per car and car ownership. In this meta-analytical study we aim to investigate and explain the variation in empirical estimates of the price elasticity of gasoline demand. A methodological novelty is that we use the linear relationship between the elasticities to develop a meta-analytical estimation approach based on a Seemingly Unrelated Regression (SUR) model with Cross Equation Restrictions. This approach enables us to combine observations of different elasticities and thus increase our sample size. Furthermore, it allows for a more detailed interpretation of our meta-regression results. The empirical results of the study demonstrate that the SUR approach leads to more precise results (i.e., lower standard errors) than a standard meta-analytical approach. We find that, with mean short run and long run price elasticities of - 0.34 and - 0.84, respectively, the demand for gasoline is not very price sensitive. Both in the short and the long run, the impact of a change in the gasoline price on demand is mainly driven by responses in fuel efficiency and mileage per car and to a slightly lesser degree by changes in car ownership. Furthermore, we find that study characteristics relating to the geographic area studied, the year of the study, the type of data used, the time horizon and the functional specification of the demand equation have a significant impact on the estimated value of the price elasticity of gasoline demand. (author)
A meta-analysis of the price elasticity of gasoline demand. A SUR approach
International Nuclear Information System (INIS)
Brons, Martijn; Rietveld, Piet; Nijkamp, Peter; Pels, Eric
2008-01-01
Automobile gasoline demand can be expressed as a multiplicative function of fuel efficiency, mileage per car and car ownership. This implies a linear relationship between the price elasticity of total fuel demand and the price elasticities of fuel efficiency, mileage per car and car ownership. In this meta-analytical study we aim to investigate and explain the variation in empirical estimates of the price elasticity of gasoline demand. A methodological novelty is that we use the linear relationship between the elasticities to develop a meta-analytical estimation approach based on a Seemingly Unrelated Regression (SUR) model with Cross Equation Restrictions. This approach enables us to combine observations of different elasticities and thus increase our sample size. Furthermore, it allows for a more detailed interpretation of our meta-regression results. The empirical results of the study demonstrate that the SUR approach leads to more precise results (i.e., lower standard errors) than a standard meta-analytical approach. We find that, with mean short run and long run price elasticities of - 0.34 and - 0.84, respectively, the demand for gasoline is not very price sensitive. Both in the short and the long run, the impact of a change in the gasoline price on demand is mainly driven by responses in fuel efficiency and mileage per car and to a slightly lesser degree by changes in car ownership. Furthermore, we find that study characteristics relating to the geographic area studied, the year of the study, the type of data used, the time horizon and the functional specification of the demand equation have a significant impact on the estimated value of the price elasticity of gasoline demand. (author)
Operations Research Approaches to Asset Management in Freight Rail
DEFF Research Database (Denmark)
Gorman, Michael F.; Harrod, Steven
2011-01-01
This article describes operations research methodologies as they apply to asset management in freight rail. We describe state-of-the-art methods for locomotive, crew, railcar, line and yard planning and management. We conclude with emerging areas of research in rail.......This article describes operations research methodologies as they apply to asset management in freight rail. We describe state-of-the-art methods for locomotive, crew, railcar, line and yard planning and management. We conclude with emerging areas of research in rail....
Customer perspectives on district heating price models
Directory of Open Access Journals (Sweden)
Kerstin Sernhed
2017-01-01
Full Text Available In Sweden there has been a move towards more cost reflective price models for district heating in order to reduce economic risks that comes with variable heat demand and high shares of fixed assets. The keywords in the new price models are higher shares of fixed cost, seasonal energy prices and charging for capacity. Also components that are meant to serve as incentives to affect behaviour are introduced, for example peak load components and flow components. In this study customer responses to these more complex price models have been investigated through focus group interviews and through interviews with companies that have changed their price models. The results show that several important customer requirements are suffering with the new price models. The most important ones are when energy savings do not provide financial savings, when costs are hard to predict and are perceived to be out of control.
SPLINE LINEAR REGRESSION USED FOR EVALUATING FINANCIAL ASSETS 1
Directory of Open Access Journals (Sweden)
Liviu GEAMBAŞU
2010-12-01
Full Text Available One of the most important preoccupations of financial markets participants was and still is the problem of determining more precise the trend of financial assets prices. For solving this problem there were written many scientific papers and were developed many mathematical and statistical models in order to better determine the financial assets price trend. If until recently the simple linear models were largely used due to their facile utilization, the financial crises that affected the world economy starting with 2008 highlight the necessity of adapting the mathematical models to variation of economy. A simple to use model but adapted to economic life realities is the spline linear regression. This type of regression keeps the continuity of regression function, but split the studied data in intervals with homogenous characteristics. The characteristics of each interval are highlighted and also the evolution of market over all the intervals, resulting reduced standard errors. The first objective of the article is the theoretical presentation of the spline linear regression, also referring to scientific national and international papers related to this subject. The second objective is applying the theoretical model to data from the Bucharest Stock Exchange
Historical Cost Dan General Price Level Accounting: Analisis Relevansi Indikator Keuangan
-, Meythi; Teresa, Sheffie
2012-01-01
In conventional accounting, financial statements are based on the historical cost principle that assumes that prices (monetary unit) are stable. Conventional accounting recognizes neither changes in the general price level nor changes in the specific price level. Consequently, if there are any changes in purchasing power such as in inflation period, the historical financial statement are not economically relevant and also income is usually overstated, and the fixed assets are usually understa...
A combined modeling approach for wind power feed-in and electricity spot prices
International Nuclear Information System (INIS)
Keles, Dogan; Genoese, Massimo; Möst, Dominik; Ortlieb, Sebastian; Fichtner, Wolf
2013-01-01
Wind power generation and its impacts on electricity prices has strongly increased in the EU. Therefore, appropriate mark-to-market evaluation of new investments in wind power and energy storage plants should consider the fluctuant generation of wind power and uncertain electricity prices, which are affected by wind power feed-in (WPF). To gain the input data for WPF and electricity prices, simulation models, such as econometric models, can serve as a data basis. This paper describes a combined modeling approach for the simulation of WPF series and electricity prices considering the impacts of WPF on prices based on an autoregressive approach. Thereby WPF series are firstly simulated for each hour of the year and integrated in the electricity price model to generate an hourly resolved price series for a year. The model results demonstrate that the WPF model delivers satisfying WPF series and that the extended electricity price model considering WPF leads to a significant improvement of the electricity price simulation compared to a model version without WPF effects. As the simulated series of WPF and electricity prices also contain the correlation between both series, market evaluation of wind power technologies can be accurately done based on these series. - Highlights: • Wind power feed-in can be directly simulated with stochastic processes. • Non-linear relationship between wind power feed-in and electricity prices. • Price reduction effect of wind power feed-in depends on the actual load. • Considering wind power feed-in effects improves the electricity price simulation. • Combined modeling of both parameters delivers a data basis for evaluation tools
A risk-based approach to sanitary sewer pipe asset management.
Baah, Kelly; Dubey, Brajesh; Harvey, Richard; McBean, Edward
2015-02-01
Wastewater collection systems are an important component of proper management of wastewater to prevent environmental and human health implications from mismanagement of anthropogenic waste. Due to aging and inadequate asset management practices, the wastewater collection assets of many cities around the globe are in a state of rapid decline and in need of urgent attention. Risk management is a tool which can help prioritize resources to better manage and rehabilitate wastewater collection systems. In this study, a risk matrix and a weighted sum multi-criteria decision-matrix are used to assess the consequence and risk of sewer pipe failure for a mid-sized city, using ArcGIS. The methodology shows that six percent of the uninspected sewer pipe assets of the case study have a high consequence of failure while four percent of the assets have a high risk of failure and hence provide priorities for inspection. A map incorporating risk of sewer pipe failure and consequence is developed to facilitate future planning, rehabilitation and maintenance programs. The consequence of failure assessment also includes a novel failure impact factor which captures the effect of structurally defective stormwater pipes on the failure assessment. The methodology recommended in this study can serve as a basis for future planning and decision making and has the potential to be universally applied by municipal sewer pipe asset managers globally to effectively manage the sanitary sewer pipe infrastructure within their jurisdiction. Copyright © 2014 Elsevier B.V. All rights reserved.
Drescher, Christopher F.; Johnson, Laura R.; Kurz, A. Solomon; Scales, Peter C.; Kiliho, Ray P.
2018-01-01
Background: Assets-based approaches are well-suited to youth living in majority world contexts, such as East Africa. However, positive psychology research with African adolescents is rare. One hindering factor is the lack of translated measures for conducting research. Objective: This study builds capacity for positive youth development research…
Daily House Price Indices: Construction, Modeling, and Longer-Run Predictions
DEFF Research Database (Denmark)
Bollerslev, Tim; Patton, Andrew J.; Wang, Wenjing
We construct daily house price indices for ten major U.S. metropolitan areas. Our calculations are based on a comprehensive database of several million residential property transactions and a standard repeat-sales method that closely mimics the methodology of the popular monthly Case-Shiller house...... price indices. Our new daily house price indices exhibit dynamic features similar to those of other daily asset prices, with mild autocorrelation and strong conditional heteroskedasticity of the corresponding daily returns. A relatively simple multivariate time series model for the daily house price...... index returns, explicitly allowing for commonalities across cities and GARCH effects, produces forecasts of monthly house price changes that are superior to various alternative forecast procedures based on lower frequency data....
Intangible asset tax depreciation in the Czech Republic
Directory of Open Access Journals (Sweden)
Pavel Svirák
2011-01-01
Full Text Available This paper aims to familiarize readers with the legislative development of intangible asset tax depreciation in the Czech Republic since 1993. The paper is divided into several basic chapters, of which the main chapter describes and analyzes the development of legislation in three thus-existing legal modes regulating intangible asset tax depreciation (the periods 1993–2000; 2001–2004; 2004–2011. A separate sub-chapter deals with each of these three modes, which fundamentally differ in the concept of determining tax depreciations. For better clarity, changes in the legislation in question are described using tables. Over the first mentioned mode, i.e. the mode valid for assets acquired in the period 1993–2000, intangible asset tax depreciations were determined by the same manner as tangible asset tax depreciations. This period is characterized by gradual establishment (specification of legislation that may be partially attributed to the stormy development of social conditions and the need for them to be reflected in law. For the period 2001–2003, standard amendments were contained in accounting regulations. The Income Tax Act (hereinafter ITA did not contain an amendment of intangible assets and its depreciations. It merely determined that accounting depreciations of intangible assets were a tax expense. Nevertheless, changes also occurred in this short time period, which this paper will later address. Effective from 2004, legislation on intangible assets and their tax depreciations returned to the ITA. Changes came in this mode of determining depreciations as well; nevertheless, one may consider the current legislative regulation to be stabilized. Later in this paper for the selected category of intangible assets (software, the authors describe and assess the dependence of the portion of the entry price entering tax expenses in the form of tax depreciations on the year of acquiring intangible assets. To achieve the stated objectives
Directory of Open Access Journals (Sweden)
Yuheng Yang
2017-08-01
Full Text Available The traditional concepts of water resource development and utilization have caused serious hydrological and environmental issues in some regions. In addition, policy issues in China have led to a severe water crisis. The quantitative accounting of water resources is a theoretical approach to solving these problems. In this paper, 13 indicators were selected from four classes, including resources, the environment, society, and efficiency, and a case study of Jinan, Shandong Province, was performed using a set pair analysis model to calculate the water resource assets from 2011–2015. In previous methods of water resource accounting, the water quality was not considered; therefore, the loss coefficient of water resource assets was proposed to improve the reliability of accounting. According to the relationships among the unit price of water, water quantity, and water quality, physical and quantitative accounting methods were used to create water balance sheets from 2011–2015. The calculation results showed that the physical change in water resource assets in Jinan City was −30 million m 3 , and water resource assets initially increased and then decreased. In 2011, 2012, 2013, 2014, and 2015, water resource assets totalled 36.5 million USD, 45.9 million USD, 66.7 million USD, 35.5 million USD, and 37.5 million USD, respectively (at 6.4588, 6.3125, 6.1932, 6.2166, 6.2284 USRMB, respectively. This initial accounting provides quantitative and physical support for the improved management of water resources.
Are stock prices too volatile to be justified by the dividend discount model?
Akdeniz, Levent; Salih, Aslıhan Altay; Ok, Süleyman Tuluğ
2007-03-01
This study investigates excess stock price volatility using the variance bound framework of LeRoy and Porter [The present-value relation: tests based on implied variance bounds, Econometrica 49 (1981) 555-574] and of Shiller [Do stock prices move too much to be justified by subsequent changes in dividends? Am. Econ. Rev. 71 (1981) 421-436.]. The conditional variance bound relationship is examined using cross-sectional data simulated from the general equilibrium asset pricing model of Brock [Asset prices in a production economy, in: J.J. McCall (Ed.), The Economics of Information and Uncertainty, University of Chicago Press, Chicago (for N.B.E.R.), 1982]. Results show that the conditional variance bounds hold, hence, our hypothesis of the validity of the dividend discount model cannot be rejected. Moreover, in our setting, markets are efficient and stock prices are neither affected by herd psychology nor by the outcome of noise trading by naive investors; thus, we are able to control for market efficiency. Consequently, we show that one cannot infer any conclusions about market efficiency from the unconditional variance bounds tests.
