WorldWideScience

Sample records for reporting risk-based pricing

  1. 76 FR 13902 - Fair Credit Reporting Risk-Based Pricing Regulations

    Science.gov (United States)

    2011-03-15

    ... TRADE COMMISSION 16 CFR Parts 640 and 698 RIN R411009 Fair Credit Reporting Risk-Based Pricing... respective risk-based pricing rules to require disclosure of credit scores and information relating to credit scores in risk-based pricing notices if a credit score of the consumer is used in setting the material...

  2. 75 FR 2723 - Fair Credit Reporting Risk-Based Pricing Regulations

    Science.gov (United States)

    2010-01-15

    ...-based pricing notice to a consumer when the creditor uses a consumer report to grant or extend credit to... consumers to combat identity theft, increase the accuracy of consumer reports, and allow consumers to... consumer report is often used in evaluating the risk posed by the consumer. Creditors that engage in risk...

  3. Risk Based Milk Pricing Model at Dairy Farmers Level

    Directory of Open Access Journals (Sweden)

    W. Septiani

    2017-12-01

    Full Text Available The milk price from a cooperative institution to farmer does not fully cover the production cost. Though, dairy farmers encounter various risks and uncertainties in conducting their business. The highest risk in milk supply lies in the activities at the farm. This study was designed to formulate a model for calculating milk price at farmer’s level based on risk. Risks that occur on farms include the risk of cow breeding, sanitation, health care, cattle feed management, milking and milk sales. This research used the location of the farm in West Java region. There were five main stages in the preparation of this model, (1 identification and analysis of influential factors, (2 development of a conceptual model, (3 structural analysis and the amount of production costs, (4 model calculation of production cost with risk factors, and (5 risk based milk pricing model. This research built a relationship between risks on smallholder dairy farms with the production costs to be incurred by the farmers. It was also obtained the formulation of risk adjustment factor calculation for the variable costs of production in dairy cattle farm. The difference in production costs with risk and the total production cost without risk was about 8% to 10%. It could be concluded that the basic price of milk proposed based on the research was around IDR 4,250-IDR 4,350/L for 3 to 4 cows ownership. Increasing farmer income was expected to be obtained by entering the value of this risk in the calculation of production costs. 

  4. Risk Pricing in Construction Tenders - How, Who, What

    Directory of Open Access Journals (Sweden)

    Marcus Tower

    2012-11-01

    Full Text Available Construction projects are most commonlyprocured in Australia by means of a traditionaldesign–tender–build model, whereby design islargely completed then contractors submittenders in a competitive environment.Construction contractors must consider riskswithin their tenders. This paper reports theresearch findings into pricing for risk incompetitive tenders by constructioncontractors. The research is based onstructured interviews with 10 contractingpersonnel; supplemented by 23 responses ofconstruction personnel from an online survey.Two common methods to price for risk are atrade-by-trade basis or an overall percentageor lump sum addition to the base estimate.Experience and intuition plays a significant rolein pricing for risk in tenders and the numberand type of people involved varies with projectsize, with greater involvement as project sizeincreases. The most significant risks priced intenders were: availability of resources; designor documentation errors; incomplete design;buildability issues; and inclement weather. Themost significant project factors considered bycontractors when pricing for risk in tenders are:value of liquidated damages; type ofcontract/procurement; completeness ofdocumentation; project complexity; and currentworkload. These risks and project factors areprimarily those over which the contractor haslimited or no control.

  5. Option-Based Estimation of the Price of Co-Skewness and Co-Kurtosis Risk

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Fournier, Mathieu; Fournier, Mathieu

    -neutral second moments, and the price of co-kurtosis risk corresponds to the spread between the physical and the risk-neutral third moments. The option-based estimates of the prices of risk lead to reasonable values of the associated risk premia. An out-of-sample analysis of factor models with co-skewness and co......We show that the prices of risk for factors that are nonlinear in the market return are readily obtained using index option prices. We apply this insight to the price of co-skewness and co-kurtosis risk. The price of co-skewness risk corresponds to the spread between the physical and the risk......-kurtosis risk indicates that the new estimates of the price of risk improve the models performance. Models with higher-order market moments also robustly outperform standard competitors such as the CAPM and the Fama-French model....

  6. Option-Based Estimation of the Price of Co-Skewness and Co-Kurtosis Risk

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Fournier, Mathieu; Jacobs, Kris

    -neutral second moments, and the price of co-kurtosis risk corresponds to the spread between the physical and the risk-neutral third moments. The option-based estimates of the prices of risk lead to reasonable values of the associated risk premia. An out-of-sample analysis of factor models with co-skewness and co......We show that the prices of risk for factors that are nonlinear in the market return are readily obtained using index option prices. We apply this insight to the price of co-skewness and co-kurtosis risk. The price of co-skewness risk corresponds to the spread between the physical and the risk......-kurtosis risk indicates that the new estimates of the price of risk improve the models' performance. Models with higher-order market moments also robustly outperform standard competitors such as the CAPM and the Fama-French model....

  7. The Earnings/Price Risk Factor in Capital Asset Pricing Models

    Directory of Open Access Journals (Sweden)

    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.

  8. Output Price Risk, Material Input Price Risk, and Price Margins: Evidence from the US Catfish Industry.

    Directory of Open Access Journals (Sweden)

    David Bouras

    2017-07-01

    Full Text Available Aim/purpose - To develop a conceptual model for analyzing the impact of output price risk and material input price risk on price margins. Design/methodology/approach - To analyze the combined effect of output price risk and material input risk on price margins, we use a series of comparative static analyses, GARCH models, and data ranging from 1990/01 to 2012/12. Findings - The theoretical results indicate that the impact of output price risk and the impact of material input price risk on price margins are ambiguous and, to a great extent, hinge on the correlation between output price and material input price. The empirical results show that whole frozen catfish price risk and live catfish price risk negatively affect the price margin for frozen catfish. The empirical results, however, indicate that the risk of the price of live catfish affects markedly the price margin for frozen whole catfish in contrast to the impact of the risk of the price of frozen whole catfish. Research implications/limitations - The empirical results have significant implications for managerial decision-making especially when crafting strategies for improving price margins. Accordingly, in order to beef up the price margin for frozen whole catfish, catfish processors may consider engaging in vertical integration. This paper has some limitations: first, it assumes that firms operate in competitive markets; second, it assumes that firms produce and sell a single product. Originality/value/contribution - Unlike earlier studies that focused solely on the effect of output price risk on price margins, this paper analyzes theoretically and empirically the impact of output price risk and material input price risk on price margins.

  9. Proceedings: 1996 EPRI conference on innovative approaches to electricity pricing: Managing the transition to market-based pricing

    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

  10. Accounting for fuel price risk: Using forward natural gas prices instead of gas price forecasts to compare renewable to natural gas-fired generation

    Energy Technology Data Exchange (ETDEWEB)

    Bolinger, Mark; Wiser, Ryan; Golove, William

    2003-08-13

    Against the backdrop of increasingly volatile natural gas prices, renewable energy resources, which by their nature are immune to natural gas fuel price risk, provide a real economic benefit. Unlike many contracts for natural gas-fired generation, renewable generation is typically sold under fixed-price contracts. Assuming that electricity consumers value long-term price stability, a utility or other retail electricity supplier that is looking to expand its resource portfolio (or a policymaker interested in evaluating different resource options) should therefore compare the cost of fixed-price renewable generation to the hedged or guaranteed cost of new natural gas-fired generation, rather than to projected costs based on uncertain gas price forecasts. To do otherwise would be to compare apples to oranges: by their nature, renewable resources carry no natural gas fuel price risk, and if the market values that attribute, then the most appropriate comparison is to the hedged cost of natural gas-fired generation. Nonetheless, utilities and others often compare the costs of renewable to gas-fired generation using as their fuel price input long-term gas price forecasts that are inherently uncertain, rather than long-term natural gas forward prices that can actually be locked in. This practice raises the critical question of how these two price streams compare. If they are similar, then one might conclude that forecast-based modeling and planning exercises are in fact approximating an apples-to-apples comparison, and no further consideration is necessary. If, however, natural gas forward prices systematically differ from price forecasts, then the use of such forecasts in planning and modeling exercises will yield results that are biased in favor of either renewable (if forwards < forecasts) or natural gas-fired generation (if forwards > forecasts). In this report we compare the cost of hedging natural gas price risk through traditional gas-based hedging instruments (e

  11. Pricing Chinese Convertible Bonds with Dynamic Credit Risk

    Directory of Open Access Journals (Sweden)

    Ping Li

    2014-01-01

    Full Text Available To price convertible bonds more precisely, least squares Monte Carlo (LSM method is used in this paper for its advantage in handling the dependence of derivatives on the path, and dynamic credit risk is used to replace the fixed one to make the value of convertible bonds reflect the real credit risk. In the empirical study, we price convertible bonds based on static credit risk and dynamic credit risk, respectively. Empirical results indicate that the ICBC convertible bond has been overpriced, resulting from the underestimation of credit risk. In addition, when there is an issue of dividend, the conversion price will change in China's convertible bonds, while it does not change in the international convertible bonds. So we also empirically study the difference between the convertible bond's prices by assuming whether the conversion price changes or not.

  12. House price risk and the hedging benefits of home Ownership

    NARCIS (Netherlands)

    Dröes, M.I.; Hassink, W.H.J.

    2013-01-01

    Using a repeat-sales methodology, this paper finds that estimates of house price risk based on aggregate house price indices substantially underestimate the true size of house price risk. This is the result of the fact that aggregate house price indices average away the idiosyncratic volatility in

  13. CREDIT RISK MINIMIZATION WAYS AND PRICING OF BANKING SERVICES

    Directory of Open Access Journals (Sweden)

    V. E. Gladkova

    2011-01-01

    Full Text Available Accurate accounting of own expenses on rendering banking services and forming reasonable prices for them make it possible for commercial banks to adequately react to market situation changes. Credit risk minimization comprises: credit rationing (in Russia according to RF Central Bank norms; credit diversification; credit structuring; and forming reserves to cover respective bank risks (also in accordance with RF CB documents. Effective is bank credit hedging (insuring through credit derivatives. Most advanced at international finance markets are such risk minimization systems as Basel-II and IRBA. Pricing models based on individual assessment of each borrower’s risk class (Risk Based Pricing approach are widely used.

  14. Estimating the commodity market price of risk for energy prices

    International Nuclear Information System (INIS)

    Kolos, Sergey P.; Ronn, Ehud I.

    2008-01-01

    The purpose of this paper is to estimate the ''market price of risk'' (MPR) for energy commodities, the ratio of expected return to standard deviation. The MPR sign determines whether energy forward prices are upward- or downward-biased predictors of expected spot prices. We estimate MPRs using spot and futures prices, while accounting for the Samuelson effect. We find long-term MPRs generally positive and short-term negative, consistent with positive energy betas and hedging, respectively. In spot electricity markets, MPRs in Day-Ahead Prices agree with short-dated futures. Our results relate risk premia to informed hedging decisions, and futures prices to forecast/expected prices. (author)

  15. Analyzing the Risks Embedded in Option Prices with rndfittool

    DEFF Research Database (Denmark)

    Barletta, Andrea; Santucci de Magistris, Paolo

    2018-01-01

    This paper introduces a new computational tool for the analysis of the risks embedded in a set of prices of European-style options. The software enables the estimation of the risk-neutral density (RND) from the observed option prices by means of orthogonal polynomial expansions. Orthogonal...... polynomials offer a viable alternative to more standard techniques based on interpolation and estimation of the second-order derivatives of option prices. The app rndfittool is available on GitHub and its usage is illustrated with examples based on real data....

  16. Quantifying price risk of electricity retailer based on CAPM and RAROC methodology

    International Nuclear Information System (INIS)

    Karandikar, R.G.; Khaparde, S.A.; Kulkarni, S.V.

    2007-01-01

    In restructured electricity markets, electricity retailers set up contracts with generation companies (GENCOs) and with end users to meet their load requirements at agreed upon tariff. The retailers invest consumer payments as capital in the volatile competitive market. In this paper, a model for quantifying price risk of electricity retailer is proposed. An IEEE 30 Bus test system is used to demonstrate the model. The Capital Asset Pricing Model (CAPM) is demonstrated to determine the retail electricity price for the end users. The factor Risk Adjusted Recovery on Capital (RAROC) is used to quantify the price risk involved. The methodology proposed in this paper can be used by retailer while submitting proposal for electricity tariff to the regulatory authority. (author)

  17. Quantifying price risk of electricity retailer based on CAPM and RAROC methodology

    Energy Technology Data Exchange (ETDEWEB)

    Karandikar, R.G.; Khaparde, S.A.; Kulkarni, S.V. [Electrical Engineering Department, Indian Institute of Technology Bombay, Mumbai 400 076 (India)

    2007-12-15

    In restructured electricity markets, electricity retailers set up contracts with generation companies (GENCOs) and with end users to meet their load requirements at agreed upon tariff. The retailers invest consumer payments as capital in the volatile competitive market. In this paper, a model for quantifying price risk of electricity retailer is proposed. An IEEE 30 Bus test system is used to demonstrate the model. The Capital Asset Pricing Model (CAPM) is demonstrated to determine the retail electricity price for the end users. The factor Risk Adjusted Recovery on Capital (RAROC) is used to quantify the price risk involved. The methodology proposed in this paper can be used by retailer while submitting proposal for electricity tariff to the regulatory authority. (author)

  18. Effectiveness of the management of price risk methodologies for the corn market based on trading signals

    Directory of Open Access Journals (Sweden)

    W. Rossouw

    2013-03-01

    Full Text Available Corn production is scattered geographically over various continents, but most of it is grown in the United States. As such, the world price of corn futures contracts is largely dominated by North American corn prices as traded on the Chicago Board of Trade. In recent years, this market has been characterised by an increase in price volatility and magnitude of price movement as a result of decreasing stock levels. The development and implementation of an effective and successful derivative price risk management strategy based on the Chicago Board of Trade corn futures contract will therefore be of inestimable value to market stakeholders worldwide. The research focused on the efficient market hypothesis and the possibility of contesting this phenomenon through an application of a derivative price risk management methodology. The methodology is based on a combination of an analysis of market trends and technical oscillators with the objective of generating returns superior to that of a market benchmark. The study found that market participants are currently unable to exploit price movement in a manner which results in returns that contest the notion of efficient markets. The methodology proposed, however, does allow the user to consistently achieve returns superior to that of a predetermined market benchmark. The benchmark price for the purposes of this study was the average price offered by the market over the contract lifetime, and as such, the efficient market hypothesis was successfully contested

  19. Price Risk and Risk Management in Agriculture

    Directory of Open Access Journals (Sweden)

    Udo Broll

    2013-06-01

    Full Text Available This note studies the risk-management decisions of a risk-averse farmer. The farmer faces multiple sources of price uncertainty. He sells commodities to two markets at two prices, but only one of these markets has a futures market. We show that the farmer’s optimal commodity futures market position, i.e., a cross-hedge strategy, is actually an over-hedge, a full-hedge, or an under-hedge strategy, depending on whether the two prices are strongly positively correlated, uncorrelated, or negatively correlated, respectively.

  20. 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)

  1. Market price of risk implied by Asian-style electricity options and futures

    International Nuclear Information System (INIS)

    Weron, Rafal

    2008-01-01

    In this paper we propose a jump-diffusion type model which recovers the main characteristics of electricity spot price dynamics in the Nordic market, including seasonality, mean-reversion and spiky behavior. We show how the calibration of the market price of risk to actively traded futures contracts allows for efficient valuation of Nord Pool's Asian-style options written on the spot electricity price. Furthermore, we study the evolution of the market price of risk (and the risk premium) over a three year time period and compare the obtained results with those reported in the literature. (author)

  2. Market price of risk implied by Asian-style electricity options and futures

    Energy Technology Data Exchange (ETDEWEB)

    Weron, Rafal [Hugo Steinhaus Center for Stochastic Methods, Institute of Mathematics and Computer Science, Wroclaw University of Technology, 50-370 Wroclaw (Poland)

    2008-05-15

    In this paper we propose a jump-diffusion type model which recovers the main characteristics of electricity spot price dynamics in the Nordic market, including seasonality, mean-reversion and spiky behavior. We show how the calibration of the market price of risk to actively traded futures contracts allows for efficient valuation of Nord Pool's Asian-style options written on the spot electricity price. Furthermore, we study the evolution of the market price of risk (and the risk premium) over a three year time period and compare the obtained results with those reported in the literature. (author)

  3. Solutions for wood-based bio-energy price discovery

    Energy Technology Data Exchange (ETDEWEB)

    Teraes, Timo [FOEX Indexes Ltd., Helsinki (Finland)], e-mail: timo@foex.fi

    2012-11-01

    Energy prices are highly volatile. This volatility can have serious ill-effects on the profitability of companies engaged in the energy business. There are, however, a number of price risk management tools which can be used to reduce the problems caused by price volatility. International trade of wood pellets and wood chips is rapidly growing. A good price transparency helps in developing the trade further. In order to meet the renewable energy targets within the EU, further growth of volumes is needed, at least within Europe and from overseas supply sources to the European markets. Reliable price indices are a central element in price risk management and in general price discovery. Exchanges have provided, in the past, the most widely known price discovery systems. Since 1990's, an increasing number of price risk management tools has been based on cash settlement concept. Cash settlement requires high quality benchmark price indices. These have been developed by the exchanges themselves, by trade press and by independent price benchmark provider companies. The best known of these benchmarks in forest industry and now also in wood-based bioenergy products are the PIX indices, provided by FOEX Indexes Ltd. This presentation discusses the key requirements for a good price index and the different ways of using the indices. Price relationships between wood chip prices and pellet prices are also discussed as will be the outlook for the future volume growth and trade flows in woodchips and pellets mainly from the European perspective.

  4. Pricing Vulnerable Options with Market Prices of Common Jump Risks under Regime-Switching Models

    Directory of Open Access Journals (Sweden)

    Miao Han

    2018-01-01

    Full Text Available This paper investigates the valuation of vulnerable European options considering the market prices of common systematic jump risks under regime-switching jump-diffusion models. The way of regime-switching Esscher transform is adopted to identify an equivalent martingale measure for pricing vulnerable European options. Explicit analytical pricing formulae for vulnerable European options are derived by risk-neutral pricing theory. For comparison, the other two cases are also considered separately. The first case considers all jump risks as unsystematic risks while the second one assumes all jumps risks to be systematic risks. Numerical examples for the valuation of vulnerable European options are provided to illustrate our results and indicate the influence of the market prices of jump risks on the valuation of vulnerable European options.

  5. Oil prices and long-run risk

    Science.gov (United States)

    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.

  6. Market based solutions for power pricing

    International Nuclear Information System (INIS)

    Wangensteen, Ivar

    2002-06-01

    The report examines how the price for effect reserves, spot market power and regulated power is formed provided ideal market conditions rule. Primarily the price determining factors in a market for power reserves are examined and how the connection between this market and the energy market (the spot market) is. In a free market there would be a balance between what the actors may obtain by operating in the open market for power reserves/regulated power on the one hand and the market for spot power on the other. Primarily we suppose that the desired amount of power reserve is known. Secondly the problem constellation is extended to comprise the size of the effect reserves i.e. the optimising of the requirement to the power reserves. The optimal amount of power reserves is obtained when there is a balance between the cost and the benefit. This optimal balance is achieved when expected macro economical loss due to outfacing balances against the cost of maintaining larger reserves. By using a simple model it is demonstrated that a system operator regulates the maximal price in the regulated market and this equals the rationing price. The actors will offer sufficient reserves even if the reserve price is zero (provided risk neutrality). If the maximal price for regulated power is lower the price of effect reserves will rise. Based on the same simple model calculations are made for how short and long term market balance will be for increasing demands

  7. 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)

  8. Electricity market pricing, risk hedging and modeling

    Science.gov (United States)

    Cheng, Xu

    In this dissertation, we investigate the pricing, price risk hedging/arbitrage, and simplified system modeling for a centralized LMP-based electricity market. In an LMP-based market model, the full AC power flow model and the DC power flow model are most widely used to represent the transmission system. We investigate the differences of dispatching results, congestion pattern, and LMPs for the two power flow models. An appropriate LMP decomposition scheme to quantify the marginal costs of the congestion and real power losses is critical for the implementation of financial risk hedging markets. However, the traditional LMP decomposition heavily depends on the slack bus selection. In this dissertation we propose a slack-independent scheme to break LMP down into energy, congestion, and marginal loss components by analyzing the actual marginal cost of each bus at the optimal solution point. The physical and economic meanings of the marginal effect at each bus provide accurate price information for both congestion and losses, and thus the slack-dependency of the traditional scheme is eliminated. With electricity priced at the margin instead of the average value, the market operator typically collects more revenue from power sellers than that paid to power buyers. According to the LMP decomposition results, the revenue surplus is then divided into two parts: congestion charge surplus and marginal loss revenue surplus. We apply the LMP decomposition results to the financial tools, such as financial transmission right (FTR) and loss hedging right (LHR), which have been introduced to hedge against price risks associated to congestion and losses, to construct a full price risk hedging portfolio. The two-settlement market structure and the introduction of financial tools inevitably create market manipulation opportunities. We investigate several possible market manipulation behaviors by virtual bidding and propose a market monitor approach to identify and quantify such

  9. Evaluation of different hedging strategies for commodity price risks of industrial cogeneration plants

    International Nuclear Information System (INIS)

    Palzer, Andreas; Westner, Günther; Madlener, Reinhard

    2013-01-01

    In this paper, we design and evaluate eight different strategies for hedging commodity price risks of industrial cogeneration plants. Price developments are parameterized based on EEX data from 2008 to 2011. The probability distributions derived are used to determine the value-at-risk (VaR) of the individual strategies, which are in a final step combined in a mean-variance portfolio analysis for determining the most efficient hedging strategy. We find that the strategy adopted can have a marked influence on the remaining price risk. Quarter futures are found to be particularly well suited for reducing market price risk. In contrast, spot trading of CO 2 certificates is found to be preferable compared to forward market trading. Finally, portfolio optimization shows that a mix of various hedging strategies can further improve the profitability of a heat-based cogeneration plant. - Highlights: • Evaluation of commodity price risk hedging strategies for industrial cogeneration. • Value-at-risk analysis of eight different hedging strategies. • Mean-variance portfolio analysis for determining the optimal hedging strategy mix. • A mix of hedging strategies further improves profitability of heat-based CHP

  10. Pricing of Asian temperature risk

    OpenAIRE

    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...

  11. Religion and stock price crash risk: Evidence

    Directory of Open Access Journals (Sweden)

    Wenfei Li

    2016-09-01

    Full Text Available This paper investigates whether religious traditions influence firm-specific crash risk in China. Using a sample of A-share listed firms from 2003 to 2013, we provide evidence that the more intense the religious environment, the lower the stock price crash risk, implying that religion plays an important role in Chinese corporate governance. Further, we find that (1 religion affects stock price crash risk by reducing earnings management and the management perk problem; (2 different religions have different effects, and Taoism, in particular, is unrelated to crash risk; and (3 the effects of religion are more pronounced with higher quality corporate governance and a stronger legal environment. Religion constrains the management agency problem, thus reducing stock price crash risk in China. Our paper enriches the literature on stock price crash risk and religion, and on new economic geography.

  12. Uranium price reporting systems

    International Nuclear Information System (INIS)

    1987-09-01

    This report describes the systems for uranium price reporting currently available to the uranium industry. The report restricts itself to prices for U 3 O 8 natural uranium concentrates. Most purchases of natural uranium by utilities, and sales by producers, are conducted in this form. The bulk of uranium in electricity generation is enriched before use, and is converted to uranium hexafluoride, UF 6 , prior to enrichment. Some uranium is traded as UF 6 or as enriched uranium, particularly in the 'secondary' market. Prices for UF 6 and enriched uranium are not considered directly in this report. However, where transactions in UF 6 influence the reported price of U 3 O 8 this influence is taken into account. Unless otherwise indicated, the terms uranium and natural uranium used here refer exclusively to U 3 O 8 . (author)

  13. Application of adversarial risk analysis model in pricing strategies with remanufacturing

    Directory of Open Access Journals (Sweden)

    Liurui Deng

    2015-01-01

    Full Text Available Purpose: Purpose: This paper mainly focus on the application of adversarial risk analysis (ARA in pricing strategy with remanufacturing. We hope to obtain more realistic results than classical model. Moreover, we also wish that our research improve the development of ARA in pricing strategy of manufacturing or remanufacturing. Approach: In order to gain more actual research, combining adversarial risk analysis, we explore the pricing strategy with remanufacturing based on Stackelberg model. Especially, we build OEM’s 1-order ARA model and further study on manufacturers and remanufacturers’ pricing strategy. Findings: We find the OEM’s 1-order ARA model for the OEM’s product cost C. Besides, we get according manufacturers and remanufacturers’ pricing strategies. Besides, the pricing strategies based on 1-order ARA model have advantage over than the classical model regardless of OEMs and remanufacturers. Research implications: The research on application of ARA imply that we can get more actual results with this kind of modern risk analysis method and ARA can be extensively in pricing strategies of supply chain. Value: Our research improves the application of ARA in remanufacturing industry. Meanwhile, inspired by this analysis, we can also create different ARA models for different parameters. Furthermore, some results and analysis methods can be applied to other pricing strategies of supply chain.

  14. Dairy farmer use of price risk management tools.

    Science.gov (United States)

    Wolf, C A

    2012-07-01

    Volatility in milk and feed prices can adversely affect dairy farm profitability. Many risk management tools are available for use by US dairy farmers. This research uses surveys of Michigan dairy farmers to examine the extent to which price risk management tools have been used, the farm and operator characteristics that explain the use of these tools, and reasons farmers have not used these tools. A 1999 survey was used to benchmark the degree to which dairy producers had used milk and feed price risk management instruments to compare with 2011 use rates. The surveys collected information about the farm characteristics such as herd size, farmland operated, business organization, and solvency position. Farm operator characteristics collected include age, education, and experience. Dairy farmer use of both milk and feed price risk management tools increased between 1999 and 2011. In 2011, herd size was positively related to the use of milk price risk management tools, whereas farms organized as a sole proprietorship were less likely to use them. Also in 2011, herd size and land operated were positively related to feed price risk management tools, whereas operator age was negatively related. Reasons why farmers had not used price risk management tools included basis risk, cost, lack of management time, cooperative membership, and lack of understanding. Conclusions include the need for educational programming on price risk management tools and a broader exploration of dairy farm risk management programs. Copyright © 2012 American Dairy Science Association. Published by Elsevier Inc. All rights reserved.

  15. 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

  16. 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)

  17. Risk Measure and Early-Warning System of China's Stock Market Based on Price-Earnings Ratio and Price-to-Book Ratio

    Directory of Open Access Journals (Sweden)

    Rongda Chen

    2014-01-01

    Full Text Available Based on the actual situation of China's stock market, this paper proposes a method for measuring the stock market's risk and early-warning methods which are based on price-to-earnings ratio and price-to-book ratio. The study found that the method of VaR can capture the bigger daily drops in a period, and if the drop is at the periodical top of the index, the probability of a sharp index decline will be very high. It also confirmed that the method is feasible and practical for people to use. In the long run, this method really can send early-warning signals of sharp decline; the warning levels increase as the index rises. The study also found that index will not fall after every warning but will continue going forward because of inertia, particularly during a big trend.

  18. Policy interactions, risk and price formation in carbon markets

    International Nuclear Information System (INIS)

    Blyth, William; Bunn, Derek; Kettunen, Janne; Wilson, Tom

    2009-01-01

    Carbon pricing is an important mechanism for providing companies with incentives to invest in carbon abatement. Price formation in carbon markets involves a complex interplay between policy targets, dynamic technology costs, and market rules. Carbon pricing may under-deliver investment due to R and D externalities, requiring additional policies which themselves affect market prices. Also, abatement costs depend on the extent of technology deployment due to learning-by-doing. This paper introduces an analytical framework based on marginal abatement cost (MAC) curves with the aim of providing an intuitive understanding of the key dynamics and risk factors in carbon markets. The framework extends the usual static MAC representation of the market to incorporate policy interactions and some technology cost dynamics. The analysis indicates that supporting large-scale deployment of mature abatement technologies suppresses the marginal cost of abatement, sometimes to zero, whilst increasing total abatement costs. However, support for early stage R and D may reduce both total abatement cost and carbon price risk. An important aspect of the analysis is in elevating risk management considerations into energy policy formation, as the results of the stochastic modelling indicate wide distributions for the emergence of carbon prices and public costs around the policy expectations. (author)

  19. Statistical properties of country risk ratings under oil price volatility: Evidence from selected oil-exporting countries

    International Nuclear Information System (INIS)

    Liu, Chang; Sun, Xiaolei; Chen, Jianming; Li, Jianping

    2016-01-01

    This paper focuses on the application of panel models for identification and analysis of influence of oil price volatility on statistical properties of country risk ratings which stem from uncertainty of macroeconomic fluctuations. Firstly, two statistical properties of country risk ratings, volatility clustering and asymmetrical revision were identified in a theoretical framework based on Cruces (2006). Secondly, considering the oil price volatility, numerical experiments were conducted based on extended models to test and verify specific properties of country risk ratings in selected oil-exporting countries. Empirical results suggest that properties of country risk remain comparatively steady despite oil price volatility. It is also found that the oil price volatility can obviously exaggerate the country risk volatility, as it happened during 2007–2009. Country clustering based on the properties of country risk ratings shows that the selected countries maintain a significant clustering tendency. These features are of great importance for estimating risk exposure of international trade and investments in oil export during extreme situations. - Highlights: •Relationship between oil price volatility and country risk is the focus. •An extended model based on Cruces (2006) is proposed. •Volatility clustering and asymmetrical revision of country risk ratings is explored. •Oil price volatility can obviously exaggerate properties of country risk volatility.

  20. Rent pricing decision support mathematical model for finance leases under effective risks

    Directory of Open Access Journals (Sweden)

    Rabbani Masoud

    2015-01-01

    Full Text Available Nowadays, leasing has become an increasingly important and popular method for equipment acquisition. But, because of the rent pricing difficulties and some risks that affect the lessor and lessee's decision making, there are many people that still tend to buy equipment instead of lease it. In this paper we explore how risk can affect the leasing issue support mathematical model. For this purpose, we consider three types of risk; Credit risk, Transaction risk and Risk based pricing. In particular, our focus was on how to make decision about rent pricing in a leasing problem with different customers, various quality levels and different pricing methods. Finally, the mathematical model has been solved by Genetic Algorithm that is a search heuristic to optimize the problem. This algorithm was coded in MATLAB® R2012a to provide the best set of results.

  1. Value-based pricing

    OpenAIRE

    Netseva-Porcheva Tatyana

    2010-01-01

    The main aim of the paper is to present the value-based pricing. Therefore, the comparison between two approaches of pricing is made - cost-based pricing and value-based pricing. The 'Price sensitively meter' is presented. The other topic of the paper is the perceived value - meaning of the perceived value, the components of perceived value, the determination of perceived value and the increasing of perceived value. In addition, the best company strategies in matrix 'value-cost' are outlined. .

  2. Value-based pricing

    Directory of Open Access Journals (Sweden)

    Netseva-Porcheva Tatyana

    2010-01-01

    Full Text Available The main aim of the paper is to present the value-based pricing. Therefore, the comparison between two approaches of pricing is made - cost-based pricing and value-based pricing. The 'Price sensitively meter' is presented. The other topic of the paper is the perceived value - meaning of the perceived value, the components of perceived value, the determination of perceived value and the increasing of perceived value. In addition, the best company strategies in matrix 'value-cost' are outlined. .

  3. Regime-Switching Risk: To Price or Not to Price?

    Directory of Open Access Journals (Sweden)

    Tak Kuen Siu

    2011-01-01

    “normative” issues to be addressed in pricing contingent claims under a Markovian, regime-switching, Black-Scholes-Merton model. We address this issue using a minimal relative entropy approach. Firstly, we apply a martingale representation for a double martingale to characterize the canonical space of equivalent martingale measures which may be viewed as the largest space of equivalent martingale measures to incorporate both the diffusion risk and the regime-switching risk. Then we show that an optimal equivalent martingale measure over the canonical space selected by minimizing the relative entropy between an equivalent martingale measure and the real-world probability measure does not price the regime-switching risk. The optimal measure also justifies the use of the Esscher transform for option valuation in the regime-switching market.

  4. Accounting for fuel price risk when comparing renewable togas-fired generation: the role of forward natural gas prices

    Energy Technology Data Exchange (ETDEWEB)

    Bolinger, Mark; Wiser, Ryan; Golove, William

    2004-07-17

    Unlike natural gas-fired generation, renewable generation (e.g., from wind, solar, and geothermal power) is largely immune to fuel price risk. If ratepayers are rational and value long-term price stability, then--contrary to common practice--any comparison of the levelized cost of renewable to gas-fired generation should be based on a hedged gas price input, rather than an uncertain gas price forecast. This paper compares natural gas prices that can be locked in through futures, swaps, and physical supply contracts to contemporaneous long-term forecasts of spot gas prices. We find that from 2000-2003, forward gas prices for terms of 2-10 years have been considerably higher than most contemporaneous long-term gas price forecasts. This difference is striking, and implies that comparisons between renewable and gas-fired generation based on these forecasts over this period have arguably yielded results that are biased in favor of gas-fired generation.

  5. THE ROLE OF CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE TOWARD COMPANY STOCK PRICE CRASH RISK

    Directory of Open Access Journals (Sweden)

    Handiyono M.Y.

    2017-08-01

    Full Text Available This study aims to analyze the influence of corporate social responsibility disclosure to company stock price crash risk. If socially responsible companies are committed to high standards of information transparency and do not hide bad news, they will have a low risk of crash. However, if the manager reports CSR to distract the stakeholder from bad news, the CSR will be associated with a high risk of the company stock crash. The study was conducted at Indonesian manufacturing companies registered on the IDX (BEI for the 2010-2015 period Hypothesis testing technique used a multiple regression analysis. The results showed that activities of the corporate social responsibility disclosure by the company did not have a significant relationship to the risk of the company stock price crash. This study also found that companies that conduct and report social responsibility activities simultaneously have a low risk of crashes on their company's stock price but cannot prove the relationship between the two. The implication is that social accountability reports in Indonesia are still limited to reports only and have not been considered as anything that can contribute to add value to the company or that may prevent the company from unethical behavior.

  6. Crude oil pricing report, issue 89, December 1992

    International Nuclear Information System (INIS)

    1992-01-01

    This report is prepared by the Canadian Oil Markets and Emergency Planning Division (COMEP), Energy, Mines and Resources Canada. It provides a reference for domestic and imported crude oil prices in Canadian markets and illustrates the competitive position of Canadian crude in the U.S. market. The information in this report is in part based on the Crude Oil Pricing Survey (COPS), conducted by COMEP, of Canadian refiners' domestic crude oil purchases, refinery receipts, imports and data from trade publications as well as industry pricing bulletins. 8 tabs

  7. Accounting for fuel price risk when comparing renewable to gas-fired generation: the role of forward natural gas prices

    International Nuclear Information System (INIS)

    Bolinger, Mark; Wiser, Ryan; Golove, William

    2006-01-01

    Unlike natural gas-fired generation, renewable generation (e.g., from wind, solar, and geothermal power) is largely immune to fuel price risk. If ratepayers are rational and value long-term price stability, then-contrary to common practice-any comparison of the levelized cost of renewable to gas-fired generation should be based on a hedged gas price input, rather than an uncertain gas price forecast. This paper compares natural gas prices that can be locked in through futures, swaps, and physical supply contracts to contemporaneous long-term forecasts of spot gas prices. We find that from 2000 to 2003, forward gas prices for terms of 2-10 years have been considerably higher than most contemporaneous long-term gas price forecasts. This difference is striking, and implies that comparisons between renewable and gas-fired generation based on these forecasts over this period have arguably yielded results that are biased in favor of gas-fired generation

  8. PERCEIVED RISK, PRICE AND ONLINE TRAVEL AGENCIES: DOES PRICE ALWAYS MATTER?

    Directory of Open Access Journals (Sweden)

    Patricea Elena BERTEA

    2011-01-01

    Full Text Available The present study analyzes the influence of price level in the case of onlineshopping for travel services. The methodology used is a quasi experimentdeveloped in the online environment. The analysis is made within groups andfollows three scenarios which depend on the level of brand awareness.Inside each scenario price takes two levels: similar to competition andsmaller than competition. Results show that price does not have an influenceon all types of perceived risk and that its influence depends also on the brandawareness component.

  9. Economic risk-based analysis: Effect of technical and market price uncertainties on the production of glycerol-based isobutanol

    DEFF Research Database (Denmark)

    Loureiro da Costa Lira Gargalo, Carina; Gernaey, Krist; Sin, Gürkan

    2016-01-01

    to propagate the market price and technical uncertainties to the economic indicator calculations and to quantify the respective economic risk. The results clearly indicated that under the given market price uncertainties, the probability of obtaining a negative NPV is 0.95. This is a very high probability...

  10. The Effect of Managerial Ability on Future Stock Price Crash Risk: Evidence from Korea

    Directory of Open Access Journals (Sweden)

    Soo Yeon Park

    2017-12-01

    Full Text Available This study examines the effect of managerial ability on subsequent stock price crash risk using listed firm data in Korea. Compared to some financially advanced countries, the influence of managers is particularly more powerful in Korea, as ownership and management are not effectively separate in most Korean firms. In addition, we considered the effect of large business groups called Chaebol, which is family-run conglomerates with unique corporate governance system that hugely affect the Korean economy. It is important to recognize determinants of the stock price crash risk which would result in doubt on going concern to enhance the company’s sustainable management. Hence, this study focuses on the managerial ability as one of the main factors of the stock price crash risk. We use the measures of firm-specific stock price crash risk based on Hutton et al. (2009. Managerial ability is estimated through a Data Envelopment Analysis (DEA and tobit regressions following Demerjian et al. (2012. From the empirical tests, there is a negative association between managerial ability and stock price crash risk. This suggests that managers with a higher ability release more voluntary disclosure to signal their ability, ultimately lowering the subsequent stock price crash risk. We also find that firms in large business groups, Chaebol, weaken the negative association between managerial ability and subsequent stock price crash risk.

  11. An island apart? Risks and prices in the Australian cryptomarket drug trade.

    Science.gov (United States)

    Cunliffe, Jack; Martin, James; Décary-Hétu, David; Aldridge, Judith

    2017-12-01

    Australia has a reputation as an anomaly with regard to cryptomarket drug trading, with seemingly disproportionately high levels of activity given its relatively small size, high prices and anecdotal accounts of it being a destination where many foreign-based vendors will not sell. This paper aims to investigate these claims from a risk and prices perspective. By analysing data for over 60,000 drug products available for purchase from eight cryptomarkets in January 2016 this work builds a descriptive picture of the Australian online market in comparison to the rest of the world, before moving onto analyse the prices of drugs available to Australian consumers, both online and though conventional drug supply routes. Results show that the Australian online illicit drugs market is of considerable size, internally isolated and with methamphetamine sales being particularly large by comparison to other countries. Australian cryptomarket vendors sell drugs at significantly higher prices than those listed by their foreign counterparts. Online prices are however broadly comparable to street prices, with the exception of methamphetamine where prices appear to be much lower online. These findings indicate that the perceived stringency of Australian border protection inadvertently increases the competitiveness and local market share of domestic cryptomarket vendors via a consumer side 'risk tariff', challenging the traditionally vendor-oriented drugs risk and prices framework. Copyright © 2017 Elsevier B.V. All rights reserved.

  12. Strategies for risk management using the paper markets [to minimize oil price risks

    International Nuclear Information System (INIS)

    Annesley, M.

    1993-01-01

    The severe price movement experienced within energy markets during the last few years have awakened significant interest in hedging, and other uses of the futures, options, forward and derivative markets, to minimise price risk. There are two basic strands of structure of the markets now available for risk mangement. The first of these is the Exchange markets (IPE, NYMEX, and SIMEX) providing various futures and options alternatives; the second is the forward cargo contracts. The liquidity in these forward cargo markets, is variable but the contracts do provide some hedging and price risk management opportunities, which supplement and complement the Exchange markets, particularly for the professional risk managers and market makers. A range of forward markets is potentially available serving all regions. The more recent development of widely used derivative contracts, notably the swaps and price triggering in physical sale contracts, gives further alternatives from which interested companies may choose. The derivative market, although by definition off-exchange' may use either the Exchanges, forward markets or various oil publications for establishing their prices. Therefore, Exchange futures and options, forward markets and either standard or individually tailored derivatives all provide possible solutions to the risk management needs of coping with today's volatile prices. (author)

  13. Quantifying Correlation Uncertainty Risk in Credit Derivatives Pricing

    Directory of Open Access Journals (Sweden)

    Colin Turfus

    2018-04-01

    Full Text Available We propose a simple but practical methodology for the quantification of correlation risk in the context of credit derivatives pricing and credit valuation adjustment (CVA, where the correlation between rates and credit is often uncertain or unmodelled. We take the rates model to be Hull–White (normal and the credit model to be Black–Karasinski (lognormal. We summarise recent work furnishing highly accurate analytic pricing formulae for credit default swaps (CDS including with defaultable Libor flows, extending this to the situation where they are capped and/or floored. We also consider the pricing of contingent CDS with an interest rate swap underlying. We derive therefrom explicit expressions showing how the dependence of model prices on the uncertain parameter(s can be captured in analytic formulae that are readily amenable to computation without recourse to Monte Carlo or lattice-based computation. In so doing, we crucially take into account the impact on model calibration of the uncertain (or unmodelled parameters.

  14. A Dynamic Programming Approach for Pricing Weather Derivatives under Issuer Default Risk

    Directory of Open Access Journals (Sweden)

    Wolfgang Karl Härdle

    2017-10-01

    Full Text Available Weather derivatives are contingent claims with payoff based on a pre-specified weather index. Firms exposed to weather risk can transfer it to financial markets via weather derivatives. We develop a utility-based model for pricing baskets of weather derivatives under default risk on the issuer side in over-the-counter markets. In our model, agents maximise the expected utility of their terminal wealth, while they dynamically rebalance their weather portfolios over a finite investment horizon. Using dynamic programming approach, we obtain semi-closed forms for the equilibrium prices of weather derivatives and for the optimal strategies of the agents. We give an example on how to price rainfall derivatives on selected stations in China in the universe of a financial investor and a weather exposed crop insurer.

  15. The evolution of electricity prices in an uncertain world. Contracting and managing the price risk

    International Nuclear Information System (INIS)

    Vassilopoulos, Ph.; Rapin, D.

    2004-01-01

    With the liberalization of the electricity market, the large industrial consumers saw their electric bill changing nature. Before, this price reflected a long term negotiation with the monopoly, now it is established in a free way via wholesale markets. This evolution marks a transfer of the management of price risk from the producer towards the consumer. This change is not in itself a problem if the hedging instruments are adapted. We note a contamination of the price of the derivative products by the spot while at the same time the traditional relation between cash and term is not always valid for electricity because of its non storability. When well even the price of the derivative products would be formed in an autonomous way, it poses a second problem: that of their indexing on price references like Platt's whose result is assimilated more to a survey of large producers than a true confrontation of supply and demand. This article proposes to examine this change of nature and behaviour of electricity prices. After having explained the intrinsically volatile characteristic of spot prices, we will recall that the products in the long term are not always optimal solutions to decrease this price risk. Lastly, we will highlight a solution of skirting at the risks mentioned above: contracting between producers and consumers. (authors)

  16. Risk Pricing and Profit Maximization of Insurance Companies ...

    African Journals Online (AJOL)

    The research investigates the impact of pricing of risk on the profitability of Nigeria insurance market and also the relationship between operation expenses and profitability of the non-life insurance market in Nigeria. Results show that economy, competition and government regulation have effect on pricing of risk. Also, it was ...

  17. Return and Risk of Pairs Trading Using a Simulation-Based Bayesian Procedure for Predicting Stable Ratios of Stock Prices

    Directory of Open Access Journals (Sweden)

    David Ardia

    2016-03-01

    Full Text Available We investigate the direct connection between the uncertainty related to estimated stable ratios of stock prices and risk and return of two pairs trading strategies: a conditional statistical arbitrage method and an implicit arbitrage one. A simulation-based Bayesian procedure is introduced for predicting stable stock price ratios, defined in a cointegration model. Using this class of models and the proposed inferential technique, we are able to connect estimation and model uncertainty with risk and return of stock trading. In terms of methodology, we show the effect that using an encompassing prior, which is shown to be equivalent to a Jeffreys’ prior, has under an orthogonal normalization for the selection of pairs of cointegrated stock prices and further, its effect for the estimation and prediction of the spread between cointegrated stock prices. We distinguish between models with a normal and Student t distribution since the latter typically provides a better description of daily changes of prices on financial markets. As an empirical application, stocks are used that are ingredients of the Dow Jones Composite Average index. The results show that normalization has little effect on the selection of pairs of cointegrated stocks on the basis of Bayes factors. However, the results stress the importance of the orthogonal normalization for the estimation and prediction of the spread—the deviation from the equilibrium relationship—which leads to better results in terms of profit per capital engagement and risk than using a standard linear normalization.

  18. State energy price and expenditure report 1990

    International Nuclear Information System (INIS)

    1992-01-01

    The State Energy Price and Expenditure Report (SEPER) presents energy price and expenditure estimates individually for the 50 States and the District of Columbia and in aggregate for the United States. The estimates are provided by energy source and economic sector. This report is an update of the State Energy Price and Expenditure Report 1989 published in September 1991. Energy price and expenditure estimates are published for the years 1970, 1975, 1980, and 1985 through 1990. Documentation follows the tables and describes how the price estimates are developed, including sources of data, methods of estimation, and conversion factors applied

  19. Oil price risk management in the 1990s - issues for producers and lenders

    International Nuclear Information System (INIS)

    Lambert, S.

    1994-01-01

    Oil prices have exhibited considerable volatility over the past five or ten years and the management of oil price risk has become an important factor in underpinning the viability of many oil producing operations from both a lender's and investor's perspective. Various oil based hedging products are now available to protect against such volatility, ranging from products which fix forward prices to option based arrangements which set a floor price but retain some (or all) of the potential upside. These products have particular relevance for petroleum companies with limited financial resources or who are looking to limit recourse to particular assets/cash flows. There are a number of techniques which can be successfully combined to mitigate oil price volatility and the most relevant of these to a producer are discussed. The recent development of the Tapis swap and option markets, which have provided flexibility to Australasian producers, is also discussed. Oil based financial products can also be used as a method of funding (e.g. for a development or acquisition) as an alternative to traditional cash based borrowing structures, thus creating a natural hedge against oil price movements. It is estimated that the use of such structures, coupled with a well structured revenue hedging program, can enhance a project's attractiveness from a lender's perspective (particularly with respect to protection against down side movements in oil price) and/or provide greater certainty of returns to producers. A case study of a recent commodity risk management based financing is presented. 1 fig., 6 tabs

  20. Benefits from Liberalisation. Update to EURELECTRIC-KEMA report confirms price reductions for customers

    International Nuclear Information System (INIS)

    2007-07-01

    EURELECTRIC believes it important to consider facts and figures when discussing electricity prices. Electricity markets have delivered - and still deliver - lower prices since the beginning of the liberalisation process for a majority of customer categories. A report drawn up by KEMA on behalf of EURELECTRIC in November 2005 ('Review of European Electricity Prices') looked at price evolution from a European perspective. The figures included in this update are based on that report, updated by KEMA for the years 2005 and 2006. It is important to note that all data on electricity prices used are based on official Eurostat data

  1. Pricing Liquidity Risk with Heterogeneous Investment Horizons

    NARCIS (Netherlands)

    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

  2. Risk pricing practices in finance, insurance and construction

    OpenAIRE

    Laryea, Samuel

    2008-01-01

    A review of current risk pricing practices in the financial, insurance and construction sectors is conducted through a comprehensive literature review. The purpose was to inform a study on risk and price in the tendering processes of contractors: specifically, how contractors take account of risk when they are calculating their bids for construction work. The reference to mainstream literature was in view of construction management research as a field of application rather than a fundamental ...

  3. 12 CFR 327.9 - Assessment risk categories and pricing methods.

    Science.gov (United States)

    2010-01-01

    ... 12 Banks and Banking 4 2010-01-01 2010-01-01 false Assessment risk categories and pricing methods... OF GENERAL POLICY ASSESSMENTS In General § 327.9 Assessment risk categories and pricing methods. (a... and a weighted average of CAMELS component ratings will be multiplied by a corresponding pricing...

  4. An Investigation into the Fundamental Drivers of Pricing of Residential Mortgage Products – A Risk Pricing Viewpoint

    Directory of Open Access Journals (Sweden)

    Harry M Karamujic

    2010-12-01

    Full Text Available Residential mortgage products (also known as home loans pricing has been long understood to be something of a ‘dark art’, requiring judgment and experience, rather than being an exact science. In the last decade, a lot has changed in this field and more and more lenders, primarily the larger lenders, are increasingly looking to make their pricing as exact as possible. Even so, inadequate pricing of residential mortgage products (in particular its substandard risk pricing has been seen as one of major causes of the global financial crisis (GFC and subsequent spectacular banking collapses. The underlying theme of the paper is to exhibit how contemporary lenders, in practice, price their residential mortgage products. While discussing elements of the pricing calculation particular attention was given to the exposition of how contemporary lenders price risks involved in providing home loans. Because of the importance of Basel capital accords to how financial institutions assess and quantify their risks, the paper provides an overview of Basel capital accords. The author envisages that the paper will (i help enhance comprehension of the underlying elements of the pricing calculation and the ways in which these elements relate to each other, (ii scrutinize how contemporary lenders identify and quantify risks and (iii improve consciousness of future changes in interest rates

  5. 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

  6. Pricing Mining Concessions Based on Combined Multinomial Pricing Model

    Directory of Open Access Journals (Sweden)

    Chang Xiao

    2017-01-01

    Full Text Available A combined multinomial pricing model is proposed for pricing mining concession in which the annualized volatility of the price of mineral products follows a multinomial distribution. First, a combined multinomial pricing model is proposed which consists of binomial pricing models calculated according to different volatility values. Second, a method is provided to calculate the annualized volatility and the distribution. Third, the value of convenience yields is calculated based on the relationship between the futures price and the spot price. The notion of convenience yields is used to adjust our model as well. Based on an empirical study of a Chinese copper mine concession, we verify that our model is easy to use and better than the model with constant volatility when considering the changing annualized volatility of the price of the mineral product.

  7. Can environmental sustainability be used to manage energy price risk?

    International Nuclear Information System (INIS)

    Henriques, Irene; Sadorsky, Perry

    2010-01-01

    Energy security issues and climate change are two of the most pressing problems facing society and both of these problems are likely to increase energy price variability in the coming years. This paper develops and estimates a model of a company's energy price exposure and presents evidence showing that increases in a company's environmental sustainability lowers its energy price exposure. This result is robust across two different measures of energy prices. These results should be useful to companies seeking new ways of addressing energy price risk as well as governments concerned about the impact that energy price risk can have on economic growth and prosperity. (author)

  8. Bond Pricing with Default Risk

    OpenAIRE

    Saa-Requejo, Jesus; Santa-Clara, Pedro

    1997-01-01

    We offer a new model for pricing bonds subject to default risk. The event of default is remodeled as the first time that a state variable that captures the solvency of the issue goes below a certain level. The payoff to the bond in case of default is a constant fraction of the value of a security with the same promised payoffs but without the risk of default. We show that our model is very tractable under different models of interest rate risk and of the interaction between default risk and i...

  9. State energy price and expenditure report 1989

    International Nuclear Information System (INIS)

    1991-01-01

    The State Energy Price and Expenditure Report (SEPER) presents energy price and expenditure estimates for the 50 States, the District of Columbia, and the United States. The estimates are provided by energy source (e.g., petroleum, natural gas, coal, and electricity) and by major consuming or economic sector. This report is an update of the State Energy Price and Expenditure Report 1988 published in September 1990. Changes from the last report are summarized in a section of the documentation. Energy price and expenditure estimates are published for the years 1970, 1975, 1980, and 1985 through 1989. Documentation follows the tables and describes how the price estimates are developed, including sources of data, methods of estimation, and conversion factors applied. Consumption estimates used to calculate expenditures, and the documentation for those estimates, are from the State Energy Data Report, Consumption Estimates, 1960--1989 (SEDR), published in May 1991. Expenditures are calculated by multiplying the price estimates by the consumption estimates, adjusted to remove process fuel and intermediate product consumption. All expenditures are consumer expenditures, that is, they represent estimates of money directly spent by consumers to purchase energy, generally including taxes. 11 figs., 43 tabs

  10. State energy price and expenditure report 1989

    Energy Technology Data Exchange (ETDEWEB)

    1991-09-30

    The State Energy Price and Expenditure Report (SEPER) presents energy price and expenditure estimates for the 50 States, the District of Columbia, and the United States. The estimates are provided by energy source (e.g., petroleum, natural gas, coal, and electricity) and by major consuming or economic sector. This report is an update of the State Energy Price and Expenditure Report 1988 published in September 1990. Changes from the last report are summarized in a section of the documentation. Energy price and expenditure estimates are published for the years 1970, 1975, 1980, and 1985 through 1989. Documentation follows the tables and describes how the price estimates are developed, including sources of data, methods of estimation, and conversion factors applied. Consumption estimates used to calculate expenditures, and the documentation for those estimates, are from the State Energy Data Report, Consumption Estimates, 1960--1989 (SEDR), published in May 1991. Expenditures are calculated by multiplying the price estimates by the consumption estimates, adjusted to remove process fuel and intermediate product consumption. All expenditures are consumer expenditures, that is, they represent estimates of money directly spent by consumers to purchase energy, generally including taxes. 11 figs., 43 tabs.

  11. Edgeworth Price Cycles, Cost-Based Pricing, and Sticky Pricing in Retail Gasoline Markets

    OpenAIRE

    Michael D. Noel

    2007-01-01

    This paper examines dynamic pricing behavior in retail gasoline markets for 19 Canadian cities over 574 weeks. I find three distinct retail pricing patterns: 1. cost-based pricing, 2. sticky pricing, and 3. steep, asymmetric retail price cycles that, while seldom documented empirically, resemble those of Maskin & Tirole[1988]. Using a Markov switching regression, I estimate the prevalence of patterns and the structural characteristics of the cycles. Retail price cycles prevail in over 40% of ...

  12. New market based price regulation on combined heat and power in Denmark

    International Nuclear Information System (INIS)

    Koch, Jesper; Nielsen, Marianne; Hansen, Anders B.; Lawaetz, Henrik

    2003-01-01

    Major economic risks can become reality when local co-generation plants (L-CHP ) meet the full market penetration with new market based price regulation. Co-generation produces more than 50% of the national electricity consumption and half of the production is generated from L-CHP. The new price regulation is assumed to take action in 2004. The paper will present an analysis of a market based price regulation on the L-CHP-sector. The paper will spotlight on L-CHP in district heating systems supplying heat for domestic purposes. When smaller and medium sized CHP sell electricity they are paid an average price of 46 Euro per MWh. The return of selling electricity shall primarily cover the expenditure of buying gas for electricity production and writing off investments cost of a CHP-plant. With the framework of today it is a fact that the plants (in average) are only slightly competitive compared to individual heat production plants. When CHP meet market conditions there is a high risk that electricity prices will be reduced significantly (prices of 20 - 30 Euro per MWh) for a longer period. Significantly reduced electricity prices will result in dramatically increased heat prices. If no action is taken there will be a potential risk that heat consumers in the smaller and medium sized cities together must pay an extra bill of 200 million Euro each year. It corresponds to an average increase of the heating bill of 300 - 500 Euro per year for an average house. This is far from acceptable. There will also be a high risk that companies with industrial CHP will permanently convert to heat only boiler and only use their CHP occasionally because CHP plants might not be cost-effective when electricity prices are low. These effects can cause a significant increase of the national CO 2 emission

  13. Risk assessment of new pricing strategies in the district heating market. A case study at Sundsvall Energi AB

    International Nuclear Information System (INIS)

    Bjoerkqvist, Olof; Idefeldt, Jim; Larsson, Aron

    2010-01-01

    The price structure of district heating has been no major scientific issue for the last decades in energy-related research. However, today trends in district heating pricing tend to move towards a more customer-oriented approach with predetermined prices under a longer periods, leading to a more complex price structure. If a district heating supplier offers district heating with predetermined prices in order to compete with similar electricity offers, the financial risk of the new price structure is significantly higher than the risk of an ordinary variable cost offer based on short-run marginal cost. In contrary to an electricity seller, the district heating company cannot transfer all of the risk of predetermined prices to the financial market, instead the company is thrown upon its own ability to handle the risk by, e.g., hedging its own energy purchase. However, all uncertainties cannot be coped with in this manner. Thus, there is a need for a methodology that can be used to estimate the financial risk of different price structures and to value different opportunities to reduce the risk. In this article, we propose a methodology, implemented in prototype software, to evaluate the risk associated with new price structures in district heating. (author)

  14. Managing Disease Risks from Trade: Strategic Behavior with Many Choices and Price Effects.

    Science.gov (United States)

    Chitchumnong, Piyayut; Horan, Richard D

    2018-03-16

    An individual's infectious disease risks, and hence the individual's incentives for risk mitigation, may be influenced by others' risk management choices. If so, then there will be strategic interactions among individuals, whereby each makes his or her own risk management decisions based, at least in part, on the expected decisions of others. Prior work has shown that multiple equilibria could arise in this setting, with one equilibrium being a coordination failure in which individuals make too few investments in protection. However, these results are largely based on simplified models involving a single management choice and fixed prices that may influence risk management incentives. Relaxing these assumptions, we find strategic interactions influence, and are influenced by, choices involving multiple management options and market price effects. In particular, we find these features can reduce or eliminate concerns about multiple equilibria and coordination failure. This has important policy implications relative to simpler models.

  15. [The price-based certainty of purchase influences consumer behavior for discount].

    Science.gov (United States)

    Arihara, Katsuhiko; Ariga, Atsunori; Furuya, Takeshi

    2016-04-01

    Tversky & Kahneman (1981) reported that most participants decided to drive when they could save money on a low-price good as compared to when they could save on a high-price good, even though the discount prices were same. Although this irrational decision making has been interpreted as a rate-dependent estimation of value (prospect theory), this study newly proposes that it can be explained by the certainty of purchase based on the price of goods. Experiment 1 replicated the previously reported difference in decision making, and additionally demonstrated that participants' certainty of purchase was lower for a high- than a low-price good. When it was emphasized that participants' intention to purchase high- and low-price goods were equally sure, decision making did not significantly differ (Experiment 2). Furthermore, decision making differed based only on the certainty of purchase even,when prices of goods were-same (Experiment 3). Consumers' decision making may be rather rational, depending straightforwardly on the certainty of purchase that is susceptible to price.

  16. The Price of Commodity Risk in Stock and Futures Markets

    NARCIS (Netherlands)

    M. Boons (Martijn); F.A. de Roon (Frans); M.K. Szymanowska (Marta)

    2014-01-01

    textabstractWe find that commodity risk is priced in the cross-section of US stock returns. Following the financialization of commodities, investors hedge commodity price risk directly in the futures market, primarily via commodity index investments, whereas before they gained commodity exposure

  17. Gas prices and price process

    International Nuclear Information System (INIS)

    Groenewegen, G.G.

    1992-01-01

    On a conference (Gas for Europe in the 1990's) during the Gasexpo '91 the author held a speech of which the Dutch text is presented here. Attention is paid to the current European pricing methods (prices based on the costs of buying, transporting and distributing the natural gas and prices based on the market value, which is deducted from the prices of alternative fuels), and the transparency of the prices (lack of information on the way the prices are determined). Also attention is paid to the market signal transparency and gas-gas competition, which means a more or less free market of gas distribution. The risks of gas-to-gas competition for a long term price stability, investment policies and security of supply are discussed. Opposition against the Third Party Access (TPA), which is the program to implement gas-to-gas competition, is caused by the fear of natural gas companies for lower gas prices and lower profits. Finally attention is paid to government regulation and the activities of the European Commission (EC) in this matter. 1 fig., 6 ills., 1 tab

  18. An analysis of security price risk and return among publicly traded pharmacy corporations.

    Science.gov (United States)

    Gilligan, Adrienne M; Skrepnek, Grant H

    2013-01-01

    Community pharmacies have been subject to intense and increasing competition in the past several decades. To determine the security price risk and rate of return of publicly traded pharmacy corporations present on the major U.S. stock exchanges from 1930 to 2009. The Center of Research in Security Prices (CRSP) database was used to examine monthly security-level stock market prices in this observational retrospective study. The primary outcome of interest was the equity risk premium, with analyses focusing upon financial metrics associated with risk and return based upon modern portfolio theory (MPT) including: abnormal returns (i.e., alpha), volatility (i.e., beta), and percentage of returns explained (i.e., adjusted R(2)). Three equilibrium models were estimated using random-effects generalized least squares (GLS): 1) the Capital Asset Pricing Model (CAPM); 2) Fama-French Three-Factor Model; and 3) Carhart Four-Factor Model. Seventy-five companies were examined from 1930 to 2009, with overall adjusted R(2) values ranging from 0.13 with the CAPM to 0.16 with the Four-Factor model. Alpha was not significant within any of the equilibrium models across the entire 80-year time period, though was found from 1999 to 2009 in the Three- and Four-Factor models to be associated with a large, significant, and negative risk-adjusted abnormal returns of -33.84%. Volatility varied across specific time periods based upon the financial model employed. This investigation of risk and return within publicly listed pharmacy corporations from 1930 to 2009 found that substantial losses were incurred particularly from 1999 to 2009, with risk-adjusted security valuations decreasing by one-third. Copyright © 2013 Elsevier Inc. All rights reserved.

  19. Optimal fuel-mix in CHP plants under a stochastic permit price. Risk-neutrality versus risk-aversion

    International Nuclear Information System (INIS)

    Lappi, Pauli; Ollikka, Kimmo; Ollikainen, Markku

    2010-01-01

    This paper studies the optimal fuel-mix of a CHP producer under emission permit price risk. The producer's multi-fuel plant uses two CO 2 -intensive fuels and one clean fuel. Using a mean-variance framework we develop three models. The models are divided into spot-models (risk neutral and risk averse cases) and a forward-model (risk averse case). We derive the effects of price risk on optimal fuel use. An increase in price risk can in fact increase the use of CO 2 -intensive fuel in the spot-model. In the forward-model, the production and financial decisions are separate. We also evaluate the risk-bearing behavior of seven Finnish CHP producers. We found that risk-neutrality describes behavior better than risk-aversion. (author)

  20. Target Price Accuracy

    Directory of Open Access Journals (Sweden)

    Alexander G. Kerl

    2011-04-01

    Full Text Available This study analyzes the accuracy of forecasted target prices within analysts’ reports. We compute a measure for target price forecast accuracy that evaluates the ability of analysts to exactly forecast the ex-ante (unknown 12-month stock price. Furthermore, we determine factors that explain this accuracy. Target price accuracy is negatively related to analyst-specific optimism and stock-specific risk (measured by volatility and price-to-book ratio. However, target price accuracy is positively related to the level of detail of each report, company size and the reputation of the investment bank. The potential conflicts of interests between an analyst and a covered company do not bias forecast accuracy.

  1. State energy price and expenditure report 1994

    Energy Technology Data Exchange (ETDEWEB)

    NONE

    1997-06-01

    The State Energy Price and Expenditure Report (SEPER) presents energy price and expenditure estimates individually for the 50 States and the District of Columbia and in aggregate for the United States. The price and expenditure estimates developed in the State Energy Price and Expenditure Data System (SEPEDS) are provided by energy source and economic sector and are published for the years 1970 through 1994. Consumption estimates used to calculate expenditures and the documentation for those estimates are taken from the State Energy Data Report 1994, Consumption Estimates (SEDR), published in October 1996. Expenditures are calculated by multiplying the price estimates by the consumption estimates, which are adjusted to remove process fuel; intermediate petroleum products; and other consumption that has no direct fuel costs, i.e., hydroelectric, geothermal, wind, solar, and photovoltaic energy sources. Documentation is included describing the development of price estimates, data sources, and calculation methods. 316 tabs.

  2. State energy price and expenditure report 1994

    International Nuclear Information System (INIS)

    1997-06-01

    The State Energy Price and Expenditure Report (SEPER) presents energy price and expenditure estimates individually for the 50 States and the District of Columbia and in aggregate for the United States. The price and expenditure estimates developed in the State Energy Price and Expenditure Data System (SEPEDS) are provided by energy source and economic sector and are published for the years 1970 through 1994. Consumption estimates used to calculate expenditures and the documentation for those estimates are taken from the State Energy Data Report 1994, Consumption Estimates (SEDR), published in October 1996. Expenditures are calculated by multiplying the price estimates by the consumption estimates, which are adjusted to remove process fuel; intermediate petroleum products; and other consumption that has no direct fuel costs, i.e., hydroelectric, geothermal, wind, solar, and photovoltaic energy sources. Documentation is included describing the development of price estimates, data sources, and calculation methods. 316 tabs

  3. Bank Systemic Risk-Taking and Loan Pricing : Evidence from Syndicated Loans

    NARCIS (Netherlands)

    Gong, D.

    2014-01-01

    In this paper we document evidence of systemic risk taking from syndicated loan pricing. Using U.S. syndicated loan data, we find that the borrower's idiosyncratic risk is positively priced whereas systematic risk is negatively related to loan spreads, controlling for firm, loan and bank specific

  4. Optimal fuel-mix in CHP plants under a stochastic permit price. Risk-neutrality versus risk-aversion

    Energy Technology Data Exchange (ETDEWEB)

    Lappi, Pauli; Ollikka, Kimmo; Ollikainen, Markku [Department of Economics and Management, P.O. Box 27, University of Helsinki, FIN-00014 Helsinki (Finland)

    2010-02-15

    This paper studies the optimal fuel-mix of a CHP producer under emission permit price risk. The producer's multi-fuel plant uses two CO{sub 2}-intensive fuels and one clean fuel. Using a mean-variance framework we develop three models. The models are divided into spot-models (risk neutral and risk averse cases) and a forward-model (risk averse case). We derive the effects of price risk on optimal fuel use. An increase in price risk can in fact increase the use of CO{sub 2}-intensive fuel in the spot-model. In the forward-model, the production and financial decisions are separate. We also evaluate the risk-bearing behavior of seven Finnish CHP producers. We found that risk-neutrality describes behavior better than risk-aversion. (author)

  5. Optimal fuel-mix in CHP plants under a stochastic permit price: Risk-neutrality versus risk-aversion

    Energy Technology Data Exchange (ETDEWEB)

    Lappi, Pauli, E-mail: pauli.lappi@helsinki.f [Department of Economics and Management, P.O. Box 27, University of Helsinki, FIN-00014 Helsinki (Finland); Ollikka, Kimmo, E-mail: kimmo.ollikka@helsinki.f [Department of Economics and Management, P.O. Box 27, University of Helsinki, FIN-00014 Helsinki (Finland); Ollikainen, Markku, E-mail: markku.ollikainen@helsinki.f [Department of Economics and Management, P.O. Box 27, University of Helsinki, FIN-00014 Helsinki (Finland)

    2010-02-15

    This paper studies the optimal fuel-mix of a CHP producer under emission permit price risk. The producer's multi-fuel plant uses two CO{sub 2}-intensive fuels and one clean fuel. Using a mean-variance framework we develop three models. The models are divided into spot-models (risk neutral and risk averse cases) and a forward-model (risk averse case). We derive the effects of price risk on optimal fuel use. An increase in price risk can in fact increase the use of CO{sub 2}-intensive fuel in the spot-model. In the forward-model, the production and financial decisions are separate. We also evaluate the risk-bearing behavior of seven Finnish CHP producers. We found that risk-neutrality describes behavior better than risk-aversion.

  6. Entropy-based financial asset pricing.

    Directory of Open Access Journals (Sweden)

    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.

  7. Entropy-based financial asset pricing.

    Science.gov (United States)

    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.

  8. Managing risks of market price uncertainty for a microgrid operation

    Science.gov (United States)

    Raghavan, Sriram

    After deregulation of electricity in the United States, the day-ahead and real-time markets allow load serving entities and generation companies to bid and purchase/sell energy under the supervision of the independent system operator (ISO). The electricity market prices are inherently uncertain, and can be highly volatile. The main objective of this thesis is to hedge against the risk from the uncertainty of the market prices when purchasing/selling energy from/to the market. The energy manager can also schedule distributed generators (DGs) and storage of the microgrid to meet the demand, in addition to energy transactions from the market. The risk measure used in this work is the variance of the uncertain market purchase/sale cost/revenue, assuming the price following a Gaussian distribution. Using Markowitz optimization, the risk is minimized to find the optimal mix of purchase from the markets. The problem is formulated as a mixed integer quadratic program. The microgrid at Illinois Institute of Technology (IIT) in Chicago, IL was used as a case study. The result of this work reveals the tradeoff faced by the microgrid energy manager between minimizing the risk and minimizing the mean of the total operating cost (TOC) of the microgrid. With this information, the microgrid energy manager can make decisions in the day-ahead and real-time markets according to their risk aversion preference. The assumption of market prices following Gaussian distribution is also verified to be reasonable for the purpose of hedging against their risks. This is done by comparing the result of the proposed formulation with that obtained from the sample market prices randomly generated using the distribution of actual historic market price data.

  9. Australian Coal Company Risk Factors: Coal and Oil Prices

    OpenAIRE

    M. Zahid Hasan; Ronald A. Ratti

    2014-01-01

    Examination of panel data on listed coal companies on the Australian exchange over January 1999 to February 2010 suggests that market return, interest rate premium, foreign exchange rate risk, and coal price returns are statistically significant in determining the excess return on coal companies’ stock. Coal price return and oil price return increases have statistically significant positive effects on coal company stock returns. A one per cent rise in coal price raises coal company returns ...

  10. Estimated burden of cardiovascular disease and value-based price range for evolocumab in a high-risk, secondary-prevention population in the US payer context.

    Science.gov (United States)

    Toth, Peter P; Danese, Mark; Villa, Guillermo; Qian, Yi; Beaubrun, Anne; Lira, Armando; Jansen, Jeroen P

    2017-06-01

    To estimate real-world cardiovascular disease (CVD) burden and value-based price range of evolocumab for a US-context, high-risk, secondary-prevention population. Burden of CVD was assessed using the UK-based Clinical Practice Research Datalink (CPRD) in order to capture complete CV burden including CV mortality. Patients on standard of care (SOC; high-intensity statins) in CPRD were selected based on eligibility criteria of FOURIER, a phase 3 CV outcomes trial of evolocumab, and categorized into four cohorts: high-risk prevalent atherosclerotic CVD (ASCVD) cohort (n = 1448), acute coronary syndrome (ACS) (n = 602), ischemic stroke (IS) (n = 151), and heart failure (HF) (n = 291) incident cohorts. The value-based price range for evolocumab was assessed using a previously published economic model. The model incorporated CPRD CV event rates and considered CV event reduction rate ratios per 1 mmol/L reduction in low-density lipoprotein-cholesterol (LDL-C) from a meta-analysis of statin trials by the Cholesterol Treatment Trialists Collaboration (CTTC), i.e. CTTC relationship. Multiple-event rates of composite CV events (ACS, IS, or coronary revascularization) per 100 patient-years were 12.3 for the high-risk prevalent ASCVD cohort, and 25.7, 13.3, and 23.3, respectively, for incident ACS, IS, and HF cohorts. Approximately one-half (42%) of the high-risk ASCVD patients with a new CV event during follow-up had a subsequent CV event. Combining these real-world event rates and the CTTC relationship in the economic model, the value-based price range (credible interval) under a willingness-to-pay threshold of $150,000/quality-adjusted life-year gained for evolocumab was $11,990 ($9,341-$14,833) to $16,856 ($12,903-$20,678) in ASCVD patients with baseline LDL-C levels ≥70 mg/dL and ≥100 mg/dL, respectively. Real-world CVD burden is substantial. Using the observed CVD burden in CPRD and the CTTC relationship, the cost-effectiveness analysis showed

  11. Value at Risk on Composite Price Share Index Stock Data

    Science.gov (United States)

    Oktaviarina, A.

    2018-01-01

    The financial servicest authority was declared Let’s Save Campaign on n commemoration of the World Savings Day that falls on this day, October 31, 2016. The activity was greeted enthusiastically by Indonesia Stock Exchange by taking out the slogan Let’s Save The Stocks. Stock is a form of investment that is expected to benefit in the future despite has risks. Value at Risk (VaR) is a method that can measure how much the risk of a financial investment. Composite Stock Price Indeks is the stock price index used by Indonesia Stock Exchange as stock volatility benchmarks in Indonesia. This study aimed to estimate Value at Risk (VaR) on closing price Composite Price Share Index Stock data on the period 20 September 2016 until 20 September 2017. Box-Pierce test results p value=0.9528 which is greater than a, that shows homoskedasticity. Value at Risk (VaR) with Variance Covariance Method is Rp.3.054.916,07 which means with 99% confindence interval someone who invests Rp.100.000.000,00 will get Rp.3.054.916,07 as a maximum loss.

  12. Risk neutral second best toll pricing.

    Science.gov (United States)

    2011-08-01

    We propose a risk-neutral second best toll pricing scheme to account for the possible no uniqueness : of user equilibrium solutions. The scheme is designed to optimize for the expected objective value : as the UE solution varies within the solution s...

  13. Dependence and risk assessment for oil prices and exchange rate portfolios: A wavelet based approach

    Science.gov (United States)

    Aloui, Chaker; Jammazi, Rania

    2015-10-01

    In this article, we propose a wavelet-based approach to accommodate the stylized facts and complex structure of financial data, caused by frequent and abrupt changes of markets and noises. Specifically, we show how the combination of both continuous and discrete wavelet transforms with traditional financial models helps improve portfolio's market risk assessment. In the empirical stage, three wavelet-based models (wavelet-EGARCH with dynamic conditional correlations, wavelet-copula, and wavelet-extreme value) are considered and applied to crude oil price and US dollar exchange rate data. Our findings show that the wavelet-based approach provides an effective and powerful tool for detecting extreme moments and improving the accuracy of VaR and Expected Shortfall estimates of oil-exchange rate portfolios after noise is removed from the original data.

  14. Essays on energy derivatives pricing and financial risk management =

    Science.gov (United States)

    Madaleno, Mara Teresa da Silva

    This thesis consists of an introductory chapter (essay I) and five more empirical essays on electricity markets and CO2 spot price behaviour, derivatives pricing analysis and hedging. Essay I presents the structure of the thesis and electricity markets functioning and characteristics, as well as the type of products traded, to be analyzed on the following essays. In the second essay we conduct an empirical study on co-movements in electricity markets resorting to wavelet analysis, discussing long-term dynamics and markets integration. Essay three is about hedging performance and multiscale relationships in the German electricity spot and futures markets, also using wavelet analysis. We concentrate the investigation on the relationship between coherence evolution and hedge ratio analysis, on a time-frequency-scale approach, between spot and futures which conditions the effectiveness of the hedging strategy. Essays four, five and six are interrelated between them and with the other two previous essays given the nature of the commodity analyzed, CO2 emission allowances, traded in electricity markets. Relationships between electricity prices, primary energy fuel prices and carbon dioxide permits are analyzed on essay four. The efficiency of the European market for allowances is examined taking into account markets heterogeneity. Essay five analyzes stylized statistical properties of the recent traded asset CO2 emission allowances, for spot and futures returns, examining also the relation linking convenience yield and risk premium, for the German European Energy Exchange (EEX) between October 2005 and October 2009. The study was conducted through empirical estimations of CO2 allowances risk premium, convenience yield, and their relation. Future prices from an ex-post perspective are examined to show evidence for significant negative risk premium, or else a positive forward premium. Finally, essay six analyzes emission allowances futures hedging effectiveness, providing

  15. Volatility Mean Reversion and the Market Price of Volatility Risk

    NARCIS (Netherlands)

    Boswijk, H.P.