Tight Error Bounds for Fourier Methods for Option Pricing for Exponential Levy Processes
Crocce, Fabian
2016-01-06
Prices of European options whose underlying asset is driven by the L´evy process are solutions to partial integrodifferential Equations (PIDEs) that generalise the Black-Scholes equation by incorporating a non-local integral term to account for the discontinuities in the asset price. The Levy -Khintchine formula provides an explicit representation of the characteristic function of a L´evy process (cf, [6]): One can derive an exact expression for the Fourier transform of the solution of the relevant PIDE. The rapid rate of convergence of the trapezoid quadrature and the speedup provide efficient methods for evaluationg option prices, possibly for a range of parameter configurations simultaneously. A couple of works have been devoted to the error analysis and parameter selection for these transform-based methods. In [5] several payoff functions are considered for a rather general set of models, whose characteristic function is assumed to be known. [4] presents the framework and theoretical approach for the error analysis, and establishes polynomial convergence rates for approximations of the option prices. [1] presents FT-related methods with curved integration contour. The classical flat FT-methods have been, on the other hand, extended for option pricing problems beyond the European framework [3]. We present a methodology for studying and bounding the error committed when using FT methods to compute option prices. We also provide a systematic way of choosing the parameters of the numerical method, minimising the error bound and guaranteeing adherence to a pre-described error tolerance. We focus on exponential L´evy processes that may be of either diffusive or pure jump in type. Our contribution is to derive a tight error bound for a Fourier transform method when pricing options under risk-neutral Levy dynamics. We present a simplified bound that separates the contributions of the payoff and of the process in an easily processed and extensible product form that
Canadian natural gas price debate
International Nuclear Information System (INIS)
Wight, G.
1998-01-01
Sunoco Inc. is a subsidiary of Suncor Energy, one of Canada's largest integrated energy companies having total assets of $2.8 billion. As one of the major energy suppliers in the country, Sunoco Inc has a substantial stake in the emerging trends in the natural gas industry, including the Canadian natural gas price debate. Traditionally, natural gas prices have been determined by the number of pipeline expansions, weather, energy supply and demand, and storage levels. In addition to all these traditional factors which still apply today, the present day natural gas industry also has to deal with deregulation, open competition and the global energy situation, all of which also have an impact on prices. How to face up to these challenges is the subject of this discourse. tabs., figs
Roy, Michael J
2017-08-08
The 'assets-based approach' to health and well-being has, on the one hand, been presented as a potentially empowering means to address the social determinants of health while, on the other, been criticised for obscuring structural drivers of inequality and encouraging individualisation and marketisation; in essence, for being a tool of neoliberalism. This study looks at how this apparent contestation plays out in practice through a critical realist-inspired examination of practitioner discourses, specifically of those working within communities to address social vulnerabilities that we know impact upon health. The study finds that practitioners interact with the assets-based policy discourse in interesting ways. Rather than unwitting tools of neoliberalism, they considered their work to be about mitigating the worst effects of poverty and social vulnerability in ways that enhance collectivism and solidarity, concepts that neoliberalism arguably seeks to disrupt. Furthermore, rather than a different, innovative, way of working, they consider the assets-based approach to simply be a re-labelling of what they have been doing anyway, for as long as they can remember. So, for practitioners, rather than a 'new' approach to public health, the assets-based public health movement seems to be a return to recognising and appreciating the role of community within public health policy and practice; ideals that predate neoliberalism by quite some considerable time.
The pricing of firm bonds with extendable maturity by the reduced form approach
Directory of Open Access Journals (Sweden)
REN Xuemin
2012-10-01
Full Text Available We associate credit events with market rates to price firm bonds with extendable maturity.We deal with the credit risk by the reduced form approach and obtain the pricing formula for firm bonds with extendable maturity by the PDE approach under the assumption of stochastic interest rate and compare its return rate with that of ordinary firm bonds.
Internal audit of costs on fixed assets repair
Directory of Open Access Journals (Sweden)
M.Yu. Samchyk
2016-12-01
Full Text Available The article focuses on the approaches to the process and methods of expenditure audit on repair and modernization of fixed assets and the author considers that there is no single approach to understanding the issue. The author improves the organizational and methodological support of internal audit of expenditures on the fixed assets repair and modernization that forms the accurate information for management repair and modernization of fixed assets. The paper specifies the goals and objectives of internal expenditures on repair and modernization of fixed assets, depending on the sources of such facilities to the company, allowing the author to determine the documentary control methods to be applied by an auditor to perform each task. The article determines the areas of risk components of internal control that can lead to ineffective implementation of authority by officials of an enterprise in the process of fixed assets repair, which can cause inefficient use of resources and, consequently, decrease in the efficiency of the work of fixed assets repair and modernization. The author proposes the list of auditor’s questions to assess the internal control system in the repair of fixed assets and these questions will help identify the significant drawbacks of control means.
An Ising spin state explanation for financial asset allocation
Horvath, Philip A.; Roos, Kelly R.; Sinha, Amit
2016-03-01
We build on the developments in the application of statistical mechanics, notably the identity of the spin degree of freedom in the Ising model, to explain asset price dynamics in financial markets with a representative agent. Specifically, we consider the value of an individual spin to represent the proportional holdings in various assets. We use partial moment arguments to identify asymmetric reactions to information and develop an extension of a plunging and dumping model. This unique identification of the spin is a relaxation of the conventional discrete state limitation on an Ising spin to accommodate a new archetype in Ising model-finance applications wherein spin states may take on continuous values, and may evolve in time continuously, or discretely, depending on the values of the partial moments.
Directory of Open Access Journals (Sweden)
David C. Ling
2013-08-01
Full Text Available We examine the impact of heterogeneous investors with asymmetric bargaining positions on transaction prices in private commercial real estate markets. Using a dataset that contains nearly 100,000 commercial real estate transactions during 1997-2009, we examine the extent to which common conditions of sale and buyer characteristics affect bargaining power and negotiated prices. We find that tax-motivated buyers seeking to complete a delayed Section 1031 exchange pay an average price premium of 12.5% when purchasing smaller properties. However, these price premiums for exchange motivated buyers are not observed among more expensive properties. We find strong evidence that out-of-state buyers pay significantly more (8 - 11% premium for commercial properties than in-state buyers. Consistent with our expectations, we find that sellers of distressed properties negotiate significantly lower transaction prices (13 - 15% discount than sellers of non-distressed properties, all else equal. Finally, we find evidence that REITs pay price premiums between 14 - 16% for office and industrial and retail properties. Our results strongly support the notion that relative bargaining power influences negotiated transaction prices.
Valuing carbon assets for high-tech with application to the wind energy industry
International Nuclear Information System (INIS)
Han, Liyan; Liu, Yang; Lin, Qiang; Huang, Gubo
2015-01-01
In contrast to the traditional methods for high-tech evaluation, we introduce a new, more active idea for considering the carbon asset effect, in addition to the economic and technological considerations for strategic significance. The method proposed in this paper considers a reduced amount of carbon emissions, less than that of the current industry baseline, to be an asset that is beneficial to a firm that adopts a new technology. The measured carbon asset values vary across different technologies, in different industries and over time. The new method is applied to the valuing of wind energy technology and uses the Weibull distribution to estimate the wind energy capacity and a concrete sensitivity analysis. These applications support the validity of the new method and show that the impact of the fluctuations of carbon sinks on the values of carbon assets is significantly greater than that of volatility in the production output. The paper also presents some policy recommendations based on the results. - Highlights: • Carbon asset dimension for high-tech evaluation. • Valuing wind energy technology by Weibull distribution. • Greater impact of the carbon sink price on the carbon asset value than that of production output. • The environmental risk could be measured based on the carbon asset assessment.
Implementing and certifying a state of the art asset management approach - practical experiences
Slootweg, J.G.; Clemens, G.J.M.B.
2007-01-01
Subject of the paper is the implementation of the Asset Management concept into the organization of Essent Netwerk First, the drivers for and essentials of the Asset Management concept are introduced. Then, the organization of Essent Netwerk’s Asset Management department is described. Finally, the
Asset management techniques for transformers
International Nuclear Information System (INIS)
Abu-Elanien, Ahmed E.B.; Salama, M.M.A.
2010-01-01
In a deregulated/reformed environment, the electric utilities are under constant pressure for reducing operating costs, enhancing the reliability of transmission and distribution equipments, and improving quality of power and services to the customer. Moreover, the risk involved in running the system without proper attention to assets integrity in service is quite high. Additionally, the probability of losing any equipment vital to the transmission and distribution system, such as power and distribution transformers, is increasing especially with the aging of power system's assets. Today the focus of operating the power system is changed and efforts are being directed to explore new approaches/techniques of monitoring, diagnosis, condition evaluation, maintenance, life assessment, and possibility of extending the life of existing assets. In this paper, a comprehensive illustration of the transformer asset management activities is presented. The importance of each activity together with the latest researches done in the area is highlighted. (author)
Managing Credit Booms and Busts : A Pigouvian Taxation Approach
Jeanne, O.; Korinek, A.
2010-01-01
We study a dynamic model in which the interaction between debt ac- cumulation and asset prices magni es credit booms and busts. We find that borrowers do not internalize these feedback e¤ects and therefore suf- fer from excessively large booms and busts in both credit flows and asset prices. We show
Schoemaker, M.J.R.; Jonker, J.
2005-01-01
- Purpose – To develop a concept of managing intangible assets in contemporary organisations. Insight is given into the rise of the network organisation and the importance of talent, social capital and identity in this kind of organisation. - Design/methodology/approach – This paper develops a
Multiple stakeholders in road pricing: A game theoretic approach
Ohazulike, Anthony; Still, Georg J.; Kern, Walter; van Berkum, Eric C.; Hausken, Kjell; Zhuang, Jun
2015-01-01
We investigate a game theoretic approach as an alternative to the standard multi-objective optimization models for road pricing. Assuming that various, partly conflicting traffic externalities (congestion, air pollution, noise, safety, etcetera) are represented by corresponding players acting on a
Quantum computational finance: Monte Carlo pricing of financial derivatives
Rebentrost, Patrick; Gupt, Brajesh; Bromley, Thomas R.
2018-01-01
Financial derivatives are contracts that can have a complex payoff dependent upon underlying benchmark assets. In this work, we present a quantum algorithm for the Monte Carlo pricing of financial derivatives. We show how the relevant probability distributions can be prepared in quantum superposition, the payoff functions can be implemented via quantum circuits, and the price of financial derivatives can be extracted via quantum measurements. We show how the amplitude estimation algorithm can...
Option pricing and foreign investment under political risk
Cherian, J.A.; Perotti, E.C.
1999-01-01
The paper analyzes foreign investment and asset prices in a context of uncertainty over future government policy. The model endogenizes the process of learning by foreign investors facing a potentially opportunistic government, which chooses strategically the timing of a policy reversal in order to
Option pricing and foreign investment under political risk
Cherian, J.A.; Perotti, E.C.
1999-01-01
he paper analyses foreign investment and asset prices in a context of uncertainty over future government policy. The model endogenizes the process of learning by foreign investors facing a potentially opportunistic government, which chooses strategically the timing of a policy reversal in order to
Option pricing and foreign investment under political risk
Cherian, J. A.; Perotti, E.C.
1999-01-01
The paper analyses foreign investment and asset prices in a context of uncertainty over future government policy. The model endogenizes the process of learning by foreign investors facing a potentially opportunistic government, which chooses strategically the timing of a policy reversal in order to
Nasuha, Rizky
2013-01-01
The research was motivated by the development of the business world, where companies rely heavily on investment. Before investing, stock investment in this case, it is necessary to consider the possibilities that will be faced by investors. One method used to assess investment decisions is the CAPM (Capital Asset Pricing Model). This study aims to analyze the CAPM method related to stock investment decisions. Types of research used in this research is descriptive research with quantitative ap...
Proactive pavement asset management with climate change aspects
Zofka, Adam
2018-05-01
Pavement Asset Management System is a systematic and objective tool to manage pavement network based on the rational, engineering and economic principles. Once implemented and mature Pavement Asset Management System serves the entire range of users starting with the maintenance engineers and ending with the decision-makers. Such a system is necessary to coordinate agency management strategy including proactive maintenance. Basic inputs in the majority of existing Pavement Asset Management System approaches comprise the actual pavement inventory with associated construction history and condition, traffic information as well as various economical parameters. Some Pavement Management System approaches include also weather aspects which is of particular importance considering ongoing climate changes. This paper presents challenges in implementing the Pavement Asset Management System for those National Road Administrations that manage their pavement assets using more traditional strategies, e.g. worse-first approach. Special considerations are given to weather-related inputs and associated analysis to demonstrate the effects of climate change in a short- and long-term range. Based on the presented examples this paper concludes that National Road Administrations should account for the weather-related factors in their Pavement Management Systems as this has a significant impact on the system outcomes from the safety and economical perspective.
Directory of Open Access Journals (Sweden)
Kazaryan Ruben
2018-01-01
Full Text Available Problems of accounting and reporting of net assets and the procedure of their formation taking into account the specifics of the economic and legal status of property of a non-commercial autonomous institution are some of the most controversial in the accounting for entities of the public sector. The study focuses on justification of accounting rules for net assets of public sector entities. The methods used in the study are as follows: comparison, synthesis, analysis, logical approach, and system approach. The article examines legal aspects and specifics of recognition of assets of public sector entities in accordance with IPSAS standards (International Public Sector Accounting Standards are a set of accounting standards issued by IPSASB (Council for International Financial Reporting Standards for Public Sector Organizations used by state-owned enterprises worldwide in preparation of financial statements as of the 31st of August, 2015. The most crucial factor in the modeling of key performance indicators of the system-target approach to estimation of the sustainability level of net assets on the basis of IPSAS is a multicriterial evaluation of the basic management strategy for quality system elements used in operational and strategic planning projects operations in high-rise construction. We offer an alternative evaluation of assets due to be returned to the right holder (the state controller in the event of liquidation of a public sector entity.
Kazaryan, Ruben
2018-03-01
Problems of accounting and reporting of net assets and the procedure of their formation taking into account the specifics of the economic and legal status of property of a non-commercial autonomous institution are some of the most controversial in the accounting for entities of the public sector. The study focuses on justification of accounting rules for net assets of public sector entities. The methods used in the study are as follows: comparison, synthesis, analysis, logical approach, and system approach. The article examines legal aspects and specifics of recognition of assets of public sector entities in accordance with IPSAS standards (International Public Sector Accounting Standards are a set of accounting standards issued by IPSASB (Council for International Financial Reporting Standards for Public Sector Organizations) used by state-owned enterprises worldwide in preparation of financial statements as of the 31st of August, 2015. The most crucial factor in the modeling of key performance indicators of the system-target approach to estimation of the sustainability level of net assets on the basis of IPSAS is a multicriterial evaluation of the basic management strategy for quality system elements used in operational and strategic planning projects operations in high-rise construction. We offer an alternative evaluation of assets due to be returned to the right holder (the state controller) in the event of liquidation of a public sector entity.
Directory of Open Access Journals (Sweden)
Wei Chen
2015-01-01
Full Text Available The target of this paper is to establish the bid-ask pricing framework for the American contingent claims against risky assets with G-asset price systems on the financial market under Knightian uncertainty. First, we prove G-Dooby-Meyer decomposition for G-supermartingale. Furthermore, we consider bid-ask pricing American contingent claims under Knightian uncertainty, by using G-Dooby-Meyer decomposition; we construct dynamic superhedge strategies for the optimal stopping problem and prove that the value functions of the optimal stopping problems are the bid and ask prices of the American contingent claims under Knightian uncertainty. Finally, we consider a free boundary problem, prove the strong solution existence of the free boundary problem, and derive that the value function of the optimal stopping problem is equivalent to the strong solution to the free boundary problem.
Asset sales, asset exchanges, and shareholder wealth in China
Directory of Open Access Journals (Sweden)
Weiting Huang
2012-01-01
Full Text Available In this paper, we study a sample of 1376 corporate asset sales and 250 asset exchanges in China between 1998 and 2006. We find that corporate asset sales in China enhance firm value with a cumulative abnormal return (CAR of 0.46% for the pre-announcement five-day period, which is consistent with the evidence discovered in both U.K. and U.S. For companies that exchanged assets during the sample period, the pre-announcement five-day CAR of 1.32% is statistically significant. We also discover that gains from divesting assets are positively related to managerial performance measured by Tobin's q ratio and the relative size of the asset sold or exchanged. Well-managed (high-q companies are more likely to sell or exchange assets in a value-maximizing fashion than poorly managed (low-q companies. Furthermore, asset-seller gains are not related to enhancing corporate focus, but improving corporate focus by exchanging for core assets enhances firm value.
Energy Technology Data Exchange (ETDEWEB)
Mandal, Paras; Senjyu, Tomonobu [Department of Electrical and Electronics, University of the Ryukyus, 1 Senbaru, Nagakami Nishihara, Okinawa 903-0213 (Japan); Funabashi, Toshihisa [Meidensha Corporation, Tokyo 103-8515 (Japan)
2006-09-15
In daily power markets, forecasting electricity prices and loads are the most essential task and the basis for any decision making. An approach to predict the market behaviors is to use the historical prices, loads and other required information to forecast the future prices and loads. This paper introduces an approach for several hour ahead (1-6h) electricity price and load forecasting using an artificial intelligence method, such as a neural network model, which uses publicly available data from the NEMMCO web site to forecast electricity prices and loads for the Victorian electricity market. An approach of selection of similar days is proposed according to which the load and price curves are forecasted by using the information of the days being similar to that of the forecast day. A Euclidean norm with weighted factors is used for the selection of the similar days. Two different ANN models, one for one to six hour ahead load forecasting and another for one to six hour ahead price forecasting have been proposed. The MAPE (mean absolute percentage error) results show a clear increasing trend with the increase in hour ahead load and price forecasting. The sample average of MAPEs for one hour ahead price forecasts is 9.75%. This figure increases to only 20.03% for six hour ahead predictions. Similarly, the one to six hour ahead load forecast errors (MAPE) range from 0.56% to 1.30% only. MAPE results show that several hour ahead electricity prices and loads in the deregulated Victorian market can be forecasted with reasonable accuracy. (author)
International Nuclear Information System (INIS)
Mandal, Paras; Senjyu, Tomonobu; Funabashi, Toshihisa
2006-01-01
In daily power markets, forecasting electricity prices and loads are the most essential task and the basis for any decision making. An approach to predict the market behaviors is to use the historical prices, loads and other required information to forecast the future prices and loads. This paper introduces an approach for several hour ahead (1-6 h) electricity price and load forecasting using an artificial intelligence method, such as a neural network model, which uses publicly available data from the NEMMCO web site to forecast electricity prices and loads for the Victorian electricity market. An approach of selection of similar days is proposed according to which the load and price curves are forecasted by using the information of the days being similar to that of the forecast day. A Euclidean norm with weighted factors is used for the selection of the similar days. Two different ANN models, one for one to six hour ahead load forecasting and another for one to six hour ahead price forecasting have been proposed. The MAPE (mean absolute percentage error) results show a clear increasing trend with the increase in hour ahead load and price forecasting. The sample average of MAPEs for one hour ahead price forecasts is 9.75%. This figure increases to only 20.03% for six hour ahead predictions. Similarly, the one to six hour ahead load forecast errors (MAPE) range from 0.56% to 1.30% only. MAPE results show that several hour ahead electricity prices and loads in the deregulated Victorian market can be forecasted with reasonable accuracy
International Nuclear Information System (INIS)
Chattopadhyay, Manojit; Kumar Mitra, Subrata
2015-01-01
The present work endeavors to explore the potential asymmetries in the pricing of oil products in India where prices are not only affected by the crude oil price changes in the international markets but are also subject to government interventions. In order to protect domestic consumers from this volatility, historically the government of India tried to control the domestic price of petroleum products by cross subsidization and giving subsidies. In this paper, we analyze the impact of crude oil price on domestic oil prices by applying nonlinear autoregressive distributed lag (NARDL) and Growing Hierarchical Self-Organizing Map (GHSOM) approaches for the period of April, 2005–July, 2014. The GHSOM has been explored through pattern analysis on the asymmetric behavior using similarity measures. From the study it can be interpreted that the prices of products left to be determined by the market exhibit a strong asymmetry. However, pricing of the products that are monitored and controlled by the government do not exhibit any such asymmetry. Hence, the question still remains – should the government intervene in pricing petroleum products when monopolistic attitudes of large oil companies are detrimental to the interest of retail consumers? - Highlights: • We explored the potential asymmetries in the pricing of oil products in India. • Analyze cointegration and asymmetric behavior of oil products by NARDL approach. • GHSOM method has been explored for pattern analysis on the asymmetric behavior. • The analysis reveals that the market determined prices exhibits a strong asymmetry. • Oil product pricing controlled by the government do not exhibit such asymmetry.
Asset prices and rents in a GE model with imperfect competition
Pierre Lafourcade
2003-01-01
This paper analyses the general equilibrium effects on asset valuation and capital accumulation of an exogenous drop in the rate of return required by investors in a model of production with imperfectly competitive product markets. The model improves substantially on the standard perfectly competitive neo-classical framework, by dissociating the behavior of marginal and average q. It tracks more closely current observed data on the ratio of stock-market value to the economy's capital base, wh...
The estimation of risk-premium implicit in oil prices
International Nuclear Information System (INIS)
Luis, J.B.
2001-01-01
The futures price can be seen as the sum of the expected value of the underlying asset price and a risk-premium. In order to disentangle these two components of the futures price, one can try to model the relationship between spot and futures prices, in order to obtain a closed expression for the risk-premium, or to use information from spot and option prices to estimate risk-aversion functions. Given the high volatility of the ratios between futures and spot prices, we opted for the latter, estimating risk-neutral and subjective probability density functions, respectively, from observed option and spot prices. looking at the prices of Brent and West Texas Intermediate light/sweet crude oil options, the obtained evidence suggests that risk-aversion is typically very low for levels near the futures prices. However, due to price volatility and, consequently, to the tails of distribution, the risk-aversion functions are badly behaved in extreme prices and futures prices do not anticipate sharp movements in oil spot prices. Therefore, futures oil prices seem to be useful in forecasting spot prices only when moderate price changes occur. (author)
Assets and place of nuclear power on the European energy market
International Nuclear Information System (INIS)
Damianov, S.; Giger, F.
2001-01-01
In the current context of falling prices, nuclear power proves competitive and this will only progress in the coming years. For the future, nuclear power must draw on two assets, namely environment and economy. It offers a reliable and stable procurement policy, with both security and energy independence. As a matter of fact, only nuclear power may guarantee stable prices over the long term. Other energy sources are branded by a high volatility in prices. And this volatility has a price in itself: customers are obliged to hedge their risk exposure with financial tools. It remains to be assessed what will be the share of these risk-coverage tools in the various energy offers, and what amounts the customers will be ready to pay for their risk-exposure. All the above being economical scenarios in a newly emerging and fluctuating market, where forecasts and market trending are still relatively doubtful. (author)
Ready, Robert Clayton
I show that relative levels of aggregate consumption and personal oil consumption provide an excellent proxy for oil prices, and that high oil prices predict low future aggregate consumption growth. Motivated by these facts, I add an oil consumption good to the long-run risk model of Bansal and Yaron [2004] to study the asset pricing implications of observed changes in the dynamic interaction of consumption and oil prices. Empirically I observe that, compared to the first half of my 1987--2010 sample, oil consumption growth in the last 10 years is unresponsive to levels of oil prices, creating an decrease in the mean-reversion of oil prices, and an increase in the persistence of oil price shocks. The model implies that the change in the dynamics of oil consumption generates increased systematic risk from oil price shocks due to their increased persistence. However, persistent oil prices also act as a counterweight for shocks to expected consumption growth, with high expected growth creating high expectations of future oil prices which in turn slow down growth. The combined effect is to reduce overall consumption risk and lower the equity premium. The model also predicts that these changes affect the riskiness of of oil futures contracts, and combine to create a hump shaped term structure of oil futures, consistent with recent data.
Empirical Studies of Exchange Rates: Price Behavior, Rate Determinationand Market Efficiency
Richard M. Levich
1983-01-01
Theoretical and empirical research completed over the last decade has dramatically increased our understanding of exchange rate behavior. The major insight to come from this decade of research is that foreign exchange is a financial asset. In an asset pricing framework, current exchange rates reflect the expected values of future exogenous variables. The purpose of this paper is to survay the empirical evidence on exchange rate behavior, market efficiency and related topics. Section 2 present...
Analysis of commodity prices with the particle filter
International Nuclear Information System (INIS)
Aiube, Fernando Antonio Lucena; Baidya, Tara Keshar Nanda; Tito, Edison Americo Huarsaya
2008-01-01
The behavior of commodities prices is fundamental to real-asset investment decisions, hedging, and pricing financial derivatives. Schwartz and Smith [Schwartz, E.S., Smith, J.E. (2000). Short term-variations and long-term dynamics in commodity prices. Management Science, 46, 893-911.] proposed a two-factor model for describing the stochastic processes of commodity prices, in which the two factors are short-term variations and equilibrium prices. These are both unobserved state variables that are estimated using the Kalman filter. The estimation is based on the observation of future prices for different maturities. The authors have carried out this process without incorporating jumps in the short-term variation of prices. Here we aim to demonstrate that the inclusion of jumps better explains the behavior of oil prices, and in fact creates difficulties in the estimation of state variables. This is because the variables become non-Gaussian so the Kalman filter is not recommended. Another methodology, called the particle filter, is more suitable in this case, and we describe its application in this article
Analyzing price and efficiency dynamics of large appliances with the experience curve approach
International Nuclear Information System (INIS)
Weiss, Martin; Patel, Martin K.; Junginger, Martin; Blok, Kornelis
2010-01-01
Large appliances are major power consumers in households of industrialized countries. Although their energy efficiency has been increasing substantially in past decades, still additional energy efficiency potentials exist. Energy policy that aims at realizing these potentials faces, however, growing concerns about possible adverse effects on commodity prices. Here, we address these concerns by applying the experience curve approach to analyze long-term price and energy efficiency trends of three wet appliances (washing machines, laundry dryers, and dishwashers) and two cold appliances (refrigerators and freezers). We identify a robust long-term decline in both specific price and specific energy consumption of large appliances. Specific prices of wet appliances decline at learning rates (LR) of 29±8% and thereby much faster than those of cold appliances (LR of 9±4%). Our results demonstrate that technological learning leads to substantial price decline, thus indicating that the introduction of novel and initially expensive energy efficiency technologies does not necessarily imply adverse price effects in the long term. By extending the conventional experience curve approach, we find a steady decline in the specific energy consumption of wet appliances (LR of 20-35%) and cold appliances (LR of 13-17%). Our analysis suggests that energy policy might be able to bend down energy experience curves. (author)
DEFF Research Database (Denmark)
Fotouhi Ghazvini, Mohammad Ali; Faria, Pedro; Ramos, Sergio
2015-01-01
how a REP with light physical assets, such as DG (distributed generation) units and ESS (energy storage systems), can survive in a competitive retail market. The paper discusses the effective risk management strategies for the REPs to deal with the uncertainties of the DAM (day-ahead market) and how...... to hedge the financial losses in the market. A two-stage stochastic programming problem is formulated. It aims to establish the financial incentive-based DR programs and the optimal dispatch of the DG units and ESSs. The uncertainty of the forecasted day-ahead load demand and electricity price is also...... taken into account with a scenario-based approach. The principal advantage of this model for REPs is reducing the risk of financial losses in DAMs, and the main benefit for the whole system is market power mitigation by virtually increasing the price elasticity of demand and reducing the peak demand....