    2001-01-01

    This paper analyzes sources of derivative pricing errors in a stochastic volatility model estimated on stock return data. It is shown that such pricing errors may reflect the existence of a market price of volatility risk, but also may be caused by estimation errors due to a slow mean reversion in

  16. Financing Target and Resale Pricing in Reward-Based Crowdfunding

    Directory of Open Access Journals (Sweden)

    Lei Xu

    2018-04-01

    Full Text Available Resale is an effective tool for reward-based crowdfunding creators to make more profit after crowdfunding successfully. On the one hand, funds raised during the crowdfunding affect the resale pricing as a capital constraint; on the other hand, backers’ strategic purchasing behavior in the resale stage can also disturb the creator’s financing target decision-making through affecting resale pricing. In view of this, this paper builds a two-stage crowdfunding model to examine the interaction between the financing target and resale pricing in the presence of strategic backers. The results show that a lower financing amount leads to higher prices in the resale stage due to the rationing effect, and suppresses price volatility due to strategic purchasing behavior. In contrast, a higher financing amount enables the creator to build a large capacity, which does not restrict the resale prices and profit. Besides, in the context of high unit production cost or high backer patience level, there is no need for the creator to set a high financing target at the risk of crowdfunding failure.

  17. Managing price risk - setting and implementing strategies

    International Nuclear Information System (INIS)

    Haines, D.

    1999-01-01

    The three hedging strategies for price risk management within the natural gas industry are described. The three strategies are: (1) speculative trader (characterized by 'trading for profit, i.e. small margin/large volumes); (2) price optimizer (the objective here is to outperform the market in the establishment of a price); and (3) strategic hedger( the characteristic concern in this strategy is to manage long-term company goals, i.e. balance sheet orientation). The strategies are not mutually exclusive, but overlapping areas can be the source of considerable confusion. Any firm can enter into more than one of these strategies. Integrated companies will adopt very different strategies for upstream versus downstream operations. Details of the three strategies are provided

  18. Closed-form pricing formula for exchange option with credit risk

    International Nuclear Information System (INIS)

    Kim, Geonwoo; Koo, Eunho

    2016-01-01

    In this paper, we study the valuation of Exchange option with credit risk. Since the over-the-counter (OTC) markets have grown rapidly in size, the counterparty default risk is very important and should be considered for the valuation of options. For modeling of credit risk, we use the structural model of Klein [13]. We derive the closed-form pricing formula for the price of the Exchange option with credit risk via the Mellin transform and provide the experiment results to illustrate the important properties of option with numerical graphs.

  19. ANALYSIS OF SUPPLY RESPONSE AND PRICE RISK ON RICE PRODUCTION IN NIGERIA

    Directory of Open Access Journals (Sweden)

    Opeyemi Eyitayo Ayinde

    2017-03-01

    Full Text Available  Nigeria, like most African countries, has engaged in agricultural liberalization since 1986 in the hope that reforms emphasizing price incentives will encourage producers to respond. Thus far, the reforms seem to have introduced greater uncertainty into the market given increasing rates of price volatility. This study amongst other things therefore seeks to determine and model the responsiveness of rice supply to price risk in Nigeria. Statistical information on domestic and imported quantities of rice was obtained for 41 years (1970 to 2011 from various sources, such as the Food and Agriculture Organization (FAO database, Federal Ministry of Agriculture statistical bulletins, Central Bank of Nigeria statistical bulletins and National Bureau of Statistic (NBS. Data were analyzed using equilibrium output supply function, co-integration models, and vector autoregressive distributed lag model. Rice importation was statistically significant and changes in output were also responsive to changes in price. The results indicate that producers are more responsive not only to price and non-price factor but also to price risk and exchange rate. It is therefore imperative to reduce the effects of price risk as to increase the response of producer to supply by bridging the gap in production

  20. Value-based differential pricing: efficient prices for drugs in a global context.

    Science.gov (United States)

    Danzon, Patricia; Towse, Adrian; Mestre-Ferrandiz, Jorge

    2015-03-01

    This paper analyzes pharmaceutical pricing between and within countries to achieve second-best static and dynamic efficiency. We distinguish countries with and without universal insurance, because insurance undermines patients' price sensitivity, potentially leading to prices above second-best efficient levels. In countries with universal insurance, if each payer unilaterally sets an incremental cost-effectiveness ratio (ICER) threshold based on its citizens' willingness-to-pay for health; manufacturers price to that ICER threshold; and payers limit reimbursement to patients for whom a drug is cost-effective at that price and ICER, then the resulting price levels and use within each country and price differentials across countries are roughly consistent with second-best static and dynamic efficiency. These value-based prices are expected to differ cross-nationally with per capita income and be broadly consistent with Ramsey optimal prices. Countries without comprehensive insurance avoid its distorting effects on prices but also lack financial protection and affordability for the poor. Improving pricing efficiency in these self-pay countries includes improving regulation and consumer information about product quality and enabling firms to price discriminate within and between countries. © 2013 The Authors. Health Economics published by John Wiley & Sons Ltd.

  1. Competitive electricity markets around the world: approaches to price risk management

    International Nuclear Information System (INIS)

    Masson, G.S.

    1999-01-01

    This chapter focuses on wholesale electricity markets, and traces the histories of the US and UK power industries. Risk management in the new electricity market is examined covering price risk, location basis risk, volume risk, and margin and cross-commodity risk. Specific competitive market systems that have been implemented around the world including mandatory pools, voluntary pools, and bilateral markets are discussed. Panels describing the functions of ancillary services, electricity price volatility, and the problems of capacity payments and the UK pool are presented

  2. 10 CFR 215.5 - Pricing and volume reports.

    Science.gov (United States)

    2010-01-01

    ... 10 Energy 3 2010-01-01 2010-01-01 false Pricing and volume reports. 215.5 Section 215.5 Energy DEPARTMENT OF ENERGY OIL COLLECTION OF FOREIGN OIL SUPPLY AGREEMENT INFORMATION § 215.5 Pricing and volume reports. To the extent not reported pursuant to § 215.3, any person lifting for export crude oil from a...

  3. State energy price and expenditure report, 1995

    Energy Technology Data Exchange (ETDEWEB)

    NONE

    1998-08-01

    The State Energy Price and Expenditure Report (SEPER) presents energy price and expenditure estimates individually for the 50 States and the District of Columbia and in aggregate for the US. The estimates developed in the State Energy Price and Expenditure Data System (SEPEDS) are provided by energy source and economic sector and are published for the years 1970 through 1995. Data for all years are available on a CD-ROM and via Internet. Consumption estimates used to calculate expenditures and the documentation for those estimates are taken from the State Energy Data Report 1995, Consumption Estimates (SEDR), published in December 1997. Expenditures are calculated by multiplying the price estimates by the consumption estimates, which are adjusted to remove process fuel; intermediate petroleum products; and other consumption that has no direct fuel costs, i.e., hydroelectric, geothermal, wind, solar, and photovoltaic energy sources.

  4. Risk-Averse Suppliers’ Optimal Pricing Strategies in a Two-Stage Supply Chain

    Directory of Open Access Journals (Sweden)

    Rui Shen

    2013-01-01

    Full Text Available Risk-averse suppliers’ optimal pricing strategies in two-stage supply chains under competitive environment are discussed. The suppliers in this paper focus more on losses as compared to profits, and they care their long-term relationship with their customers. We introduce for the suppliers a loss function, which covers both current loss and future loss. The optimal wholesale price is solved under situations of risk neutral, risk averse, and a combination of minimizing loss and controlling risk, respectively. Besides, some properties of and relations among these optimal wholesale prices are given as well. A numerical example is given to illustrate the performance of the proposed method.

  5. Estimating the Value of Price Risk Reduction in Energy Efficiency Investments in Buildings

    Directory of Open Access Journals (Sweden)

    Pekka Tuominen

    2017-10-01

    Full Text Available This paper presents a method for calculating the value of price risk reduction to a consumer that can be achieved with investments in energy efficiency. The value of price risk reduction is discussed to some length in general terms in the literature reviewed but, so far, no methodology for calculating the value has been presented. Here we suggest such a method. The problem of valuating price risk reduction is approached using a variation of the Black–Scholes model by considering a hypothetical financial instrument that a consumer would purchase to insure herself against unexpected price hikes. This hypothetical instrument is then compared with an actual energy efficiency investment that reaches the same level of price risk reduction. To demonstrate the usability of the method, case examples are calculated for typical single-family houses in Finland. The results show that the price risk entailed in household energy consumption can be reduced by a meaningful amount with energy efficiency investments, and that the monetary value of this reduction can be calculated. It is argued that this often-overlooked benefit of energy efficiency investments merits more consideration in future studies.

  6. Shopping Center Financing: Pricing Loan Default Risk

    OpenAIRE

    Peter Chinloy; James Musumeci

    1994-01-01

    The financing structure of a shopping center is decomposed into an income security and two put options. These put options are respectively held by the borrower against the lender for default, and by the lender against an insurer or reinsurer. The prices of the put option depend on the loan-to-value ration of the loan and on the risk of the investment. The interest rate charged on the loan is the sum of four components: a riskless rate, lender production costs, and the net price of the put opt...

  7. Inquiry report about electricity prices

    International Nuclear Information System (INIS)

    2004-10-01

    In March 2004, the French minister of economy, finances and industry put in the hands of the general inspection of finances and of the general council of mines, the mission to carry out an expertise about the evolution of electricity prices since February 2000, date of the progressive opening of the electricity market to competition. Since 2003, many customers, in particular the big power consuming industries, have started to worry in front of the increase of electricity prices. The conclusions of the expertise represent a contribution to the analysis of the operation of electricity markets and will participate to the improvement of this operation. This document comprises the synthesis of the report given to the minister and the full report. (J.S.)

  8. Assessing the value of price caps and floors

    Energy Technology Data Exchange (ETDEWEB)

    NONE

    2009-07-01

    This publication assesses the long-term economic and climatic effects of introducing price caps and price floors in hypothetical global climate change mitigation policy. Based on emission trends, abatement costs and equilibrium climate sensitivity from IPCC and IEA reports, this quantitative analysis confirms that price caps could significantly reduce economic uncertainty. This uncertainty stems primarily from unpredictable economic growth and energy prices, and ultimately unabated emission trends. In addition, the development of abatement technologies is uncertain. Furthermore,this analysis shows that rigid targets may entail greater economic risks with little or no comparative advantage for the climate. More ambitious emission objectives, combined with price caps and price floors, could still entail significantly lower expected costs while driving similar, or even slightly better, climatic outcomes in probabilistic terms.

  9. Hedging LDC price risk in the futures market

    International Nuclear Information System (INIS)

    Trace, J.W.

    1990-01-01

    During its first five months the natural gas futures market has seen steady growth and increasing participation by various industry players, particularly producers, marketers, and brokers. Not much has been heard, however, about participation by the principal retailers of the gas industry, the local distribution companies (LDCs). Undoubtedly, various LDCs are now in the process of determining whether or not the gas futures market can serve any useful business purpose in their operations. In examining this question LDCs should keep in mind that the futures market should serve the same purpose for them as it does for any other business engaged in the actual buying and selling of price-volatile commodities - mitigation of price risk. This article looks at the risks of the market, gives examples of investments to hedge risks and looks at the overall performance of the market

  10. The world price of jump and volatility risk

    NARCIS (Netherlands)

    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

  11. Optimal combined purchasing strategies for a risk-averse manufacturer under price uncertainty

    Directory of Open Access Journals (Sweden)

    Qiao Wu

    2015-09-01

    Full Text Available Purpose: The purpose of our paper is to analyze optimal purchasing strategies when a manufacturer can buy raw materials from a long-term contract supplier and a spot market under spot price uncertainty. Design/methodology/approach: This procurement model can be solved by using dynamic programming. First, we maximize the DM’s utility of the second period, obtaining the optimal contract quantity and spot quantity for the second period. Then, maximize the DM’s utility of both periods, obtaining the optimal purchasing strategy for the first period. We use a numerical method to compare the performance level of a pure spot sourcing strategy with that of a mixed strategy. Findings: Our results show that optimal purchasing strategies vary with the trend of contract prices. If the contract price falls, the total quantity purchased in period 1 will decrease in the degree of risk aversion. If the contract price increases, the total quantity purchased in period 1 will increase in the degree of risk aversion. The relationship between the optimal contract quantity and the degree of risk aversion depends on whether the expected spot price or the contract price is larger in period 2. Finally, we compare the performance levels between a combined strategy and a spot sourcing strategy. It shows that a combined strategy is optimal for a risk-averse buyer. Originality/value: It’s challenging to deal with a two-period procurement problem with risk consideration. We have obtained results of a two-period procurement problem with two sourcing options, namely contract procurement and spot purchases. Our model incorporates the buyer’s risk aversion factor and the change of contract prices, which are not addressed in early studies.

  12. Price risk perceptions and management strategies in selected European food supply chains

    NARCIS (Netherlands)

    Assefa, Tsion T.; Meuwissen, Miranda P.M.; Oude Lansink, Alfons G.J.M.

    2017-01-01

    Agricultural prices in European food markets have become more volatile over the past decade exposing agribusinesses to risk and uncertainty. This study goes beyond the farm stage and explores through interviews the price risk perceptions and management strategies in multiple stages of the food

  13. The Exposure of Mortgage Borrowers to Interest Rate Risk, Income Risk and House Price Risk – Evidence from Swiss Loan Application Data

    OpenAIRE

    Guin, Benjamin; Brown, Martin

    2015-01-01

    We study the exposure of mortgage borrowers in Switzerland to interest rate, income and house price risks and examine how the households’ choice of risky mortgages is related to individual interest rate expectations and risk-aversion. Our analysis is based on a unique data set of household mortgage applications from September 2012 until January 2014. Our assessment of risk exposure among mortgage borrowers in Switzerland is highly sensitive to the underlying assumptions on mortgage costs, hou...

  14. Pricing Liquidity Risk with Heterogeneous Investment Horizons

    NARCIS (Netherlands)

    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)

  15. Scheduling of a hydro producer considering head-dependency, price scenarios and risk-aversion

    International Nuclear Information System (INIS)

    Pousinho, H.M.I.; Mendes, V.M.F.; Catalão, J.P.S.

    2012-01-01

    Highlights: ► A MIQP approach is proposed for the short-term hydro scheduling problem. ► Head-dependency, discontinuous operating regions and discharge ramping constraints are considered. ► As new contribution to earlier studies, market uncertainty is introduced in the model via price scenarios. ► Also, risk aversion is incorporated by limiting the volatility of the expected profit through CVaR. ► A case study based on one of the main Portuguese cascaded hydro systems is provided. - Abstract: In this paper, a mixed-integer quadratic programming approach is proposed for the short-term hydro scheduling problem, considering head-dependency, discontinuous operating regions and discharge ramping constraints. As new contributions to earlier studies, market uncertainty is introduced in the model via price scenarios, and risk aversion is also incorporated by limiting the volatility of the expected profit through the conditional value-at-risk. Our approach has been applied successfully to solve a case study based on one of the main Portuguese cascaded hydro systems, requiring a negligible computational time.

  16. Obesity and supermarket access: proximity or price?

    Science.gov (United States)

    Drewnowski, Adam; Aggarwal, Anju; Hurvitz, Philip M; Monsivais, Pablo; Moudon, Anne V

    2012-08-01

    We examined whether physical proximity to supermarkets or supermarket price was more strongly associated with obesity risk. The Seattle Obesity Study (SOS) collected and geocoded data on home addresses and food shopping destinations for a representative sample of adult residents of King County, Washington. Supermarkets were stratified into 3 price levels based on average cost of the market basket. Sociodemographic and health data were obtained from a telephone survey. Modified Poisson regression was used to test the associations between obesity and supermarket variables. Only 1 in 7 respondents reported shopping at the nearest supermarket. The risk of obesity was not associated with street network distances between home and the nearest supermarket or the supermarket that SOS participants reported as their primary food source. The type of supermarket, by price, was found to be inversely and significantly associated with obesity rates, even after adjusting for individual-level sociodemographic and lifestyle variables, and proximity measures (adjusted relative risk=0.34; 95% confidence interval=0.19, 0.63) Improving physical access to supermarkets may be one strategy to deal with the obesity epidemic; improving economic access to healthy foods is another.

  17. The European carbon market (2005-2007): banking, pricing and risk hedging strategies

    International Nuclear Information System (INIS)

    Chevallier, J.

    2008-11-01

    This thesis investigates the market rules of the European carbon market (EU ETS) during 2005-2007. We provide theoretical and empirical analyses of banking and borrowing provisions, price drivers and risk hedging strategies attached to tradable quotas, which were introduced to cover the CO 2 emissions of around 10,600 installations in Europe. In Chapter 1, we outline the economic and environmental effects of banking and borrowing on tradable permits markets. More specifically, we examine the banking and borrowing provisions adopted in the EU ETS, and the effects of banning banking between Phases I and II on CO 2 price changes. We show statistically that the low levels of CO 2 prices recorded until the end of Phase I may be explained by the restriction on the inter-period transfer of allowances, besides the main explanations that were identified by market observers. In Chapter 2, we identify the carbon price drivers since the launch of the EU ETS on January 1, 2005. We emphasize the central role played by the 2005 yearly compliance event imposed by the European Commission in revealing the net short/long position at the installation level in terms of allowances allocated with respect to verified emissions. The main result of this study features that price drivers of CO 2 allowances linked to energy market prices and unanticipated weather events vary around institutional events. Moreover, we show the influence of the variation of industrial production in three sectors covered by the EU ETS on CO 2 price changes by applying a disentangling analysis, that has also been extended at the country-level. In Chapter 3, we focus on the risk hedging strategies linked to holding CO 2 allowances. By using a methodology applied on stock markets, we recover the changes in investors' average risk aversion. This study shows that, during the time period considered, risk aversion has been higher on the carbon market than on the stock market, and that the risk is linked to an increasing

  18. Price caps and price floors in climate policy: a quantitative assessment

    Energy Technology Data Exchange (ETDEWEB)

    Philibert, Cedric

    2008-12-15

    This study assesses the long-term economic and environmental effects of introducing price caps and price floors in hypothetical climate change mitigation architecture, which aims to reduce global energy-related CO2 emissions by 50% by 2050. Based on abatement costs in IPCC and IEA reports, this quantitative analysis confirms what qualitative analyses have already suggested: introducing price caps could significantly reduce economic uncertainty. This uncertainty stems primarily from unpredictable economic growth and energy prices, and ultimately unabated emission trends. In addition, the development of abatement technologies is uncertain. With price caps, the expected costs could be reduced by about 50% and the uncertainty on economic costs could be one order of magnitude lower. Reducing economic uncertainties may spur the adoption of more ambitious policies by helping to alleviate policy makers' concerns of economic risks. Meanwhile, price floors would reduce the level of emissions beyond the objective if the abatement costs ended up lower than forecasted. If caps and floors are commensurate with the ambition of the policy pursued and combined with slightly tightened emission objectives, climatic results could be on average similar to those achieved with 'straight' objectives (i.e. with no cost-containment mechanism). (auth)

  19. Theory of Financial Risk and Derivative Pricing - 2nd Edition

    Science.gov (United States)

    Bouchaud, Jean-Philippe; Potters, Marc

    2003-12-01

    Foreword; Preface; 1. Probability theory: basic notions; 2. Maximum and addition of random variables; 3. Continuous time limit, Ito calculus and path integrals; 4. Analysis of empirical data; 5. Financial products and financial markets; 6. Statistics of real prices: basic results; 7. Non-linear correlations and volatility fluctuations; 8. Skewness and price-volatility correlations; 9. Cross-correlations; 10. Risk measures; 11. Extreme correlations and variety; 12. Optimal portfolios; 13. Futures and options: fundamental concepts; 14. Options: hedging and residual risk; 15. Options: the role of drift and correlations; 16. Options: the Black and Scholes model; 17. Options: some more specific problems; 18. Options: minimum variance Monte-Carlo; 19. The yield curve; 20. Simple mechanisms for anomalous price statistics; Index of most important symbols; Index.

  20. Risks, prices, and positions: A social network analysis of illegal drug trafficking in the world-economy.

    Science.gov (United States)

    Boivin, Rémi

    2014-03-01

    Illegal drug prices are extremely high, compared to similar goods. There is, however, considerable variation in value depending on place, market level and type of drugs. A prominent framework for the study of illegal drugs is the "risks and prices" model (Reuter & Kleiman, 1986). Enforcement is seen as a "tax" added to the regular price. In this paper, it is argued that such economic models are not sufficient to explain price variations at country-level. Drug markets are analysed as global trade networks in which a country's position has an impact on various features, including illegal drug prices. This paper uses social network analysis (SNA) to explain price markups between pairs of countries involved in the trafficking of illegal drugs between 1998 and 2007. It aims to explore a simple question: why do prices increase between two countries? Using relational data from various international organizations, separate trade networks were built for cocaine, heroin and cannabis. Wholesale price markups are predicted with measures of supply, demand, risks of seizures, geographic distance and global positioning within the networks. Reported prices (in $US) and purchasing power parity-adjusted values are analysed. Drug prices increase more sharply when drugs are headed to countries where law enforcement imposes higher costs on traffickers. The position and role of a country in global drug markets are also closely associated with the value of drugs. Price markups are lower if the destination country is a transit to large potential markets. Furthermore, price markups for cocaine and heroin are more pronounced when drugs are exported to countries that are better positioned in the legitimate world-economy, suggesting that relations in legal and illegal markets are directed in opposite directions. Consistent with the world-system perspective, evidence is found of coherent world drug markets driven by both local realities and international relations. Copyright © 2013 Elsevier B

  1. Pricing, hedging and risk management : practical tips for natural gas buyers and sellers

    International Nuclear Information System (INIS)

    Shields, D.

    1998-01-01

    Risk analysis and techniques to manage risk as it pertains to the natural gas industry were discussed. Portfolio allocations for long-term, short-term fixed price and variable price contracts were described. Options were defined as a market instrument offering the benefits of a fixed price purchase or sale without the obligation of incurring financial or opportunity losses if the market goes against the option buyer. Options should be used as a defence strategy to protect portfolios from price risk in times of uncertainty and to take advantage of current floating market conditions without making a full price commitment. Options can also be used as an offensive strategy to make a directional play on the market or on volatility. Options selling was regarded as a much higher risk than options buying. The variables that affect options premiums were: (1) volatility, (2) time to expiration, (3) underlying price versus strike price, and (4) flexibility. Williams Energy's new world class energy trading floor in Tulsa, Oklahoma was also described. Williams is the largest-volume transporter of natural gas in the U.S. with more than 27,000 miles of pipelines. Williams pipelines transport 16 per cent of all the natural gas used in the U.S. and the company is one of the nation's largest natural gas gatherers and processors. tabs., figs

  2. The estimation of time-varying risks in asset pricing modelling using B-Spline method

    Science.gov (United States)

    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.

  3. Arbitrage Pricing, Capital Asset Pricing, and Agricultural Assets

    OpenAIRE

    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...

  4. Price fairness

    OpenAIRE

    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...

  5. Financial sustainability for a lignocellulosic biorefinery under carbon constraints and price downside risk

    International Nuclear Information System (INIS)

    Cheng, Lingfeng; Anderson, C. Lindsay

    2016-01-01

    Highlights: • Stochastic program determines production, risk management strategy for biorefinery. • Scheduled production commitment decreases as tiered carbon tax rate increases. • Risk averse producers prefer the forward contract as a mode of product sales. • Time varying forward prices and inventory enable producers to increase profits. • Inventory is beneficial to producers, below the threshold for inventory costs. - Abstract: The development of an environmentally sustainable and financially viable replacement for fossil fuels continues to elude industry investors even though the benefits of replacing them is undisputed. Biofuels are among the promising replacements for fossil fuels. However, the development and production process for bio-based fuels creates uncertainty for industry investors. In order to increase process profitability, financial tools can be implemented with current technology. This paper proposes the use of forward contracts to mitigate risk, and it also considers the impact of carbon tax constraints and price uncertainty. Specifically, a stochastic optimization approach is implemented to develop strategies, which increases the net present value (NPV) of a production facility through determination of an optimal production schedule, as well as the creation of a portfolio of forward contracts to reduce product price risk. Results of numerical case studies show that if the policymaker is risk averse, production is higher in the early planning period rather than the later period. This paper also investigates the ability to maintain inventory in order to create additional financial benefit.

  6. A comparative examination of currency risk pricing and market integration in the stock markets of Nigeria and South Africa

    Directory of Open Access Journals (Sweden)

    Odongo Kodongo

    2012-07-01

    Full Text Available We examine the pricing of currency risk and market integration in the equity markets of Nigeria and South Africa. Using the Generalized Method of Moments with a multi-beta asset pricing model and firm-level data, we find that currency risk is partly unconditionally priced in South Africa's stock market, with this market being largely integrated with the world equity markets. Conversely, currency risk is not priced in Nigeria's equity market, which also shows no evidence of integration with the world equity markets. Interestingly, a portfolio analysis of firms reveals a size based return sensitivity to both world equity markets and exchange rate volatility across the two countries. Therefore, while general results suggest that Nigeria, rather than South Africa, would provide greater diversification benefits to international investors with little or no worry about hedging unconditional exchange rate risk, that view must be nuanced when considering large size firms which are consistently sensitive to the two factors across both countries.

  7. 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.

  8. Risks and interrelationships of subdistrict house prices: the case of Amsterdam.

    Science.gov (United States)

    Teye, Alfred Larm; de Haan, Jan; Elsinga, Marja G

    2018-01-01

    This paper uses individual house transaction data from 1995 to 2014 in Amsterdam to explore the risks and interrelationships of the subdistrict house prices. Simple indicators suggest that house prices grow faster and are more risky in the central business district and its immediate surrounding areas than in the peripherals. Furthermore, we observe an over time decreasing intervariations between the subdistrict house price growth rates, whereas we find a lead-lag and house price causal flow from the more central to the peripheral subdistricts.

  9. A study of the effects of company size on systematic risk based on the capital asset pricing model among accepted companies in Tehran Stock Market ,

    Directory of Open Access Journals (Sweden)

    Reza Rostami

    2012-08-01

    Full Text Available Systematic risk (beta is one of the most effective factors in predicting the appropriate required rate of return of portfolios. Understanding systematic risk of usual portfolio of various companies helps investors consider financial investment, more confidentially. The aim of this study is to determine if there is any significant relationship between Company Size (Market value of stocks, Book value of stocks, level of company sale, trade volume of stocks, Price dividend ratio as independent variables and Systematic risk (Beta as dependent variables. The study chooses 112 companies accepted in Tehran Stock Market based on screening (systematic deletion in a six-year- period from 2005 to 2010. The required data were gathered from basic financial statement, committee reports, and other available documents in Tehran Stock Market. Regression and Pearson correlation were used to analyze the data. The results of the study revealed that there is a significant relationship between the variables. Some suggestions regarding the topic of the research are given too.

  10. The roles of the trading time risks on stock investment return and risks in stock price crashes

    Science.gov (United States)

    Li, Jiang-Cheng; Dong, Zhi-Wei; Yang, Guo-Hui; Long, Chao

    2017-03-01

    The roles of the trading time risks (TTRs) on stock investment return and risks are investigated in the condition of stock price crashes with Hushen300 data (CSI300) and Dow Jones Industrial Average (ˆDJI), respectively. In order to describe the TTR, we employ the escape time that the stock price drops from the maximum to minimum value in a data window length (DWL). After theoretical and empirical research on probability density function of return, the results in both ˆDJI and CSI300 indicate that: (i) As increasing DWL, the expectation of returns and its stability are weakened. (ii) An optimal TTR is related to a maximum return and minimum risk of stock investment in stock price crashes.

  11. Derivative pricing with liquidity risk : Theory and evidence from the credit default swap market

    NARCIS (Netherlands)

    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

  12. Which currency to set price? A model of multiple countries and risk averse firm

    OpenAIRE

    Jian Wang

    2004-01-01

    A crucial question centering many recent debates in the international macroeconomics is under which currency the price is sticky. This paper provides a microfoundation to study the firm¡¦s choice of price setting currency in the sticky price model. I first prove that the risk preference is a secondary consideration in the choice of the price setting currency. This result questions the claim that the currency forward market can change the currency choice of risk averse firms. Then I extend the...

  13. Implications of commodity price risk and operating leverage on petroleum project economic evaluations

    International Nuclear Information System (INIS)

    Salahor, G.; Laughton, D.G.

    1999-01-01

    The modern asset pricing method, MAP, can provide businesses with improved tools for economic analysis. This in turn leads to greater precision in the analysis of the effects of the following parameters: project structure, time, and uncertainty. This greater precision with MAP extends to analysis of the possibility for active control of the decision alternatives for managers in the petroleum business, especially where this possibility is not questioned. A methodology is developed as a model that quantifies revenue risk based on the nature of commodity price volatility and the accepted price of risk in the commodity market. A mathematical description is included of a natural gas log-normal distribution incorporating the annual volatility in the forecast, and a measure of the rate at which volatility decreases in the long run in the forecast. Give this volatility model, a risk discount factor is determinable and applicable to the current expectation of the commodity prices at a given time, and a discount time factor of all parts of the cash flow stream. Cases are used to evaluate a natural gas development project for the purpose of yielding scenarios for capital vs. operating cost trade-offs, price risk management, production profile, and the effect of the reverting vs. non-reverting price model. In application one, a comparison is made of discounted cash flow (DCF) to MAP evaluations giving a perspective on the various development choices which a producer has through third-party service providers. Further, an example is used to compare the two methods as alternative evaluations of development alternatives to speed up or slow down the production rate and decline profile of a gas field. As in the first example, the DCF discounting is higher than the net discounting in the MAP evaluation. But in this example both methods produce the same project structure decision. The small amount of incremental capital and operating costs needed for the higher production case are

  14. Three essays on pricing and risk management in electricity markets

    Science.gov (United States)

    Kotsan, Serhiy

    2005-07-01

    A set of three papers forms this dissertation. In the first paper I analyze an electricity market that does not clear. The system operator satisfies fixed demand at a fixed price, and attempts to minimize "cost" as indicated by independent generators' supply bids. No equilibrium exists in this situation, and the operator lacks information sufficient to minimize actual cost. As a remedy, we propose a simple efficient tax mechanism. With the tax, Nash equilibrium bids still diverge from marginal cost but nonetheless provide sufficient information to minimize actual cost, regardless of the tax rate or number of generators. The second paper examines a price mechanism with one price assigned for each level of bundled real and reactive power. Equilibrium allocation under this pricing approach raises system efficiency via better allocation of the reactive power reserves, neglected in the traditional pricing approach. Pricing reactive power should be considered in the bundle with real power since its cost is highly dependent on real power output. The efficiency of pricing approach is shown in the general case, and tested on the 30-bus IEEE network with piecewise linear cost functions of the generators. Finally the third paper addresses the problem of optimal investment in generation based on mean-variance portfolio analysis. It is assumed the investor can freely create a portfolio of shares in generation located on buses of the electrical network. Investors are risk averse, and seek to minimize the variance of the weighted average Locational Marginal Price (LMP) in their portfolio, and to maximize its expected value. I conduct simulations using a standard IEEE 68-bus network that resembles the New York - New England system and calculate LMPs in accordance with the PJM methodology for a fully optimal AC power flow solution. Results indicate that the network topology is a crucial determinant of the investment decision as line congestion makes it difficult to deliver power to

  15. Multinational Corporations and Stock Price Crash Risk

    Directory of Open Access Journals (Sweden)

    Anthony May

    2016-10-01

    Full Text Available A nascent literature in finance and accounting on tail risk in individual stock returns concludes that bad news hoarding by corporate managers engenders sudden, extreme crashes in a firm’s stock price when the bad news is eventually made public. This literature finds that firm-specific crash risk is higher among firms with more severe asymmetric information and agency problems. A hitherto disjointed literature spanning the fields of international business, finance, and accounting suggests that geographic dispersion in a firm’s operations, and especially dispersion across different countries, gives rise to organizational complexities and greater costs of monitoring that can exacerbate asymmetric information and agency problems. Motivated by the confluence of arguments and findings from these two strands of literature, this paper examines whether stock price crash risk is higher among multinational firms than domestic firms. Using a large sample of U.S. headquartered firms during 1987-2011, we find robust evidence that multinational firms are significantly more likely to crash than domestic firms. Moreover, we show that the difference in crash risk between multinational and domestic firms is most acute among firms with weaker corporate governance mechanisms, including weaker shareholder rights, less independent boards, and less stable institutional ownership. Our analysis indicates that stronger monitoring from each of these three governance mechanisms significantly attenuates the positive relation between crash risk and multinationality. Our findings are robust to the use of alternative measures of crash risk and to controlling for known determinants of crash risk identified in prior studies. Our study offers new insights that should hold value for scholars and market participants interested in understanding the implications of heighted agency problems that multinational firms are likely to encounter and scholars and market participants

  16. Pharmaceutical policies: effects of reference pricing, other pricing, and purchasing policies.

    Science.gov (United States)

    Acosta, Angela; Ciapponi, Agustín; Aaserud, Morten; Vietto, Valeria; Austvoll-Dahlgren, Astrid; Kösters, Jan Peter; Vacca, Claudia; Machado, Manuel; Diaz Ayala, Diana Hazbeydy; Oxman, Andrew D

    2014-10-16

    Pharmaceuticals are important interventions that could improve people's health. Pharmaceutical pricing and purchasing policies are used as cost-containment measures to determine or affect the prices that are paid for drugs. Internal reference pricing establishes a benchmark or reference price within a country which is the maximum level of reimbursement for a group of drugs. Other policies include price controls, maximum prices, index pricing, price negotiations and volume-based pricing. To determine the effects of pharmaceutical pricing and purchasing policies on health outcomes, healthcare utilisation, drug expenditures and drug use. We searched the Cochrane Central Register of Controlled Trials (CENTRAL), part of The Cochrane Library (including the Effective Practice and Organisation of Care Group Register) (searched 22/10/2012); MEDLINE In-Process & Other Non-Indexed Citations and MEDLINE, Ovid (searched 22/10/2012); EconLit, ProQuest (searched 22/10/2012); PAIS International, ProQuest (searched 22/10/2012); World Wide Political Science Abstracts, ProQuest (searched 22/10/2012); INRUD Bibliography (searched 22/10/2012); Embase, Ovid (searched 14/12/2010); NHSEED, part of The Cochrane Library (searched 08/12/2010); LILACS, VHL (searched 14/12/2010); International Political Science Abstracts (IPSA), Ebsco (searched (17/12/2010); OpenSIGLE (searched 21/12/10); WHOLIS, WHO (searched 17/12/2010); World Bank (Documents and Reports) (searched 21/12/2010); Jolis (searched 09/10/2011); Global Jolis (searched 09/10/2011) ; OECD (searched 30/08/2005); OECD iLibrary (searched 30/08/2005); World Bank eLibrary (searched 21/12/2010); WHO - The Essential Drugs and Medicines web site (browsed 21/12/2010). Policies in this review were defined as laws; rules; financial and administrative orders made by governments, non-government organisations or private insurers. To be included a study had to include an objective measure of at least one of the following outcomes: drug use

  17. Emergency-Dependent Supply Decisions with Risk Perception and Price Control

    Directory of Open Access Journals (Sweden)

    Shaofu Du

    2014-01-01

    Full Text Available This paper studies the impact of emergencies on the supplier’s decision-making behaviors including production and information sharing in consideration of consumer risk perception, consumer loss aversion phenomenon, and government price control. The intensity of emergencies is sequential and emergencies can be divided into two types (positive or negative according to their effect on demand. When emergencies have negative effect on demand, the supplier’s sales will reduce and he would share information to the market. When emergencies have positive effect on demand, we find that when the price is under price cap the supplier will not share information to the market; when the price reaches price cap, the supplier will share a certain amount of information to the market. We were surprised to find that increasing demand is not always good for the supplier when there exist government price control and lost sales penalty, and information helps the supplier to effectively manipulate demand.

  18. Risks and interrelationships of subdistrict house prices : the case of Amsterdam

    NARCIS (Netherlands)

    Teye, A.L.; de Haan, J.G.; Elsinga, M.G.

    2017-01-01

    This paper uses individual house transaction data from 1995 to 2014 in Amsterdam to explore the risks and interrelationships of the subdistrict house prices. Simple indicators suggest that house prices grow faster and are more risky in the central business district and its immediate surrounding

  19. Tracing the Base: A Topographic Test for Collusive Basing-Point Pricing

    NARCIS (Netherlands)

    Bos, Iwan; Schinkel, Maarten Pieter

    2009-01-01

    Basing-point pricing is known to have been abused by geographically dispersed firms in order to eliminate competition on transportation costs. This paper develops a topographic test for collusive basing-point pricing. The method uses transaction data (prices, quantities) and customer project site

  20. Tracing the base: A topographic test for collusive basing-point pricing

    NARCIS (Netherlands)

    Bos, I.; Schinkel, M.P.

    2008-01-01

    Basing-point pricing is known to have been abused by geographically dispersed firms in order to eliminate competition on transportation costs. This paper develops a topographic test for collusive basing-point pricing. The method uses transaction data (prices, quantities) and customer project site

  1. What is a new drug worth? An innovative model for performance-based pricing.

    Science.gov (United States)

    Dranitsaris, G; Dorward, K; Owens, R C; Schipper, H

    2015-05-01

    This article focuses on a novel method to derive prices for new pharmaceuticals by making price a function of drug performance. We briefly review current models for determining price for a new product and discuss alternatives that have historically been favoured by various funding bodies. The progressive approach to drug pricing, proposed herein, may better address the views and concerns of multiple stakeholders in a developed healthcare system by acknowledging and incorporating input from disparate parties via comprehensive and successive negotiation stages. In proposing a valid construct for performance-based pricing, the following model seeks to achieve several crucial objectives: earlier and wider access to new treatments; improved transparency in drug pricing; multi-stakeholder involvement through phased pricing negotiations; recognition of innovative product performance and latent changes in value; an earlier and more predictable return for developers without sacrificing total return on investment (ROI); more involved and informed risk sharing by the end-user. © 2014 John Wiley & Sons Ltd.

  2. Incentivising flood risk adaptation through risk based insurance premiums : Trade-offs between affordability and risk reduction

    NARCIS (Netherlands)

    Hudson, Paul F.; Botzen, W.J.W.; Feyen, L.; Aerts, Jeroen C.J.H.

    2016-01-01

    The financial incentives offered by the risk-based pricing of insurance can stimulate policyholder adaptation to flood risk while potentially conflicting with affordability. We examine the trade-off between risk reduction and affordability in a model of public-private flood insurance in France and

  3. Real House Price Dynamics in OECD countries - The risk of large movements in prices

    OpenAIRE

    Mamre, Mari Olsen

    2014-01-01

    Using different econometric approaches and based on a panel of 21 OECD countries this thesis investigate whether differences in structural or policy factors significantly affects the price responsiveness of shocks to demand in the short run and in the cases of abrupt movements in real prices. Over such steeper areas of the housing cycle the analysis focus specifically on finding evidence of asymmetric responses of demand and structural factors on price dynamics. The study of asymmetries in th...

  4. Fuel prices scenario generation based on a multivariate GARCH model for risk analysis in a wholesale electricity market

    International Nuclear Information System (INIS)

    Batlle, C.; Barquin, J.

    2004-01-01

    This paper presents a fuel prices scenario generator in the frame of a simulation tool developed to support risk analysis in a competitive electricity environment. The tool feeds different erogenous risk factors to a wholesale electricity market model to perform a statistical analysis of the results. As the different fuel series that are studied, such as the oil or gas ones, present stochastic volatility and strong correlation among them, a multivariate Generalized Autoregressive Conditional Heteroskedastic (GARCH) model has been designed in order to allow the generation of future fuel prices paths. The model makes use of a decomposition method to simplify the consideration of the multidimensional conditional covariance. An example of its application with real data is also presented. (author)

  5. Fairness concerns and risk aversion on recycle pricing strategies: Implications for environmentally friendly supply chains

    OpenAIRE

    He, Jianhong; Zhang, Lei; Lu, Binbin; Li, Lin

    2018-01-01

    This paper studies the pricing strategy in the closed-loop supply chain with Nash bargaining when considering fairness concerns and risk aversion. Mainly, the authors argue that behavioral factors (i.e., fairness concern and risk aversion) should be introduced into pricing process. They consider three different pricing models: the first is that both manufacturer and retailer have fairness concern; the second is both manufacturer and retailer have risk aversion and the final is manufacturer ha...

  6. Risk preference, option pricing and portfolio hedging with proportional transaction costs

    International Nuclear Information System (INIS)

    Wang, Xiao-Tian; Li, Zhe; Zhuang, Le

    2017-01-01

    Highlights: • Scaling is a key factor in option pricing. • The model is theoretically analyzed and the results are new. • Some numerical examples are performed. • The implied-volatility-frown is affected by the risk preference and scaling. - Abstract: This paper is concerned in the option pricing and portfolio hedging in a discrete time case with the proportional transaction costs. Through the Monte Carlo simulations it has been shown that the fractal scaling and risk preference of traders have an important influence on the hedging performances in both option pricing and portfolio hedging in a discrete time case. In addition, the relation between preference of traders and implied volatility frown is discussed. We conclude that the risk preferences of traders play an important role in determining the shape of the implied-volatility-frown and the different options having the different hedging frequencies is another reason for the implied volatility frown.

  7. Estimating customer preferences for new pricing products. Final report

    International Nuclear Information System (INIS)

    Goett, A.A.

    1998-10-01

    This report summarizes the results of a review of various methods to analyze customer preferences for electric service pricing products. The purpose of this study was to evaluate different techniques for analyzing preferences for electric service and pricing products in a competitive retail electricity market. In this market, competing providers will offer a variety of electric services under different price structures, and customers will face the decision of choosing a single electric service provider and pricing plan. The service and price characteristics that utilities offer will largely determine their market shares and profitability. Understanding preferences will be critical to quantifying the effects of service and pricing attributes on market share and profitability in the deregulated retail electricity market

  8. Earthquake insurance pricing: a risk-based approach.

    Science.gov (United States)

    Lin, Jeng-Hsiang

    2018-04-01

    Flat earthquake premiums are 'uniformly' set for a variety of buildings in many countries, neglecting the fact that the risk of damage to buildings by earthquakes is based on a wide range of factors. How these factors influence the insurance premiums is worth being studied further. Proposed herein is a risk-based approach to estimate the earthquake insurance rates of buildings. Examples of application of the approach to buildings located in Taipei city of Taiwan were examined. Then, the earthquake insurance rates for the buildings investigated were calculated and tabulated. To fulfil insurance rating, the buildings were classified into 15 model building types according to their construction materials and building height. Seismic design levels were also considered in insurance rating in response to the effect of seismic zone and construction years of buildings. This paper may be of interest to insurers, actuaries, and private and public sectors of insurance. © 2018 The Author(s). Disasters © Overseas Development Institute, 2018.

  9. Price-Anderson Law - reports on Price-Anderson issues

    International Nuclear Information System (INIS)

    Anon.

    1985-01-01

    Five of the six papers in this study are by experts outside the nuclear industry, and deal with fear, risk, and risk management as they apply to the review of the Price-Anderson Act. The purpose of the Act is to encourage private enterprise to develop a reliable source of electric power and to protect the public from the financial consequences of injury or damage that may occur during the process. The titles of the five papers are: (1) the effects of ionizing radiation on human health, (2) proof of causation through expert opinion evidence in low-level radiation cases, (3) a critical review of the probability of causation method, (4) the nuclear liability claims experience of the nuclear insurance pools, (5) review of nuclear liability compensation systems applicable to reactors outside the United States, and (6) the economic foundations of limited liability for nuclear reactor accidents. A separate abstract was prepared for each of the papers for EDB, EPA, and INS

  10. Value-based pricing: A success factor in the competitive struggle

    OpenAIRE

    Netseva-Porcheva Tatyana

    2011-01-01

    Over the past decade, the view that the main purpose of market oriented organizations is not to satisfy the consumer, but to create values has dominated. Exactly the values, their creation, retention and increase, are the main sources of competitive advantage of the company. The purpose of the present report is to present the price formation, based on product value, as a source of competitive advantage. In connection with the so-defined objective, the value and the product price for the custo...

  11. The impact of house price index specification levels on the risk profile of housing corporations

    NARCIS (Netherlands)

    Kramer, B.; Kuijl, T.; Francke, M.

    2009-01-01

    Asset Liability Management (ALM) for housing corporations is based on stochastic scenario models for important risk and return drivers such as interest and inflation rates, construction costs and sales prices of houses. Given the situation of the housing corporation (current real estate portfolio,

  12. Estimating the Volatility of Cocoa Price Return with ARCH and GARCH Models

    Directory of Open Access Journals (Sweden)

    Lya Aklimawati

    2013-08-01

    Full Text Available Dynamics of market changing as a result of market liberalization have an impact on agricultural commodities price fluctuation. High volatility on cocoa price movement reflect its price and market risk. Because of price and market uncertainty, the market players face some difficulties to make a decision in determining business development. This research was conducted to 1 understand the characteristics of cocoa price movement in cocoa futures trading, and 2analyze cocoa price volatility using ARCH and GARCH type model. Research was carried out by direct observation on the pattern of cocoa price movement in the futures trading and volatility analysis based on secondary data. The data was derived from Intercontinental Exchange ( ICE Futures U.S. Reports. The analysis result showed that GARCH is the best model to predict the value of average cocoa price return volatility, because it meets criteria of three diagnostic checking, which are ARCH-LM test, residual autocorrelation test and residual normality test. Based on the ARCH-LM test, GARCH (1,1did not have heteroscedasticity, because p-value  2 (0.640139and F-statistic (0.640449 were greater than 0.05. Results of residual autocorrelation test indicated that residual value of GARCH (1,1 was random, because the statistic value of Ljung-Box (LBon the 36 th lag is smaller than the statistic value of  2. Whereas, residual normality test concluded the residual of GARCH (1,1 were normally distributed, because AR (29, MA (29, RESID (-1^2, and GARCH (-1 were significant at 5% significance level. Increasing volatility value indicate high potential risk. Price risk can be reduced by managing financial instrument in futures trading such as forward and futures contract, and hedging. The research result also give an insight to the market player for decision making and determining time of hedging. Key words: Volatility, price, cocoa, GARCH, risk, futures trading

  13. An EV Charging Scheduling Mechanism Based on Price Negotiation

    Directory of Open Access Journals (Sweden)

    Baocheng Wang

    2018-05-01

    Full Text Available Scheduling EV user’s charging behavior based on charging price and applying renewable energy resources are the effective methods to release the load pressure of power grids brought about by the large-scale popularity of electric vehicles (EVs. This paper presents a novel approach for EV charging scheduling based on price negotiation. Firstly, the EV charging system framework based on price negotiation and renewable energy resources is discussed. Secondly, the price negotiation model is presented, including the initial price models and the conditions of transactions. Finally, an EV charging scheduling mechanism based on price negotiation (CSM-PN, including the price adjustment strategies of both the operator and EV users is proposed to seek a final transaction during multi-round price negotiation. Simulation results show that this novel approach can effectively improve the charging station operator’s income, reduce the EV users’ costs, and balance the load of the power grid while improving the efficiency of the EV charging system.

  14. Risk hedging against the fuel price fluctuation in energy service business

    International Nuclear Information System (INIS)

    Bannai, Masaaki; Tomita, Yasushi; Ishida, Yasushi; Miyazaki, Takahiko; Akisawa, Atsushi; Kashiwagi, Takao

    2007-01-01

    Energy service business, or energy service company (ESCO), is expanding among industrial users as a means of energy saving. The ESCO business normally tends to become a long-term operation. During the operation, fluctuations of fuel and electricity costs significantly impact on the stability of the profit from ESCO business. Therefore, it is essential to reduce the risk of fuel and electricity cost fluctuations. Generally, a transaction called ''financial derivative'' is used as a measure of hedging against the fuel price fluctuation. In the case of ESCO business, it is necessary to manage the risk of both electricity and fuel price fluctuations because the variation in electricity price strongly affects the profit from ESCO as that in fuel price does. In this paper, the stabilization of the ESCO profit using financial derivatives was discussed by quantitative analyses of the actual data from existing plants. Case studies revealed that the appropriate volume of the fuel derivative implementation was less than a half of the fuel consumption at the ESCO facilities, and it ranged from 5% to 50%. (author)

  15. The price of correlation risk:evidence from Chinese stock market

    Institute of Scientific and Technical Information of China (English)

    Yiwen Deng; Chen Liu; Zhenlong Zheng

    2014-01-01

    Purpose-The purpose of this paper is to study how the market correlation changes in Chinese stock market and how the market correlation affects stock returns.Design/methodology/approach-The authors first examine the relationship between the market correlation and the market return.Then,the authors run formal multiple regressions to see whether correlation risk is priced in security returns.Findings-The authors find that market correlation increases when the market index falls down.Though market correlation risk is partly influenced by macroeconomic shocks,volatility risk,liquidity risk and higher moment risk,market correlation contains unique information that measures the benefit investors gain from diversification strategies.The market correlation risk is negatively priced.This conclusion remains valid even if the authors have considered the influence of other risk factors and the impact of conditional information.Research limitations/implications-Subjected to the limited history of the Chinese stock market,the authors cannot use more accurate and specific empirical methodology to fulfill the empirical research.And this renders further study.Originality/value-This research provides empirical evidence in a new data sample and it sheds lights on correlation strategies for institutional investors in China.

  16. Uranium price formation. Final report

    International Nuclear Information System (INIS)

    1977-10-01

    The modern uranium industry came into existence in 1946. Until 1966, its sole customer was the Atomic Energy Commission, whose needs for U 3 O 8 relative to industry capacity declined over the years. The development of the commercial market after 1965 coincided with a period of excess capacity and falling nominal and real prices. Gradually in 1973 and dramatically thereafter, market conditions changed and prices rose as utilities sought larger quantities of U 3 O 8 and longer term contracts. Questions about availability of long-run supplies were raised, given the known reserve base. The response of the supply of U 3 O 8 to incentives offered first by the AEC and later by the utilities in the context of new and developing market conventions is examined. The methodology used is microeconomic analysis, qualitatively applied to the history of price formation in the market. Because the study emphasizes the implications of the history of uranium price formation for forecasting supply response, the study presents many different kinds of data and evaluates their quality and appropriateness for forecasting. A simple, very-useful framework for analyzing the history of the market for U 3 O 8 was developed and used to describe supply responses in selected important periods of the industry's development. It is concluded that the response of supply of U 3 O 8 to rising prices or to expectations of demand growth has been impressively strong. The potential reserve inventory is large enough to meet the needs for nuclear power generation through the end of this century. The price necessary to induce producers to find and produce these reserves is uncertain, partly because of problems inherent in estimating long-run supply curves and partly because recent inflation has created major uncertainties about the cost of future supplies

  17. Local house prices and mental health.

    Science.gov (United States)

    Joshi, Nayan Krishna

    2016-03-01

    This paper examines the impact of local (county-level) house prices on individual self-reported mental health using individual level data from the United States Behavioral Risk Factor Surveillance System between 2005 and 2011. Exploiting a fixed-effects model that relies on within-county variations, relative to the corresponding changes in other counties, I find that while individuals are likely to experience worse self-reported mental health when local house prices decline, this association is most pronounced for individuals who are least likely to be homeowners. This finding is not consistent with a prediction from a pure wealth mechanism but rather with the hypothesis that house prices act as an economic barometer. I also demonstrate that the association between self-reported mental health and local house prices is not driven by unemployment or foreclosure. The primary result-that lower local house prices have adverse impact on self-reported mental health of homeowners and renters-is consistent with studies using data from the United Kingdom.

  18. Value based pricing: the least valued pricing strategy

    OpenAIRE

    Hoenen, Bob

    2017-01-01

    Pricing has been one of the least researched topics in marketing, although within these pricing strategies: cost-plus pricing is considered as the leading pricing strategy worldwide. Why should companies use such an unprofitable strategy, where fighting for a higher market share due to low prices is more a rule than exception? VBP is one of the most underestimated strategies by organizations. The definition of VBP is: 'value pricing applies to products that have the potential of being differe...

  19. Impact of Risk Aversion on Price and Quality Decisions under Demand Uncertainty via the CARA Utility Function

    Directory of Open Access Journals (Sweden)

    Qinqin Li

    2014-01-01

    Full Text Available This paper investigates optimal price and quality decisions of a manufacturer-retailer supply chain under demand uncertainty, in which players are both risk-averse decision makers. The manufacturer determines the wholesale price and quality of the product, and the retailer determines the retail price. By means of game theory, we employ the constant absolute risk aversion (CARA function to analyze two different supply chain structures, that is, manufacturer Stackelberg model (MS and retailer Stackelberg model (RS. We then analyze the results to explore the effects of risk aversion of the manufacturer and the retailer upon the equilibrium decisions. Our results imply that both the risk aversion of the manufacturer and the retailer play an important role in the price and quality decisions. We find that, in general, in MS and RS models, the optimal wholesale price and quality decrease with the risk aversion of the manufacturer but increase with the risk aversion of the retailer, while the retail price decreases with the risk aversion of the manufacturer as well as the retailer. We also examine the impact of quality cost coefficient on the optimal decisions. Finally, numerical examples are presented to illustrate the different degree of effects of players’ risk aversion on equilibrium results and to compare results in different models considered.

  20. Systemic Risk-Taking at Banks: Evidence from the Pricing of Syndicated Loans

    NARCIS (Netherlands)

    D. Gong (Di); W.B. Wagner (Wolf)

    2016-01-01

    textabstractPublic guarantees extended during systemic crises can affect the relative pricing of risks in the financial system. Studying the market for syndicated loans, we find that banks require lower compensation for aggregate risk than for idiosyncratic risk, consistent with systemic risk-taking

  1. Value-based pricing: A success factor in the competitive struggle

    Directory of Open Access Journals (Sweden)

    Netseva-Porcheva Tatyana

    2011-01-01

    Full Text Available Over the past decade, the view that the main purpose of market oriented organizations is not to satisfy the consumer, but to create values has dominated. Exactly the values, their creation, retention and increase, are the main sources of competitive advantage of the company. The purpose of the present report is to present the price formation, based on product value, as a source of competitive advantage. In connection with the so-defined objective, the value and the product price for the customer are derived as key factors for success of the company in the competitive struggle; the role of the value of the product in the marketing and pricing is revealed; and theory clarifies the two basic approaches for determining the price of the product on the basis of value - customer value modeling (CVM and economic value modeling (EVM, their nature, scope of application, advantages and disadvantages.

  2. Risk-return and difference of Ipe wood price in Pará and São Paulo markets

    Directory of Open Access Journals (Sweden)

    Humberto Figueira Barbosa

    2014-03-01

    Full Text Available This study estimated the relation risk-return and the trend of the price difference among the markets of consumers of Ipê amarelo (Tabebuia serratifolia sawn wood in the State of Pará and the cities of Baurú, Campinas, and Sorocaba,. It was considered as indicative of risk the Coefficient of Variation (CV, and as indicative of return the Rate of Geometric Growth (RGG of the price series that was also used to estimate the trend of the price difference among the markets. It was noted that the risk-return relationship is coherent in all markets, and the city of Sorocaba stands out with the greatest estimative in both risk and return, and presents increase trend of the price difference among State of Pará market, which presented a temporal deficit in the price increase compared to other markets analyzed.

  3. An annual framework for clustering-based pricing for an electricity retailer

    International Nuclear Information System (INIS)

    Mahmoudi-Kohan, N.; Moghaddam, M. Parsa; Sheikh-El-Eslami, M.K.

    2010-01-01

    In the competitive environment, it is necessary for a retailer to increase his/her profit as much as possible. There are few researches focused on the subjects related to the retailer and the retail market. In addition, those researches have mostly focused on the participation of the retailer in the wholesale market. In order to determine the optimal selling price, the knowledge of how and when consumers use electricity is essential to the retailer. This type of information can be found in load profiles of customers. In this paper, an annual framework for optimal price offering by a retailer is proposed which is based on clustering technique. For this purpose, load profiles of customers are used as their consumption patterns. Also, a profit function is defined as the objective of optimization problem based on the load profile considering conditional value at risk (CVaR) for risk modeling. Also, a new acceptance function is proposed to overcome drawbacks of the traditional ones. The objective function is a mixed-integer nonlinear problem which is solved by GAMS software. (author)

  4. PRICES IN COMPETITIVE SYSTEM

    Directory of Open Access Journals (Sweden)

    VADUVA MARIA

    2017-08-01

    Full Text Available Regularities of competitive market determine rules for determining prices and their dynamics. Orientation prices to competition (competitive pricing is the strategy most frequently used in countries with market economies and especially for exports. Moreover, in an economy dominated by market competition it cannot be ignored without certain risks the prices resulting from competition between products bidders. Companies that use this type of strategy seek to maintain a level of prices linked to that charged by other competitors (or exporting producers generally no longer covering production costs or demand, relying on the assumption that the average market price is a reasonable basis of costs. But the way how practical guidance and reporting to the competition in every price strategy, will be determined by the company's market position, by the available power and enjoyed prestige, objectives and prospects of its market share etc. according to these elements, there may be several versions of pricing strategies oriented to competitors.

  5. Real-time pricing strategy of micro-grid energy centre considering price-based demand response

    Science.gov (United States)

    Xu, Zhiheng; Zhang, Yongjun; Wang, Gan

    2017-07-01

    With the development of energy conversion technology such as power to gas (P2G), fuel cell and so on, the coupling between energy sources becomes more and more closely. Centralized dispatch among electricity, natural gas and heat will become a trend. With the goal of maximizing the system revenue, this paper establishes the model of micro-grid energy centre based on energy hub. According to the proposed model, the real-time pricing strategy taking into account price-based demand response of load is developed. And the influence of real-time pricing strategy on the peak load shifting is discussed. In addition, the impact of wind power predicted inaccuracy on real-time pricing strategy is analysed.

  6. Binary Tree Pricing to Convertible Bonds with Credit Risk under Stochastic Interest Rates

    Directory of Open Access Journals (Sweden)

    Jianbo Huang

    2013-01-01

    Full Text Available The convertible bonds usually have multiple additional provisions that make their pricing problem more difficult than straight bonds and options. This paper uses the binary tree method to model the finance market. As the underlying stock prices and the interest rates are important to the convertible bonds, we describe their dynamic processes by different binary tree. Moreover, we consider the influence of the credit risks on the convertible bonds that is described by the default rate and the recovery rate; then the two-factor binary tree model involving the credit risk is established. On the basis of the theoretical analysis, we make numerical simulation and get the pricing results when the stock prices are CRR model and the interest rates follow the constant volatility and the time-varying volatility, respectively. This model can be extended to other financial derivative instruments.

  7. State energy-price system: 1981 update

    Energy Technology Data Exchange (ETDEWEB)

    Fang, J.M.; Imhoff, K.L.; Hood, L.J.

    1983-08-01

    This report updates the State Energy Price Data System (STEPS) to include state-level energy prices by fuel and by end-use sectors for 1981. Both physical unit prices and Btu prices are presented. Basic documentation of the data base remains generally the same as in the original report: State Energy Price System; Volume 1: Overview and Technical Documentation (DOE/NBB-0029 Volume 1 of 2, November 1982). The present report documents only the changes in procedures necessitated by the update to 1981 and the corrections to the basic documentation.

  8. Price adjustment for traditional Chinese medicine procedures: Based on a standardized value parity model.

    Science.gov (United States)

    Wang, Haiyin; Jin, Chunlin; Jiang, Qingwu

    2017-11-20

    Traditional Chinese medicine (TCM) is an important part of China's medical system. Due to the prolonged low price of TCM procedures and the lack of an effective mechanism for dynamic price adjustment, the development of TCM has markedly lagged behind Western medicine. The World Health Organization (WHO) has emphasized the need to enhance the development of alternative and traditional medicine when creating national health care systems. The establishment of scientific and appropriate mechanisms to adjust the price of medical procedures in TCM is crucial to promoting the development of TCM. This study has examined incorporating value indicators and data on basic manpower expended, time spent, technical difficulty, and the degree of risk in the latest standards for the price of medical procedures in China, and this study also offers a price adjustment model with the relative price ratio as a key index. This study examined 144 TCM procedures and found that prices of TCM procedures were mainly based on the value of medical care provided; on average, medical care provided accounted for 89% of the price. Current price levels were generally low and the current price accounted for 56% of the standardized value of a procedure, on average. Current price levels accounted for a markedly lower standardized value of acupuncture, moxibustion, special treatment with TCM, and comprehensive TCM procedures. This study selected a total of 79 procedures and adjusted them by priority. The relationship between the price of TCM procedures and the suggested price was significantly optimized (p based on a standardized value parity model is a scientific and suitable method of price adjustment that can serve as a reference for other provinces and municipalities in China and other countries and regions that mainly have fee-for-service (FFS) medical care.

  9. Pricing and Timing Strategies for New Product Using Agent-Based Simulation of Behavioural Consumers

    OpenAIRE

    Keeheon Lee; Hoyeop Lee; Chang Ouk Kim

    2014-01-01

    In this study, we are interested in the problem of determining the pricing and timing strategies of a new product by developing an agent-based product diffusion simulation. In the proposed simulation model, agents imitate behavioural consumers, who are reference dependent and risk averse in the evaluation of new products and whose interactions create word-of-mouth regarding new products. Pricing and timing strategies involve the timing of a new product release, the timing of providing a disco...

  10. The Arbitrage Pricing Model: A Pedagogic Derivation and a Spreadsheet-Based Illustration

    Directory of Open Access Journals (Sweden)

    Clarence C. Y. Kwan

    2016-05-01

    Full Text Available This paper derives, from a pedagogic perspective, the Arbitrage Pricing Model, which is an important asset pricing model in modern finance. The derivation is based on the idea that, if a self-financed investment has no risk exposures, the payoff from the investment can only be zero. Microsoft Excel plays an important pedagogic role in this paper. The Excel illustration not only helps students recognize more fully the various nuances in the model derivation, but also serves as a good starting point for students to explore on their own the relevance of the noise issue in the model derivation.

  11. 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.

  12. Can reported VaR be used as an indicator of the volatility of share prices? Evidence from UK banks.

    OpenAIRE

    Ou, Shian Kao

    2006-01-01

    Value at Risk (VaR) is used as an indicator to measure the risks contained in a firm. With the uprising development of VaR theory and computational techniques, the VaR is nowadays adopted by banks and reported in annual reports. Since the method to calculate VaR is questioned, and the reported VaR can not be thoroughly audited, this paper attempts to find the relationship between the reported VaR and the volatility of share price for UK listed banks. This paper reviews literature about VaR an...

  13. Is there dependence and systemic risk between oil and renewable energy stock prices?

    International Nuclear Information System (INIS)

    Reboredo, Juan C.

    2015-01-01

    We study systemic risk and dependence between oil and renewable energy markets using copulas to characterize the dependence structure and to compute the conditional value-at-risk as a measure of systemic risk. We found significant time-varying average and symmetric tail dependence between oil returns and several global and sectoral renewable energy indices. Our evidence on systemic risk indicates that oil price dynamics significantly contributes around 30% to downside and upside risk of renewable energy companies. These results have important implications for risk management and renewable energy policies. - Highlights: • We study systemic risk and dependence between oil and renewable energy markets. • Dependence and conditional value-at-risk is obtained through copulas. • Oil and renewable energy displayed time-varying average and symmetric tail dependence. • Oil price contribution to the downside and upside risks of renewable energy companies was around 30%

  14. Public transparency Web sites for radiology practices: prevalence of price, clinical quality, and service quality information.

    Science.gov (United States)

    Rosenkrantz, Andrew B; Doshi, Ankur M

    2016-01-01

    To assess information regarding radiology practices on public transparency Web sites. Eight Web sites comparing radiology centers' price and quality were identified. Web site content was assessed. Six of eight Web sites reported examination prices. Other reported information included hours of operation (4/8), patient satisfaction (2/8), American College of Radiology (ACR) accreditation (3/8), on-site radiologists (2/8), as well as parking, accessibility, waiting area amenities, same/next-day reports, mammography follow-up rates, examination appropriateness, radiation dose, fellowship-trained radiologists, and advanced technologies (1/8 each). Transparency Web sites had a preponderance of price (and to a lesser extent service quality) information, risking fostering price-based competition at the expense of clinical quality. Copyright © 2016 Elsevier Inc. All rights reserved.

  15. Application of Derivatives Market for Controlling Risks of Commodity Prices

    Directory of Open Access Journals (Sweden)

    Rasuolė Drazdauskienė

    2015-05-01

    Full Text Available The issue of raw milk procurement cost level and fluctuation which inhibits strengthening negotiating positions of dairy product fabricants and probability of them staying competitive in the European Union, is examined. Scientific literature that analyzes risks of staple prices is overviewed in the article. The paper provides statistical data representing the situation of Lithuania in contrast with European Union rates. Global usage of prospective transactions and their possible influence on price regulation are analyzed. After examining statistical data and academic literature, conclusions are provided.

  16. Pricing Externalities to Balance Public Risks and Benefits of Research.

    Science.gov (United States)

    Farquhar, Sebastian; Cotton-Barratt, Owen; Snyder-Beattie, Andrew

    How should scientific funders evaluate research with public health risks? Some risky work is valuable, but accepting too much risk may be ethically neglectful. Recent controversy over H5N1 influenza experiments has highlighted the difficulty of this problem. Advocates of the research claim the work is needed to understand pandemics, while opponents claim that accidents or misuse could release the very pandemic the work is meant to prevent. In an attempt to resolve the debate, the US government sponsored an independent evaluation that successfully produced a quantitative estimate of the risks involved, but only a qualitative estimate of the benefits. Given the difficulties of this "apples-to-oranges" risk-benefit analysis, what is the best way forward? Here we outline a general approach for balancing risks and benefits of research with public risks. Instead of directly comparing risks and benefits, our approach requires only an estimate of risk, which is then translated into a financial price. This estimate can be obtained either through a centrally commissioned risk assessment or by mandating liability insurance, which allows private markets to estimate the financial burden of risky research. The resulting price can then be included in the cost of the research, enabling funders to evaluate grants as usual-comparing the scientific merits of a project against its full cost to society. This approach has the advantage of aligning incentives by assigning costs to those responsible for risks. It also keeps scientific funding decisions in the hands of scientists, while involving the public on questions of values and risk experts on risk evaluation.

  17. Economic analysis of coal price-electricity price adjustment in China based on the CGE model

    International Nuclear Information System (INIS)

    He, Y.X.; Zhang, S.L.; Yang, L.Y.; Wang, Y.J.; Wang, J.

    2010-01-01

    In recent years, coal price has risen rapidly, which has also brought a sharp increase in the expenditures of thermal power plants in China. Meantime, the power production price and power retail price have not been adjusted accordingly and a large number of thermal power plants have incurred losses. The power industry is a key industry in the national economy. As such, a thorough analysis and evaluation of the economic influence of the electricity price should be conducted before electricity price adjustment is carried out. This paper analyses the influence of coal price adjustment on the electric power industry, and the influence of electricity price adjustment on the macroeconomy in China based on computable general equilibrium models. The conclusions are as follows: (1) a coal price increase causes a rise in the cost of the electric power industry, but the influence gradually descends with increase in coal price; and (2) an electricity price increase has an adverse influence on the total output, Gross Domestic Product (GDP), and the Consumer Price Index (CPI). Electricity price increases have a contractionary effect on economic development and, consequently, electricity price policy making must consequently consider all factors to minimize their adverse influence.

  18. 76 FR 41602 - Fair Credit Reporting Risk-Based Pricing Regulations

    Science.gov (United States)

    2011-07-15

    ... on and disclose the key factors provided with the scores purchased from consumer reporting agencies... making the credit decision, the creditor must disclose that score and certain information relating to the... following disclosures: (1) the credit score \\4\\ used by the person in making the credit decision; (2) the...

  19. Electricity prices and power derivatives: An affine jump diffusion approach with seasonal volatility and prices

    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)

  20. Ontario gas prices review task force report : fairness at the pump

    International Nuclear Information System (INIS)

    2000-01-01

    Sudden gas price increases hit Ontario consumers in July 1999, and as a result, the Gas Busters Hotline operated by the provincial government received over 4,000 complaints concerning the price of gas. World crude oil prices increased to above 34 American dollars per barrel by March 2000, and there were discrepancies by as much as 10 cents a litre in the price of gas in Ontario, depending on the community where the purchase was made. The Gas Prices Review Task Force was established in November 1999 to assist in the identification of an adequate solution to the rising price of gas. Public participation was sought, as well as input from representatives of consumer groups and industry. The Task Force was also mandated to conduct policy options research to ensure fair prices at the pump, to examine the regulatory or legislative initiatives that would work best for the protection of the consumer, in accordance with the federal Competition Act. A report was submitted to the Minister of Consumer and Commercial Relations. A total of fourteen recommendations were made to the Minister. The recommendations touched topics as varied as tax collection legislation, price monitoring, segmented earnings reports, removal of the Goods and Services Tax (GST). refs., figs

  1. Estimating inpatient hospital prices from state administrative data and hospital financial reports.

    Science.gov (United States)

    Levit, Katharine R; Friedman, Bernard; Wong, Herbert S

    2013-10-01

    To develop a tool for estimating hospital-specific inpatient prices for major payers. AHRQ Healthcare Cost and Utilization Project State Inpatient Databases and complete hospital financial reporting of revenues mandated in 10 states for 2006. Hospital discharge records and hospital financial information were merged to estimate revenue per stay by payer. Estimated prices were validated against other data sources. Hospital prices can be reasonably estimated for 10 geographically diverse states. All-payer price-to-charge ratios, an intermediate step in estimating prices, compare favorably to cost-to-charge ratios. Estimated prices also compare well with Medicare, MarketScan private insurance, and the Medical Expenditure Panel Survey prices for major payers, given limitations of each dataset. Public reporting of prices is a consumer resource in making decisions about health care treatment; for self-pay patients, they can provide leverage in negotiating discounts off of charges. Researchers can also use prices to increase understanding of the level and causes of price differentials among geographic areas. Prices by payer expand investigational tools available to study the interaction of inpatient hospital price setting among public and private payers--an important asset as the payer mix changes with the implementation of the Affordable Care Act. © Published 2013. This article is a U.S. Government work and is in the public domain in the USA.

  2. Heterogeneity and option pricing

    NARCIS (Netherlands)

    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.

  3. The Value of Negotiating Cost-Based Transfer Prices

    Directory of Open Access Journals (Sweden)

    Anne Chwolka

    2010-10-01

    Full Text Available This paper analyzes the potential of one-step transfer prices based on either variable or full costs for coordinating decentralized production and quality-improving investment decisions. Transfer prices based on variable costs fail to induce investments on the upstream stage. In contrast, transfer prices based on full costs provide strong investment incentives for the upstream divisions. However, they fail to coordinate the investment decisions. We show that negotiations prevent such coordination failure. In particular, we find that the firm benefits from a higher degree of decentralization so that total profit increases in the number of parameters being subject to negotiations.

  4. Frequency Based Real-time Pricing for Residential Prosumers

    Science.gov (United States)

    Hambridge, Sarah Mabel

    This work is the first to explore frequency based pricing for secondary frequency control as a price-reactive control mechanism for residential prosumers. A frequency based real-time electricity rate is designed as an autonomous market control mechanism for residential prosumers to provide frequency support as an ancillary service. In addition, prosumers are empowered to participate in dynamic energy transactions, therefore integrating Distributed Energy Resources (DERs), and increasing distributed energy storage onto the distributed grid. As the grid transitions towards DERs, a new market based control system will take the place of the legacy distributed system and possibly the legacy bulk power system. DERs provide many benefits such as energy independence, clean generation, efficiency, and reliability to prosumers during blackouts. However, the variable nature of renewable energy and current lack of installed energy storage on the grid will create imbalances in supply and demand as uptake increases, affecting the grid frequency and system operation. Through a frequency-based electricity rate, prosumers will be encouraged to purchase energy storage systems (ESS) to offset their neighbor's distributed generation (DG) such as solar. Chapter 1 explains the deregulation of the power system and move towards Distributed System Operators (DSOs), as prosumers become owners of microgrids and energy cells connected to the distributed system. Dynamic pricing has been proposed as a benefit to prosumers, giving them the ability to make decisions in the energy market, while also providing a way to influence and control their behavior. Frequency based real-time pricing is a type of dynamic pricing which falls between price-reactive control and transactive control. Prosumer-to-prosumer transactions may take the place of prosumer-to-utility transactions, building The Energy Internet. Frequency based pricing could be a mechanism for determining prosumer prices and supporting

  5. NON-LINEARITY OF AUDIT PRICES AND REPUTATION IN DEVELOPING COUNTRIES: SHIFT TO OR FROM?

    Directory of Open Access Journals (Sweden)

    Svitlana Shulha

    2016-11-01

    Full Text Available The purpose of the paper is to analyse the origins of audit prices non-linearity in developing countries. We assume risk- and industry-sensitiveness of audit firms there due to the low institutional capacity, weak market forces development and questionable both auditors and clients ethical behaviour affecting market sustainability and implying additional challenges on stakeholder confidence. Methodology. We combine economic geography approach and reputation-averse phenomenon to explain endogenous volatility of average audit prices in Ukraine for the period of 2008-2015. Analysis of recent publications partially explains audit pricing non-linearity determinants that have both qualitative (brand and specialization and quantitative (risks, manipulations, bribery nature in developing countries. First, we qualify determinants of audit fees by inherent origin (endogenous, exogenous, stakeholder side (demand, supply, and market structure (concentrated, fragmented. Second, we summarize reputation challenges of audit business in developing countries. Third, we run empirical analysis of average prices in Ukraine for the period of 2008-2015 based on annual Chamber of Auditors of Ukraine reports data. Practical implications. Audit pricing models in developed countries are mainly exogenous and based on the auditor’s risk assessment. Vulnerability of markets and clients’ unethical behaviour makes audit pricing models more endogenous in developing countries. Value/originality. This is the first paper providing a better understanding of audit prices declination in Ukraine as a consequence of dysfunctional audit firms’ behaviour, institutional and market fragility, inherent to developing countries.

  6. Composition of traders in live cattle futures contracts : behavior and implications to price discovery

    OpenAIRE

    Rowsell, John

    1991-01-01

    The concepts of risk transfer and price discovery are well developed roles for futures markets. The interaction between traders in futures markets in the transferring and acceptance of price risk contributes to the discovery of price. Interaction of traders in the risk transfer and price discovery processes is examined in this dissertation. Data employed were for live cattle futures at the Chicago Mercantile Exchange developed from the confidential daily records of reporting trader positions ...

  7. Dynamic Relation Mechanism between Cotton Future Price and Stock Price of Related Listed Companies

    Institute of Scientific and Technical Information of China (English)

    2011-01-01

    The Dynamic relation mechanism between ZCE cotton futures price and related listed company stock price has been studied based on the metastock historical data in January 1st,2007 to September 1st,2010,Johansen co-integration analysis,Vector error correction model,Granger causality test and variance decomposition method.The results indicated that:long-term equilibrium relationship existed between ZCE cotton futures price and Xinsai share stock price while which changed in the same tendency and speed in the long-term.Cotton futures price is the main reason for the changing of Xinsai share stock price.The lead-lag relationship in changing course had been confirmed that existed between ZCE cotton futures price and the Xinsai share stock price.Meanwhile,the forward pass mechanism of price changing information had been found only from the ZCE cotton futures market to the stock market while showing asymmetry.Conclusions of the study can be used for cotton and related corporate to hedge business risks by the cotton price changes.

  8. Willingness to Overpay for Insurance and for Consumer Credit: Search and Risk Behavior Under Price Dispersion

    Directory of Open Access Journals (Sweden)

    Sergey MALAKHOV

    2014-11-01

    Full Text Available When income growth under price dispersion reduces the time of search and raises prices of purchases, the increase in purchase price can be presented as the increase in the willingness to pay for insurance or the willingness to pay for consumer credit. The optimal consumer decision represents the trade-off between the propensity to search for beneficial insurance or consumer credit, and marginal savings on insurance policy or consumer credit. Under price dispersion the indirect utility function takes the form of cubic parabola, where the risk aversion behavior ends at the saddle point of the comprehensive insurance or the complete consumer credit. The comparative static analysis of the saddle point of the utility function discovers the ambiguity of the departure from risk-neutrality. This ambiguity can produce the ordinary risk seeking behavior as well as mathematical catastrophes of Veblen-effect’s imprudence and over prudence of family altruism. The comeback to risk aversion is also ambiguous and it results either in increasing or in decreasing relative risk aversion. The paper argues that the decreasing relative risk aversion comes to the optimum quantity of money.

  9. Incentivising flood risk adaptation through ris based insurance premiums: trade-offs between affordability and risk reduction

    NARCIS (Netherlands)

    Hudson, P.G.M.B.; Botzen, W.J.W.; Feyen, L.; Aerts, J.C.J.H.