The world price of jump and volatility risk
Driessen, J.; Maenhout, P.
2006-01-01
Jump and volatility risk are important for understanding equity returns, option pricing and asset allocation. This paper is the first to study international integration of markets for jump and volatility risk, using data on index options for each of the three main global markets: US S&P 500 index
Cash dividends and futures prices on discontinuous filtrations
Vellekoop, M.H.; Nieuwenhuis, J.W.
We derive a general formula for the futures price process without the restriction that the assets used in the future margin account are continuous and of finite variation. To do so, we model tradeable securities with dividends which are not necessarily cash dividends at fixed times or continuously
Optimal portfolio selection in a Lévy market with uncontrolled cash flow and only risky assets
Zeng, Yan; Li, Zhongfei; Wu, Huiling
2013-03-01
This article considers an investor who has an exogenous cash flow evolving according to a Lévy process and invests in a financial market consisting of only risky assets, whose prices are governed by exponential Lévy processes. Two continuous-time portfolio selection problems are studied for the investor. One is a benchmark problem, and the other is a mean-variance problem. The first problem is solved by adopting the stochastic dynamic programming approach, and the obtained results are extended to the second problem by employing the duality theory. Closed-form solutions of these two problems are derived. Some existing results are found to be special cases of our results.
Pricing perpetual American options under multiscale stochastic elasticity of variance
International Nuclear Information System (INIS)
Yoon, Ji-Hun
2015-01-01
Highlights: • We study the effects of the stochastic elasticity of variance on perpetual American option. • Our SEV model consists of a fast mean-reverting factor and a slow mean-revering factor. • A slow scale factor has a very significant impact on the option price. • We analyze option price structures through the market prices of elasticity risk. - Abstract: This paper studies pricing the perpetual American options under a constant elasticity of variance type of underlying asset price model where the constant elasticity is replaced by a fast mean-reverting Ornstein–Ulenbeck process and a slowly varying diffusion process. By using a multiscale asymptotic analysis, we find the impact of the stochastic elasticity of variance on the option prices and the optimal exercise prices with respect to model parameters. Our results enhance the existing option price structures in view of flexibility and applicability through the market prices of elasticity risk
78 FR 60929 - Guinness Atkinson Asset Management, Inc., et al.; Notice of Application
2013-10-02
... changes in the Fund's portfolio as a result of the rebalancing of its Underlying Index (any such change, a...) or any Index Provider (as defined below). 3. Each Fund will consist of a portfolio of securities and other assets and positions (``Portfolio Positions'') selected to correspond generally to the price and...
The quotient of normal random variables and application to asset price fat tails
Caginalp, Carey; Caginalp, Gunduz
2018-06-01
The quotient of random variables with normal distributions is examined and proven to have power law decay, with density f(x) ≃f0x-2, with the coefficient depending on the means and variances of the numerator and denominator and their correlation. We also obtain the conditional probability densities for each of the four quadrants given by the signs of the numerator and denominator for arbitrary correlation ρ ∈ [ - 1 , 1) . For ρ = - 1 we obtain a particularly simple closed form solution for all x ∈ R. The results are applied to a basic issue in economics and finance, namely the density of relative price changes. Classical finance stipulates a normal distribution of relative price changes, though empirical studies suggest a power law at the tail end. By considering the supply and demand in a basic price change model, we prove that the relative price change has density that decays with an x-2 power law. Various parameter limits are established.
CAViaR-based forecast for oil price risk
International Nuclear Information System (INIS)
Huang, Dashan; Yu, Baimin; Fabozzi, Frank J.; Fukushima, Masao
2009-01-01
As a benchmark for measuring market risk, value-at-risk (VaR) reduces the risk associated with any kind of asset to just a number (amount in terms of a currency), which can be well understood by regulators, board members, and other interested parties. This paper employs a new VaR approach due to Engle and Manganelli [Engle, R.F., Manganelli, S., 2004. CAViaR: Conditional Autoregressive Value at Risk by Regression Quantiles. Journal of Business and Economic Statistics 22, 367-381] to forecasting oil price risk. In doing so, we provide two original contributions by introducing a new exponentially weighted moving average CAViaR model and developing a mixed data regression model for multi-period VaR prediction. (author)
Development of methodological approaches to the accounting of ownership of land assets in Ukraine
Directory of Open Access Journals (Sweden)
T.P. Ostapchuk
2015-09-01
Full Text Available Accounting and legal display of land resources is very important in modern society as the land assets are of great value both for the state as a whole and for each landowner and land user. That’s why they must have a proper legal framework and a quite informative method of accounting. In practice the subjects of land relations have many questions and certain inconsistencies in existing legal documents. In addition, there is a mismatch of the current regulatory framework to the rules of accounting. Today, accounting law has no documents that would specifically be related to land resources, as the objects of accounting, and the rights to them. The article specifies the list of objects of accounting associated with the full ownership on land and other property rights on them. The author improves the methodical approaches to accounting display operations with land assets depending on the power of land owner, based on existing regulations and take into account the experience of other countries.
Dynamic Pricing of New Products in Competitive Markets: A Mean-Field Game Approach
Chenavaz, Régis; Paraschiv, Corina; Turinici, Gabriel
2017-01-01
Dynamic pricing of new products has been extensively studied in monopolistic and oligopolistic markets. But, the optimal control and differential game tools used to investigate the pricing behavior on markets with a finite number of firms are not well-suited to model competitive markets with an infinity of firms. Using a mean-field games approach, this paper examines dynamic pricing policies in competitive markets, where no firm exerts market power. The theoretical setting is based on a diffu...
Cryptocurrency price drivers: Wavelet coherence analysis revisited.
Phillips, Ross C; Gorse, Denise
2018-01-01
Cryptocurrencies have experienced recent surges in interest and price. It has been discovered that there are time intervals where cryptocurrency prices and certain online and social media factors appear related. In addition it has been noted that cryptocurrencies are prone to experience intervals of bubble-like price growth. The hypothesis investigated here is that relationships between online factors and price are dependent on market regime. In this paper, wavelet coherence is used to study co-movement between a cryptocurrency price and its related factors, for a number of examples. This is used alongside a well-known test for financial asset bubbles to explore whether relationships change dependent on regime. The primary finding of this work is that medium-term positive correlations between online factors and price strengthen significantly during bubble-like regimes of the price series; this explains why these relationships have previously been seen to appear and disappear over time. A secondary finding is that short-term relationships between the chosen factors and price appear to be caused by particular market events (such as hacks / security breaches), and are not consistent from one time interval to another in the effect of the factor upon the price. In addition, for the first time, wavelet coherence is used to explore the relationships between different cryptocurrencies.
Impact of carbon cost on wholesale electricity price: A note on price pass-through issues
Energy Technology Data Exchange (ETDEWEB)
Kim, Wook [Korea Southern Power Co., 167, Samsung-dong, Gangnam-gu, Seoul 135-791 (Korea); Chattopadhyay, Deb [Saha International, Level 26, 385 Bourke Street, Melbourne, VIC 3000 (Australia); Park, Jong-bae [Electrical Engineering Department, Konkuk University, 1 Hwayang-dong, Kwanggin-gu, Seoul 143-701 (Korea)
2010-08-15
Carbon costs - either in the form of a carbon tax or through permit prices in an emissions trading scheme - would ultimately be reflected in higher electricity prices. Carbon cost ''pass-through'' is critical to the survival of existing coal generation assets and has been discussed widely as a measure of business impact in the electricity industry. This paper sets out in a structured way the factors that determine price pass-through and why this may differ greatly across different systems. Although the basic concept of price pass-through is simple, a clear understanding of the underlying factors is critical to developing insights on how carbon cost would impact on existing coal generation businesses. It is shown that pass-through can vary drastically if the underlying dispatch potential of generators varies significantly across alternative emissions reduction scenarios. It can also vary depending on the availability of competing cleaner forms of generation. Pass-through as a measure of business performance is, therefore, hard to generalize across different circumstances and should be interpreted carefully. (author)
DEFF Research Database (Denmark)
Riegels, Niels; Pulido-Velazquez, Manuel; Doulgeris, Charalampos
2013-01-01
management objectives. However, the design and implementation of economic instruments for water management, including water pricing, has emerged as a challenging aspect of WFD implementation. This study demonstrates the use of a systems analysis approach to designing and comparing two economic approaches......Economic theory suggests that water pricing can contribute to efficient management of water scarcity. The European Union (EU) Water Framework Directive (WFD) is a major legislative effort to introduce the use of economic instruments to encourage efficient water use and achieve environmental...... to efficient management of groundwater and surface water given EU WFD ecological flow requirements. Under the first approach, all wholesale water users in a river basin face the same volumetric price for water. This water price does not vary in space or in time, and surface water and groundwater are priced...
Regime-Based Versus Static Asset Allocation: Letting the Data Speak
DEFF Research Database (Denmark)
Nystrup, Peter; Hansen, Bo William; Madsen, Henrik
2015-01-01
Regime shifts present a big challenge to traditional strategic asset allocation. This article investigates whether regimebased asset allocation can effectively respond to changes in financial regimes at the portfolio level, in an effort to provide better long-term results than more static...... approaches can offer. The authors center their regime-based approach around a regime-switching model with time-varying parameters that can match financial markets’ tendency to change behavior abruptly and the fact that the new behavior often persists for several periods after a change. In an asset universe...
Integrated approach to transmission services pricing
International Nuclear Information System (INIS)
Yu, C.W.; David, A.K.
1999-01-01
The paper presents an intuitively logical split between: (a) embedded, (b) operating, and (c) expansion cost based pricing and methodologies for implementation, for transmission services. A conceptually straightforward mechanism for the equitable allocation of transmission network embedded cost recovery based on capacity-use and reliability benefit is proposed, expansion cost is charged on a long-run marginal cost basis and finally, operating cost recovery is based on short-run marginal pricing. This is followed by co-ordinating these alternatives and integrating the pricing mechanisms to achieve appropriate price signals for bulk power users of transmission systems. (author)
Asset management trends and challenges
Energy Technology Data Exchange (ETDEWEB)
Rijks, E. [Continuon, Arnhem (Netherlands); Ford, G.L. [PowerNex Associates Inc., Toronto, ON (Canada); Sanchis, G. [Reseau de Transport d' Electricite, Paris (France)
2007-07-01
Recent business and regulatory changes in the electric power industry have affected the operation of electric utilities. Most have accepted competition and commercialization. Various strategies have emerged as companies strive to improve performance and retain profitability in an environment where competition or regulatory pressure is reducing revenues at a time when customer expectation is increasing. As focus shifts away from engineering excellence towards commercial performance, the new business ideology for electric utilities is to optimize asset management. This paper identified asset management technology trends, opportunities and challenges. Although many utilities are currently comfortable with their existing asset management processes, regulators are increasingly scrutinizing utilities as they seek approval for rates and investments in aging infrastructure. Much more rigorous financial analysis methods are needed to justify the large investments that are needed. In addition, the credibility of the processes and methods used by utilities will be increasingly questioned. In recognition of the growing importance of asset management, several initiatives have been launched to provide forums for sharing information and to provide a unifying force to asset management methods. The International Council on Large Electric Systems (CIGRE) was one of the first to recognize the importance of asset management. This paper summarized recent CIGRE activities as well as the developments of publicly available specification (PAS) 55 in the United Kingdom. It was concluded that utilities that adopt standardized approaches will be more credible in the eyes of regulatory authorities. 3 refs., 4 figs.
A remark on the set of arbitrage-free prices in a multi-period model
DEFF Research Database (Denmark)
Ranjan, Abhishek
2013-01-01
We study the convexity property of the set QF of arbitrage ‐ free prices of a multi ‐period financial structure F. The set of arbitrage‐free prices is shown to be a convex cone under conditions on the financial structure F that hold in particular for short ‐ lived assets. Furthermore, we provide ...