    2016-01-01

    The financial incentives offered by the risk-based pricing of insurance can stimulate policyholder adaptation to flood risk while potentially conflicting with affordability. We examine the trade-off between risk reduction and affordability in a model of public-private flood insurance in France and

  10. Sociological Factors Affecting Agricultural Price Risk Management in Australia

    Science.gov (United States)

    Jackson, Elizabeth; Quaddus, Mohammed; Islam, Nazrul; Stanton, John

    2009-01-01

    The highly volatile auction system in Australia accounts for 85 percent of ex-farm wool sales, with the remainder sold by forward contract, futures, and other hedging methods. In this article, against the background of an extensive literature on price risk strategies, we investigate the behavioral factors associated with producers' adoption of…

  11. Coordinating Contracts for Two-Stage Fashion Supply Chain with Risk-Averse Retailer and Price-Dependent Demand

    Directory of Open Access Journals (Sweden)

    Minli Xu

    2013-01-01

    Full Text Available When the demand is sensitive to retail price, revenue sharing contract and two-part tariff contract have been shown to be able to coordinate supply chains with risk neutral agents. We extend the previous studies to consider a risk-averse retailer in a two-echelon fashion supply chain. Based on the classic mean-variance approach in finance, the issue of channel coordination in a fashion supply chain with risk-averse retailer and price-dependent demand is investigated. We propose both single contracts and joint contracts to achieve supply chain coordination. We find that the coordinating revenue sharing contract and two-part tariff contract in the supply chain with risk neutral agents are still useful to coordinate the supply chain taking into account the degree of risk aversion of fashion retailer, whereas a more complex sales rebate and penalty (SRP contract fails to do so. When using combined contracts to coordinate the supply chain, we demonstrate that only revenue sharing with two-part tariff contract can coordinate the fashion supply chain. The optimal conditions for contract parameters to achieve channel coordination are determined. Numerical analysis is presented to supplement the results and more insights are gained.

  12. Cross-border electricity market effects due to price caps in an emission trading system: An agent-based approach

    International Nuclear Information System (INIS)

    Richstein, Jörn C.; Chappin, Emile J.L.; Vries, Laurens J. de

    2014-01-01

    The recent low CO 2 prices in the European Union Emission Trading Scheme (EU ETS) have triggered a discussion whether the EU ETS needs to be adjusted. We study the effects of CO 2 price floors and a price ceiling on the dynamic investment pathway of two interlinked electricity markets (loosely based on Great Britain, which already has introduced a price floor, and on Central Western Europe). Using an agent-based electricity market simulation with endogenous investment and a CO 2 market (including banking), we analyse the cross-border effects of national policies as well as system-wide policy options. A common, moderate CO 2 auction reserve price results in a more continuous decarbonisation pathway. This reduces CO 2 price volatility and the occurrence of carbon shortage price periods, as well as the average cost to consumers. A price ceiling can shield consumers from extreme price shocks. These price restrictions do not cause a large risk of an overall emissions overshoot in the long run. A national price floor lowers the cost to consumers in the other zone; the larger the zone with the price floor, the stronger the effect. Price floors that are too high lead to inefficiencies in investment choices and to higher consumer costs. - Highlights: • Cross-border effects of CO 2 policies were investigated with an agent-based model. • The current EU ETS might cause CO 2 price shocks and CO 2 price volatility. • A CO 2 auction reserve price does not lower welfare, but lowers CO 2 price volatility. • A national CO 2 price floor lowers consumer cost in the other countries. • A CO 2 price ceiling does not lead to an overshoot of emissions

  13. Energy price risk management

    International Nuclear Information System (INIS)

    Evans, J.W.G.

    1998-01-01

    While long term, fixed price contracts for fuel procurement and export of excess power may lock in the economics of a CHP plant, these do not necessarily give the best pricing opportunities that may exist during the life of those contracts. A more prudent approach may be to vary the length of the contracts and markets are now developing in gas and electricity to assist in the management of such a portfolio. (Author)

  14. Energy pricing under uncertain supply

    International Nuclear Information System (INIS)

    Serra, P.J.

    1997-01-01

    This paper introduces a new pricing system - based on the Chilean tariff regulations - to deal with an uncertain energy supply. It consists of a basic rate for each unit actually consumed and a compensation that the utilities pay their customers for each unit of energy that they voluntarily reduce below their normal consumption during an energy shortage. Within the framework of a model that portrays the stylized facts of the Chilean electric system, and assumes risk-neutral agents, this paper shows the equivalency of the new pricing system with both contingent pricing and priority pricing. (Author)

  15. Reflections on the reporting of the uranium spot price

    International Nuclear Information System (INIS)

    Novak, E.D.

    1984-01-01

    Reporting of the Spot Uranium Price does not represent the uranium market, but actually represents the extremities of a market. The Spot Prices tend to cause instabilities in the market if relied upon too heavily and an excessive use will actually support a questionable transition from a fuel supply industry to a commodities industry. Utility fuel buyers and uranium sellers must be careful how they use the Spot Price, or they will continue to create an unstable supply/demand relationship. But, since we all rely upon statistics for the illusion of independence, we may get the commodities market, assisted along by the information people, whether we want it or not

  16. Price Comparisons on the Internet Based on Computational Intelligence

    Science.gov (United States)

    Kim, Jun Woo; Ha, Sung Ho

    2014-01-01

    Information-intensive Web services such as price comparison sites have recently been gaining popularity. However, most users including novice shoppers have difficulty in browsing such sites because of the massive amount of information gathered and the uncertainty surrounding Web environments. Even conventional price comparison sites face various problems, which suggests the necessity of a new approach to address these problems. Therefore, for this study, an intelligent product search system was developed that enables price comparisons for online shoppers in a more effective manner. In particular, the developed system adopts linguistic price ratings based on fuzzy logic to accommodate user-defined price ranges, and personalizes product recommendations based on linguistic product clusters, which help online shoppers find desired items in a convenient manner. PMID:25268901

  17. 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...

  18. Pricing index-based catastrophe bonds: Part 2: Object-oriented design issues and sensitivity analysis

    Science.gov (United States)

    Unger, André J. A.

    2010-02-01

    This work is the second installment in a two-part series, and focuses on object-oriented programming methods to implement an augmented-state variable approach to aggregate the PCS index and introduce the Bermudan-style call feature into the proposed CAT bond model. The PCS index is aggregated quarterly using a discrete Asian running-sum formulation. The resulting aggregate PCS index augmented-state variable is used to specify the payoff (principle) on the CAT bond based on reinsurance layers. The purpose of the Bermudan-style call option is to allow the reinsurer to minimize their interest rate risk exposure on making fixed coupon payments under prevailing interest rates. A sensitivity analysis is performed to determine the impact of uncertainty in the frequency and magnitude of hurricanes on the price of the CAT bond. Results indicate that while the CAT bond is highly sensitive to the natural variability in the frequency of landfalling hurricanes between El Ninõ and non-El Ninõ years, it remains relatively insensitive to uncertainty in the magnitude of damages. In addition, results indicate that the maximum price of the CAT bond is insensitive to whether it is engineered to cover low frequency high magnitude events in a 'high' reinsurance layer relative to high frequency low magnitude events in a 'low' reinsurance layer. Also, while it is possible for the reinsurer to minimize their interest rate risk exposure on the fixed coupon payments, the impact of this risk on the price of the CAT bond appears small relative to the natural variability in the CAT bond price, and consequently catastrophic risk, due to uncertainty in the frequency and magnitude of landfalling hurricanes.

  19. Properly pricing country risk: a model for pricing long-term fundamental risk applied to central and eastern European countries

    Directory of Open Access Journals (Sweden)

    Debora Revoltella

    2010-09-01

    Full Text Available The private sector has used proxies such as sovereign credit ratings, spreads on sovereign bonds and spreads on sovereign credit default swaps (CDS to gauge country risk, even though these measures are pricing the risk of default of government bonds, which is different from the risks facing private participants in cross-border financing. Under normal market conditions, the CDS spreads are a very useful source of information on country risk. However, the recent crisis has shown that the CDS spreads might lead to some underpricing or overpricing of fundamentals in the case of excessively low or excessively high risk aversion. In this paper we develop an alternative measure of country risk that extracts the volatile, short-term market sentiment component from the sover eign CDS spread in order to improve its reliability in periods of market distress. We show that adverse market sentiment was a key driver of the sharp increase in sovereign CDS spreads of central and eastern European (CEE countries during the most severe phase of the crisis. We also show that our measure of country risk sheds some light on the observed stability of cross-border bank flows to CEE banks during the crisis.

  20. MARKET SIGNALS IN VALUE-BASED PRICING PREMIUMS AND DISCOUNTS

    OpenAIRE

    Feuz, Dillon M.

    1999-01-01

    There is concern in the beef industry that present marketing practices may be impending the transmission of economic signals from consumers to producers. Presently, fed cattle may be sold on a show list, pen-by-pen, or on an individual head basis, and may be priced using live weight, dressed weight, or grid or formula pricing. Market signals are more likely to reach producers if cattle are priced individually. Current value-based pricing are discussed. Three grid pricing systems are evaluated...

  1. TIME VARIATION AND ASYMMETRY IN THE WORLD PRICE OF COVARIANCE RISK: THE IMPLICATIONS FOR INTERNATIONAL DIVERSIFICATION

    OpenAIRE

    Olan T. Henry; Nilss Olekalns; Kalvinder Shields

    2004-01-01

    The International Capital Asset Pricing Model measures country risk in terms of the conditional covariance of national returns with the world return. Using impulse responses from a multivariate nonlinear model we provide evidence of time variation and asymmetry in the measure of country risk. and the implied benefit to international diversification. The evidence implies that the price of risk and the benefits from diversification may differ in a statistically and economically meaningful fashi...

  2. The price of pollution

    International Nuclear Information System (INIS)

    Bleijenberg, A.N.; Davidson, M.D.; Wit, R.

    1998-06-01

    The market does not create a price for environmental pollution for the simple reason that there is no market for the environment. What can be done is to calculate shadow prices for environmental pollution, which is achieved by calculating the price that would arise if there would be a market for the environment. In applying this method, it generally proves to be necessary to base calculations on government environmental targets. Using available research data, the method is used to calculate shadow prices for a number of key pollutants. The present report is based on the CE studies 'Schaduwprijzen Prioriterings Methodiek (SPM)' (1997), commissioned by ICI Holland BV, and 'De prijs van Milieuvervuiling' (1997), commissioned by KNP BT Packaging

  3. Final Report on the Audit of Subcontract Prices on Firm-Fixed-Price Contracts Awarded to McDonnell Aircraft Company

    Science.gov (United States)

    1990-12-03

    This is our final report on the audit of Subcontract Prices on Firm-Fixed-Price Contracts Awarded to McDonnell Aircraft Company (MCAIR). The Contract Management Directorate made the audit from October 1989 through June 1990. The objective of the audit was to compare proposed and negotiated subcontract prices and determine reasons for significant variances. We also evaluated applicable internal control procedures. For a 6-month period ending December 1989, MCAIR issued 517 subcontracts valued at $679 million.

  4. Microgrids Real-Time Pricing Based on Clustering Techniques

    Directory of Open Access Journals (Sweden)

    Hao Liu

    2018-05-01

    Full Text Available Microgrids are widely spreading in electricity markets worldwide. Besides the security and reliability concerns for these microgrids, their operators need to address consumers’ pricing. Considering the growth of smart grids and smart meter facilities, it is expected that microgrids will have some level of flexibility to determine real-time pricing for at least some consumers. As such, the key challenge is finding an optimal pricing model for consumers. This paper, accordingly, proposes a new pricing scheme in which microgrids are able to deploy clustering techniques in order to understand their consumers’ load profiles and then assign real-time prices based on their load profile patterns. An improved weighted fuzzy average k-means is proposed to cluster load curve of consumers in an optimal number of clusters, through which the load profile of each cluster is determined. Having obtained the load profile of each cluster, real-time prices are given to each cluster, which is the best price given to all consumers in that cluster.

  5. A model for hedging load and price risk in the Texas electricity market

    International Nuclear Information System (INIS)

    Coulon, Michael; Powell, Warren B.; Sircar, Ronnie

    2013-01-01

    Energy companies with commitments to meet customers' daily electricity demands face the problem of hedging load and price risk. We propose a joint model for load and price dynamics, which is motivated by the goal of facilitating optimal hedging decisions, while also intuitively capturing the key features of the electricity market. Driven by three stochastic factors including the load process, our power price model allows for the calculation of closed-form pricing formulas for forwards and some options, products often used for hedging purposes. Making use of these results, we illustrate in a simple example the hedging benefit of these instruments, while also evaluating the performance of the model when fitted to the Texas electricity market. - Highlights: • We present a structural model for electricity spot prices in the ERCOT market. • Relationships between power price and factors such as load and gas price are studied. • Seasonal patterns and load-dependent spikes are shown to be well captured. • Closed-form results for prices of forwards, options and spread options are derived. • We demonstrate the effectiveness of hedging power demand with forwards and options

  6. The pricing of long and short run variance and correlation risk in stock returns

    NARCIS (Netherlands)

    Cosemans, M.

    2011-01-01

    This paper studies the pricing of long and short run variance and correlation risk. The predictive power of the market variance risk premium for returns is driven by the correlation risk premium and the systematic part of individual variance premia. Furthermore, I find that aggregate volatility risk

  7. Pricing Energy and Ancillary Services in a Day-Ahead Market for a Price-Taker Hydro Generating Company Using a Risk-Constrained Approach

    Directory of Open Access Journals (Sweden)

    Perica Ilak

    2014-04-01

    Full Text Available This paper analyzes a price-taker hydro generating company which participates simultaneously in day-ahead energy and ancillary services markets. An approach for deriving marginal cost curves for energy and ancillary services is proposed, taking into consideration price uncertainty and opportunity cost of water, which can later be used to determine hourly bid curves. The proposed approach combines an hourly conditional value-at-risk, probability of occurrence of automatic generation control states and an opportunity cost of water to determine energy and ancillary services marginal cost curves. The proposed approach is in a linear constraint form and is easy to implement in optimization problems. A stochastic model of the hydro-economic river basin is presented, based on the actual Vinodol hydropower system in Croatia, with a complex three-dimensional relationship between the power produced, the discharged water, and the head of associated reservoir.

  8. A new active portfolio risk management for an electricity retailer based on a drawdown risk preference

    International Nuclear Information System (INIS)

    Charwand, Mansour; Gitizadeh, Mohsen; Siano, Pierluigi

    2017-01-01

    This paper addresses the deciding under uncertainty of an electricity retailer in order to maximise its total expected rate of return. The developed methodology is based on the modelling of the stochastic evolution of zonal prices that seeks to manage a portfolio of different contracts. Retailer's load and the price at each zone are forecasted using the seasonal autoregressive integrated moving average (SARIMA) model and a clustering technique is used for scenario reduction. Supply sources include the pool, self-production facilities, forward and bilateral contracts. The risk of cost fluctuation due to uncertainties is explicitly modelled using the multi-scenario drawdown methodology. This risk function quantifies in aggregated format the frequency and magnitude of the portfolio drawdowns over planning horizon. In-sample and out-of-sample runs are performed for a portfolio allocation problem. Carried out experimental results on the basis of realistic data, show that imposing risk constraints improve the “real” performance of a portfolio management in out-of-sample runs. - Highlights: • A new drawdown-based method is introduced to retailer deciding under uncertainty. • This tool is used to assess the risk levels regarding retailer midterm strategies. • The methodology is based on the modeling of the stochastic evolution of zonal prices. • The risk function quantifies the frequency and magnitude of the portfolio drawdowns. • In-sample and out-of-sample runs are performed for a portfolio allocation problem.

  9. A stable systemic risk ranking in China's banking sector: Based on principal component analysis

    Science.gov (United States)

    Fang, Libing; Xiao, Binqing; Yu, Honghai; You, Qixing

    2018-02-01

    In this paper, we compare five popular systemic risk rankings, and apply principal component analysis (PCA) model to provide a stable systemic risk ranking for the Chinese banking sector. Our empirical results indicate that five methods suggest vastly different systemic risk rankings for the same bank, while the combined systemic risk measure based on PCA provides a reliable ranking. Furthermore, according to factor loadings of the first component, PCA combined ranking is mainly based on fundamentals instead of market price data. We clearly find that price-based rankings are not as practical a method as fundamentals-based ones. This PCA combined ranking directly shows systemic risk contributions of each bank for banking supervision purpose and reminds banks to prevent and cope with the financial crisis in advance.

  10. Methodological Bases for Describing Risks of the Enterprise Business Model in Integrated Reporting

    Directory of Open Access Journals (Sweden)

    Nesterenko Oksana O.

    2017-12-01

    Full Text Available The aim of the article is to substantiate the methodological bases for describing the business and accounting risks of an enterprise business model in integrated reporting for their timely detection and assessment, and develop methods for their leveling or minimizing and possible prevention. It is proposed to consider risks in the process of forming integrated reporting from two sides: first, risks that arise in the business model of an organization and should be disclosed in its integrated report; second, accounting risks of integrated reporting, which should be taken into account by members of the cross-sectoral working group and management personnel in the process of forming and promulgating integrated reporting. To develop an adequate accounting and analytical tool for disclosure of information about the risks of the business model and integrated reporting, their leveling or minimization, in the article a terminological analysis of the essence of entrepreneurial and accounting risks is carried out. The entrepreneurial risk is defined as an objective-subjective economic category that characterizes the probability of negative or positive consequences of economic-social-ecological activity within the framework of the business model of an enterprise under uncertainty. The accounting risk is suggested to be understood as the probability of unfavorable consequences as a result of organizational, methodological errors in the integrated accounting system, which present threat to the quality, accuracy and reliability of the reporting information on economic, social and environmental activities in integrated reporting as well as threat of inappropriate decision-making by stakeholders based on the integrated report. For the timely identification of business risks and maximum leveling of the influence of accounting risks on the process of formation and publication of integrated reporting, in the study the place of entrepreneurial and accounting risks in

  11. 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...

  12. The Pricing of natural gas

    International Nuclear Information System (INIS)

    Nese, Gjermund

    2004-11-01

    The report focuses on the pricing of natural gas. The motivation has been the wish of the Norwegian authorities to increase the use of natural gas and that this should follow market conditions. The pricing of gas occurs at present in various ways in the different markets. The report identifies to main factors behind the pricing. 1) The type of market i.e. how far the liberalization of the gas markets has gone in the various countries. 2) The development within the regulation, climate and tax policies. The gas markets are undergoing as the energy markets in general, a liberalization process where the traditional monopoly based market structures are replaced by markets based on competition. There are great differences in the liberalization development of the various countries, which is reflected in the various pricing principles applied for the trade of gas in the countries. The analysis shows that the net-back-pricing is predominant in some countries i.e. that the price is in various ways indexed towards and follow the development of the price of alternative energy carriers so that the gas may be able to compete. The development towards trade places for gas where the pricing is based on offer and demand is already underway. As the liberalization of the European gas markets progresses it is expected that the gas price will be determined increasingly at spot markets instead of through bilateral agreements between monopolistic corporations. The development within the regulation, climate and tax policies and to what extent this may influence the gas prices in the future, are also studied. There seem to be effects that may pull in both directions but it is evident that these political variables will influence the gas pricing in the international market to a large extent and thereby also the future internal natural gas market

  13. Mood and the market: can press reports of investors' mood predict stock prices?

    Science.gov (United States)

    Cohen-Charash, Yochi; Scherbaum, Charles A; Kammeyer-Mueller, John D; Staw, Barry M

    2013-01-01

    We examined whether press reports on the collective mood of investors can predict changes in stock prices. We collected data on the use of emotion words in newspaper reports on traders' affect, coded these emotion words according to their location on an affective circumplex in terms of pleasantness and activation level, and created indices of collective mood for each trading day. Then, by using time series analyses, we examined whether these mood indices, depicting investors' emotion on a given trading day, could predict the next day's opening price of the stock market. The strongest findings showed that activated pleasant mood predicted increases in NASDAQ prices, while activated unpleasant mood predicted decreases in NASDAQ prices. We conclude that both valence and activation levels of collective mood are important in predicting trend continuation in stock prices.

  14. Locational price spreads and the pricing of contracts for difference. Evidence from the Nordic market

    International Nuclear Information System (INIS)

    Marckhoff, Jan; Wimschulte, Jens

    2009-01-01

    In electricity markets, not only does the risk of substantial price variations over time exist, but so does the risk of price variations over space, as prices between locations can differ due to transmission congestion. To manage this risk, Contracts for Difference (CfDs), i.e., forwards on the spread between a particular area price and the (unconstrained) system price, were introduced at the Scandinavian electricity exchange Nord Pool at the end of 2000. We empirically investigate the pricing of these CfDs over the period 2001 through 2006 and find that CfD prices contain significant risk premia. Their sign and magnitude, however, differ substantially between areas and delivery periods, because areas are subject to transmission congestion to a varying extent. While the relation between risk premia and time-to-maturity is not uniform for CfDs, there is a negative relation for implied area and system forwards, which can be explained by the relative hedging demand of market participants. In addition, we find that risk premia of CfDs and implied area forwards vary systematically with the variance and skewness of the underlying spot prices. This confirms both implications of the Bessembinder and Lemmon [Bessembinder, H., Lemmon, M.L., 2002. Equilibrium pricing and optimal hedging in electricity forward markets. Journal of Finance, 57, 1347-1382] model. (author)

  15. Papers of a Canadian Institute conference : Managing energy price risk

    International Nuclear Information System (INIS)

    2003-01-01

    During this conference, participants were offered an opportunity to broaden their knowledge on fundamentals and technical risk management. In particular, the presentations addressed topics such as: the assessment and evaluation of risk tolerance and risk management options within an organization; the tightening of risk management procedures and policies; the measurement and monitoring of risk portfolio and value at risk; the efficient trading of structured energy products; and the use of call and put options, collars and straddles, swaps and other energy related derivatives. The participants also benefited from the use of case studies, panels and tutorials conducted by energy buyers, sellers and risk management experts. The conference represented a forum where participants discussed strategies and tactics for pricing, hedging and trading energy risk in deregulated markets. Of the thirteen presentations included in this document, four were included in this database. refs., tabs., figs

  16. Long term fuel price elasticity: effects on mobility tool ownership and residential location choice - Final report

    Energy Technology Data Exchange (ETDEWEB)

    Erath, A.; Axhausen, K. W.

    2010-04-15

    This comprehensive final report for the Swiss Federal Office of Energy (SFOE) examines the long-term effects of fuel price elasticity. The study analyses how mobility tool usage and ownership as well as residence location choice are affected by rising fuel costs. Based on econometric models, long-term fuel price elasticity is derived. The authors quote that the demand reactions to higher fuel prices mainly observed are the reduction of mileage and the consideration of smaller-engined and diesel-driven cars. As cars with natural gas powered engines and electric drives were hardly considered in the survey, the results of the natural gas model can, according to the authors, only serve as a trend. No stable model could be estimated for the demand and usage of electric cars. A literature overview is presented and the design of the survey is discussed, whereby socio-demographical variables and the effects of price and residence changes are discussed. Modelling of mobility tool factors and results obtained are looked at. Finally, residence choice factors are modelled and discussed. Several appendices complete the report.

  17. Effect of the accuracy of price forecasting on profit in a Price Based Unit Commitment

    International Nuclear Information System (INIS)

    Delarue, Erik; Van Den Bosch, Pieterjan; D'haeseleer, William

    2010-01-01

    This paper discusses and quantifies the so-called loss of profit (i.e., the sub-optimality of profit) that can be expected in a Price Based Unit Commitment (PBUC), when incorrect price forecasts are used. For this purpose, a PBUC model has been developed and utilized, using Mixed Integer Linear Programming (MILP). Simulations are used to determine the relationship between the Mean Absolute Percentage Error (MAPE) of a certain price forecast and the loss of profit, for four different types of power plants. A Combined Cycle (CC) power plant and a pumped storage unit show highest sensitivity to incorrect forecasts. A price forecast with a MAPE of 15%, on average, yields 13.8% and 12.1% profit loss, respectively. A classic thermal power plant (coal fired) and cascade hydro unit are less affected by incorrect forecasts, with only 2.4% and 2.0% profit loss, respectively, at the same price forecast MAPE. This paper further demonstrates that if price forecasts show an average bias (upward or downward), using the MAPE as measure of the price forecast might not be sufficient to quantify profit loss properly. Profit loss in this case has been determined as a function of both shift and MAPE of the price forecast. (author)

  18. The Questionable Economic Case for Value-Based Drug Pricing in Market Health Systems.

    Science.gov (United States)

    Pauly, Mark V

    2017-02-01

    This article investigates the economic theory and interpretation of the concept of "value-based pricing" for new breakthrough drugs with no close substitutes in a context (such as the United States) in which a drug firm with market power sells its product to various buyers. The interpretation is different from that in a country that evaluates medicines for a single public health insurance plan or a set of heavily regulated plans. It is shown that there will not ordinarily be a single value-based price but rather a schedule of prices with different volumes of buyers at each price. Hence, it is incorrect to term a particular price the value-based price, or to argue that the profit-maximizing monopoly price is too high relative to some hypothesized value-based price. When effectiveness of treatment or value of health is heterogeneous, the profit-maximizing price can be higher than that associated with assumed values of quality-adjusted life-years. If the firm sets a price higher than the value-based price for a set of potential buyers, the optimal strategy of the buyers is to decline to purchase that drug. The profit-maximizing price will come closer to a unique value-based price if demand is less heterogeneous. Copyright © 2017 International Society for Pharmacoeconomics and Outcomes Research (ISPOR). Published by Elsevier Inc. All rights reserved.

  19. Perceived benefits of adopting Standard – Based pricing mechanism for mechanical and electrical services installations

    Directory of Open Access Journals (Sweden)

    Ganiyu Amuda Yusuf

    2014-06-01

    Full Text Available Cost is an important measure of project success and clients will expect a reliable forecast at the early stage of construction projects to inform their business decision. This study was undertaken to investigate the current practices in managing cost of mechanical and electrical (M&E services in buildings. The perceptions of practitioners on the benefits of adopting Standard – Based Pricing Mechanism for M&E services as used for building fabrics and finishes was ascertained. The methodology adopted for the study was semi – structure interview and questionnaire survey.  Inferential statistics technique was used to analyse the data collected. The results revealed that, M&E services tender documents are often based on lump sum contract. Practitioners are of the opinion that the adoption of Standard – Based Pricing Mechanism (SBPM could enhance the quality of M&E services price forecast; ensure active post contract cost monitoring and control; encourage collaborative working relationship; enhance efficient whole life cycle cost management; improve risk management and facilitate efficient tendering process. The study suggested the development of local Standard Method of Measurement for M&E services and proposed strategies to facilitate the adoption of SBPM as basis for forecasting contract price of mechanical and electrical services in buildings.

  20. Price and Structure Risks Consideration when Selecting a Marketing Strategy for an Agricultural Enterprise

    Directory of Open Access Journals (Sweden)

    Shiyan Dmytro V.

    2013-11-01

    Full Text Available The goal of the article lies in development and approval of the indicator of complex assessment of the level of price and structure risks of agricultural enterprises with the further goal of selecting a marketing strategy. It was established in the result of the study that agricultural enterprises with a high price and structure risk ratio have high indicators of economic efficiency compared to the groups with a low value of this indicator. At the same time, major enterprises (mostly agro-holdings at a certain stage, which corresponds with the set critical size of the area or livestock, have a possibility to diversify production and, consequently, reduce the price and structure risk ratio. Further studies would deal with establishing groups of agricultural enterprises on the basis of differences in economic efficiency by selected criteria (profitability of realisation of products, profit per 1 hectare and crop capacity and livestock productivity, that result not from the territorial and geographical location, but from specific features of formation of the market of agrarian products of Ukraine.

  1. Agent-Based Modeling of Day-Ahead Real Time Pricing in a Pool-Based Electricity Market

    Directory of Open Access Journals (Sweden)

    Sh. Yousefi

    2011-09-01

    Full Text Available In this paper, an agent-based structure of the electricity retail market is presented based on which day-ahead (DA energy procurement for customers is modeled. Here, we focus on operation of only one Retail Energy Provider (REP agent who purchases energy from DA pool-based wholesale market and offers DA real time tariffs to a group of its customers. As a model of customer response to the offered real time prices, an hourly acceptance function is proposed in order to represent the hourly changes in the customer’s effective demand according to the prices. Here, Q-learning (QL approach is applied in day-ahead real time pricing for the customers enabling the REP agent to discover which price yields the most benefit through a trial-and-error search. Numerical studies are presented based on New England day-ahead market data which include comparing the results of RTP based on QL approach with that of genetic-based pricing.

  2. Mood and the Market: Can Press Reports of Investors' Mood Predict Stock Prices?

    Science.gov (United States)

    Scherbaum, Charles A.; Kammeyer-Mueller, John D.

    2013-01-01

    We examined whether press reports on the collective mood of investors can predict changes in stock prices. We collected data on the use of emotion words in newspaper reports on traders' affect, coded these emotion words according to their location on an affective circumplex in terms of pleasantness and activation level, and created indices of collective mood for each trading day. Then, by using time series analyses, we examined whether these mood indices, depicting investors' emotion on a given trading day, could predict the next day's opening price of the stock market. The strongest findings showed that activated pleasant mood predicted increases in NASDAQ prices, while activated unpleasant mood predicted decreases in NASDAQ prices. We conclude that both valence and activation levels of collective mood are important in predicting trend continuation in stock prices. PMID:24015202

  3. 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

  4. Affordability Challenges to Value-Based Pricing: Mass Diseases, Orphan Diseases, and Cures.

    Science.gov (United States)

    Danzon, Patricia M

    2018-03-01

    To analyze how value-based pricing (VBP), which grounds the price paid for pharmaceuticals in their value, can manage "affordability" challenges, defined as drugs that meet cost-effectiveness thresholds but are "unaffordable" within the short-run budget. Three specific contexts are examined, drawing on recent experience. First, an effective new treatment for a chronic, progressive disease, such as hepatitis C, creates a budget spike that is transitory because initial prevalence is high, relative to current incidence. Second, "cures" that potentially provide lifetime benefits may claim abnormally high VBP prices, with high immediate budget impact potentially/partially offset by deferred cost savings. Third, although orphan drugs in principle target rare diseases, in aggregate they pose affordability concerns because of the growing number of orphan indications and increasingly high prices. For mass diseases, the transitory budget impact of treating the accumulated patient stock can be managed by stratified rollout that delays treatment of stable patients and prioritizes patients at high risk of deterioration. Delay spreads the budget impact and permits potential savings from launch of competing treatments. For cures, installment payments contingent on outcomes could align payment flows and appropriately shift risk to producers. This approach, however, entails high administrative and incentive costs, especially if applied across multiple payers in the United States. For orphan drugs, the available evidence on research and development trends and returns argues against the need for a higher VBP threshold to incentivize research and development in orphan drugs, given existing statutory benefits under orphan drug legislation. Copyright © 2018 International Society for Pharmacoeconomics and Outcomes Research (ISPOR). Published by Elsevier Inc. All rights reserved.

  5. Some fundamental technical concepts about cost based transmission pricing

    International Nuclear Information System (INIS)

    Shirmohammadi, D.; Filho, X.V.; Gorenstin, B.; Pereira, M.V.P.

    1996-01-01

    In this paper the authors describe the basic technical concepts involved in developing cost based transmission prices. They introduce the concepts of transmission pricing paradigms and methodologies to better illustrate how transmission costs are transformed into transmission prices. The authors also briefly discuss the role of these paradigms and methodologies in promoting ''economic efficiency'' which is narrowly defined in this paper. They conclude the paper with an example of the application of some of these paradigms and methodologies for pricing transmission services in Brazil

  6. Dynamic Pricing

    DEFF Research Database (Denmark)

    Sharifi, Reza; Anvari-Moghaddam, Amjad; Fathi, S. Hamid

    2017-01-01

    Dynamic pricing scheme, also known as real-time pricing (RTP), can be more efficient and technically beneficial than the other price-based schemes (such as flat-rate or time-of-use (TOU) pricing) for enabling demand response (DR) actions. Over the past few years, advantages of RTP-based schemes h...... of dynamic pricing can lead to increased willingness of consumers to participate in DR programs which in turn improve the operation of liberalized electricity markets.......Dynamic pricing scheme, also known as real-time pricing (RTP), can be more efficient and technically beneficial than the other price-based schemes (such as flat-rate or time-of-use (TOU) pricing) for enabling demand response (DR) actions. Over the past few years, advantages of RTP-based schemes...

  7. List prices vs. bargain prices: which solution to estimate consumer price indices?

    OpenAIRE

    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...

  8. Financial structure signalling to auditors` pricing

    Directory of Open Access Journals (Sweden)

    Etumudon Ndidi ASIEN

    2017-05-01

    Full Text Available This paper empirically examines capital structure signalling to auditors. Financial structure has adverse selection that can negatively affect auditors’ perception of firm value or risk, which can lead the auditor to charge high price. We expect firms’ financial structure to positively relate with auditors’ pricing. Using panel data analysis methodology to analyse data of 311 firm-year observations of non-finance firms covering the period 2012-2015, pooled OLS regression results suggest that financial structure is positively related to auditors’ price. We find that equity, but not debt, is significantly related to auditors’ price. These results hold after controlling for auditor type. The positive relations suggest lower perceptions of firm value (hence high risk by auditors, thereby making firms to pay higher auditors’ price. This suggests that auditors penalise equity financed firms more than debt financed firms, probably because auditors interpret equity financing as firms’ inability to raise debt. Based on the findings, we recommend that auditors should monitor the capital structure of their clients to guide them in pricing their services. We also recommend that corporate finance managers should rebalance their firms’ capital structure cognisant of the fact that it signals to auditors.

  9. Biogas slurry pricing method based on nutrient content

    Science.gov (United States)

    Zhang, Chang-ai; Guo, Honghai; Yang, Zhengtao; Xin, Shurong

    2017-11-01

    In order to promote biogas-slurry commercialization, A method was put forward to valuate biogas slurry based on its nutrient contents. Firstly, element contents of biogas slurry was measured; Secondly, each element was valuated based on its market price, and then traffic cost, using cost and market effect were taken into account, the pricing method of biogas slurry were obtained lastly. This method could be useful in practical production. Taking cattle manure raw meterial biogas slurry and con stalk raw material biogas slurry for example, their price were 38.50 yuan RMB per ton and 28.80 yuan RMB per ton. This paper will be useful for recognizing the value of biogas projects, ensuring biogas project running, and instructing the cyclic utilization of biomass resources in China.

  10. The Combination Forecasting of Electricity Price Based on Price Spikes Processing: A Case Study in South Australia

    Directory of Open Access Journals (Sweden)

    Jianzhou Wang

    2014-01-01

    Full Text Available Electricity price forecasting holds very important position in the electricity market. Inaccurate price forecasting may cause energy waste and management chaos in the electricity market. However, electricity price forecasting has always been regarded as one of the largest challenges in the electricity market because it shows high volatility, which makes electricity price forecasting difficult. This paper proposes the use of artificial intelligence optimization combination forecasting models based on preprocessing data, called “chaos particles optimization (CPSO weight-determined combination models.” These models allow for the weight of the combined model to take values of [-1,1]. In the proposed models, the density-based spatial clustering of applications with noise (DBSCAN algorithm is used to identify outliers, and the outliers are replaced by a new data-produced linear interpolation function. The proposed CPSO weight-determined combination models are then used to forecast the projected future electricity price. In this case study, the electricity price data of South Australia are simulated. The results indicate that, while the weight of the combined model takes values of [-1,1], the proposed combination model can always provide adaptive, reliable, and comparatively accurate forecast results in comparison to traditional combination models.

  11. Price Uncertainty and Optimal Hedging in the Agricultural Market

    Directory of Open Access Journals (Sweden)

    Nicolae ISTUDOR

    2014-06-01

    Full Text Available The increased volatility of the agricultural prices has detrimental effects on the economic welfare and raises concerns regarding poverty and malnutrition at a global level. Financial risk management can be an efficient solution for limiting the effects of international agricultural price volatility. The paper analyzes the behavior of the U.S. wheat and corn prices, emphasizing their highly volatile and unpredictable nature. Given the existence of the basis risk, the estimation of the optimal hedge ratio is needed in order to provide an efficient hedging strategy against price risks. The role of public authorities in this context can consist in promoting education in the fields of hedging and understanding the agricultural price volatility risk. We estimate static and time varying optimal hedge ratios for wheat and corn through several methods. Based on the out of sample hedging effectiveness given by the variance reduction, the methods are compared and the results show that the time varying hedge ratios estimated through rolling window OLS and GARCH methods outperform the static counterparts.

  12. Pricing risk and ambiguity: the effect of perspective taking.

    Science.gov (United States)

    Trautmann, Stefan T; Schmidt, Ulrich

    2012-01-01

    In the valuation of uncertain prospects, a difference is often observed between selling and buying perspectives. This paper distinguishes between risk (known probabilities) and ambiguity (unknown probabilities) in decisions under uncertainty and shows that the valuation disparity increases under ambiguity compared to risk. It is found that both the comparative versus noncomparative evaluation of risky and ambiguous prospects and the uniqueness of the valuation perspective (either seller or buyer) moderate this increase in the disparity under ambiguity. The finding is consistent with recent theoretical accounts of pricing under uncertainty. We discuss implications for market behaviour and for the ambiguity paradigm as a research tool.

  13. Electricity prices in a competitive environment: Marginal cost pricing of generation services and financial status of electric utilities. A preliminary analysis through 2015

    International Nuclear Information System (INIS)

    1997-08-01

    The emergence of competitive markets for electricity generation services is changing the way that electricity is and will be priced in the United States. This report presents the results of an analysis that focuses on two questions: (1) How are prices for competitive generation services likely to differ from regulated prices if competitive prices are based on marginal costs rather than regulated open-quotes cost-of-serviceclose quotes pricing? (2) What impacts will the competitive pricing of generation services (based on marginal costs) have on electricity consumption patterns, production costs, and the financial integrity patterns, production costs, and the financial integrity of electricity suppliers? This study is not intended to be a cost-benefit analysis of wholesale or retail competition, nor does this report include an analysis of the macroeconomic impacts of competitive electricity prices

  14. A non-Gaussian Ornstein-Uhlenbeck model for pricing wind power futures

    DEFF Research Database (Denmark)

    Benth, Fred Espen; Pircalabu, Anca

    2018-01-01

    generated assuming a recent level of installed capacity. Also, based on one year of observed prices for wind power futures with different delivery periods, we study the market price of risk. Generally, we find a negative risk premium whose magnitude decreases as the length of the delivery period increases....