The 1998 annual: Focusing on asset quality
International Nuclear Information System (INIS)
1998-01-01
Operational and financial activities of Newport Petroleum Corporation during fiscal year 1998 are reviewed. Despite the low oil prices, and the consequent reduction in industry activity and financial results, the Company continued to focus on high quality assets. The Company improved its proved and probable reserves by 21.3 million barrels of oil equivalent, increasing its reserve life index to over 10 years. Reserve addition costs in 1998 were a competitive $ 7.08 per barrel of oil equivalent. The Company produced more than 20,000 barrels of oil equivalent per day, generating revenue of $ 141 million. The Company acquired an interest in the Caroline Gas Unit for $ 165 million late in 1998 and experienced success with the drilling of two wells. At year end, reserves of approx. 575 bcf of raw gas in place were attributed to this area. New light oil discoveries were made in the Rigel area of northern British Columbia and the Shiningbank area of west-central Alberta. Both properties have significant development potential. While share price performance was essentially flat for the year, the target remains to add value on a per share basis over the long term. The outlook for natural gas appears to be positive, with markets expected to be robust with prices tracking supply/demand fundamentals. The completion of additional pipeline capacity from Alberta into U.S. markets has resulted in a lowering of the differential to U.S. prices, and as a result, it appears that pricing in western Canada will improve in the next several years. Although the outlook for oil prices remains uncertain, with recent OPEC commitments to curtail volumes, there is reason for cautious optimism. Overall, the Company is confident that it has the financial strength to not only weather an extended period of oil price weakness, but to continue to expand its activity levels and prosper
General overview of the ASSET activities in Ukraine
Energy Technology Data Exchange (ETDEWEB)
Ruday, C G [Ministry for Environmental Protection and Nuclear Safety of Ukraine, Kiev (Ukraine)
1997-12-31
Brief retrospective summary of the ASSET experience in Ukraine since first mission held in June 1992. Analysis of the positive influence of the ASSET approaches to the general safety culture status. Specific problems of the current situation. Difference in attitude to ASSET missions of plant managers and plant safety experts reveals global safety culture drawbacks on the organizational level. Analysis of the direct and root causes of the situation. Lessons learned. Ideas for corrective measures to be implemented. (author). 7 tabs.
General overview of the ASSET activities in Ukraine
International Nuclear Information System (INIS)
Ruday, C.G.
1996-01-01
Brief retrospective summary of the ASSET experience in Ukraine since first mission held in June 1992. Analysis of the positive influence of the ASSET approaches to the general safety culture status. Specific problems of the current situation. Difference in attitude to ASSET missions of plant managers and plant safety experts reveals global safety culture drawbacks on the organizational level. Analysis of the direct and root causes of the situation. Lessons learned. Ideas for corrective measures to be implemented. (author). 7 tabs
Dranitsaris, George; Ortega, Ana; Lubbe, Martie S; Truter, Ilse
2012-03-01
Several European governments have recently mandated price cuts in drugs to reduce health care spending. However, such measures without supportive evidence may compromise patient care because manufacturers may withdraw current products or not launch new agents. A value-based pricing scheme may be a better approach for determining a fair drug price and may be a medium for negotiations between the key stakeholders. To demonstrate this approach, pharmacoeconomic (PE) modeling was used from the Spanish health care system perspective to estimate a value-based price for bevacizumab, a drug that provides a 1.4-month survival benefit to patients with metastatic colorectal cancer (mCRC). The threshold used for economic value was three times the Spanish per capita GDP, as recommended by the World Health Organization (WHO). A PE model was developed to simulate outcomes in mCRC patients receiving chemotherapy ± bevacizumab. Clinical data were obtained from randomized trials and costs from a Spanish hospital. Utility estimates were determined by interviewing 24 Spanish oncology nurses and pharmacists. A price per dose of bevacizumab was then estimated using a target threshold of € 78,300 per quality-adjusted life year gained, which is three times the Spanish per capita GDP. For a 1.4-month survival benefit, a price of € 342 per dose would be considered cost effective from the Spanish public health care perspective. The price may be increased to € 733 or € 843 per dose if the drug were able to improve patient quality of life or enhance survival from 1.4 to 3 months. This study demonstrated that a value-based pricing approach using PE modeling and the WHO criteria for economic value is feasible and perhaps a better alternative to government mandated price cuts. The former approach would be a good starting point for opening dialog between European government payers and the pharmaceutical industry.
Sjöberg, Daniel
2013-01-01
The purpose of this thesis is to analyse and compare the transfer pricing approaches held by the OECD, Germany and the United States when transferring an ongoing concern. The term “ongoing concern” in the OECD Transfer Pricing Guidelines is to be interpreted as very wide and to cover every case where a function is bundled with assets and risks. Even though there is no legal definition of the term , the definition of the OECD can still be said to represent the common definition of the term. Wh...
Pricing real estate index options under stochastic interest rates
Gong, Pu; Dai, Jun
2017-08-01
Real estate derivatives as new financial instruments are not merely risk management tools but also provide a novel way to gain exposure to real estate assets without buying or selling the physical assets. Although real estate derivatives market has exhibited a rapid development in recent years, the valuation challenge of real estate derivatives remains a great obstacle for further development in this market. In this paper, we derive a partial differential equation contingent on a real estate index in a stochastic interest rate environment and propose a modified finite difference method that adopts the non-uniform grids to solve this problem. Numerical results confirm the efficiency of the method and indicate that constant interest rate models lead to the mispricing of options and the effects of stochastic interest rates on option prices depend on whether the term structure of interest rates is rising or falling. Finally, we have investigated and compared the different effects of stochastic interest rates on European and American option prices.
Regionalisation of asset values for risk analyses
Directory of Open Access Journals (Sweden)
A. H. Thieken
2006-01-01
Full Text Available In risk analysis there is a spatial mismatch of hazard data that are commonly modelled on an explicit raster level and exposure data that are often only available for aggregated units, e.g. communities. Dasymetric mapping techniques that use ancillary information to disaggregate data within a spatial unit help to bridge this gap. This paper presents dasymetric maps showing the population density and a unit value of residential assets for whole Germany. A dasymetric mapping approach, which uses land cover data (CORINE Land Cover as ancillary variable, was adapted and applied to regionalize aggregated census data that are provided for all communities in Germany. The results were validated by two approaches. First, it was ascertained whether population data disaggregated at the community level can be used to estimate population in postcodes. Secondly, disaggregated population and asset data were used for a loss evaluation of two flood events that occurred in 1999 and 2002, respectively. It must be concluded that the algorithm tends to underestimate the population in urban areas and to overestimate population in other land cover classes. Nevertheless, flood loss evaluations demonstrate that the approach is capable of providing realistic estimates of the number of exposed people and assets. Thus, the maps are sufficient for applications in large-scale risk assessments such as the estimation of population and assets exposed to natural and man-made hazards.
Ochiai, T.; Nacher, J. C.
2011-09-01
The prices of financial products in markets are determined by the behavior of investors, who are influenced by positive and negative news. Here, we present a mathematical model to reproduce the price movements in real financial markets affected by news. The model has both positive and negative feed-back mechanisms. Furthermore, the behavior of the model is examined by considering two types of noise. Our results show that the dynamic balance of positive and negative feed-back mechanisms with the noise effect determines the asset price movement.
Managing terminology assets in Electronic Health Records.
Abrams, Kelly; Schneider, Sue; Scichilone, Rita
2009-01-01
Electronic Health Record (EHR)systems rely on standard terminologies and classification systems that require both Information Technology (IT) and Information Management (IM) skills. Convergence of perspectives is necessary for effective terminology asset management including evaluation for use, maintenance and intersection with software applications. Multiple terminologies are necessary for patient care communication and data capture within EHRs and other information management tasks. Terminology asset management encompasses workflow and operational context as well as IT specifications and software application run time requirements. This paper identifies the tasks, skills and collaboration of IM and IT approaches for terminology asset management.
Identifying asset-based trends in sustainable programmes which ...
African Journals Online (AJOL)
We indicate the similarities between the asset-based approach and current discourses focusing on the notion of schools as nodes of support and care.1 We conclude by suggesting that knowledge of asset-based good practices could be shared with families in school-based sessions, thereby developing schools', families' ...
Option pricing under stochastic volatility: the exponential Ornstein–Uhlenbeck model
International Nuclear Information System (INIS)
Perelló, Josep; Masoliver, Jaume; Sircar, Ronnie
2008-01-01
We study the pricing problem for a European call option when the volatility of the underlying asset is random and follows the exponential Ornstein–Uhlenbeck model. The random diffusion model proposed is a two-dimensional market process that takes a log-Brownian motion to describe price dynamics and an Ornstein–Uhlenbeck subordinated process describing the randomness of the log-volatility. We derive an approximate option price that is valid when (i) the fluctuations of the volatility are larger than its normal level, (ii) the volatility presents a slow driving force, toward its normal level and, finally, (iii) the market price of risk is a linear function of the log-volatility. We study the resulting European call price and its implied volatility for a range of parameters consistent with daily Dow Jones index data
AN ECOSYSTEM PERSPECTIVE ON ASSET MANAGEMENT INFORMATION
Directory of Open Access Journals (Sweden)
Lasse METSO
2017-07-01
Full Text Available Big Data and Internet of Things will increase the amount of data on asset management exceedingly. Data sharing with an increased number of partners in the area of asset management is important when developing business opportunities and new ecosystems. An asset management ecosystem is a complex set of relationships between parties taking part in asset management actions. In this paper, the current barriers and benefits of data sharing are identified based on the results of an interview study. The main benefits are transparency, access to data and reuse of data. New services can be created by taking advantage of data sharing. The main barriers to sharing data are an unclear view of the data sharing process and difficulties to recognize the benefits of data sharing. For overcoming the barriers in data sharing, this paper applies the ecosystem perspective on asset management information. The approach is explained by using the Swedish railway industry as an example.
An Ecosystem Perspective On Asset Management Information
Metso, Lasse; Kans, Mirka
2017-09-01
Big Data and Internet of Things will increase the amount of data on asset management exceedingly. Data sharing with an increased number of partners in the area of asset management is important when developing business opportunities and new ecosystems. An asset management ecosystem is a complex set of relationships between parties taking part in asset management actions. In this paper, the current barriers and benefits of data sharing are identified based on the results of an interview study. The main benefits are transparency, access to data and reuse of data. New services can be created by taking advantage of data sharing. The main barriers to sharing data are an unclear view of the data sharing process and difficulties to recognize the benefits of data sharing. For overcoming the barriers in data sharing, this paper applies the ecosystem perspective on asset management information. The approach is explained by using the Swedish railway industry as an example.
Directory of Open Access Journals (Sweden)
Hyun No Kim
2018-03-01
Full Text Available The implementation of government policy can have an influence on market environment and market prices of pork in consequence. In South Korea, consumers prefer high-fat pork cuts due to the prevalence of roosting pork over a hot grill. This paper examines the impact of the government policy which aims to increase the consumption of low-fat pork cuts because of the concerns regarding asymmetric consumption between high-fat and low-fat pork cuts. Using hedonic price methods combined with quasi-experimental approaches we estimate the subsequent impact of food policy on the price of low-fat pork cuts using a time series of sales data. This study utilized an effective approach which has been widely employed for policy evaluation to produce plausible estimates of the economic values generated by the government policy. We find the existence of market segmentation and different impacts of the policy between markets. While the market price for high-fat pork cuts has remained stable, the price for low-fat pork cuts has slightly increased since the policy has been implemented. This paper illustrates that government’s policy can be a good strategy to maintain sustainability of the food industry by improving the balance in pork consumption and the management of stocks.
A queueing theory description of fat-tailed price returns in imperfect financial markets
Lamba, H.
2010-09-01
In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of price thresholds to simulate agent behavior over much longer timescales than are currently used in models of order-books. We show that many phenomena, routinely ignored in efficient market theory, can be systematically introduced into an otherwise efficient market, resulting in models that robustly replicate the most important stylized facts. We then demonstrate a close link between such threshold models and queueing theory, with large price changes corresponding to the busy periods of a single-server queue. The distribution of the busy periods is known to have excess kurtosis and non-exponential decay under various assumptions on the queue parameters. Such an approach may prove useful in the development of mathematical models for rapid deleveraging and panics in financial markets, and the stress-testing of financial institutions.
Real Options in Capital Budgeting. Pricing the Option to Delay and the Option to Abandon a Project
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Nicoleta Vintila
2007-07-01
Full Text Available Traditional discounted cash-flows method for assessing projects assumes that investment decision is an irreversible one, which is not correct. Managers can and must reconsider their initial decision as the new information arises during the project life. This is managerial flexibility and it creates strategic value for a project, only if management takes advantage of the opportunities associated with an analyzed project. Real options represent a new approach in capital budgeting, using the theory of pricing financial options for investments in real assets. In this paper, we emphasize the characteristics and valuation methodologies of real options. The objective in the last section is pricing the option to delay and the option to abandon a project in construction materials field.
Equilibrium Asset and Option Pricing under Jump-Diffusion Model with Stochastic Volatility
Directory of Open Access Journals (Sweden)
Xinfeng Ruan
2013-01-01
Full Text Available We study the equity premium and option pricing under jump-diffusion model with stochastic volatility based on the model in Zhang et al. 2012. We obtain the pricing kernel which acts like the physical and risk-neutral densities and the moments in the economy. Moreover, the exact expression of option valuation is derived by the Fourier transformation method. We also discuss the relationship of central moments between the physical measure and the risk-neutral measure. Our numerical results show that our model is more realistic than the previous model.