  15. Electricity Price Forecasting Based on AOSVR and Outlier Detection

    Institute of Scientific and Technical Information of China (English)

    Zhou Dianmin; Gao Lin; Gao Feng

    2005-01-01

    Electricity price is of the first consideration for all the participants in electric power market and its characteristics are related to both market mechanism and variation in the behaviors of market participants. It is necessary to build a real-time price forecasting model with adaptive capability; and because there are outliers in the price data, they should be detected and filtrated in training the forecasting model by regression method. In view of these points, this paper presents an electricity price forecasting method based on accurate on-line support vector regression (AOSVR) and outlier detection. Numerical testing results show that the method is effective in forecasting the electricity prices in electric power market.

  16. The capital-asset-pricing model and arbitrage pricing theory: a unification.

    Science.gov (United States)

    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.

  17. Compound Option Pricing under Fuzzy Environment

    Directory of Open Access Journals (Sweden)

    Xiandong Wang

    2014-01-01

    Full Text Available Considering the uncertainty of a financial market includes two aspects: risk and vagueness; in this paper, fuzzy sets theory is applied to model the imprecise input parameters (interest rate and volatility. We present the fuzzy price of compound option by fuzzing the interest and volatility in Geske’s compound option pricing formula. For each α, the α-level set of fuzzy prices is obtained according to the fuzzy arithmetics and the definition of fuzzy-valued function. We apply a defuzzification method based on crisp possibilistic mean values of the fuzzy interest rate and fuzzy volatility to obtain the crisp possibilistic mean value of compound option price. Finally, we present a numerical analysis to illustrate the compound option pricing under fuzzy environment.

  18. Optimal hydro scheduling and offering strategies considering price uncertainty and risk management

    International Nuclear Information System (INIS)

    Catalão, J.P.S.; Pousinho, H.M.I.; Contreras, J.

    2012-01-01

    Hydro energy represents a priority in the energy policy of Portugal, with the aim of decreasing the dependence on fossil fuels. In this context, optimal hydro scheduling acquires added significance in moving towards a sustainable environment. A mixed-integer nonlinear programming approach is considered to enable optimal hydro scheduling for the short-term time horizon, including the effect of head on power production, start-up costs related to the units, multiple regions of operation, and constraints on discharge variation. As new contributions to the field, market uncertainty is introduced in the model via price scenarios and risk management is included using Conditional Value-at-Risk to limit profit volatility. Moreover, plant scheduling and pool offering by the hydro power producer are simultaneously considered to solve a realistic cascaded hydro system. -- Highlights: ► A mixed-integer nonlinear programming approach is considered for optimal hydro scheduling. ► Market uncertainty is introduced in the model via price scenarios. ► Risk management is included using conditional value-at-risk. ► Plant scheduling and pool offering by the hydro power producer are simultaneously considered. ► A realistic cascaded hydro system is solved.

  19. U.S. Residential Photovoltaic (PV) System Prices, Q4 2013 Benchmarks: Cash Purchase, Fair Market Value, and Prepaid Lease Transaction Prices

    Energy Technology Data Exchange (ETDEWEB)

    Davidson, C.; James, T. L.; Margolis, R.; Fu, R.; Feldman, D.

    2014-10-01

    The price of photovoltaic (PV) systems in the United States (i.e., the cost to the system owner) has dropped precipitously in recent years, led by substantial reductions in global PV module prices. This report provides a Q4 2013 update for residential PV systems, based on an objective methodology that closely approximates the book value of a PV system. Several cases are benchmarked to represent common variation in business models, labor rates, and module choice. We estimate a weighted-average cash purchase price of $3.29/W for modeled standard-efficiency, polycrystalline-silicon residential PV systems installed in the United States. This is a 46% decline from the 2013-dollar-adjusted price reported in the Q4 2010 benchmark report. In addition, this report frames the cash purchase price in the context of key price metrics relevant to the continually evolving landscape of third-party-owned PV systems by benchmarking the minimum sustainable lease price and the fair market value of residential PV systems.

  20. Price-Anderson Act - the third decade. Report to Congress

    International Nuclear Information System (INIS)

    Saltzman, J.

    1983-12-01

    Subsection 170p. of the Atomic Energy Act of 1954, as amended, requires that the Commission submit to the Congress by August 1, 1983, a detailed report on the need for continuation or modification of Section 170 of the Act, the Price-Anderson provisions. The report is divided into four sections with detailed subject reports appended to the main report. Sections I through III include an examination of issues that the Commission was required by statute to study (i.e., condition of the nuclear industry, state of knowledge of nuclear safety, and availability of private insurance), and discussion of other issues of interest and importance to the Congress and to the public. The subjects covered are as follows: (1) overview of the Price-Anderson system; (2) the state of knowledge of nuclear safety; (3) availability of private insurance; (4) conditions of the nuclear industry; (5) causality and proof of damages; (6) limitation of liability and subsidy; and (7) a proposal that would provide for removal of the limitation of liability but with limited annual liability payments. Section IV of the report contains conclusions and recommendations. Section V contains a bibliography

  1. Computational intelligence applications to option pricing, volatility forecasting and value at risk

    CERN Document Server

    Mostafa, Fahed; Chang, Elizabeth

    2017-01-01

    The results in this book demonstrate the power of neural networks in learning complex behavior from the underlying financial time series data . The results in this book also demonstrate how neural networks can successfully be applied to volatility modeling, option pricings, and value at risk modeling. These features allow them to be applied to market risk problems to overcome classical issues associated with statistical models. .

  2. International Transfer Pricing in Multinational Enterprises

    DEFF Research Database (Denmark)

    Rossing, Christian Plesner; Cools, Martine; Rohde, Carsten

    2017-01-01

    Current curricula in management accounting stress the role of transfer pricing as a tool for measuring the performance of responsibility centers and their managers. Recently, however, multinational enterprises (MNEs) have felt increasing pressure to comply with transfer pricing tax regulation...... of responsibility accounting. Specifically, the case study is a fictional MNE, allowing you to apply the OECD Guidelines in practice to cross-border transfers within an MNE, and to discuss the implications of tax-based transfer pricing for responsibility accounting. As a basis for working on the case study....... As a result, tax risk management considerations play a key role in the transfer pricing decisions of MNEs today. This case seeks to provide you with examples of the core principles of international transfer pricing, as well as to allow you to discuss international transfer pricing in the context...

  3. Electricity prices in a competitive environment: Marginal cost pricing of generation services and financial status of electric utilities. A preliminary analysis through 2015

    Energy Technology Data Exchange (ETDEWEB)

    NONE

    1997-08-01

    The emergence of competitive markets for electricity generation services is changing the way that electricity is and will be priced in the United States. This report presents the results of an analysis that focuses on two questions: (1) How are prices for competitive generation services likely to differ from regulated prices if competitive prices are based on marginal costs rather than regulated {open_quotes}cost-of-service{close_quotes} pricing? (2) What impacts will the competitive pricing of generation services (based on marginal costs) have on electricity consumption patterns, production costs, and the financial integrity patterns, production costs, and the financial integrity of electricity suppliers? This study is not intended to be a cost-benefit analysis of wholesale or retail competition, nor does this report include an analysis of the macroeconomic impacts of competitive electricity prices.

  4. Oil price induced gas acquisition contracts. Immune to price changes; Oelpreisindizierte Gasbezugsvertraege. Immun gegen Preisaenderungen

    Energy Technology Data Exchange (ETDEWEB)

    Verhoeven, Meike [Soptim AG, Aachen (Germany)

    2012-10-15

    The gas price continues to be linked to the oil price. Gas utilities that must buy gas in these conditions and sell it at a fixed price incur considerable financial risk. Especially with long-term buying contracts, and especially for gas from Russia, producers insist on linking to the oil price. Gas utilities, on the other hand, had to stop to sell gas at a price linked to the oil price two years ago. Utilities attempt to protect themselves, e.g. via oil swaps. Professional portfolio management is necessary to cope with the risks and the highly complex processes involved.

  5. A quantile-based Time at Risk: A new approach for assessing risk in financial markets

    Science.gov (United States)

    Bolgorian, Meysam; Raei, Reza

    2013-11-01

    In this paper, we provide a new measure for evaluation of risk in financial markets. This measure is based on the return interval of critical events in financial markets or other investment situations. Our main goal was to devise a model like Value at Risk (VaR). As VaR, for a given financial asset, probability level and time horizon, gives a critical value such that the likelihood of loss on the asset over the time horizon exceeds this value is equal to the given probability level, our concept of Time at Risk (TaR), using a probability distribution function of return intervals, provides a critical time such that the probability that the return interval of a critical event exceeds this time equals the given probability level. As an empirical application, we applied our model to data from the Tehran Stock Exchange Price Index (TEPIX) as a financial asset (market portfolio) and reported the results.

  6. The Impact of Measurement Error on Estimates of the Price Reaction to USDA Crop Reports

    OpenAIRE

    Aulerich, Nicole M.; Irwin, Scott H.; Nelson, Carl H.

    2007-01-01

    This paper investigates the impact of USDA crop production reports in corn and soybean futures markets. The analysis is based on all corn and soybean production reports released over 1970-2006. The empirical analysis compares the typical OLS event study approach to the new Identification by Censoring (ITC) technique. Corn and soybean production reports are analyzed both separately and together for impact in corn and soybean futures prices. ITC proves to be the more useful method because it av...

  7. 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

  8. 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....

  9. A comparison of alternative methods for measuring cigarette prices.

    Science.gov (United States)

    Chaloupka, Frank J; Tauras, John A; Strasser, Julia H; Willis, Gordon; Gibson, James T; Hartman, Anne M

    2015-05-01

    Government agencies, public health organisations and tobacco control researchers rely on accurate estimates of cigarette prices for a variety of purposes. Since the 1950s, the Tax Burden on Tobacco (TBOT) has served as the most widely used source of this price data despite its limitations. This paper compares the prices and collection methods of the TBOT retail-based data and the 2003 and 2006/2007 waves of the population-based Tobacco Use Supplement to the Current Population Survey (TUS-CPS). From the TUS-CPS, we constructed multiple state-level measures of cigarette prices, including weighted average prices per pack (based on average prices for single-pack purchases and average prices for carton purchases) and compared these with the weighted average price data reported in the TBOT. We also constructed several measures of tax avoidance from the TUS-CPS self-reported data. For the 2003 wave, the average TUS-CPS price was 71 cents per pack less than the average TBOT price; for the 2006/2007 wave, the difference was 47 cents. TUS-CPS and TBOT prices were also significantly different at the state level. However, these differences varied widely by state due to tax avoidance opportunities, such as cross-border purchasing. The TUS-CPS can be used to construct valid measures of cigarette prices. Unlike the TBOT, the TUS-CPS captures the effect of price-reducing marketing strategies, as well as tax avoidance practices and non-traditional types of purchasing. Thus, self-reported data like TUS-CPS appear to have advantages over TBOT in estimating the 'real' price that smokers face. Published by the BMJ Publishing Group Limited. For permission to use (where not already granted under a licence) please go to http://group.bmj.com/group/rights-licensing/permissions.

  10. Toward Value-Based Pricing to Boost Cancer Research and Innovation.

    Science.gov (United States)

    Ocana, Alberto; Amir, Eitan; Tannock, Ian F

    2016-06-01

    The high market price of new anticancer agents has stimulated debate about the long-term sustainability of healthcare systems and whether these new agents can continue to be supported by public healthcare or by private insurers. In addition, some drugs have been approved with limited clinical benefit, raising concerns about setting a minimum requirement for medical benefit. Options to resolve these problems include raising the bar for approval of new drugs and/or pricing of new agents based on the medical benefit that they offer to patients. In this commentary, we suggest that new agents should be marketed in a two-step process that would include first the approval of the new drug by the regulatory agencies and second the introduction of a market price based on the medical benefit that the new intervention offers to patients. Introduction of value-based pricing would maintain the sustainability of health care systems and would improve drug development, as it would pressure pharmaceutical companies to become more innovative and avoid the development of compounds with limited benefit. Value-based pricing could also stimulate the funding of research directed to development of new anticancer drugs with novel mechanisms of action. Cancer Res; 76(11); 3127-9. ©2016 AACR. ©2016 American Association for Cancer Research.

  11. Pricing Survivor Forwards and Swaps in Incomplete Markets Using Simulation Techniques

    DEFF Research Database (Denmark)

    Boyer, M. Martin; Favaro, Amélie; Stentoft, Lars

    2012-01-01

    This article considers how to manage longevity risk using longevity derivatives products. We review the potential counterparties that naturally have exposure to this type of risk and we provide details on two very simple products, the survivor forward and the survivor swap, that can be used...... to trade this type of risk. We then discuss how such products can be priced using a simulation-based approach that has been shown to be successful in pricing financial derivatives. To illustrate the flexibility of the approach we price survivor forwards and swaps using the simple dynamics of the Lee...

  12. Investors’ risk attitudes and stock price fluctuation asymmetry

    Science.gov (United States)

    Zhang, Yu; Li, Honggang

    2011-05-01

    Price rise/fall asymmetry, which indicates enduring but modest rises and sudden short-term falls, is a ubiquitous phenomenon in stock markets throughout the world. Instead of the widely used time series method, we adopt inverse statistics from turbulence to analyze this asymmetry. To explore its underlying mechanism, we build a multi-agent model with two kinds of investors, which are specifically referred to as fundamentalists and chartists. Inspired by Kahneman and Tversky’s claim regarding peoples’ asymmetric psychological responses to the equivalent levels of gains and losses, we assume that investors take different risk attitudes to gains and losses and adopt different trading strategies. The simulation results of the model developed herein are consistent with empirical work, which may support our conjecture that investors’ asymmetric risk attitudes might be one origin of rise/fall asymmetry.

  13. Convergence of decision rules for value-based pricing of new innovative drugs.

    Science.gov (United States)

    Gandjour, Afschin

    2015-04-01

    Given the high costs of innovative new drugs, most European countries have introduced policies for price control, in particular value-based pricing (VBP) and international reference pricing. The purpose of this study is to describe how profit-maximizing manufacturers would optimally adjust their launch sequence to these policies and how VBP countries may best respond. To decide about the launching sequence, a manufacturer must consider a tradeoff between price and sales volume in any given country as well as the effect of price in a VBP country on the price in international reference pricing countries. Based on the manufacturer's rationale, it is best for VBP countries in Europe to implicitly collude in the long term and set cost-effectiveness thresholds at the level of the lowest acceptable VBP country. This way, international reference pricing countries would also converge towards the lowest acceptable threshold in Europe.

  14. Modeling spot markets for electricity and pricing electricity derivatives

    Science.gov (United States)

    Ning, Yumei

    Spot prices for electricity have been very volatile with dramatic price spikes occurring in restructured market. The task of forecasting electricity prices and managing price risk presents a new challenge for market players. The objectives of this dissertation are: (1) to develop a stochastic model of price behavior and predict price spikes; (2) to examine the effect of weather forecasts on forecasted prices; (3) to price electricity options and value generation capacity. The volatile behavior of prices can be represented by a stochastic regime-switching model. In the model, the means of the high-price and low-price regimes and the probabilities of switching from one regime to the other are specified as functions of daily peak load. The probability of switching to the high-price regime is positively related to load, but is still not high enough at the highest loads to predict price spikes accurately. An application of this model shows how the structure of the Pennsylvania-New Jersey-Maryland market changed when market-based offers were allowed, resulting in higher price spikes. An ARIMA model including temperature, seasonal, and weekly effects is estimated to forecast daily peak load. Forecasts of load under different assumptions about weather patterns are used to predict changes of price behavior given the regime-switching model of prices. Results show that the range of temperature forecasts from a normal summer to an extremely warm summer cause relatively small increases in temperature (+1.5%) and load (+3.0%). In contrast, the increases in prices are large (+20%). The conclusion is that the seasonal outlook forecasts provided by NOAA are potentially valuable for predicting prices in electricity markets. The traditional option models, based on Geometric Brownian Motion are not appropriate for electricity prices. An option model using the regime-switching framework is developed to value a European call option. The model includes volatility risk and allows changes

  15. The liquidity management of institutional investors and the pricing of liquidity risk

    NARCIS (Netherlands)

    Xing, Ran

    2016-01-01

    This dissertation studies how mutual funds and hedge funds manage their liquidity and reduce trading costs, and the pricing of liquidity level and liquidity risk in financial markets. Chapter 1 documents the trading behavior of actively managed equity mutual funds from the perspective of their

  16. Panel data nonparametric estimation of production risk and risk preferences

    DEFF Research Database (Denmark)

    Czekaj, Tomasz Gerard; Henningsen, Arne

    approaches for obtaining firm-specific measures of risk attitudes. We found that Polish dairy farmers are risk averse regarding production risk and price uncertainty. According to our results, Polish dairy farmers perceive the production risk as being more significant than the risk related to output price......We apply nonparametric panel data kernel regression to investigate production risk, out-put price uncertainty, and risk attitudes of Polish dairy farms based on a firm-level unbalanced panel data set that covers the period 2004–2010. We compare different model specifications and different...

  17. Country risk analysis

    International Nuclear Information System (INIS)

    David, A.

    1992-01-01

    This paper reports that the oil industry has been an internationally based industry that has been heavily dependent on outside financing sources. Historically, financing came from investment houses that, in most cases, participated in the projects as equity investors. However, investment companies can no longer satisfy the capital requirements of the current high level of exploration and development activities. The current trend is to involve commercial banks on a purely lending basis. Commercial banks, by their nature, are risk averse. In the case of oil and gas exploration and production they are asked to take not only technical risk and price risk but geopolitical risk as well. Methods have been developed by commercial banks to reduce technical and price risks to point which enables them to be comfortable with a loan. However, geopolitical risks are more difficult to assess. The risk associated with many countries are the nationalization of the investment, new tax restrictions, restriction of currency movements, and/or revisions to the production sharing agreements

  18. Gasoline prices in Canada : report of Standing Committee on Industry, Science and Technology

    International Nuclear Information System (INIS)

    Lastewka, W.

    2003-11-01

    The House of Commons Standing Committee on Industry, Science and Technology has reviewed the data on retail, rack and crude gasoline prices in Canada in response to soaring prices. Prices were compared to those in the United States and elsewhere. The Committee looked at all possible explanations for the most recent increase in gasoline prices and has concluded that the recent increase in the price of gasoline was the result of industry's competitive reactions to a series of international crises and abnormally cold weather in North America. No evidence indicated anticompetitive conduct on the part of the industry, nor was there evidence of abusive behaviour on the part of vertically integrated suppliers in the form of squeezing retail margins to eliminate or discipline independent retailers. The Committee relied on data collected and published by the industry. It would have preferred an independent source, but none was available. The Committee recommended that the Government of Canada create and fund a Petroleum Monitoring Agency to collect and disseminate price data on crude oil, refined petroleum products, and retail gasoline for all relevant North American markets. The agency will report to Parliament on an annual basis for 3 years. The report will include information on the competitive aspects of the petroleum sector in Canada. refs., tabs., figs

  19. Cost savings of unit-based pricing of household waste; the case of the Netherlands

    NARCIS (Netherlands)

    E. Dijkgraaf (Elbert); R.H.J.M. Gradus (Raymond)

    2003-01-01

    textabstractUsing a panel data set for Dutch municipalities we estimate effects for weight-based, bag-based, frequency-based and volume-based pricing of household waste collection. Unit-based pricing shows to be effective in reducing solid and compostable and increasing recyclable waste. Pricing has

  20. BASIC METHODS OF CLASSIFICATION AND CHARACTERISTICS OF METHODS OF PRICING IN UKRAINE

    Directory of Open Access Journals (Sweden)

    A. Boguslavskiy

    2014-12-01

    Full Text Available The article provided definitions and shows the need to use different methods of pricing of enterprises. Exposed the reasons of the absence of a universal classification of pricing methods. The approaches of different authors to classify groups of pricing methods: 1 the cost method; 2 methods with a focus on competition; 3 methods for pricing based on demand, 4 pricing with a focus on maximum profit, 5 parametric methods, 6 pricing under risk and uncertainty, etc. An improved classification pricing methods with the release of the following groups: 1 the methods of cost pricing; 2 methods based on demand; 3 methods, based on competition; 4 microeconomic methods; 5 methods which are based on product life cycles; 6 methods, depending on economic conditions; 7 econometric and statistical techniques 8 Methods of transfer pricing; 9 methods in accordance with the terms of agreements; 10 Methods of assortment pricing; 11 combined methods of pricing and so on. The basic directions of use of combined methods of pricing and analysis of their possible use in Ukraine are shown.

  1. Cross hedging and forward-contract pricing of electricity

    International Nuclear Information System (INIS)

    Woo, C.-K.; Hoang, K.; Horowitz, I.

    2001-01-01

    We consider the problem of an electric-power marketer offering a fixed-price forward contract to provide electricity that it purchases from a potentially volatile and unpredictable fledgling spot energy market. One option for the risk-averse marketer who wants to hedge against the spot-price volatility is to engage in cross hedging to reduce the contract's profit variance, and to determine the forward-contract price as a risk-adjusted price - the sum of a baseline price and a risk premium. We show how the marketer can estimate the spot-price relationship between two wholesale energy markets for the purpose of cross hedging, as well as the optimal hedge and the forward contract's baseline price and risk premium

  2. Incorporating the value of changes in price volatility into cost-benefit analysis-an application to oil prices in the transport sector

    Energy Technology Data Exchange (ETDEWEB)

    Jensen, Thomas C., E-mail: tcj@transport.dtu.d [Department of Transport, Danish Technical University, Bygningstorvet 116 Vest, 2800 Lyngby (Denmark); Moller, Flemming [National Environmental Research Institute, Box 358, Frederiksborgvej 399, 4000 Roskilde (Denmark)

    2010-01-15

    This paper contains a tentative suggestion of how to take into account the value of changes in price volatility in real world cost-benefit analyses. Price volatility is an important aspect of security of supply which first of all concerns physical availability, but assuming that consumers are risk averse, security of supply can also be viewed as a matter of avoiding oscillations in consumption originating from volatile prices of for instance oil. When the government makes transport-related choices on behalf of the consumers, the effect on oscillations in general consumption should be included in the policy assessment taking into account the most significant correlations between prices of alternative fuels and between fuel prices and consumption in general. In the present paper, a method of valuing changes in price volatility based on portfolio theory is applied to some very simple transport-related examples. They indicate that including the value of changes in price volatility often makes very little difference to the results of cost-benefit analyses, but more work has to be done on quantifying, among other things, consumers' risk aversion and the background standard deviation in total consumption before firm conclusions can be drawn.

  3. Incorporating the value of changes in price volatility into cost-benefit analysis. An application to oil prices in the transport sector

    Energy Technology Data Exchange (ETDEWEB)

    Jensen, Thomas C. [Department of Transport, Danish Technical University, Bygningstorvet 116 Vest, 2800 Lyngby (Denmark); Moeller, Flemming [National Environmental Research Institute, Box 358, Frederiksborgvej 399, 4000 Roskilde (Denmark)

    2010-01-15

    This paper contains a tentative suggestion of how to take into account the value of changes in price volatility in real world cost-benefit analyses. Price volatility is an important aspect of security of supply which first of all concerns physical availability, but assuming that consumers are risk averse, security of supply can also be viewed as a matter of avoiding oscillations in consumption originating from volatile prices of for instance oil. When the government makes transport-related choices on behalf of the consumers, the effect on oscillations in general consumption should be included in the policy assessment taking into account the most significant correlations between prices of alternative fuels and between fuel prices and consumption in general. In the present paper, a method of valuing changes in price volatility based on portfolio theory is applied to some very simple transport-related examples. They indicate that including the value of changes in price volatility often makes very little difference to the results of cost-benefit analyses, but more work has to be done on quantifying, among other things, consumers' risk aversion and the background standard deviation in total consumption before firm conclusions can be drawn. (author)

  4. Incorporating the value of changes in price volatility into cost-benefit analysis. An application to oil prices in the transport sector

    International Nuclear Information System (INIS)

    Jensen, Thomas C.; Moeller, Flemming

    2010-01-01

    This paper contains a tentative suggestion of how to take into account the value of changes in price volatility in real world cost-benefit analyses. Price volatility is an important aspect of security of supply which first of all concerns physical availability, but assuming that consumers are risk averse, security of supply can also be viewed as a matter of avoiding oscillations in consumption originating from volatile prices of for instance oil. When the government makes transport-related choices on behalf of the consumers, the effect on oscillations in general consumption should be included in the policy assessment taking into account the most significant correlations between prices of alternative fuels and between fuel prices and consumption in general. In the present paper, a method of valuing changes in price volatility based on portfolio theory is applied to some very simple transport-related examples. They indicate that including the value of changes in price volatility often makes very little difference to the results of cost-benefit analyses, but more work has to be done on quantifying, among other things, consumers' risk aversion and the background standard deviation in total consumption before firm conclusions can be drawn. (author)

  5. Price-based control of electrical power systems

    NARCIS (Netherlands)

    Jokic, A.; Lazar, M.; Bosch, van den P.P.J.; Negenborn, R.R.; Lukszo, Z.; Hellendorn, H.

    2010-01-01

    In this chapter we present the price-based control as a suitable approach to solve some of the challenging problems facing future, market-based power sys tems. On the example of economically optimal power balance and transmission network congestion control, we present how global objectives and

  6. Does stock price synchronicity effect information content of reported earnings? Evidence from the MENA region

    Directory of Open Access Journals (Sweden)

    Omar Farooq

    2016-08-01

    Full Text Available This paper documents the effect of stock price synchronicity on the value relevance of reported earnings in the MENA region during the period between 2009 and 2013. Our results show that the information content of reported earnings increases with increase in stock price synchronicity. We document higher impact of earnings on returns for firms with higher stock price synchronicity. We argue that firms with high synchronicity have better information environment. As a result, these firms disclose information that is of high quality. We also show that information conveyed through stock price synchronicity is more important than information conveyed through traditional governance mechanisms

  7. Determination of the Regulatory Asset Base of power distribution companies. Background report of 'Guidelines for price cap regulation in the Dutch electricity sector'

    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)

  8. Ecuadorian Banana Farms Should Consider Organic Banana with Low Price Risks in Their Land-Use Portfolios

    Science.gov (United States)

    Castro, Luz Maria; Calvas, Baltazar; Knoke, Thomas

    2015-01-01

    Organic farming is a more environmentally friendly form of land use than conventional agriculture. However, recent studies point out production tradeoffs that often prevent the adoption of such practices by farmers. Our study shows with the example of organic banana production in Ecuador that economic tradeoffs depend much on the approach of the analysis. We test, if organic banana should be included in economic land-use portfolios, which indicate how much of the land is provided for which type of land-use. We use time series data for productivity and prices over 30 years to compute the economic return (as annualized net present value) and its volatility (with standard deviation as risk measure) for eight crops to derive land-use portfolios for different levels of risk, which maximize economic return. We find that organic banana is included in land-use portfolios for almost every level of accepted risk with proportions from 1% to maximally 32%, even if the same high uncertainty as for conventional banana is simulated for organic banana. A more realistic, lower simulated price risk increased the proportion of organic banana substantially to up to 57% and increased annual economic returns by up to US$ 187 per ha. Under an assumed integration of both markets, for organic and conventional banana, simulated by an increased coefficient of correlation of economic return from organic and conventional banana (ρ up to +0.7), organic banana holds significant portions in the land-use portfolios tested only, if a low price risk of organic banana is considered. We conclude that uncertainty is a key issue for the adoption of organic banana. As historic data support a low price risk for organic banana compared to conventional banana, Ecuadorian farmers should consider organic banana as an advantageous land-use option in their land-use portfolios. PMID:25799506

  9. Investment Risk in the Context of Price Changes on the Real Estate and Stock Markets

    Directory of Open Access Journals (Sweden)

    Wolski Rafał

    2016-03-01

    Full Text Available The residential real estate market is thought to show a tendency for wide fluctuations in prices, as a result of which price bubbles appear. This element of risk has a direct bearing on investors interested in speculation and those seeking to meet their housing needs. Wide fluctuations in the values of real estate affect the investors’ financial situation in many ways, by determining the possibility of meeting one’s housing needs, reducing or sometimes raising creditworthiness, and by increasing investment risk measured by volatility. Omitting the obvious social dimension of the residential real estate market and concentrating on its financial aspects, the author of the article analyses to what degree wide swings in prices can be recognized as specific to this market. To this end, the volatility of prices in the stock market and in the secondary housing market in Poland is compared. An analysis is performed to establish which of them has higher average volatility measures or rates of return, i.e. which of them is more profitable or secure for investors. Statistical tests are used to find out whether average rates of return or measures of risk are equal or different between the two markets. The results of the research show that the secondary housing market and the stock market differ concerning cumulative average rates of return and standard deviations. In the first of them, they are respectively higher and lower.

  10. Mapping of selected markets with Nodal pricing or similar systems. Australia, New Zealand and North American power markets

    Energy Technology Data Exchange (ETDEWEB)

    Mathiesen, Vivi (ed.)

    2011-07-01

    This report shows that the principals of nodal pricing can be implemented in different ways. A common denominator for markets with nodal pricing is a central market based nodal dispatch, where prices and flows are determined simultaneously close to real time. This stands apart from the European market design, which is based on a highly simplified version of the grid, and a physical point auction day ahead. Congestion management is handled by the TSO during the operational hour and not through the market as is the case in nodal pricing systems. Nodal pricing yields optimal dispatch and congestion management through the market, and as such an optimal utilisation of energy generation and network. However, whether this short term optimisation delivers the highest overall efficiency for the market in terms of competition in the wholesale and retail market, price discovery, possibilities for hedging, long term price signals etc. is difficult to determine. The markets investigated handle issues such as market power, risk management, investment signals and retail markets in very different ways. New Zealand and PJM are examples of markets with full nodal pricing, i.e. both generators and the demand side are exposed to nodal prices. The PJM market has more 'additional features' than the New Zealand market. Examples of these are separate capacity market to trigger investments in generation and generator price caps to deal with situations of market power. In addition PJM offers liquid and mature markets for risk management, such as aggregates of nodes where market participant can chose to be settled (rather than to be settled directly at the node). A general finding though, seems to be that risk management at peripheral nodes is challenging in nodal markets, particularly for independent retailers. In New Zealand generators and retailers were permitted to 'reintegrate' in order to cope with the nodal prices. The Australian market has central market based

  11. BASIC METHODS OF CLASSIFICATION AND CHARACTERISTICS OF METHODS OF PRICING IN UKRAINE

    OpenAIRE

    A. Boguslavskiy

    2014-01-01

    The article provided definitions and shows the need to use different methods of pricing of enterprises. Exposed the reasons of the absence of a universal classification of pricing methods. The approaches of different authors to classify groups of pricing methods: 1) the cost method; 2) methods with a focus on competition; 3) methods for pricing based on demand, 4) pricing with a focus on maximum profit, 5) parametric methods, 6) pricing under risk and uncertainty, etc. An improved classificat...

  12. Factors affecting forward pricing behaviour: implications of alternative regression model specifications

    Directory of Open Access Journals (Sweden)

    Henry Jordaan

    2010-12-01

    Full Text Available Price risk associated with maize production became a reason for concern in South Africa only after the deregulation of the agricultural commodities markets in the mid-1990s, when farmers became responsible for marketing their own crops. Although farmers can use, inter alia, the cash forward contracting and/or the derivatives market to manage price risk, few farmers actually participate in forward pricing. A similar reluctance to use forward pricing methods is also found internationally. A number of different model specifications have been used in previous research to model forward pricing behaviour which is based on the assumption that the same variables influence both the adoption and the quantity decision. This study compares the results from a model specification which models forward pricing behaviour in a single-decision framework with the results from modelling the quantity decision conditional to the adoption decision in a two-step approach. The results suggest that substantially more information is obtained by modelling forward pricing behaviour as two separate decisions rather than a single decision. Such information may be valuable in educational material compiled to educate farmers in the effective use of forward pricing methods in price risk management. Modelling forward pricing behaviour as two separate decisions  is thus a more effective means of modelling forward pricing behaviour than modelling it as a single decision.

  13. The influence of the PFI on waste management pricing

    International Nuclear Information System (INIS)

    2000-01-01

    This report analyses the pricing mechanisms generated within the waste management sector under the Private Finance Initiative (PFI) and compares them with the cost-plus pricing mechanisms. The background to the research is traced, and the influence of the PFI on service procurement, the incentives to use PFI, the procurement process, and the allocation of contractual risk are discussed. The PFI pricing mechanisms are described, and a case study of a hypothetical local authority involved in the tender for integrated waste management services is created to illustrate the pricing mechanisms under the PFI, comparisons with traditional pricing, and a quantitative analysis. A non-PFI model, a PFI 20 year model, and PFI 25 year model are presented in the appendix

  14. The influence of the PFI on waste management pricing

    Energy Technology Data Exchange (ETDEWEB)

    NONE

    2000-07-01

    This report analyses the pricing mechanisms generated within the waste management sector under the Private Finance Initiative (PFI) and compares them with the cost-plus pricing mechanisms. The background to the research is traced, and the influence of the PFI on service procurement, the incentives to use PFI, the procurement process, and the allocation of contractual risk are discussed. The PFI pricing mechanisms are described, and a case study of a hypothetical local authority involved in the tender for integrated waste management services is created to illustrate the pricing mechanisms under the PFI, comparisons with traditional pricing, and a quantitative analysis. A non-PFI model, a PFI 20 year model, and PFI 25 year model are presented in the appendix.

  15. Prize something, including quality. The price of supply interruption. On the search for φ. Technical report

    International Nuclear Information System (INIS)

    Baarsma, B.E.; Berkhout, P.H.G.; Hop, J.P.

    2004-04-01

    The Dutch Office of Energy Regulation (DTe) plans to adjust the present regulations with regard to regional electricity network companies. In 2002 an integrated model for pricing and quality regulations is drafted, which is expected to be implemented in 2005. This report serves as input for such a model. Quality is defined in terms of electricity supply disruptions. The aim of the study on the title subject is to determine prices for different types of power supply disruptions. The study is based on a survey among 12,400 households and nearly 2,500 small and medium-sized businesses in the Netherlands [nl

  16. Cross hedging and forward-contract pricing of electricity

    Energy Technology Data Exchange (ETDEWEB)

    Woo, C.-K.; Hoang, K. [Energy and Environmental Economics, Inc., 353 Sacramento Street, Suite 1700, 94111 San Francisco, CA (United States); Horowitz, I. [Decision and Information Sciences, Warrington College of Business Administration, University of Florida, 32611 Gainesville, FL (United States)

    2001-01-01

    We consider the problem of an electric-power marketer offering a fixed-price forward contract to provide electricity that it purchases from a potentially volatile and unpredictable fledgling spot energy market. One option for the risk-averse marketer who wants to hedge against the spot-price volatility is to engage in cross hedging to reduce the contract's profit variance, and to determine the forward-contract price as a risk-adjusted price - the sum of a baseline price and a risk premium. We show how the marketer can estimate the spot-price relationship between two wholesale energy markets for the purpose of cross hedging, as well as the optimal hedge and the forward contract's baseline price and risk premium.

  17. A Multiperiod Equilibrium Pricing Model

    Directory of Open Access Journals (Sweden)

    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.

  18. Monetary Policy, Risk-Taking, and Pricing : Evidence from a Quasi-Natural Experiment

    NARCIS (Netherlands)

    Ioannidou, V.; Ongena, S.; Peydro, J.L.

    2009-01-01

    We analyse the impact of monetary policy on bank risk-taking and pricing. Bolivia provides us with an excellent experimental setting to identify this impact. Its small economy is not synchronized with the US economy but its banking system is almost fully dollarized. Consequently the US federal funds

  19. Can and should value-based pricing be applied to molecular diagnostics?

    Science.gov (United States)

    Garau, Martina; Towse, Adrian; Garrison, Louis; Housman, Laura; Ossa, Diego

    2013-01-01

    Current pricing and reimbursement systems for diagnostics are not efficient. Prices for diagnostics are often driven by administrative practices and expected production cost. The purpose of the paper is to discuss how a value-based pricing framework being used to ensure efficient use and price of medicines could also be applied to diagnostics. Diagnostics not only facilitates health gain and cost savings, but also information to guide patients' decisions on interventions and their future 'behaviors'. For value assessment processes we recommend a two-part approach. Companion diagnostics introduced at the launch of the drug should be assessed through new drug assessment processes considering a broad range of value elements and a balanced analysis of diagnostic impacts. A separate diagnostic-dedicated committee using value-based pricing principles should review other diagnostics lying outside the companion diagnostics-and-drug 'at-launch' situation.

  20. Using price data to consider risk in the evaluation of forest management investments.

    Science.gov (United States)

    David C. Baumgartner; Carol A. Hyldahl

    1991-01-01

    Shows how existing information on the historic prices of various timber species and products can be used to provide a measure of the market risk, return, and efficient portfolios of alternative forestry investments using examples from three Midwestern states.

  1. Estimating 'Value at Risk' of crude oil price and its spillover effect using the GED-GARCH approach

    International Nuclear Information System (INIS)

    Fan, Ying; Wei, Yi-Ming; Zhang, Yue-Jun; Tsai, Hsien-Tang

    2008-01-01

    Estimation has been carried out using GARCH-type models, based on the Generalized Error Distribution (GED), for both the extreme downside and upside Value-at-Risks (VaR) of returns in the WTI and Brent crude oil spot markets. Furthermore, according to a new concept of Granger causality in risk, a kernel-based test is proposed to detect extreme risk spillover effect between the two oil markets. Results of an empirical study indicate that the GED-GARCH-based VaR approach appears more effective than the well-recognized HSAF (i.e. historical simulation with ARMA forecasts). Moreover, this approach is also more realistic and comprehensive than the standard normal distribution-based VaR model that is commonly used. Results reveal that there is significant two-way risk spillover effect between WTI and Brent markets. Supplementary study indicates that at the 99% confidence level, when negative market news arises that brings about a slump in oil price return, historical information on risk in the WTI market helps to forecast the Brent market. Conversely, it is not the case when positive news occurs and returns rise. Historical information on risk in the two markets can facilitate forecasts of future extreme market risks for each other. These results are valuable for anyone who needs evaluation and forecasts of the risk situation in international crude oil markets. (author)

  2. The capital-asset-pricing model and arbitrage pricing theory: A unification

    Science.gov (United States)

    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

  3. Costing and pricing electric power reserve services. Final report

    International Nuclear Information System (INIS)

    Kirsch, L.D.; Rajaraman, R.; Clark, C.

    1997-12-01

    In the competitive electric power markets of the imminent future, reserves will be the second largest generation service in terms of their revenues and profits. Because reserves will be more widely traded than at present, they will be provided by the cheapest available sources regardless of the ownership of those sources. Price will determine the willingness of generators and consumers to provide reserve services; and it may also determine the willingness of reserve users to purchase reserve services. This report presents a methodology by which generation firms and merchant firms can profitably cost and price the reserve services that they offer. The methodology is generally applicable to a wide range of market structures that such firms might face

  4. Effects of unit-based garbage pricing : A differences-in-differences approach

    NARCIS (Netherlands)

    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

  5. Mud Pit Risk-Based Closure Strategy Report, Nevada Test Site, Nevada, Revision 0

    Energy Technology Data Exchange (ETDEWEB)

    Brain Hoenes

    2004-08-01

    This report presents the findings of the human and ecological risk assessment for the NTS mud pits. The risk assessment utilizes data from 52 of the 270 NTS mud pits in conjunction with corroborative data from 87 other DOE mud pits associated with nuclear testing (at locations on the NTS, in the western United States, and Alaska) as well as relevant process knowledge. Based on the risk assessment findings, the report provides a strategy for further evaluation, characterization, and closure of all 270 NTS mud pit CASs using the Streamlined Approach for Environmental Restoration (SAFER).

  6. Rising gasoline prices increase new motorcycle sales and fatalities.

    Science.gov (United States)

    Zhu, He; Wilson, Fernando A; Stimpson, Jim P; Hilsenrath, Peter E

    2015-12-01

    We examined whether sales of new motorcycles was a mechanism to explain the relationship between motorcycle fatalities and gasoline prices. The data came from the Motorcycle Industry Council, Energy Information Administration and Fatality Analysis Reporting System for 1984-2009. Autoregressive integrated moving average (ARIMA) regressions estimated the effect of inflation-adjusted gasoline price on motorcycle sales and logistic regressions estimated odds ratios (ORs) between new and old motorcycle fatalities when gasoline prices increase. New motorcycle sales were positively correlated with gasoline prices (r = 0.78) and new motorcycle fatalities (r = 0.92). ARIMA analysis estimated that a US$1 increase in gasoline prices would result in 295,000 new motorcycle sales and, consequently, 233 new motorcycle fatalities. Compared to crashes on older motorcycle models, those on new motorcycles were more likely to be young riders, occur in the afternoon, in clear weather, with a large engine displacement, and without alcohol involvement. Riders on new motorcycles were more likely to be in fatal crashes relative to older motorcycles (OR 1.14, 95 % confidence interval (CI) 1.02-1.28) when gasoline prices increase. Our findings suggest that, in response to increasing gasoline prices, people tend to purchase new motorcycles, and this is accompanied with significantly increased crash risk. There are several policy mechanisms that can be used to lower the risk of motorcycle crash injuries through the mechanism of gas prices and motorcycle sales such as raising awareness of motorcycling risks, enhancing licensing and testing requirements, limiting motorcycle power-to-weight ratios for inexperienced riders, and developing mandatory training programs for new riders.

  7. Analysis of district heating pricing in Finland from the customers' and energy companies perspectives. Final report; Kaukolaemmoen hinnoittelun nykytila ja tulevaisuuden mahdollisuudet. Loppuraportti

    Energy Technology Data Exchange (ETDEWEB)

    Sarvaranta, A.; Jaaskelainen, J.; Puolakka, J.; Kouri, P. [AF-Consult, Vantaa (Finland)

    2012-12-15

    The heating market in Finland is changing. Until now, district heating demand has been constantly increasing. However, forecasts predict the demand to drop slightly in the future due to the increasing energy efficiency demands and development of competing heating technologies. Maintaining existing customer base may rise as one of the major challenges of a district heating company in the future. This report covers the topic 'Analysis of district heating pricing in Finland from the customers' and energy companies perspectives'. The report provides a general description of the current challenges and future opportunities of district heating pricing in Finland. Cost and pricing structures are discussed from both the companies and customers' perspectives. The overall objective is to provide an overview of the current state of district heating pricing in Finland and provide information on new pricing opportunities. The conclusions of the report provide information that district heating companies can use in developing their pricing system. Based on the literature and material analysed in this study, district heating pricing currently lacks adequate transparency and therefore should be developed to reflect the cost structure more closely. New metering technologies allow more accurate information on heat consumption and can hence be used to improve the transparency of pricing. Average marginal costs generally vary between seasons. If the goal is to reflect the cost structure taking into account the average variable costs, season dependent pricing becomes desirable. More variability in pricing between seasons may also keep customers from switching completely or partially into other heating systems, as the pricing becomes more cost-effective and easier to understand. Different types of customers wish for different properties in pricing: transparency, freedom of choice, convenience, more dynamic pricing, etc.. While expanding and tailoring the pricing

  8. Price-elastic demand in deregulated electricity markets

    Energy Technology Data Exchange (ETDEWEB)

    Siddiqui, Afzal S.

    2003-05-01

    The degree to which any deregulated market functions efficiently often depends on the ability of market agents to respond quickly to fluctuating conditions. Many restructured electricity markets, however, experience high prices caused by supply shortages and little demand-side response. We examine the implications for market operations when a risk-averse retailer's end-use consumers are allowed to perceive real-time variations in the electricity spot price. Using a market-equilibrium model, we find that price elasticity both increases the retailers revenue risk exposure and decreases the spot price. Since the latter induces the retailer to reduce forward electricity purchases, while the former has the opposite effect, the overall impact of price responsive demand on the relative magnitudes of its risk exposure and end-user price elasticity. Nevertheless, price elasticity decreases cumulative electricity consumption. By extending the analysis to allow for early settlement of demand, we find that forward stage end-user price responsiveness decreases the electricity forward price relative to the case with price-elastic demand only in real time. Moreover, we find that only if forward stage end-user demand is price elastic will the equilibrium electricity forward price be reduced.

  9. Papers of the 2. annual Canadian Institute conference on managing natural gas price volatility : effective risk strategies for turbulent times

    International Nuclear Information System (INIS)

    2002-01-01

    The issue of how natural gas price volatility is affecting future energy projects was the focus of this conference. Discussions focused on the dynamics of supply and demand of natural gas in North America and how end-users are responding to price fluctuations. Methods by which storage can be used as an effective risk management tool was also on the agenda. The hedging strategies that work best for leading energy firms were described. It was noted that price volatility can be reduced through improved market transparency. Discussions also focused on credit risk in a volatile price environment. A total of 17 papers were presented of which 3 were indexed separately for inclusion in the database. tabs., figs

  10. Natural gas pricing

    International Nuclear Information System (INIS)

    Freedenthal, C.

    1993-01-01

    Natural gas pricing is the heart and soul of the gas business. Price specifically affects every phase of the industry. Too low a price will result in short supplies as seen in the mid-1970s when natural gas was scarce and in tight supply. To fully understand the pricing of this energy commodity, it is important to understand the total energy picture. In addition, the effect and impact of world and US economies, and economics in general are crucial to understanding natural gas pricing. The purpose of this presentation will be to show the parameters going into US natural gas pricing including the influence of the many outside industry factors like crude oil and coal pricing, market drivers pushing the gas industry, supply/demand parameters, risk management for buyers and sellers, and other elements involved in pricing analysis

  11. FTR-option formulation and pricing

    International Nuclear Information System (INIS)

    Parmeshwaran, Vijay; Muthuraman, Kumar

    2009-01-01

    Recent changes in electricity markets have advocated the use of Local Marginal Prices (LMP) for congestion management and pricing. From the perspective of market participants, the LMPs pose a risk since they are not known before a transaction on the grid is made. Financial transmission rights (FTR) are instruments that help market participants hedge this risk and are issuable in two flavors - obligations and options. While pricing obligations are much easier, pricing FTR options pose a significant challenge. In this paper we develop a computational method for pricing FTR options. We also discuss the problem of designing financial instrument sets that assure revenue adequacy for the issuer. We point out the difficulty in assuring revenue adequacy when FTR options are present and propose a scheme for overcoming the difficulty. The proposed pricing method can be used to compute prices of options and obligations in the primary market or as a reliable pricing tool to compute option prices in the secondary market. Finally using a test network we present and discuss numerical results. (author)

  12. Electricity transmission pricing: Tracing based point-of-connection tariff

    International Nuclear Information System (INIS)

    Abhyankar, A.R.; Khaparde, S.A.

    2009-01-01

    Point-of-connection (POC) scheme of transmission pricing in decentralized markets charges the participants a single rate per MW depending on their point-of-connection. Use of grossly aggregated postage stamp rates as POC charges fails to provide appropriate price signals. The POC tariff based on distribution of network sunk costs by employing conventional tracing assures recovery of sunk costs based on extent of use of network by participants. However, the POC tariff by this method does not accommodate economically efficient price signals which correspond to marginal costs. On the other hand, the POC tariff, if made proportional to marginal costs alone, fails to account for sunk costs and extent of use of network. This paper overcomes these lacunae by combining the above stated desired objectives under the recently proposed optimal tracing framework. Since real power tracing problem is amenable to multiple solutions, it is formulated as linearly constrained optimization problem. By employing this methodology, consideration of extent of network use and sunk cost recovery are guaranteed, while objective function is designed such that the spatial pattern of price signals closely follows the pattern of scaled locational marginal prices. The methodology is tested on IEEE 30 bus system, wherein average power flow pattern is established by running various simulation states on congested and un-congested network conditions. (author)

  13. The Pricing of Tail Risk and the Equity Premium: Evidence from International Option Markets

    DEFF Research Database (Denmark)

    Andersen, Torben Gustav; Fusari, Nicola; Todorov, Viktor

    We explore the pricing of tail risk as manifest in index options across international equity markets. The risk premium associated with negative tail events displays persistent shifts, unrelated to volatility. This tail risk premium is a potent predictor of future equity returns, while option......-implied volatility only forecasts the future return variation. Hence, compensation for negative jump risk is the primary driver of the equity premium across all indices, whereas the reward for pure diffusive variance risk is largely unrelated to future equity returns. We also document pronounced commonalities...

  14. The price of policy risk — Empirical insights from choice experiments with European photovoltaic project developers

    International Nuclear Information System (INIS)

    Lüthi, Sonja; Wüstenhagen, Rolf

    2012-01-01

    Managing the transition to a renewable energy future is an important policy priority in many countries. Solar photovoltaic (PV) technology is expected to make an essential contribution, but due to relatively high cost, its growth to date has been largely driven by public policy, notably feed-in tariffs. Feed-in tariffs have been implemented in various countries, but with widely differing outcomes in terms of installed PV capacity. Previous research indicates that the level of policy risk may be an important driver for differences in renewable energy policy effectiveness. This paper suggests that project developers who make a decision between PV investment opportunities in different countries carefully weigh feed-in tariff-induced returns against a set of policy risks, and choose the country with the most favorable risk-return profile. This model is empirically tested by a stated preference survey among European PV project developers, consisting of 1575 choice decisions by 63 investors. The findings demonstrate that risk matters in PV policy design, and that a “price tag” can be attached to specific policy risks, such as the duration of administrative processes or uncertainty induced by an approaching capacity cap. Governments can build on these empirical results to design policies that will be effective in attracting private PV investment, while at the same time maintaining efficiency by providing an adequate compensation for policy risk. - Highlights: ► This study is based on 1575 choice and rating decisions made by 63 European PV project developers. ► This study confirms importance of “non-economic” barriers to deployment of renewable energy. ► This study measures “price of policy risk”, i.e. investors' willingness-to-accept certain policy risks.

  15. Optimal Premium Pricing for a Heterogeneous Portfolio of Insurance Risks

    Directory of Open Access Journals (Sweden)

    Athanasios A. Pantelous

    2009-01-01

    Full Text Available The paper revisits the classical problem of premium rating within a heterogeneous portfolio of insurance risks using a continuous stochastic control framework. The portfolio is divided into several classes where each class interacts with the others. The risks are modelled dynamically by the means of a Brownian motion. This dynamic approach is also transferred to the design of the premium process. The premium is not constant but equals the drift of the Brownian motion plus a controlled percentage of the respective volatility. The optimal controller for the premium is obtained using advanced optimization techniques, and it is finally shown that the respective pricing strategy follows a more balanced development compared with the traditional premium approaches.

  16. Pricing Volatility Referenced Assets

    Directory of Open Access Journals (Sweden)

    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.

  17. A supply and demand based volatility model for energy prices

    International Nuclear Information System (INIS)

    Kanamura, Takashi

    2009-01-01

    This paper proposes a new volatility model for energy prices using the supply-demand relationship, which we call a supply and demand based volatility model. We show that the supply curve shape in the model determines the characteristics of the volatility in energy prices. It is found that the inverse Box-Cox transformation supply curve reflecting energy markets causes the inverse leverage effect, i.e., positive correlation between energy prices and volatility. The model is also used to show that an existing (G)ARCH-M model has the foundations on the supply-demand relationship. Additionally, we conduct the empirical studies analyzing the volatility in the U.S. natural gas prices. (author)

  18. A supply and demand based volatility model for energy prices

    Energy Technology Data Exchange (ETDEWEB)

    Kanamura, Takashi [J-POWER, 15-1, Ginza 6-Chome, Chuo-ku, Tokyo 104-8165 (Japan)

    2009-09-15

    This paper proposes a new volatility model for energy prices using the supply-demand relationship, which we call a supply and demand based volatility model. We show that the supply curve shape in the model determines the characteristics of the volatility in energy prices. It is found that the inverse Box-Cox transformation supply curve reflecting energy markets causes the inverse leverage effect, i.e., positive correlation between energy prices and volatility. The model is also used to show that an existing (G)ARCH-M model has the foundations on the supply-demand relationship. Additionally, we conduct the empirical studies analyzing the volatility in the U.S. natural gas prices. (author)

  19. Ambiguity and Volatility : Asset Pricing Implications

    NARCIS (Netherlands)

    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.

  20. Actuarial risk measures for financial derivative pricing

    NARCIS (Netherlands)

    Goovaerts, M.J.; Laeven, R.J.A.

    2008-01-01

    We present an axiomatic characterization of price measures that are superadditive and comonotonic additive for normally distributed random variables. The price representation derived involves a probability measure transform that is closely related to the Esscher transform, and we call it the

  1. Real-time electricity pricing mechanism in China based on system dynamics

    International Nuclear Information System (INIS)

    He, Yongxiu; Zhang, Jixiang

    2015-01-01

    Highlights: • The system dynamics is used to research the real-time electricity pricing mechanism. • Four kinds of the real-time electricity pricing models are carried out and simulated. • It analysed the electricity price, the user satisfaction and the social benefits under the different models. • Market pricing is the trend of the real-time electricity pricing mechanism. • Initial development path of the real-time price mechanism for China is designed between 2015 and 2030. - Abstract: As an important means of demand-side response, the reasonable formulation of the electricity price mechanism will have an important impact on the balance between the supply and demand of electric power. With the introduction of Chinese intelligence apparatus and the rapid development of smart grids, real-time electricity pricing, as the frontier electricity pricing mechanism in the smart grid, will have great significance on the promotion of energy conservation and the improvement of the total social surplus. From the perspective of system dynamics, this paper studies different real-time electricity pricing mechanisms based on load structure, cost structure and bidding and analyses the situation of user satisfaction and the total social surplus under different pricing mechanisms. Finally, through the comparative analysis of examples under different real-time pricing scenarios, this paper aims to explore and design the future dynamic real-time electricity pricing mechanism in China, predicts the dynamic real-time pricing level and provides a reference for real-time electricity price promotion in the future

  2. Rule-Based and Case-Based Reasoning in Housing Prices

    OpenAIRE

    Gabrielle Gayer; Itzhak Gilboa; Offer Lieberman

    2004-01-01

    People reason about real-estate prices both in terms of general rules and in terms of analogies to similar cases. We propose to empirically test which mode of reasoning fits the data better. To this end, we develop the statistical techniques required for the estimation of the case-based model. It is hypothesized that case-based reasoning will have relatively more explanatory power in databases of rental apartments, whereas rule-based reasoning will have a relative advantage in sales data. We ...

  3. Food Prices and Climate Extremes: A Model of Global Grain Price Variability with Storage

    Science.gov (United States)

    Otto, C.; Schewe, J.; Frieler, K.

    2015-12-01

    Extreme climate events such as droughts, floods, or heat waves affect agricultural production in major cropping regions and therefore impact the world market prices of staple crops. In the last decade, crop prices exhibited two very prominent price peaks in 2007-2008 and 2010-2011, threatening food security especially for poorer countries that are net importers of grain. There is evidence that these spikes in grain prices were at least partly triggered by actual supply shortages and the expectation of bad harvests. However, the response of the market to supply shocks is nonlinear and depends on complex and interlinked processes such as warehousing, speculation, and trade policies. Quantifying the contributions of such different factors to short-term price variability remains difficult, not least because many existing models ignore the role of storage which becomes important on short timescales. This in turn impedes the assessment of future climate change impacts on food prices. Here, we present a simple model of annual world grain prices that integrates grain stocks into the supply and demand functions. This firstly allows us to model explicitly the effect of storage strategies on world market price, and thus, for the first time, to quantify the potential contribution of trade policies to price variability in a simple global framework. Driven only by reported production and by long--term demand trends of the past ca. 40 years, the model reproduces observed variations in both the global storage volume and price of wheat. We demonstrate how recent price peaks can be reproduced by accounting for documented changes in storage strategies and trade policies, contrasting and complementing previous explanations based on different mechanisms such as speculation. Secondly, we show how the integration of storage allows long-term projections of grain price variability under climate change, based on existing crop yield scenarios.

  4. A hybrid model for electricity spot prices

    International Nuclear Information System (INIS)

    Anderson, C.L.D.

    2004-01-01

    Electricity prices were highly regulated prior to the deregulation of the electric power industry. Prices were predictable, allowing generators and wholesalers to calculate their production costs and revenues. With deregulation, electricity has become the most volatile of all commodities. Electricity must be consumed as soon as it is generated due to the inability to store it in any sufficient quantity. Economic uncertainty exists because the supply of electricity cannot shift as quickly as the demand, which is highly variable. When demand increases quickly, the price must respond. Therefore, price spikes occur that are orders of magnitude higher than the base electricity price. This paper presents a robust and realistic model for spot market electricity prices used to manage risk in volatile markets. The model is a hybrid of a top down data driven method commonly used for financial applications, and a bottom up system driven method commonly used in regulated electricity markets. The advantage of the model is that it incorporates primary system drivers and demonstrates their effects on final prices. The 4 primary modules of the model are: (1) a model for forced outages, (2) a model for maintenance outages, (3) an electrical load model, and (4) a price model which combines the results of the previous 3 models. The performance of each model was tested. The forced outage model is the first of its kind to simulate the system on an aggregate basis using Weibull distributions. The overall spot price model was calibrated to, and tested with, data from the electricity market in Pennsylvania, New Jersey and Maryland. The model performed well in simulated market prices and adapted readily to changing system conditions and new electricity markets. This study examined the pricing of derivative contracts on electrical power. It also compared a range of portfolio scenarios using a Cash Flow at Risk approach

  5. A hybrid model for electricity spot prices

    Energy Technology Data Exchange (ETDEWEB)

    Anderson, C.L.D.

    2004-07-01

    Electricity prices were highly regulated prior to the deregulation of the electric power industry. Prices were predictable, allowing generators and wholesalers to calculate their production costs and revenues. With deregulation, electricity has become the most volatile of all commodities. Electricity must be consumed as soon as it is generated due to the inability to store it in any sufficient quantity. Economic uncertainty exists because the supply of electricity cannot shift as quickly as the demand, which is highly variable. When demand increases quickly, the price must respond. Therefore, price spikes occur that are orders of magnitude higher than the base electricity price. This paper presents a robust and realistic model for spot market electricity prices used to manage risk in volatile markets. The model is a hybrid of a top down data driven method commonly used for financial applications, and a bottom up system driven method commonly used in regulated electricity markets. The advantage of the model is that it incorporates primary system drivers and demonstrates their effects on final prices. The 4 primary modules of the model are: (1) a model for forced outages, (2) a model for maintenance outages, (3) an electrical load model, and (4) a price model which combines the results of the previous 3 models. The performance of each model was tested. The forced outage model is the first of its kind to simulate the system on an aggregate basis using Weibull distributions. The overall spot price model was calibrated to, and tested with, data from the electricity market in Pennsylvania, New Jersey and Maryland. The model performed well in simulated market prices and adapted readily to changing system conditions and new electricity markets. This study examined the pricing of derivative contracts on electrical power. It also compared a range of portfolio scenarios using a Cash Flow at Risk approach.

  6. Study on Market Stability and Price Limit of Chinese Stock Index Futures Market: An Agent-Based Modeling Perspective.

    Science.gov (United States)

    Xiong, Xiong; Nan, Ding; Yang, Yang; Yongjie, Zhang

    2015-01-01

    This paper explores a method of managing the risk of the stock index futures market and the cross-market through analyzing the effectiveness of price limits on the Chinese Stock Index 300 futures market. We adopt a cross-market artificial financial market (include the stock market and the stock index futures market) as a platform on which to simulate the operation of the CSI 300 futures market by changing the settings of price limits. After comparing the market stability under different price limits by appropriate liquidity and volatility indicators, we find that enhancing price limits or removing price limits both play a negative impact on market stability. In contrast, a positive impact exists on market stability if the existing price limit is maintained (increase of limit by10%, down by 10%) or it is broadened to a proper extent. Our study provides reasonable advice for a price limit setting and risk management for CSI 300 futures.

  7. Latent class analysis of accident risks in usage-based insurance: Evidence from Beijing.

    Science.gov (United States)

    Jin, Wen; Deng, Yinglu; Jiang, Hai; Xie, Qianyan; Shen, Wei; Han, Weijian

    2018-06-01

    Car insurance is quickly becoming a big data industry, with usage-based insurance (UBI) poised to potentially change the business of insurance. Telematics data, which are transmitted from wireless devices in car, are widely used in UBI to obtain individual-level travel and driving characteristics. While most existing studies have introduced telematics data into car insurance pricing, the telematics-related characteristics are directly obtained from the raw data. In this study, we propose to quantify drivers' familiarity with their driving routes and develop models to quantify drivers' accident risks using the telematics data. In addition, we build a latent class model to study the heterogeneity in travel and driving styles based on the telematics data, which has not been investigated in literature. Our main results include: (1) the improvement to the model fit is statistically significant by adding telematics-related characteristics; (2) drivers' familiarity with their driving trips is critical to identify high risk drivers, and the relationship between drivers' familiarity and accident risks is non-linear; (3) the drivers can be classified into two classes, where the first class is the low risk class with 0.54% of its drivers reporting accidents, and the second class is the high risk class with 20.66% of its drivers reporting accidents; and (4) for the low risk class, drivers with high probability of reporting accidents can be identified by travel-behavior-related characteristics, while for the high risk class, they can be identified by driving-behavior-related characteristics. The driver's familiarity will affect the probability of reporting accidents for both classes. Copyright © 2018 Elsevier Ltd. All rights reserved.

  8. Higher prices, higher quality? Evidence from German nursing homes.

    Science.gov (United States)

    Herr, Annika; Hottenrott, Hanna

    2016-02-01

    This study investigates the relationship between prices and quality of 7400 German nursing homes. We use a cross section of public quality reports for all German nursing homes, which had been evaluated between 2010 and 2013 by external institutions. Our analysis is based on multivariate regressions in a two stage least squares framework, where we instrument prices to explain their effect on quality controlling for income, nursing home density, demographics, labour market characteristics, and infrastructure at the regional level. Descriptive analysis shows that prices and quality do not only vary across nursing homes, but also across counties and federal states and that quality and prices correlate positively. Second, the econometric analysis, which accounts for the endogenous relation between negotiated price and reported quality, shows that quality indeed positively depends on prices. In addition, more places in nursing homes per people in need are correlated with both lower prices and higher quality. Finally, unobserved factors at the federal state level capture some of the variation of reported quality across nursing homes. Our results suggest that higher prices increase quality. Furthermore, since reported quality and prices vary substantially across federal states, we conclude that the quality and prices of long-term care facilities may well be compared within federal states but not across. Copyright © 2016 Elsevier Ireland Ltd. All rights reserved.

  9. Study and Simulation on Dynamics of a Risk-Averse Supply Chain Pricing Model with Dual-Channel and Incomplete Information

    Science.gov (United States)

    Sun, Lijian; Ma, Junhai

    Under the industrial background of dual-channel, volatility in demand of consumers, we use the theory of bifurcations and numerical simulation tools to investigate the dynamic pricing game in a dual-channel supply chain with risk-averse behavior and incomplete information. Due to volatility of demand of consumers, we consider all the players in the supply chain are risk-averse. We assume there exist Bertrand game and Manufacturers’ Stackelberg in the chain which are closer to reality. The main objective of the paper is to investigate the complex influence of the decision parameters such as wholesale price adjustment speed, risk preference and service value on stability of the risk-averse supply chain and average utilities of all the players. We lay emphasis on the influence of chaos on average utilities of all the players which did not appear in previous studies. The dynamic phenomena, such as the bifurcation, chaos and sensitivity to initial values are analyzed by 2D bifurcation phase portraits, Double Largest Lyapunov exponent, basins of attraction and so on. The study shows that the manufacturers should slow down their wholesale price adjustment speed to get more utilities, if the manufacturers are willing to take on more risk, they will get more profits, but they must keep their wholesale prices in a certain range in order to maintain the market stability.

  10. 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...

  11. 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...

  12. Forecasting crude oil price with an EMD-based neural network ensemble learning paradigm

    International Nuclear Information System (INIS)

    Yu, Lean; Wang, Shouyang; Lai, Kin Keung

    2008-01-01

    In this study, an empirical mode decomposition (EMD) based neural network ensemble learning paradigm is proposed for world crude oil spot price forecasting. For this purpose, the original crude oil spot price series were first decomposed into a finite, and often small, number of intrinsic mode functions (IMFs). Then a three-layer feed-forward neural network (FNN) model was used to model each of the extracted IMFs, so that the tendencies of these IMFs could be accurately predicted. Finally, the prediction results of all IMFs are combined with an adaptive linear neural network (ALNN), to formulate an ensemble output for the original crude oil price series. For verification and testing, two main crude oil price series, West Texas Intermediate (WTI) crude oil spot price and Brent crude oil spot price, are used to test the effectiveness of the proposed EMD-based neural network ensemble learning methodology. Empirical results obtained demonstrate attractiveness of the proposed EMD-based neural network ensemble learning paradigm. (author)

  13. Average regional end-use energy price projections to the year 2030

    International Nuclear Information System (INIS)

    1991-01-01

    The energy prices shown in this report cover the period from 1991 through 2030. These prices reflect sector/fuel price projections from the Annual Energy Outlook 1991 (AEO) base case, developed using the Energy Information Administration's (EIA) Intermediate Future Forecasting System (IFFS) forecasting model. Projections through 2010 are AEO base case forecasts. Projections for the period from 2011 through 2030 were developed separately from the AEO for this report, and the basis for these projections is described in Chapter 3. Projections in this report include average energy prices for each of four Census Regions for the residential, commercial, industrial, and transportation end-use sectors. Energy sources include electricity, distillate fuel oil, liquefied petroleum gas, motor gasoline, residual fuel oil, natural gas, and steam coal. (VC)

  14. Pricing schemes for new drugs: a welfare analysis.

    Science.gov (United States)

    Levaggi, Rosella

    2014-02-01

    Drug price regulation is acquiring increasing significance in the investment choices of the pharmaceutical sector. The overall objective is to determine an optimal trade-off between the incentives for innovation, consumer protection, and value for money. However, price regulation is itself a source of distortion. In this study, we examine the welfare properties of listing through a bargaining process and value-based pricing schemes. The latter are superior instruments to uncertain listing processes for maximising total welfare, but the distribution of the benefits between consumers and the industry depends on rate of rebate chosen by the regulator. However, through an appropriate choice, it is always possible to define a value-based pricing scheme with risk sharing, which both consumers and the industry prefer to an uncertain bargaining process. Copyright © 2013 Elsevier Ltd. All rights reserved.

  15. Designing an agricultural vegetative waste-management system under uncertain prices of treatment-technology output products.

    Science.gov (United States)

    Broitman, D; Raviv, O; Ayalon, O; Kan, I

    2018-05-01

    Setting up a sustainable agricultural vegetative waste-management system is a challenging investment task, particularly when markets for output products of waste-treatment technologies are not well established. We conduct an economic analysis of possible investments in treatment technologies of agricultural vegetative waste, while accounting for fluctuating output prices. Under a risk-neutral approach, we find the range of output-product prices within which each considered technology becomes most profitable, using average final prices as the exclusive factor. Under a risk-averse perspective, we rank the treatment technologies based on their computed certainty-equivalent profits as functions of the coefficient of variation of the technologies' output prices. We find the ranking of treatment technologies based on average prices to be robust to output-price fluctuations provided that the coefficient of variation of the output prices is below about 0.4, that is, approximately twice as high as that of well-established recycled-material markets such as glass, paper and plastic. We discuss some policy implications that arise from our analysis regarding vegetative waste management and its associated risks. Copyright © 2018 Elsevier Ltd. All rights reserved.

  16. Price returns efficiency of the Shanghai A-Shares

    Science.gov (United States)

    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.

  17. [Risk sharing methods in middle income countries].

    Science.gov (United States)

    Inotai, András; Kaló, Zoltán

    2012-01-01

    The pricing strategy of innovative medicines is based on the therapeutic value in the largest pharmaceutical markets. The cost-effectiveness of new medicines with value based ex-factory price is justifiable. Due to the international price referencing and parallel trade the ex-factory price corridor of new medicines has been narrowed in recent years. Middle income countries have less negotiation power to change the narrow drug pricing corridor, although their fair intention is to buy pharmaceuticals at lower price from their scarce public resources compared to higher income countries. Therefore the reimbursement of new medicines at prices of Western-European countries may not be justifiable in Central-Eastern European countries. Confidential pricing agreements (i.e. confidential price discounts, claw-back or rebate) in lower income countries of the European Union can alleviate this problem, as prices of new medicines can be adjusted to local purchasing power without influencing the published ex-factory price and so the accessibility of patients to these drugs in other countries. In order to control the drug budget payers tend to apply financial risk sharing agreements for new medicines in more and more countries to shift the consequences of potential overspending to pharmaceutical manufacturers. The major paradox of financial risk-sharing schemes is that increased mortality, poor persistence of patients, reduced access to healthcare providers, and no treatment reduce pharmaceutical spending. Consequently, payers have started to apply outcome based risk sharing agreements for new medicines recently to improve the quality of health care provision. Our paper aims to review and assess the published financial and outcome based risk sharing methods. Introduction of outcome based risk-sharing schemes can be a major advancement in the drug reimbursement strategy of payers in middle income countries. These schemes can help to reduce the medical uncertainty in coverage

  18. Ex-vessel Fish Price Database: Disaggregating Prices for Low-Priced Species from Reduction Fisheries

    Directory of Open Access Journals (Sweden)

    Travis C. Tai

    2017-11-01

    Full Text Available Ex-vessel fish prices are essential for comprehensive fisheries management and socioeconomic analyses for fisheries science. In this paper, we reconstructed a global ex-vessel price database with the following areas of improvement: (1 compiling reported prices explicitly listed as “for reduction to fishmeal and fish oil” to estimate prices separately for catches destined for fishmeal and fish oil production, and other non-direct human consumption purposes; (2 including 95% confidence limit estimates for each price estimation; and (3 increasing the number of input data and the number of price estimates to match the reconstructed Sea Around Us catch database. Our primary focus was to address this first area of improvement as ex-vessel prices for catches destined for non-direct human consumption purposes were substantially overestimated, notably in countries with large reduction fisheries. For example in Peru, 2010 landed values were estimated as 3.8 billion real 2010 USD when using separate prices for reduction fisheries, compared with 5.8 billion using previous methods with only one price for all end-products. This update of the price database has significant global and country-specific impacts on fisheries price and landed value trends over time.

  19. Capacity pricing in a free market

    International Nuclear Information System (INIS)

    Wangensteen, Ivar; Wolfgang, Ove; Doorman, Gerard

    2005-01-01

    This report deals primarily with pricing of reserve capacity, partly on a theoretical basis and partly based on practical experience from the Norwegian market. In the theoretical part we describe a simple model for investigation of equilibrium prices on capacity reserves, spot power and regulating power. This model is based on strong simplifying assumptions. Next a computer model is introduced. That enables more complexity and makes it possible to analyse more realistic scenarios. Finally the report describes experiences from the Norwegian market. The Norwegian System Operator, Statnett, is responsible for the Balancing Market (BM) and Reserves Option Market (ROM), which was introduced a few years ago as a separate market for reserves. Experience with these market instruments are generally good and Statnett is preparing a new version for the winter 2004/2005. The report deals with generation as well as consumer side capacity reserves. One interesting observation is that in Norway the consumer side is providing more capacity reserves than the generators, but the consumers normally bid in a higher BM price than the generators. (author)

  20. If it ain't broke, don't price fix it: the OFT and the PPRS.

    Science.gov (United States)

    Towse, Adrian

    2007-07-01

    The Office of Fair Trading (OFT) Report on the UK Pharmaceutical Price Regulation Scheme (PPRS) recommends that when the current five-year PPRS expires in 2010 it be replaced with 'value-based pricing' which involves pre-launch centralised government price setting based on a cost-per-QALY threshold plus periodic ex post reviews. I examine the validity of the OFTs criticisms of the existing PPRS, review its proposals and propose an alternative way forward. I conclude that PPRS has performed well as a procurement bargain between industry and the UK government. It does not, however, incentivise efficient relative prices. That is not its job. I identify a number of problems with the OFT proposals. I recommend that key elements of a reformed UK pharmaceutical environment for 2010 should include an expanded role for HTA but with companies retaining freedom to set prices at launch; HTA use targeted via a contingent value of information approach; a retained backstop PPRS, perhaps moving to an RPI-X type control; the use of risk sharing and non-linear pricing arrangements; measures to ensure more effective therapeutic switching at local level; and measures to improve the take up of cost-effective treatments. Copyright (c) 2007 John Wiley & Sons, Ltd.

  1. Pricing Decisions of a Dual-Channel Supply Chain considering Supply Disruption Risk

    Directory of Open Access Journals (Sweden)

    Yancong Zhou

    2018-01-01

    Full Text Available Supply disruption may cause strong complaints of customers, which is a cost loss for the firms in the supply chain. Obviously, if realizing that there is the disruption risk, the members in a supply chain will adjust their decisions. For analyzing the influence, we consider a popular supply chain mode with dual channels, where one manufacturer has its direct sales channel and one traditional retailer channel. The manufacturer may suffer a supply disruption so that all ordered products by the retailer or the direct retail channel will be lost, and the members in supply chain will bear the corresponding disruption penalty from the customers. By considering four structures with different market power relations, the closed-form optimal price decisions of the four models are given. We found that the disruption factor improves the sales prices for any member structure as compared to the supply chain without the disruption. And the direct retail prices in the different modes are the same as each other, but the price of the traditional channel is influenced by the market share. And the sorts of the sales prices under different structures are given. We also conduct some extensive numerical analysis and compare the results under different structures. We observe that the expected optimal profits of considering the external penalty are smaller than those of no external penalty, and we give a sort of the optimal expected profits. And we also provide the effects of some parameters on the optimal decisions and the optimal expected profits.

  2. Farm Foundation Issue Report: What's Driving Food Prices?

    Energy Technology Data Exchange (ETDEWEB)

    none,

    2008-07-01

    This report provides an assessment of the major forces behind the dramatic increases in commodity prices. It is intended to provide objective information that will help all stakeholders meet the challenge to address one of the most critical public policy issues facing the world today.

  3. Market-price-based calculation and control of profit contributions in energy supply companies; Marktpreisbasierte Kalkulation und Steuerung von Ergebnisbeitraegen in Energieversorgungsunternehmen

    Energy Technology Data Exchange (ETDEWEB)

    Brehme, Annett

    2013-08-01

    As a result of the liberalisation of the electricity markets starting in the 1990s energy supply companies are confronted with the task of implementing some means of profit centre control along with a suitable risk management system for the business areas production, trade and marketing. Traditionally results accounting and profitability analysis are still done using the cost plus method. However this method does not do justice to the fact that power plant deployment and the marketing department's task of offer pricing have to be geared to wholesale prices. This has led the author to develop a market-price-based calculation and control concept for energy supply companies.

  4. Application of the Price-Volume Approach in Cases of Innovative Drugs Where Value-Based Pricing is Inadequate: Description of Real Experiences in Italy.

    Science.gov (United States)

    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.

  5. Report of the work-group on oil price volatility

    International Nuclear Information System (INIS)

    2010-01-01

    This report proposes a detailed analysis of the past and possible evolution of oil markets in terms of price volatility, financial strategies and pricing. It discusses current reflections and actions aiming at improving oil market operation: the Joint Oil Data Initiative or JODI for oil data transparency, the works of the International Energy Forum (IEF), and the conceivable reforms of the oil financial markets. Then, it proposes and discusses four main strategic orientations for a better knowledge of oil markets by France and the improvement of their operation and transparency: to support IEF initiatives, to apply to oil financial markets the global orientations defined by the G20, to set additional specific rules, and to propose a true oil strategy for the European Union. These orientations are then broken up in 22 propositions

  6. Reality check on Ontario electricity price procurement: a report from the trenches

    International Nuclear Information System (INIS)

    Rodger, J.M.; Wegiel, H.; Ferns, T.; Bystrin, A.