Method of moments approach to pricing double barrier contracts in polynomial jump-diffusion models
Eriksson, B.; Pistorius, M.
2011-01-01
Abstract: We present a method of moments approach to pricing double barrier contracts when the underlying is modelled by a polynomial jump-diffusion. By general principles the price is linked to certain infinite dimensional linear programming problems. Subsequently approximating these by finite
Transactive Control and Coordination of Distributed Assets for Ancillary Services
Energy Technology Data Exchange (ETDEWEB)
Subbarao, Krishnappa [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Fuller, Jason C. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Kalsi, Karanjit [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Somani, Abhishek [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Pratt, Robert G. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Widergren, Steven E. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States); Chassin, David P. [Pacific Northwest National Lab. (PNNL), Richland, WA (United States)
2013-09-18
The need to diversify energy supplies, the need to mitigate energy-related environmental impact, and the entry of electric vehicles in large numbers present challenges and opportunities to power system professionals. Wind and solar power provide many benefits, and to reap the benefits the resulting increased variability—forecasted as well as unforecasted—should be addressed. A majority of states and the District of Columbia, representing over half of the total load, have passed renewable portfolio standards. California’s plans call for 33% renewable energy by 2020. For grid balancing and for meeting reliability standards, ancillary services are needed. The needs for these services are poised to increase significantly. Demand resources are receiving increasing attention as one means of providing the ancillary services. Control and coordination of a large number (~millions) of distributed smart grid assets requires innovative approaches. One such approach is transactive control and coordination (TC2)—a distributed, hierarchical, agent-based incentive and control system. The TC2 paradigm is to create a market-like control system in which participation is voluntary and the participant sets the price for participation. For transactions that are frequent, automation of bids and responses is necessary. Such an approach has been developed and demonstrated at the Pacific Northwest National Laboratory. The devices, typically thermostatically controlled heating, ventilating, and air conditioning (HVAC) loads, send their bids—the quantity of energy they need and, based on the consumer preferences encoded in a simple user interface, the price they are willing to pay. The typical bid period is 5 minutes. By aggregating all the bids, a demand curve is generated by the aggregating entity, and matched with a supply curve or supply constraint. The aggregator transmits the clearing price to the devices. The winning devices proceed to consume the energy they bid for and won
Error Analysis for Fourier Methods for Option Pricing
Häppölä, Juho
2016-01-06
We provide a bound for the error committed when using a Fourier method to price European options when the underlying follows an exponential Levy dynamic. The price of the option is described by a partial integro-differential equation (PIDE). Applying a Fourier transformation to the PIDE yields an ordinary differential equation that can be solved analytically in terms of the characteristic exponent of the Levy process. Then, a numerical inverse Fourier transform allows us to obtain the option price. We present a novel bound for the error and use this bound to set the parameters for the numerical method. We analyze the properties of the bound for a dissipative and pure-jump example. The bound presented is independent of the asymptotic behaviour of option prices at extreme asset prices. The error bound can be decomposed into a product of terms resulting from the dynamics and the option payoff, respectively. The analysis is supplemented by numerical examples that demonstrate results comparable to and superior to the existing literature.
Asset liability management using stochastic programming
Pirbhai, M; Mitra, G; Kyriakis, T
2003-01-01
This chapter sets out to explain an important financial planning model called asset liability management (ALM); in particular, it discusses why in practice, optimum planning models are used. The ability to build an integrated approach that combines liability models with that of asset allocation decisions has proved to be desirable and more efficient in that it can lead to better ALM decisions. The role of uncertainty and quantification of risk in these planning models is con...
Effectiveness of infrastructure asset management: challenges for public agencies
Schraven, Daan; Hartmann, Andreas; Dewulf, Geert P.M.R.
2011-01-01
Purpose: The aim of this research is to better understand the decisions in infrastructure asset management at public agencies and the challenges of these agencies to improve the effectiveness of their decision making. Design/methodology/approach: Based on a literature review on asset management at
Nonlinear price impact from linear models
Patzelt, Felix; Bouchaud, Jean-Philippe
2017-12-01
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators, and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all intra-day scales (Patzelt and Bouchaud 2017 arXiv:1706.04163). Here we investigate how well these curves, their scaling, and the underlying return dynamics are captured by linear ‘propagator’ models. We find that the classification of trades as price-changing versus non-price-changing can explain the price impact nonlinearities and short-term return dynamics to a very high degree. The explanatory power provided by the change indicator in addition to the order sign history increases with increasing tick size. To obtain these results, several long-standing technical issues for model calibration and testing are addressed. We present new spectral estimators for two- and three-point cross-correlations, removing the need for previously used approximations. We also show when calibration is unbiased and how to accurately reveal previously overlooked biases. Therefore, our results contribute significantly to understanding both recent empirical results and the properties of a popular class of impact models.
Empirical analysis of uranium spot prices
International Nuclear Information System (INIS)
Morman, M.R.
1988-01-01
The objective is to empirically test a market model of the uranium industry that incorporates the notion that, if the resource is viewed as an asset by economic agents, then its own rate of return along with the own rate of return of a competing asset would be a major factor in formulating the price of the resource. The model tested is based on a market model of supply and demand. The supply model incorporates the notion that the decision criteria used by uranium mine owners is to select that extraction rate that maximizes the net present value of their extraction receipts. The demand model uses a concept that allows for explicit recognition of the prospect of arbitrage between a natural-resource market and the market for other capital goods. The empirical approach used for estimation was a recursive or causal model. The empirical results were consistent with the theoretical models. The coefficients of the demand and supply equations had the appropriate signs. Tests for causality were conducted to validate the use of the causal model. The results obtained were favorable. The implication of the findings as related to future studies of exhaustible resources are: (1) in some cases causal models are the appropriate specification for empirical analysis; (2) supply models should incorporate a measure to capture depletion effects
Energy Technology Data Exchange (ETDEWEB)
El Farouq, Naïma, E-mail: naima.elfarouq@univ-bpclermont.fr [Université Blaise Pascal (Clermont-Ferrand II) (France); Bernhard, Pierre, E-mail: pierre.bernhard@inria.fr [INRIA Sophia Antipolis-Méditerranée (France)
2015-10-15
We prove the missing uniqueness theorem for the viscosity solution of a quasi-variational inequality related to a minimax impulse control problem modeling the option pricing with proportional transactions costs. This result makes our robust control approach of option pricing in the interval market model essentially complete.
International Nuclear Information System (INIS)
El Farouq, Naïma; Bernhard, Pierre
2015-01-01
We prove the missing uniqueness theorem for the viscosity solution of a quasi-variational inequality related to a minimax impulse control problem modeling the option pricing with proportional transactions costs. This result makes our robust control approach of option pricing in the interval market model essentially complete
Marketing approach to pricing of rail freight
Savitska, G.
2015-01-01
Price the is essence of the economic interests the participants of the transport market, which manifests itself in maintaining or increasing of the main price component revenue. Pricing for transportation of cargoes railway transport in a market economy is the most important management decisions affecting traffic volumes, profitability and competitiveness in the transport market. The market pricing for transportation of cargoes railway transport is a concentrated expression of market conditio...
CAM Stochastic Volatility Model for Option Pricing
Directory of Open Access Journals (Sweden)
Wanwan Huang
2016-01-01
Full Text Available The coupled additive and multiplicative (CAM noises model is a stochastic volatility model for derivative pricing. Unlike the other stochastic volatility models in the literature, the CAM model uses two Brownian motions, one multiplicative and one additive, to model the volatility process. We provide empirical evidence that suggests a nontrivial relationship between the kurtosis and skewness of asset prices and that the CAM model is able to capture this relationship, whereas the traditional stochastic volatility models cannot. We introduce a control variate method and Monte Carlo estimators for some of the sensitivities (Greeks of the model. We also derive an approximation for the characteristic function of the model.
Il livello dei prezzi e la politica monetaria (The Price Level and Monetary Policy
Directory of Open Access Journals (Sweden)
Charles P. Kindleberger
2002-06-01
Full Text Available Most central banks are required or choose to stabilize a price index, largely by manipulating short term interest rates. A serious problem is what index to choose among the national income deflator, wholesale prices, the cost of living, with or eliminating highly volatile commodities such as food and energy, to produce a core index, plus others such as housing, including or without imputed rent of owner-occupied houses, or assets, whether equities or houses. No obvious and widely agreed index exists. Even if there were a clear choice, there remains a question whether a central bank should carefully consider action to achieve other goals: full employment, adjustment of the balance of payments, of the exchange rate, prevention of bubbles in asset prices, or recovery from financial crises. If so, the question of central bank weapons remains: monetary expansion or contraction, credit controls, overall or for particular purposes, and moral suasion.
A HYBRID GENETIC ALGORITHM-NEURAL NETWORK APPROACH FOR PRICING CORES AND REMANUFACTURED CORES
Directory of Open Access Journals (Sweden)
M. Seidi
2012-01-01
Full Text Available
ENGLISH ABSTRACT:Sustainability has become a major issue in most economies, causing many leading companies to focus on product recovery and reverse logistics. Remanufacturing is an industrial process that makes used products reusable. One of the important aspects in both reverse logistics and remanufacturing is the pricing of returned and remanufactured products (called cores. In this paper, we focus on pricing the cores and remanufactured cores. First we present a mathematical model for this purpose. Since this model does not satisfy our requirements, we propose a simulation optimisation approach. This approach consists of a hybrid genetic algorithm based on a neural network employed as the fitness function. We use automata learning theory to obtain the learning rate required for training the neural network. Numerical results demonstrate that the optimal value of the acquisition price of cores and price of remanufactured cores is obtained by this approach.
AFRIKAANSE OPSOMMING: Volhoubaarheid het ‘n belangrike saak geword in die meeste ekonomieë, wat verskeie maatskappye genoop het om produkherwinning en omgekeerde logistiek te onder oë te neem. Hervervaardiging is ‘n industriële proses wat gebruikte produkte weer bruikbaar maak. Een van die belangrike aspekte in beide omgekeerde logistiek en hervervaardiging is die prysbepaling van herwinne en hervervaardigde produkte. Hierdie artikel fokus op die prysbepalingsaspekte by wyse van ‘n wiskundige model.
Price returns efficiency of the Shanghai A-Shares
Long, Wang Jiang; Jaaman, Saiful Hafizah; Samsudin, Humaida Banu
2014-06-01
Beta measured from the capital asset pricing model (CAPM) is the most widely used risk to estimate expected return. In this paper factors that influence Shanghai A-share stock return based on CAPM are explored and investigated. Price data of 312 companies listed on Shanghai Stock Exchange (SSE) from the year 2000 to 2011 are investigated. This study employed the Fama-MacBeth cross-sectional method to avoid weakness of traditional CAPM. In addition, this study improves the model by adjusting missing data. Findings of this study justifies that systematic risk can explain the portfolios' returns of China SSE stock market.
Intangible liabilities: beyond models of intellectual assets
García Parra, Mercedes; Simó Guzmán, Pep; Sallán Leyes, José María; Mundet Hiern, Joan
2009-01-01
Purpose – Most models of intellectual capital measurment equal intellectual capital with intellectual assets. Nevertheless, companies sometimes must incur liabilities to make intellectual assets truly actionable. This fact suggests the existence of intangible liabilities. The aim of this paper is to refine the methods of assessment of intellectual capital by refining and extending the concept of intangible liabilities. Design/methodology/approach – The paper consists of a literature revi...
THE BUSINESS MODEL AND FINANCIAL ASSETS MEASUREMENT
NICULA Ileana
2012-01-01
The paper work analyses some aspects regarding the implementation of IFRS 9, the relationship between the business model approach and the assets classification and measurement. It does not discuss the cash flows characteristics, another important aspect of assets classification, or the reclassifications. The business model is related to some characteristics of the banks (opaqueness, leverage ratio, compliance to capital, sound liquidity requirements and risk management) and to Special Purpose...
Circulation of Railway Rolling Stock: A Branch-and-Price Approach
M. Peeters (Marc); L.G. Kroon (Leo)
2003-01-01
textabstractWe describe an algorithmic approach to determine an efficient railway rolling stock circulation on a single line or on a set of interacting lines. Given the timetable and the passengers? seat demand, we develop a branch-and-price algorithm that results in an allocation of rolling
Moses, O. Douglas
1987-01-01
This report includes two separate but related empirical studies of the relationship between financial measures for defense aerospace contractors and pricing strategies adopted by contractors. Two pricing strategies are identified: skimming and penetration. Collectively the findings indicate that the adoption of a particular pricing strategy is associated with the financial condition of the contractor as reflected in measures of risk, asset utilization and organizational slack. Keywords: Finan...
A fuzzy compromise programming approach for the Black-Litterman portfolio selection model
Directory of Open Access Journals (Sweden)
Mohsen Gharakhani
2013-01-01
Full Text Available In this paper, we examine advanced optimization approach for portfolio problem introduced by Black and Litterman to consider the shortcomings of Markowitz standard Mean-Variance optimization. Black and Litterman propose a new approach to estimate asset return. They present a way to incorporate the investor’s views into asset pricing process. Since the investor’s view about future asset return is always subjective and imprecise, we can represent it by using fuzzy numbers and the resulting model is multi-objective linear programming. Therefore, the proposed model is analyzed through fuzzy compromise programming approach using appropriate membership function. For this purpose, we introduce the fuzzy ideal solution concept based on investor preference and indifference relationships using canonical representation of proposed fuzzy numbers by means of their correspondingα-cuts. A real world numerical example is presented in which MSCI (Morgan Stanley Capital International Index is chosen as the target index. The results are reported for a portfolio consisting of the six national indices. The performance of the proposed models is compared using several financial criteria.
In/Out Status Monitoring in Mobile Asset Tracking with Wireless Sensor Networks
Directory of Open Access Journals (Sweden)
Kwangsoo Kim
2010-03-01
Full Text Available A mobile asset with a sensor node in a mobile asset tracking system moves around a monitoring area, leaves it, and then returns to the region repeatedly. The system monitors the in/out status of the mobile asset. Due to the continuous movement of the mobile asset, the system may generate an error for the in/out status of the mobile asset. When the mobile asset is inside the region, the system might determine that it is outside, or vice versa. In this paper, we propose a method to detect and correct the incorrect in/out status of the mobile asset. To solve this problem, our approach uses data about the connection state transition and the battery lifetime of the mobile node attached to the mobile asset. The connection state transition is used to classify the mobile node as normal or abnormal. The battery lifetime is used to predict a valid working period for the mobile node. We evaluate our method using real data generated by a medical asset tracking system. The experimental results show that our method, by using the estimated battery life time or by using the invalid connection state, can detect and correct most cases of incorrect in/out statuses generated by the conventional approach.
In/out status monitoring in mobile asset tracking with wireless sensor networks.
Kim, Kwangsoo; Chung, Chin-Wan
2010-01-01
A mobile asset with a sensor node in a mobile asset tracking system moves around a monitoring area, leaves it, and then returns to the region repeatedly. The system monitors the in/out status of the mobile asset. Due to the continuous movement of the mobile asset, the system may generate an error for the in/out status of the mobile asset. When the mobile asset is inside the region, the system might determine that it is outside, or vice versa. In this paper, we propose a method to detect and correct the incorrect in/out status of the mobile asset. To solve this problem, our approach uses data about the connection state transition and the battery lifetime of the mobile node attached to the mobile asset. The connection state transition is used to classify the mobile node as normal or abnormal. The battery lifetime is used to predict a valid working period for the mobile node. We evaluate our method using real data generated by a medical asset tracking system. The experimental results show that our method, by using the estimated battery life time or by using the invalid connection state, can detect and correct most cases of incorrect in/out statuses generated by the conventional approach.
American option pricing with stochastic volatility processes
Directory of Open Access Journals (Sweden)
Ping LI
2017-12-01
Full Text Available In order to solve the problem of option pricing more perfectly, the option pricing problem with Heston stochastic volatility model is considered. The optimal implementation boundary of American option and the conditions for its early execution are analyzed and discussed. In view of the fact that there is no analytical American option pricing formula, through the space discretization parameters, the stochastic partial differential equation satisfied by American options with Heston stochastic volatility is transformed into the corresponding differential equations, and then using high order compact finite difference method, numerical solutions are obtained for the option price. The numerical experiments are carried out to verify the theoretical results and simulation. The two kinds of optimal exercise boundaries under the conditions of the constant volatility and the stochastic volatility are compared, and the results show that the optimal exercise boundary also has stochastic volatility. Under the setting of parameters, the behavior and the nature of volatility are analyzed, the volatility curve is simulated, the calculation results of high order compact difference method are compared, and the numerical option solution is obtained, so that the method is verified. The research result provides reference for solving the problems of option pricing under stochastic volatility such as multiple underlying asset option pricing and barrier option pricing.
New approach to brown coal pricing using internal rate of return methodology
International Nuclear Information System (INIS)
Bejbl, Jan; Bemš, Julius; Králík, Tomáš; Starý, Oldřich; Vastl, Jaromír
2014-01-01
Highlights: • We showed that brown coal is the substitute for black coal only at the time of the investment decision. • We compiled the model used in a calculation of the economically justified price for the productive and extractive component. • The resulting economically justified price is on a par with the current black coal price. • The proposed methodological approach is applicable to solve similar tasks not only in the energy sector. - Abstract: Brown coal is one of the dominant local strategic raw materials in Europe, used, to a large extent, in the power-generating industry. The current situation, where the price of gas and electricity precludes the efficient use of gas sources, leads to the extraction of older sources, chiefly brown coal ones. In tandem with a turning away from nuclear power, brown coal is experiencing a renaissance and the issue of brown coal price setting is, and will be, relevant. This paper deals with a proposal of a new method for determining the base price, consisting of defining the reference fuel chain for electricity and heat production based on brown coal. It builds on the notion that the degree of risk of the involved parties should be reflected in the modified amount of revenue per capital invested. The resulting price is then an economically justified price which encourages a respect for the specific features of the market in question and set the base price of the commodity in a way that is acceptable for both the extractive and the productive components of the fuel chain
Pricing early-exercise and discrete barrier options by Shannon wavelet expansions
Maree, S. C.; Ortiz-Gracia, L.; Oosterlee, C. W.
2017-01-01
We present a pricing method based on Shannon wavelet expansions for early-exercise and discretely-monitored barrier options under exponential L,vy asset dynamics. Shannon wavelets are smooth, and thus approximate the densities that occur in finance well, resulting in exponential convergence.
Role of carbon price signal on the investment decisions of companies
International Nuclear Information System (INIS)
Herve, Morgan
2011-01-01
This PhD thesis focuses on the impact of the European Union Emissions Trading Scheme (EU ETS) on investment decisions in the European power sector. We provide the policy background on the EU ETS and contemporary policy and economic developments. We discuss the main types of compliance buyers' responses to the EU ETS constraint: emissions reductions, acquisitions of additional compliance assets, and other responses. We present the results of an empirical survey of the most carbon constrained European utilities. We show that strategic and economic considerations prevailed over the introduction of the carbon price. We discuss the impact of those investments on European utilities' EU ETS profile by looking at the potentially locked-in emissions, changes in the compliance perimeter and some specific developments relative to carbon leakage and Kyoto offsets. We offer a review of the investment decision-making approaches. Exploring the impact of carbon price scenarios on generation investment portfolios, we are able to identify that: the EU ETS has a moderate but central reallocation role in power generation investment portfolios; insights into the long-term carbon price trend are particularly helpful to unlock investment; some much discussed policy provisions only have a relatively small impact on investment portfolios; carbon price expectations impact decisions relative to power generation investment portfolios; while the EU ETS has a central role, the climate and non-climate policy mix matters most. (author)
Pricing and Application of Electric Storage
Zhao, Jialin
Electric storage provides a vehicle to store power for future use. It contributes to the grids in multiple aspects. For instance, electric storage is a more effective approach to provide electricity ancillary services than conventional methods. Additionally, electric storage, especially fast-responding units, allows owners to implement high-frequency power transactions in settings such as the 5-min real-time trading market. Such high-frequency power trades were limited in the past. However, as technology advances, the power markets have evolved. For instance, the California Independent System Operator now supports the 5-min real-time trading and the hourly day-ahead ancillary services bidding. Existing valuation models of electric storage were not designed to accommodate these recent market developments. To fill this gap, I focus on the fast-responding grid-level electric storage that provides both the real-time trading and the day-ahead ancillary services bidding. To evaluate such an asset, I propose a Monte Carlo Simulation-based valuation model. The foundation of my model is simulations of power prices. This study develops a new simulation model of electric prices. It is worth noting that, unlike existing models, my proposed simulation model captures the dependency of the real-time markets on the day-ahead markets. Upon such simulations, this study investigates the pricing and the application of electric storage at a 5-min granularity. Essentially, my model is a Dynamic Programming system with both endogenous variables (i.e., the State-of-Charge of electric storage) and exogenous variables (i.e., power prices). My first numerical example is the valuation of a fictitious 4MWh battery. Similarly, my second example evaluates the application of two units of 2MWh batteries. By comparing these two experiments, I investigate the issues related to battery configurations, such as the impacts of splitting storage capability on the valuation of electric storage.
A DYNAMIC APPROACH TO CALCULATE SHADOW PRICES OF WATER RESOURCES FOR NINE MAJOR RIVERS IN CHINA
Institute of Scientific and Technical Information of China (English)
Jing HE; Xikang CHEN; Yong SHI
2006-01-01
China is experiencing from serious water issues. There are many differences among the Nine Major Rivers basins of China in the construction of dikes, reservoirs, floodgates, flood discharge projects, flood diversion projects, water ecological construction, water conservancy management, etc.The shadow prices of water resources for Nine Major Rivers can provide suggestions to the Chinese government. This article develops a dynamic shadow prices approach based on a multiperiod input-output optimizing model. Unlike previous approaches, the new model is based on the dynamic computable general equilibrium (DCGE) model to solve the problem of marginal long-term prices of water resources.First, definitions and algorithms of DCGE are elaborated. Second, the results of shadow prices of water resources for Nine Major Rivers in 1949-2050 in China using the National Water Conservancy input-holding-output table for Nine Major Rivers in 1999 are listed. A conclusion of this article is that the shadow prices of water resources for Nine Major Rivers are largely based on the extent of scarcity.Selling prices of water resources should be revised via the usage of parameters representing shadow prices.
A Unified Pricing of Variable Annuity Guarantees under the Optimal Stochastic Control Framework
Directory of Open Access Journals (Sweden)
Pavel V. Shevchenko
2016-07-01
Full Text Available In this paper, we review pricing of the variable annuity living and death guarantees offered to retail investors in many countries. Investors purchase these products to take advantage of market growth and protect savings. We present pricing of these products via an optimal stochastic control framework and review the existing numerical methods. We also discuss pricing under the complete/incomplete financial market models, stochastic mortality and optimal/sub-optimal policyholder behavior, and in the presence of taxes. For numerical valuation of these contracts in the case of simple risky asset process, we develop a direct integration method based on the Gauss-Hermite quadratures with a one-dimensional cubic spline for calculation of the expected contract value, and a bi-cubic spline interpolation for applying the jump conditions across the contract cashflow event times. This method is easier to implement and faster when compared to the partial differential equation methods if the transition density (or its moments of the risky asset underlying the contract is known in closed form between the event times. We present accurate numerical results for pricing of a Guaranteed Minimum Accumulation Benefit (GMAB guarantee available on the market that can serve as a numerical benchmark for practitioners and researchers developing pricing of variable annuity guarantees to assess the accuracy of their numerical implementation.
Prudent management of utility assets -- Problem or promise?
International Nuclear Information System (INIS)
Hatch, D.; Serwinowski, M.
1998-01-01
As utilities move into a deregulated market, the extent and nature of their asset base, as well as, the manner in which they have managed it, may play a key factor in the form of regulatory recovery. Utilities must face the issue of stranded assets. One form of addressing this issue is using ''EVA'', Economic Value Added as a mechanism to form financial models for prudent asset management. The authors present an approach to this challenging aspect of deregulation. They focus on the following utility assets: buildings/facilities, and excess real physical assets. Primarily focusing on Niagara Mohawk, two or three case studies are used to demonstrate how proactive management and EVA analysis transforms underperforming utility assets. These will be presented in a way that can show benefits for all utility stakeholders such as cost avoidance, load growth, real estate tax savings, stranded asset reductions, environmental gains, corporate image enhancement, and regulatory/governmental gains; over and above possible economic gains. Examples will be given that include the transformation of utility assets into award winning commercial, residential, and industrial developments as well as recreational/park lands and greenways. Similarly, other examples will show the many tangible and intangible benefits of an effective investment recovery and waste stream management program. Various strategies will also be presented that detail how utilities can begin to develop a total comprehensive plan for their asset portfolio. The first step in realizing and maximizing EVA towards a portfolio of assets is a change in corporate policy--one from passive ownership to active prudent management. Service and cost will drive competition resulting from full deregulation. To drive down costs, utilities will need to become more efficient in dealing with their asset base. By embracing an EVA model on an entire asset portfolio, utilities can prepare and excel in the newly shaped marketplace
ACCOUNTING ALTERNATIVE TREATMENTS REGARDING FIXED ASSETS - A NATIONAL AND INTERNATIONAL APPROACH
Directory of Open Access Journals (Sweden)
Ion PERES
2009-12-01
Full Text Available By introducing the IFRS, as main accountancy source for the quoted enterprises, on the markets established byEU, for making strong its position within the interior of a such large market, IASB could not present itself souninterested in front of a potential extension of own accountancy documents, to a great number of small and middleenterprises, functional on the European market. Everyt hing is directed towards a growth of competitive capacity ofenterprises, thanks to comparability, an existing characteristic within the internal accountancy Standard, generallyapplied (even in the simplified form for the small dimensions enterprises, an d either on sector’s level or upon creditsaccess level.Tangible assets are handled by the Interna tional Accounting Standard 16 – Tangible assets. The main issuesaddressed by IAS 16 Tangible assets refers to: recognition time of assets, determinati on of their accounting value,depreciation expenses to be recognized in connection with these values, the accounting treatment, requirements forsubmission of information.This research papers objective consists on verifying the impact generated over the management of enterpriseactivity, by applying the international standards of accountancy IAS/IFRS, in editing and publishing the accountingperiod balance and of that reinforced balance, for the quoted companies. The aspects that we will underline with gr eatimportance will represent the modifications brought to the economic -financial informational system and ofmodifications appeared with a view to analyze the activity and performance of enterprises
Dynamics Model Applied to Pricing Options with Uncertain Volatility
Directory of Open Access Journals (Sweden)
Lorella Fatone
2012-01-01
model is proposed. The data used to test the calibration problem included observations of asset prices over a finite set of (known equispaced discrete time values. Statistical tests were used to estimate the statistical significance of the two parameters of the Black-Scholes model: the volatility and the drift. The effects of these estimates on the option pricing problem were investigated. In particular, the pricing of an option with uncertain volatility in the Black-Scholes framework was revisited, and a statistical significance was associated with the price intervals determined using the Black-Scholes-Barenblatt equations. Numerical experiments involving synthetic and real data were presented. The real data considered were the daily closing values of the S&P500 index and the associated European call and put option prices in the year 2005. The method proposed here for calibrating the Black-Scholes dynamics model could be extended to other science and engineering models that may be expressed in terms of stochastic dynamical systems.
Directory of Open Access Journals (Sweden)
Maria Elisabeth Moreira Carvalho Andrade
2017-07-01
Full Text Available ABSTRACT This paper contributes by encouraging discussions about the public policy of setting tariffs for public services based on the value of the investment made by the providers of these services. The purpose of this study was, in an unprecedented way and by combining theories of equity valuation and finance, to identify the asset valuation method that can lead to a fair value and balance between an affordable price for the consumer and an adequate return on investment for the concessionaires. The value assigned to these assets affects the tariff in two ways: (i via depreciation/amortization, which affects the cost of service; (ii via the return on investment, which is the portion that corresponds to the investor’s profit. We analyzed the Brazilian electricity sector, in which the rates set by the Brazilian Electricity Regulatory Agency (ANEEL currently use the new replacement value (NRV approach. We carried out empirical tests using data available on the ANEEL website from the second cycle periodic tariff review and information obtained in financial statements from 1995 onwards. The analysis included the NVR and restated historical cost (RHC methods, the latter being updated by the extended consumer price index (IPCA. After the descriptive and statistical analyses, we used the test of means to verify the differences between the variables in terms of NRV vs. RHC. The first conclusion was the absence of a significant difference between the NRV and RHC methods; that is, on average, the replacement price showed no significant difference to what would be the pure and simple restatement of assets. But this was found to hide something relevant, the fact that this average is derived from two main groups: that of the consumers who are paying more for energy services than they should, which constitutes a visible benefit to investors and loss for these consumers, and that of the consumers who are paying less than they should, which benefits them but
Directory of Open Access Journals (Sweden)
Lya Aklimawati
2013-12-01
Full Text Available High volatility cocoa price movement is consequenced by imbalancing between power demand and power supply in commodity market. World economy expectation and market liberalization would lead to instability on cocoa prices in the international commerce. Dynamic prices moving erratically influence the benefit of market players, particularly producers. The aim of this research is (1 to estimate the empirical cocoa prices model for responding market dynamics and (2 analyze short-term and long-term effect of price determinants variables on cocoa prices. This research was carried out by analyzing annualdata from 1980 to 2011, based on secondary data. Error correction mechanism (ECM approach was used to estimate the econometric model of cocoa price.The estimation results indicated that cocoa price was significantly affected by exchange rate IDR-USD, world gross domestic product, world inflation, worldcocoa production, world cocoa consumption, world cocoa stock and Robusta prices at varied significance level from 1 - 10%. All of these variables have a long run equilibrium relationship. In long run effect, world gross domestic product, world cocoa consumption and world cocoa stock were elastic (E >1, while other variables were inelastic (E <1. Variables that affecting cocoa pricesin short run equilibrium were exchange rate IDR-USD, world gross domestic product, world inflation, world cocoa consumption and world cocoa stock. The analysis results showed that world gross domestic product, world cocoa consumption and world cocoa stock were elastic (E >1 to cocoa prices in short-term. Whereas, the response of cocoa prices was inelastic to change of exchange rate IDR-USD and world inflation.Key words: Price
Pricing long-term options with stochastic volatility and stochastic interest rates
van Haastrecht, A.
2010-01-01
The markets for long-term options have expanded tremendously over the last decade. Nowadays many of these derivatives along with pension schemes and insurance products depend on joint changes in stock prices, interest rates and inflation. As a result the dependencies between the underlying assets
Close-Form Pricing of Benchmark Equity Default Swaps Under the CEV Assumption
Campi, L.; Sbuelz, A.
2005-01-01
Equity Default Swaps are new equity derivatives designed as a product for credit investors.Equipped with a novel pricing result, we provide closedform values that give an analytic contribution to the viability of cross-asset trading related to credit risk.
Diller, Hermann
2013-01-01
Purpose – The purpose of this article is to integrate the various strands of fair price research into a concise conceptual model. Design/methodology/approach – The proposed price fairness model is based on a review of the fair pricing literature, incorporating research reported in not only English but also German. Findings – The proposed fair price model depicts seven components of a fair price: distributive fairness, consistent behaviour, personal respect and regard for the partner, fair dea...
A Model for Resource Allocation Using Operational Knowledge Assets
Andreou, Andreas N.; Bontis, Nick
2007-01-01
Purpose: The paper seeks to develop a business model that shows the impact of operational knowledge assets on intellectual capital (IC) components and business performance and use the model to show how knowledge assets can be prioritized in driving resource allocation decisions. Design/methodology/approach: Quantitative data were collected from 84…
Strategic Asset Seeking by EMNEs
DEFF Research Database (Denmark)
Petersen, Bent; Seifert, Jr., Rene E.
2014-01-01
Purpose: The chapter provides an economic explanation and perspectivation of strategic asset seeking of multinational enterprises from emerging economies (EMNEs) as a prominent feature of today’s global economy. Approach: The authors apply and extend the “springboard perspective.” This perspective...
IMPACT OF LIQUIDITY AND SIZE PREMIUM ON EQUITY PRICE FORMATION IN SERBIA
Jelena Minović; Boško Živković
2012-01-01
The goal of this paper is to examine the impact of an overall market factor, the factor related to the firm size, the factor related to the ratio of book to market value of companies, and the factor of liquidity risk on expected asset returns in the Serbian market. For this market we estimated different factor models: Capital Asset Pricing Model (CAPM by Sharpe, 1964), Fama-French (FF) model (1992, 1993), Liquidity-augmented CAPM (LCAPM) by Liu (2006), and combination LCAPM with FF factors. W...
Energy Technology Data Exchange (ETDEWEB)
Schutz, S.R.
1978-12-01
An energy source ready for immediate use on a commercial scale is solar energy in the form of On Site Solar Heating (OSSH) systems. These systems collect solar energy with rooftop panels, store excess energy in water storage tanks and can, in certain circumstances, provide 100% of the space heating and hot water required by the occupants of the residential or commercial structure on which the system is located. Such systems would take advantage of a free and inexhaustible energy source--sunlight. The principal drawback of such systems is the high initial capital cost. The solution would normally be a carefully worked out corporate financing plan. However, at the moment it is individual homeowners and not corporations who are attempting to finance these systems. As a result, the terms of finance are excessively stringent and constitute the main obstacle to the large scale market penetration of OSSH. This study analyzes the feasibility of OSSH as a private utility investment. Such systems would be installed and owned by private utilities and would displace other investment projects, principally electric generating plants. The return on OSSH is calculated on the basis of the cost to the consumer of the equivalent amount of electrical energy that is displaced by the OSSH system. The hurdle rate for investment in OSSH is calculated using the Sharpe--Lintner Capital Asset Pricing Model. The results of this study indicate that OSSH is a low risk investment having an appropriate hurdle rate of 7.9%. At this rate, OSSH investment appears marginally acceptable in northern California and unambiguously acceptable in southern California. The results also suggest that utility investment in OSSH should lead to a higher degree of financial leverage for utility companies without a concurrent deterioration in the risk class of utility equity.
Energy Technology Data Exchange (ETDEWEB)
Lee, Sooill; Kim, Yong Sik; Moon, Insun; Lee, Euijong [KHNP CRI, Daejeon (Korea, Republic of)
2016-10-15
This paper introduces a security assessment approach with graded importance score of security controls and the asset consequence through an asset and risk analysis to manage the security levels in operating NPPs (Nuclear Power Plants). Whereas, those are being exposed to various types of new and existing cyber threats, vulnerabilities and risks which significantly increase the likelihood that those could be compromised. U.S. NRC(United States Nuclear Regulatory Commission) and KINAC(Korea Institute of Nuclear Nonproliferation And Control) request the cyber security plan by establishing the cyber security program through assessing and managing the potential for adverse effect on safety, security and emergency preparedness functions so as to provide high assurance that critical functions are properly protected from the cyber-attack. This paper shows the security assessment approach with graded importance score of security controls and the asset consequence. It could lead to manage the security levels consistent with the purpose of defense in- depth strategy based on regulatory rule as well as internal risk-based self-assessment. Also, this management of the security level may make effect of encouraging the installation of high ranked countermeasures in order to rapidly increase the security level. Proposed approach could be conducted for the pilot test on the model plants with each reactor type of operating NPPs.
International Nuclear Information System (INIS)
Lee, Sooill; Kim, Yong Sik; Moon, Insun; Lee, Euijong
2016-01-01
This paper introduces a security assessment approach with graded importance score of security controls and the asset consequence through an asset and risk analysis to manage the security levels in operating NPPs (Nuclear Power Plants). Whereas, those are being exposed to various types of new and existing cyber threats, vulnerabilities and risks which significantly increase the likelihood that those could be compromised. U.S. NRC(United States Nuclear Regulatory Commission) and KINAC(Korea Institute of Nuclear Nonproliferation And Control) request the cyber security plan by establishing the cyber security program through assessing and managing the potential for adverse effect on safety, security and emergency preparedness functions so as to provide high assurance that critical functions are properly protected from the cyber-attack. This paper shows the security assessment approach with graded importance score of security controls and the asset consequence. It could lead to manage the security levels consistent with the purpose of defense in- depth strategy based on regulatory rule as well as internal risk-based self-assessment. Also, this management of the security level may make effect of encouraging the installation of high ranked countermeasures in order to rapidly increase the security level. Proposed approach could be conducted for the pilot test on the model plants with each reactor type of operating NPPs
A stochastic-programming approach to integrated asset and liability ...
African Journals Online (AJOL)
This increase in complexity has provided an impetus for the investigation into integrated asset- and liability-management frameworks that could realistically address dynamic portfolio allocation in a risk-controlled way. In this paper the authors propose a multi-stage dynamic stochastic-programming model for the integrated ...
The impact of liquidity and size premium on equity price formation in Serbia
Directory of Open Access Journals (Sweden)
Minović Jelena
2012-01-01
Full Text Available The goal of this paper is to examine the impact of an overall market factor, the factor related to the firm size, the factor related to the ratio of book to market value of companies, and the factor of liquidity risk on expected asset returns in the Serbian market. For this market we estimated different factor models: Capital Asset Pricing Model (CAPM by Sharpe, 1964, Fama-French (FF model (1992, 1993, Liquidity-augmented CAPM (LCAPM by Liu (2006, and combination LCAPM with FF factors. We used daily data for the period from 2005 to 2009. Using a demanding methodology and complex dataset, we found that liquidity and firm size had a significant impact on equity price formation in Serbia. On the other hand, our results suggest that the factor related to the ratio of book to market value of companies does not have an important role in asset pricing in Serbia. We found that Liu’s two factor LCAPM model performs better in explaining stock returns than the standard CAPM and the Fama-French three factor model. Additionally, Liu’s LCAPM may indeed be a good tool for realistic assessment of the expected asset returns. The combination of the Fama-French model and the LCAPM could improve the understanding of equilibrium in the Serbian equity market. Even though previous papers have mostly dealt with examining different factor models of developed or emerging markets worldwide, none of them has tested factor models on the countries of former Yugoslavia. This paper is the first to test the FF model and LCAPM with FF factors in the case of Serbia and the area of ex-Yugoslavia. [Projekat Ministarstva nauke Republike Srbije, br. 179015: Challenges and Prospects of Structural Changes in Serbia: Strategic Directions for Economic Development and Harmonization With EU Requirements
L2-approximating Pricing under Restricted Information
International Nuclear Information System (INIS)
Mania, M.; Tevzadze, R.; Toronjadze, T.
2009-01-01
We consider the mean-variance hedging problem under partial information in the case where the flow of observable events does not contain the full information on the underlying asset price process. We introduce a certain type martingale equation and characterize the optimal strategy in terms of the solution of this equation. We give relations between this equation and backward stochastic differential equations for the value process of the problem
Conic coconuts : the pricing of contingent capital notes using conic finance
Madan, D.B.; Schoutens, W.
2010-01-01
In this paper we introduce a fundamental model under which we will price contingent capital notes using conic finance techniques. The model is based on more realistic balance-sheet models recognizing the fact that asset and liabilities are both risky and have been treated differently taking into