    2003-01-01

    The approaches taken to manage energy price risks from three different perspectives were presented. The first perspective presented was that of a law firm specializing in assisting a wide variety of clients constituting retailers and large industrial, institutional, and commercial users. The second perspective presented was that of Dofasco, the largest industrial electricity consumer in Ontario, followed by the perspective offered by Oakville Hydro, representing one of few municipally owned electricity retailers in Ontario. The first order of business, from the lawyer's viewpoint, is to identify relevant considerations for consumers and retailers, such as how do you intend to participate in the new market, what are the desired outcomes, the appetite for risk. The formulation of an approach should take the following into consideration: historical context versus new market reality, experience with electricity suppliers, and dilemma for consumers and retailers on how to level the playing field. The chosen approach was that of a request for proposals process for electricity price procurement. In the case of Dofasco, the introduction of the deregulated electricity market meant business risks, which it chose to address using an integrated risk management approach. Oakville Hydro explained its reasons for jumping into a trench: earn financial rewards and prevent brand equity erosion. Retail business must be kept simple through identifying, understanding and limiting the risks; and moving carefully but expeditiously. To mitigate the risks, it advocated getting the best legal and economics advice possible, looking for experienced partners, and not betting the shop.tabs., figs

  7. Mideast crisis and pricing in the oil futures market

    International Nuclear Information System (INIS)

    Hamed, A.H.

    1992-01-01

    Futures prices and the corresponding expected future cash price on crude oil markets differ. The difference is hypothesized to be due to a time varying risk premium where risk is due to either cash price volatility, oil output volatility, or unanticipated oil price movement. And this risk is measured by the conditional variance of the forementioned sources of risk. Using the ARCH (Autoregressive Conditional Heterosckdasticity) model and its extensions this study addresses the determination of the time varying risk premium. Political unrest in the Mideast oil exporting countries is hypothesized to be a determinant of the time varying risk premium in the oil futures market. The empirical tests allow informative inferences to be drawn on the role of political unrest in pricing oil

  8. Continuous-Time Portfolio Selection and Option Pricing under Risk-Minimization Criterion in an Incomplete Market

    Directory of Open Access Journals (Sweden)

    Xinfeng Ruan

    2013-01-01

    Full Text Available We study option pricing with risk-minimization criterion in an incomplete market where the dynamics of the risky underlying asset are governed by a jump diffusion equation. We obtain the Radon-Nikodym derivative in the minimal martingale measure and a partial integrodifferential equation (PIDE of European call option. In a special case, we get the exact solution for European call option by Fourier transformation methods. Finally, we employ the pricing kernel to calculate the optimal portfolio selection by martingale methods.

  9. Flow-based market coupling. Stepping stone towards nodal pricing?

    International Nuclear Information System (INIS)

    Van der Welle, A.J.

    2012-07-01

    For achieving one internal energy market for electricity by 2014, market coupling is deployed to integrate national markets into regional markets and ultimately one European electricity market. The extent to which markets can be coupled depends on the available transmission capacities between countries. Since interconnections are congested from time to time, congestion management methods are deployed to divide the scarce available transmission capacities over market participants. For further optimization of the use of available transmission capacities while maintaining current security of supply levels, flow-based market coupling (FBMC) will be implemented in the CWE region by 2013. Although this is an important step forward, important hurdles for efficient congestion management remain. Hence, flow based market coupling is compared to nodal pricing, which is often considered as the most optimal solution from theoretical perspective. In the context of decarbonised power systems it is concluded that advantages of nodal pricing are likely to exceed its disadvantages, warranting further development of FBMC in the direction of nodal pricing.

  10. Managing commodity risks in highway contracts : quantifying premiums, accounting for correlations among risk factors, and designing optimal price-adjustment contracts.

    Science.gov (United States)

    2011-09-01

    It is a well-known fact that macro-economic conditions, such as prices of commodities (e.g. oil, : cement and steel) affect the cost of construction projects. In a volatile market environment, highway : agencies often pass such risk to contractors us...

  11. 78 FR 10579 - TRICARE Revision to CHAMPUS DRG-Based Payment System, Pricing of Hospital Claims

    Science.gov (United States)

    2013-02-14

    ... 0720-AB58 TRICARE Revision to CHAMPUS DRG-Based Payment System, Pricing of Hospital Claims AGENCY... change TRICARE's current regulatory provision for hospital claims priced under the DRG-based payment... under the DRG- based payment system from the beneficiary's date of admission, to pricing such claims...

  12. Expected commodity returns and pricing models

    International Nuclear Information System (INIS)

    Cortazar, Gonzalo; Kovacevic, Ivo; Schwartz, Eduardo S.

    2015-01-01

    Stochastic models of commodity prices have evolved considerably in terms of their structure and the number and interpretation of the state variables that model the underlying risk. Using multiple factors, different specifications and modern estimation techniques, these models have gained wide acceptance because of their success in accurately fitting the observed commodity futures' term structures and their dynamics. It is not well emphasized however that these models, in addition to providing the risk neutral distribution of future spot prices, also provide their true distribution. While the parameters of the risk neutral distribution are estimated more precisely and are usually statistically significant, some of the parameters of the true distribution are typically measured with large errors and are statistically insignificant. In this paper we argue that to increase the reliability of commodity pricing models, and therefore their use by practitioners, some of their parameters — in particular the risk premium parameters — should be obtained from other sources and we show that this can be done without losing any precision in the pricing of futures contracts. We show how the risk premium parameters can be obtained from estimations of expected futures returns and provide alternative procedures for estimating these expected futures returns. - Highlights: • Simple methodology to improve the performance of commodity pricing models • New information about commodity futures expected return is added to the estimation. • No significant effect in pricing futures contracts is observed. • More reliable commodity pricing model's expected returns are obtained. • Methodology is open to any expected futures return model preferred by practitioner

  13. Does a property-specific environmental health risk create a “neighborhood” housing price stigma? Arsenic in private well water

    Science.gov (United States)

    Boyle, Kevin J.; Kuminoff, Nicolai V.; Zhang, Congwen; Devanney, Michael; Bell, Kathleen P.

    2010-03-01

    This paper examines the impact of arsenic contamination of groundwater on sale prices of residential properties and bare land transactions in two Maine towns, Buxton and Hollis, that rely on private wells to supply their drinking water. Prompted by tests of well water by the state of Maine, media attention focused on the communities in 1993 and 1994 when 14% of private wells were found to have arsenic concentrations exceeding the U.S. Environmental Protection Agency standard of 0.05 mg/L. Households could mitigate the serious health risks associated with arsenic ingestion by purchasing bottled water or by installing a reverse osmosis home treatment system. Our results indicate that the initial arsenic finding in 1993 led to significant, but temporary, 2 year decreases in property prices. This is a much shorter effect on prices than has been observed for Superfund sites, where prices can be depressed for a decade. These results suggest that a property-specific contamination incident that is treatable may not have a long-lasting effect on sale prices, but further research is needed to confirm if the dissipation of the price effect was actually due to the installation of in-home water treatment systems or due to the dissipation of perceived risk once the media coverage stopped.

  14. An Asset Pricing Approach to Testing General Term Structure Models including Heath-Jarrow-Morton Specifications and Affine Subclasses

    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...

  15. Option pricing: Stock price, stock velocity and the acceleration Lagrangian

    Science.gov (United States)

    Baaquie, Belal E.; Du, Xin; Bhanap, Jitendra

    2014-12-01

    The industry standard Black-Scholes option pricing formula is based on the current value of the underlying security and other fixed parameters of the model. The Black-Scholes formula, with a fixed volatility, cannot match the market's option price; instead, it has come to be used as a formula for generating the option price, once the so called implied volatility of the option is provided as additional input. The implied volatility not only is an entire surface, depending on the strike price and maturity of the option, but also depends on calendar time, changing from day to day. The point of view adopted in this paper is that the instantaneous rate of return of the security carries part of the information that is provided by implied volatility, and with a few (time-independent) parameters required for a complete pricing formula. An option pricing formula is developed that is based on knowing the value of both the current price and rate of return of the underlying security which in physics is called velocity. Using an acceleration Lagrangian model based on the formalism of quantum mathematics, we derive the pricing formula for European call options. The implied volatility of the market can be generated by our pricing formula. Our option price is applied to foreign exchange rates and equities and the accuracy is compared with Black-Scholes pricing formula and with the market price.

  16. Psychological Prices and Price Rigidity in Grocery Retailing: Analysis of German Scanner Data

    OpenAIRE

    Herrmann, Roland; Moeser, Anke

    2005-01-01

    A substantial degree of price rigidity has been reported for branded foods in various studies with scanner data. One possible explanation for price rigidity is the existence of psychological pricing points. We analyze to which extent psychological pricing plays a role in grocery retailing and whether it contributes to price rigidity of branded foods in Germany. Psychological pricing defined here as just-below-the-round-figure-pricing is empirically analyzed with scanner data of weekly prices ...

  17. 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.

  18. 73 Activity Based Costing and Product Pricing Decision: the Nigerian Case

    Directory of Open Access Journals (Sweden)

    Ebipanipre Gabriel Mieseigha

    2014-06-01

    Full Text Available This paper examined activity based costing and product pricing decisions in Nigeria so as to ascertain whether activity based costing have the ability to enhance profitability and control cost of manufacturing firms. Towards this end, a multiple correlation and regression estimation technique was used in analyzing the data obtained in the study. The study found that activity based costing affects product costing and pricing decision. In addition, the results showed that improved profitability and cost control can be achieved by implementing activity based costing approach by manufacturing firms. The implication is that traditional costing approach fails in many pricing situations by arbitrarily allocating indirect cost and activity based costing helps in allocating indirect cost accurately. Thus, it was recommended amongst others that activity based costing need to be practiced, maintained and implemented by manufacturing firms since it has a broad range of uses for a wide variety of company functions and operations in the area of process analysis, strategy support, time-based accounting, monitoring wastage, as well as quality and productivity management.

  19. Modelling the transition from cost-based to bid-based pricing in a deregulated electricity-market

    International Nuclear Information System (INIS)

    Druce, Donald J.

    2007-01-01

    Alberta is a province in western Canada with a deregulated electricity-market. Market clearing prices for most hours reflect the cost of either coal-fired or gas-fired thermal generation. Whenever there is a chronic shortage of generation or even a temporary one due to an outage, prices can be bid much higher than fuel costs would suggest. The province of British Columbia borders Alberta to the west and its electric utility, BC Hydro, has a history of trade with the utilities in Alberta. BC Hydro has predominantly hydroelectric resources and large storage reservoirs. Prior to Alberta's deregulation in 1996, BC Hydro was able to enter into mutually beneficial load-factoring contracts with the Alberta utilities. Now, as long as the transmission is available, BC Hydro can buy low priced off-peak coal-fired energy and sell into the high priced periods without having to share the benefits. BC Hydro uses a combination of econometric and Monte Carlo modelling to simulate hourly price-duration curves for Alberta that capture both cost-based and bid-based characteristics. This approach provides a good fit with the stochastic dynamic programming model that BC Hydro has developed for its mid-term hydro scheduling

  20. Modeling and forecasting electricity price jumps in the Nord Pool power market

    DEFF Research Database (Denmark)

    Knapik, Oskar

    extreme prices and forecasting of the price jumps is crucial for risk management and market design. In this paper, we consider the problem of the impact of fundamental price drivers on forecasting of price jumps in NordPool intraday market. We develop categorical time series models which take into account......For risk management traders in the electricity market are mainly interested in the risk of negative (drops) or of positive (spikes) price jumps, i.e. the sellers face the risk of negative price jumps while the buyers face the risk of positive price jumps. Understanding the mechanism that drive...

  1. Risk Neutral Option Pricing With Neither Dynamic Hedging nor Complete Markets

    OpenAIRE

    Nassim N. Taleb

    2014-01-01

    Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one, under any general probability distribution, bypassing the Black-Scholes-Merton dynamic hedging argument, and without the requirement of complete markets and other strong assumptions. We confirm that the heuristics used by traders for centuries are both mor...

  2. Estimating Drug Costs: How do Manufacturer Net Prices Compare with Other Common US Price References?

    Science.gov (United States)

    Mattingly, T Joseph; Levy, Joseph F; Slejko, Julia F; Onwudiwe, Nneka C; Perfetto, Eleanor M

    2018-05-12

    Drug costs are frequently estimated in economic analyses using wholesale acquisition cost (WAC), but what is the best approach to develop these estimates? Pharmaceutical manufacturers recently released transparency reports disclosing net price increases after accounting for rebates and other discounts. Our objective was to determine whether manufacturer net prices (MNPs) could approximate the discounted prices observed by the U.S. Department of Veterans Affairs (VA). We compared the annual, average price discounts voluntarily reported by three pharmaceutical manufacturers with the VA price for specific products from each company. The top 10 drugs by total sales reported from company tax filings for 2016 were included. The discount observed by the VA was determined from each drug's list price, reported as WAC, in 2016. Descriptive statistics were calculated for the VA discount observed and a weighted price index was calculated using the lowest price to the VA (Weighted VA Index), which was compared with the manufacturer index. The discounted price as a percentage of the WAC ranged from 9 to 74%. All three indexes estimated by the average discount to the VA were at or below the manufacturer indexes (42 vs. 50% for Eli Lilly, 56 vs. 65% for Johnson & Johnson, and 59 vs. 59% for Merck). Manufacturer-reported average net prices may provide a close approximation of the average discounted price granted to the VA, suggesting they may be a useful proxy for the true pharmacy benefits manager (PBM) or payer cost. However, individual discounts for products have wide variation, making a standard discount adjustment across multiple products less acceptable.

  3. Is a Price Increase Policy Enough for Adolescent Smokers?: Factors Affecting the Effectiveness of Increasing Cigarette Prices Among Korean Adolescent Smokers.

    Science.gov (United States)

    Lee, Yong Suk; Kim, Hong-Suk; Kim, Hyung-Do; Yoo, Ki-Bong; Jang, Sung-In; Park, Eun-Cheol

    2016-10-01

    Cigarette pricing policy is one tool for controlling smoking behavior on a national scale. It is unclear, however, what effects such policy has on adolescents and which characteristic subgroups of adolescents are more or less sensitive to cigarette pricing policy. Our data came from the 2013 Korea Youth Risk Behavior Web-based Survey. The dependent variable was whether or not a participant was classified as a "persistent smokers," defined as a smoker who would continue smoking despite any price increase. Other variables of interest were smoking days (quantity), previous attempts to stop smoking, and previous education on smoking cessation. The statistical analysis was performed using weighted data and the SURVEYFREQ and SURVEYLOGISTIC procedures in SAS 9.3. Among 7094 adolescent smokers (5349 males and 1745 females), 19.9% of males and 25.1% of females reported as persistent smokers. Compared with light smokers, heavy smokers are more likely to be persistent smokers (male: odds ratio [OR] = 2.45, 95% confidence interval [CI] = 2.04-2.95, P value policy than mild smokers, pricing policy alone is not enough to reduce the societal burden caused by smoking. We suggest that additional cessation policy is needed along with pricing policy for adolescents with heavier smoking behavior in Korea. This study shows that heavy smokers are more likely to be persistent smokers despite the cigarette price increase policy, compared with light smokers in Korean adolescents. Because heavier smokers were less sensitive to pricing policy than mild smokers, pricing policy alone is not enough to reduce the societal burden caused by smoking. We suggest that additional tobacco control policies should be evaluated and effective ones implemented in addition to cigarette prices to reduce smoking among regular adolescent smokers. © The Author 2016. Published by Oxford University Press on behalf of the Society for Research on Nicotine and Tobacco. All rights reserved. For permissions, please e

  4. An electricity price model with consideration to load and gas price effects.

    Science.gov (United States)

    Huang, Min-xiang; Tao, Xiao-hu; Han, Zhen-xiang

    2003-01-01

    Some characteristics of the electricity load and prices are studied, and the relationship between electricity prices and gas (fuel) prices is analyzed in this paper. Because electricity prices are strongly dependent on load and gas prices, the authors constructed a model for electricity prices based on the effects of these two factors; and used the Geometric Mean Reversion Brownian Motion (GMRBM) model to describe the electricity load process, and a Geometric Brownian Motion(GBM) model to describe the gas prices; deduced the price stochastic process model based on the above load model and gas price model. This paper also presents methods for parameters estimation, and proposes some methods to solve the model.

  5. Drug Pricing Reforms

    DEFF Research Database (Denmark)

    Kaiser, Ulrich; Mendez, Susan J.; Rønde, Thomas

    2015-01-01

    Reference price systems for prescription drugs have found widespread use as cost containment tools. Under such regulatory regimes, patients co-pay a fraction of the difference between pharmacy retail price of the drug and a reference price. Reference prices are either externally (based on drug...... prices in other countries) or internally (based on domestic drug prices) determined. In a recent study, we analysed the effects of a change from external to internal reference pricing in Denmark in 2005, finding that the reform led to substantial reductions in prices, producer revenues, and expenditures...... for patients and the health insurance system. We also estimated an increase in consumer welfare but the size effect depends on whether or not perceived quality differences between branded and other drugs are taken into account....

  6. The pricing of bank debt guarantees

    NARCIS (Netherlands)

    Arping, S.

    2010-01-01

    We analyze the desirability of fair pricing of government guarantees for bank liabilities. Fair pricing is desirable only if the banking sector is sufficiently transparent. In opaque banking systems, fair pricing may exacerbate banks' incentive to take excessive risks.

  7. Computational methods in the pricing and risk management of modern financial derivatives

    Science.gov (United States)

    Deutsch, Hans-Peter

    1999-09-01

    In the last 20 years modern finance has developed into a complex mathematically challenging field. Very complicated risks exist in financial markets which need very advanced methods to measure and/or model them. The financial instruments invented by the market participants to trade these risk, the so called derivatives are usually even more complicated than the risks themselves and also sometimes generate new riks. Topics like random walks, stochastic differential equations, martingale measures, time series analysis, implied correlations, etc. are of common use in the field. This is why more and more people with a science background, such as physicists, mathematicians, or computer scientists, are entering the field of finance. The measurement and management of all theses risks is the key to the continuing success of banks. This talk gives insight into today's common methods of modern market risk management such as variance-covariance, historical simulation, Monte Carlo, “Greek” ratios, etc., including the statistical concepts on which they are based. Derivatives are at the same time the main reason for and the most effective means of conducting risk management. As such, they stand at the beginning and end of risk management. The valuation of derivatives and structured financial instruments is therefore the prerequisite, the condition sine qua non, for all risk management. This talk introduces some of the important valuation methods used in modern derivatives pricing such as present value, Black-Scholes, binomial trees, Monte Carlo, etc. In summary this talk highlights an area outside physics where there is a lot of interesting work to do, especially for physicists. Or as one of our consultants said: The fascinating thing about this job is that Arthur Andersen hired me not ALTHOUGH I am a physicist but BECAUSE I am a physicist.

  8. Derivative pricing with liquidity risk: Theory and evidence from the credit default swap market

    NARCIS (Netherlands)

    Bongaerts, D.; de Jong, F.; Driessen, J.

    2008-01-01

    We derive a theoretical asset-pricing model for derivative contracts that allows for expected liquidity and liquidity risk, and estimate this model for the market of credit default swaps (CDS). Our model extends the LCAPM of Acharya and Pedersen (2005) to a setting with derivative instruments and

  9. 76 FR 72986 - Options Price Reporting Authority; Notice of Filing and Immediate Effectiveness of Proposed...

    Science.gov (United States)

    2011-11-28

    ... SECURITIES AND EXCHANGE COMMISSION [Release No. 34-65795; File No. SR-OPRA-2011-04] Options Price... Implement the Datafeed Policy November 21, 2011. Pursuant to Section 11A of the Securities Exchange Act of... Options Price Reporting Authority (``OPRA'') submitted to the Securities and Exchange Commission...

  10. Oil Prices, Credit Risks in Banking Systems, and Macro-Financial Linkages across GCC Oil Exporters

    Directory of Open Access Journals (Sweden)

    Saleh Alodayni

    2016-11-01

    Full Text Available This paper assesses the effect of the recent 2014–2015 oil price slump on the financial stability in the Gulf Cooperation Council (GCC region. The first objective of this paper is to assess how oil price shock propagates within the macroeconomy and how the macro shocks transmit to GCC banks’ balance sheets. This part of the paper implements a System Generalized Method of Moments (GMM and a Panel Fixed Effect Model to estimate the response of nonperforming loans (NPLs to its macroeconomic determinants. The second objective of this paper is to assess any negative feedback effects between the GCC banking systems and the economy. The paper, therefore, implements a Panel VAR model to explore the macro-financial linkages between GCC banking systems and the real economy. The results indicate that oil price, non-oil GDP, interest rate, stock prices, and housing prices are major determinants of NPLs across GCC banks and the overall financial stability in the region. Credit risk shock tends to propagate disturbances to non-oil GDP, credit growth, and stock prices across GCC economies. A higher level of NPLs restricts banks’ credit growth and can dampen economic growth in these economies. The results support the notion that disturbances in banking systems lead to unwanted economic consequences for the real sector.

  11. [Toward a conditional price for medicine?].

    Science.gov (United States)

    Baseilhac, E

    2013-09-01

    For the first time, and as an exceptional option, the 2012 LEEM-CEPS framework agreement introduces the notion of conditional prices in conventional practice. The contractualization of drug price according to changes in its value that could occur in "real world" enables the Payer and the Company to settle, in a predictable manner, the "bet" represented by first registration price setting. Its systematization is based on the ability to standardize the implementation and assessment of observational studies, whereas the analysis and sharing of the risk of value changes (depreciation, appreciation) are structuring elements of the contractualization. Ethical from both the payer's and patient's point of view, drug price conditionality on its value is impeded by compliance with legal and economic constraints for the company, that should be taken into account by legalising this latter's ability to influence it through observance or therapeutic education and by guaranteeing a sufficiently long period of revenues for the company. Copyright © 2013 Elsevier Masson SAS. All rights reserved.

  12. 7 CFR 1170.8 - Price reporting specifications.

    Science.gov (United States)

    2010-01-01

    ...: Intra-company sales, resales of purchased cheese, forward pricing sales (sales in which the selling... or other premium-assisted sales (for example, export assistance sales through the Cooperatives... and Grade A butter, intra-company sales, resales of purchased butter, forward pricing sales (sales in...

  13. Finding the multipath propagation of multivariable crude oil prices using a wavelet-based network approach

    Science.gov (United States)

    Jia, Xiaoliang; An, Haizhong; Sun, Xiaoqi; Huang, Xuan; Gao, Xiangyun

    2016-04-01

    The globalization and regionalization of crude oil trade inevitably give rise to the difference of crude oil prices. The understanding of the pattern of the crude oil prices' mutual propagation is essential for analyzing the development of global oil trade. Previous research has focused mainly on the fuzzy long- or short-term one-to-one propagation of bivariate oil prices, generally ignoring various patterns of periodical multivariate propagation. This study presents a wavelet-based network approach to help uncover the multipath propagation of multivariable crude oil prices in a joint time-frequency period. The weekly oil spot prices of the OPEC member states from June 1999 to March 2011 are adopted as the sample data. First, we used wavelet analysis to find different subseries based on an optimal decomposing scale to describe the periodical feature of the original oil price time series. Second, a complex network model was constructed based on an optimal threshold selection to describe the structural feature of multivariable oil prices. Third, Bayesian network analysis (BNA) was conducted to find the probability causal relationship based on periodical structural features to describe the various patterns of periodical multivariable propagation. Finally, the significance of the leading and intermediary oil prices is discussed. These findings are beneficial for the implementation of periodical target-oriented pricing policies and investment strategies.

  14. Risk premia in energy markets

    DEFF Research Database (Denmark)

    Veraart, Almut E.D.; Veraart, Luitgard A.M.

    Risk premia between spot and forward prices play a key role in energy markets. This paper derives analytic expressions for such risk premia when spot prices are modelled by Lévy semistationary processes. While the relation between spot and forward prices can be derived using classical no......-arbitrage arguments as long as the underlying commodities are storable, the situation changes in the case of electricity. Hence, in an empirical study based on electricity spot prices and futures from the European Energy Exchange market, we investigate the empirical behaviour of electricity risk premia from...

  15. Incorporating reliability evaluation into the uncertainty analysis of electricity market price

    International Nuclear Information System (INIS)

    Kang, Chongqing; Bai, Lichao; Xia, Qing; Jiang, Jianjian; Zhao, Jing

    2005-01-01

    A novel model and algorithm for analyzing the uncertainties in electricity market is proposed in this paper. In this model, bidding decision is formulated as a probabilistic model that takes into account the decision-maker's willingness to bid, risk preferences, the fluctuation of fuel-price, etc. At the same time, generating unit's uncertain output model is considered by its forced outage rate (FOR). Based on the model, the uncertainty of market price is then analyzed. Taking the analytical results into consideration, not only the reliability of the power system can be conventionally analyzed, but also the possible distribution of market prices can be easily obtained. The probability distribution of market prices can be further used to calculate the expected output and the sales income of generating unit in the market. Based on these results, it is also possible to evaluate the risk involved by generating units. A simple system with four generating units is used to illustrate the proposed algorithm. The proposed algorithm and the modeling technique are expected to helpful to the market participants in making their economic decisions

  16. Information pricing based on trusted system

    Science.gov (United States)

    Liu, Zehua; Zhang, Nan; Han, Hongfeng

    2018-05-01

    Personal information has become a valuable commodity in today's society. So our goal aims to develop a price point and a pricing system to be realistic. First of all, we improve the existing BLP system to prevent cascading incidents, design a 7-layer model. Through the cost of encryption in each layer, we develop PI price points. Besides, we use association rules mining algorithms in data mining algorithms to calculate the importance of information in order to optimize informational hierarchies of different attribute types when located within a multi-level trusted system. Finally, we use normal distribution model to predict encryption level distribution for users in different classes and then calculate information prices through a linear programming model with the help of encryption level distribution above.

  17. 77 FR 56243 - Options Price Reporting Authority; Notice of Filing and Immediate Effectiveness of Proposed...

    Science.gov (United States)

    2012-09-12

    ... SECURITIES AND EXCHANGE COMMISSION [Release No. 34-67791; File No. SR-OPRA-2012-05] Options Price Reporting Authority; Notice of Filing and Immediate Effectiveness of Proposed Amendment to the Plan for...'') \\1\\ and Rule 608 thereunder,\\2\\ notice is hereby given that on August 27, 2012, the Options Price...

  18. The effects of residential real-time pricing contracts on transco loads, pricing, and profitability: Simulations using the N-ABLE trademark agent-based model

    International Nuclear Information System (INIS)

    Ehlen, Mark A.; Scholand, Andrew J.; Stamber, Kevin L.

    2007-01-01

    An agent-based model is constructed in which a demand aggregator sells both uniform-price and real-time price (RTP) contracts to households as means for adding price elasticity in residential power use sectors, particularly during peak-price hours of the day. Simulations suggest that RTP contracts help a demand aggregator (1) shift its long-term contracts toward off-peak hours, thereby reducing its cost of power and (2) increase its short-run profits if it is one of the first aggregators to have large numbers of RTP contracts; but (3) create susceptibilities to short-term market demand and price volatilities. (author)

  19. Report of the Select Committee on Petroleum Product Pricing

    International Nuclear Information System (INIS)

    Dooks, B.

    2004-01-01

    An all-party Committee of the House of Legislative Assembly of Nova Scotia was established to investigate the pricing of petroleum products such as gasoline and home heating fuel. The Committee conducted public hearings in Halifax, Yarmouth, Bridgewater, Sydney, and Truro, in order to seek input from consumers, producers, suppliers and operators. The mandate of the Select Committee on Petroleum Product Pricing was to investigate the supply and pricing of fuels, including gasoline and home heating oil and to determine whether current prices are justified and fair. This investigation included an examination of the reasons for the current level of product prices; product supply; reasons for volatility in product prices; the rationale for differences in prices across different regions of the province; factors that affect the viability of low volume outlets in the rural and urban marketplace; factors that affect the viability of independent retail operators in the province; and, any evidence of predatory pricing practices at the wholesale and retail levels of the market. The Select Committee also made recommendations related to fair and reasonable product prices at the consumer level, retail and wholesale margins, as well as other actions that may be required to correct imbalances in the distribution and sales of these products to consumers in the province. 8 appendices

  20. Are high oil prices a threat for the price stability?

    International Nuclear Information System (INIS)

    Mollerus, A.

    2000-01-01

    The high price for oil and the decreased value of the Euro increase the risks for the stability of prices. Still, the prospects for inflation are favorable for the Euro zone. Less favorable are the consequences for the Netherlands, while the inflation difference with the Euro zone appears to become bigger, in particular as a result of the new Tax regulations in the Netherlands

  1. Price-Anderson Nuclear Safety Enforcement Program. 1996 Annual report

    International Nuclear Information System (INIS)

    1996-01-01

    This first annual report on DOE's Price Anderson Amendments Act enforcement program covers the activities, accomplishments, and planning for calendar year 1996. It also includes the infrastructure development activities of 1995. It encompasses the activities of the headquarters' Office of Enforcement in the Office of Environment, Safety and Health (EH) and Investigation and the coordinators and technical advisors in DOE's Field and Program Offices and other EH Offices. This report includes an overview of the enforcement program; noncompliances, investigations, and enforcement actions; summary of significant enforcement actions; examples where enforcement action was deferred; and changes and improvements to the program

  2. International hedging under concurrent risks of input/output prices and exchange rate : The case of Korean oil refinery

    Energy Technology Data Exchange (ETDEWEB)

    Yun, W C; Kim, S D [Korea Energy Economics Institute, Euiwang (Korea, Republic of)

    1997-11-01

    This study develops an international hedging model which accounts for the multiple risks of input and output prices and exchange rates. Considering a fixed production technology, we formulize simultaneous minimum variance hedge ratios, which reflects inter correlations among prices. To utilize the dynamic nature of prices, time-varying conditional procedures are specified to estimate the relevant variance and covariance matrix. The time-varying representations of the variance and covariance matrix are statistically appropriate, in general. The separate hedge ratios are similar to the simultaneous hedge ratios for alternative procedures. The ex post hedging effectiveness indicate that there are substantial reduction in the variance of returns for all the procedures. The contribution of foreign currency futures is minimal due to the low correlation between commodities and exchange rates. Based on the traditional definition of hedging effectiveness, the time-varying conditional procedure provide little gain to the hedgers over a constant procedure in terms of the mean and the variance reduction. However, the performance of conditional procedures could be improved by accounting for the potential problems: mis specification problem, inappropriate definition of hedging effectiveness, and conflicts between theoretical derivation and estimation of hedge ratios. (author). 39 refs., 6 tabs.

  3. Modelling the transition from cost-based to bid-based pricing in a deregulated electricity-market

    Energy Technology Data Exchange (ETDEWEB)

    Druce, Donald J. [BC Hydro, 6911 Southpoint Drive, Burnaby, British Columbia (Canada)

    2007-12-15

    Alberta is a province in western Canada with a deregulated electricity-market. Market clearing prices for most hours reflect the cost of either coal-fired or gas-fired thermal generation. Whenever there is a chronic shortage of generation or even a temporary one due to an outage, prices can be bid much higher than fuel costs would suggest. The province of British Columbia borders Alberta to the west and its electric utility, BC Hydro, has a history of trade with the utilities in Alberta. BC Hydro has predominantly hydroelectric resources and large storage reservoirs. Prior to Alberta's deregulation in 1996, BC Hydro was able to enter into mutually beneficial load-factoring contracts with the Alberta utilities. Now, as long as the transmission is available, BC Hydro can buy low priced off-peak coal-fired energy and sell into the high priced periods without having to share the benefits. BC Hydro uses a combination of econometric and Monte Carlo modelling to simulate hourly price-duration curves for Alberta that capture both cost-based and bid-based characteristics. This approach provides a good fit with the stochastic dynamic programming model that BC Hydro has developed for its mid-term hydro scheduling. (author)

  4. 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.

  5. Technology Timing and Pricing In the Presence of an Installed Base

    OpenAIRE

    Qiu_Hong Wang; Kai-Lung Hui

    2005-01-01

    This paper studies a vendor.s timing and pricing strategies to tackle its own installed base when selling a newly improved product. We characterize the market with either a partly- or fully- covered installed base, consumers. relative willingness to pay for the newly improved version of the product, and their relative payoffs from delayed purchase. Instead of using the conventional assumption of constant consumer reservation price, we propose that if consumers already own an existing (old) ve...

  6. Optimal Electricity Charge Strategy Based on Price Elasticity of Demand for Users

    Science.gov (United States)

    Li, Xin; Xu, Daidai; Zang, Chuanzhi

    The price elasticity is very important for the prediction of electricity demand. This paper mainly establishes the price elasticity coefficient for electricity in single period and inter-temporal. Then, a charging strategy is established based on these coefficients. To evaluate the strategy proposed, simulations of the two elastic coefficients are carried out based on the history data of a certain region.

  7. Portability, Salary and Asset Price Risk: A Continuous-Time Expected Utility Comparison of DB and DC Pension Plans

    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.

  8. Scientific reporting is suboptimal for aspects that characterize genetic risk prediction studies: a review of published articles based on the Genetic RIsk Prediction Studies statement.

    Science.gov (United States)

    Iglesias, Adriana I; Mihaescu, Raluca; Ioannidis, John P A; Khoury, Muin J; Little, Julian; van Duijn, Cornelia M; Janssens, A Cecile J W

    2014-05-01

    Our main objective was to raise awareness of the areas that need improvements in the reporting of genetic risk prediction articles for future publications, based on the Genetic RIsk Prediction Studies (GRIPS) statement. We evaluated studies that developed or validated a prediction model based on multiple DNA variants, using empirical data, and were published in 2010. A data extraction form based on the 25 items of the GRIPS statement was created and piloted. Forty-two studies met our inclusion criteria. Overall, more than half of the evaluated items (34 of 62) were reported in at least 85% of included articles. Seventy-seven percentage of the articles were identified as genetic risk prediction studies through title assessment, but only 31% used the keywords recommended by GRIPS in the title or abstract. Seventy-four percentage mentioned which allele was the risk variant. Overall, only 10% of the articles reported all essential items needed to perform external validation of the risk model. Completeness of reporting in genetic risk prediction studies is adequate for general elements of study design but is suboptimal for several aspects that characterize genetic risk prediction studies such as description of the model construction. Improvements in the transparency of reporting of these aspects would facilitate the identification, replication, and application of genetic risk prediction models. Copyright © 2014 Elsevier Inc. All rights reserved.

  9. Wavelet-based prediction of oil prices

    International Nuclear Information System (INIS)

    Yousefi, Shahriar; Weinreich, Ilona; Reinarz, Dominik

    2005-01-01

    This paper illustrates an application of wavelets as a possible vehicle for investigating the issue of market efficiency in futures markets for oil. The paper provides a short introduction to the wavelets and a few interesting wavelet-based contributions in economics and finance are briefly reviewed. A wavelet-based prediction procedure is introduced and market data on crude oil is used to provide forecasts over different forecasting horizons. The results are compared with data from futures markets for oil and the relative performance of this procedure is used to investigate whether futures markets are efficiently priced

  10. The impact of wind generation on the electricity spot-market price level and variance: The Texas experience

    International Nuclear Information System (INIS)

    Woo, C.K.; Horowitz, I.; Moore, J.; Pacheco, A.

    2011-01-01

    The literature on renewable energy suggests that an increase in intermittent wind generation would reduce the spot electricity market price by displacing high fuel-cost marginal generation. Taking advantage of a large file of Texas-based 15-min data, we show that while rising wind generation does indeed tend to reduce the level of spot prices, it is also likely to enlarge the spot-price variance. The key policy implication is that increasing use of price risk management should accompany expanded deployment of wind generation. - Highlights: → Rising wind generation in ERCOT tends to reduce electricity spot prices. → Rising wind generation in ERCOT is also likely to enlarge the spot-price variance. → Increased price risk management should accompany expanded wind power deployment.

  11. Applying Activity Based Costing (ABC) Method to Calculate Cost Price in Hospital and Remedy Services.

    Science.gov (United States)

    Rajabi, A; Dabiri, A

    2012-01-01

    Activity Based Costing (ABC) is one of the new methods began appearing as a costing methodology in the 1990's. It calculates cost price by determining the usage of resources. In this study, ABC method was used for calculating cost price of remedial services in hospitals. To apply ABC method, Shahid Faghihi Hospital was selected. First, hospital units were divided into three main departments: administrative, diagnostic, and hospitalized. Second, activity centers were defined by the activity analysis method. Third, costs of administrative activity centers were allocated into diagnostic and operational departments based on the cost driver. Finally, with regard to the usage of cost objectives from services of activity centers, the cost price of medical services was calculated. The cost price from ABC method significantly differs from tariff method. In addition, high amount of indirect costs in the hospital indicates that capacities of resources are not used properly. Cost price of remedial services with tariff method is not properly calculated when compared with ABC method. ABC calculates cost price by applying suitable mechanisms but tariff method is based on the fixed price. In addition, ABC represents useful information about the amount and combination of cost price services.

  12. Thinking by analogy, systematic risk, and option prices

    OpenAIRE

    Siddiqi, Hammad

    2011-01-01

    People tend to think by analogies and comparisons. Such way of thinking, termed coarse thinking by Mullainathan et al [Quarterly Journal of Economics, May 2008] is intuitively very appealing. We develop a new option pricing model based on the idea that the market consists of coarse thinkers as well as rational investors when limits to arbitrage (transaction costs) prevent rational investors from profiting at the expense of coarse thinkers. The new formula, which is a closed form solution to t...

  13. Patients' views on price shopping and price transparency.

    Science.gov (United States)

    Semigran, Hannah L; Gourevitch, Rebecca; Sinaiko, Anna D; Cowling, David; Mehrotra, Ateev

    2017-06-01

    Driven by the growth of high deductibles and price transparency initiatives, patients are being encouraged to search for prices before seeking care, yet few do so. To understand why this is the case, we interviewed individuals who were offered access to a widely used price transparency website through their employer. Qualitative interviews. We interviewed individuals enrolled in a preferred provider organization product through their health plan about their experience using the price transparency tool (if they had done so), their past medical experiences, and their opinions on shopping for care. All interviews were transcribed and manually coded using a thematic coding guide. In general, respondents expressed frustration with healthcare costs and had a positive opinion of the idea of price shopping in theory, but 2 sets of barriers limited their ability to do so in reality. The first was the salience of searching for price information. For example, respondents recognized that due to their health plan benefits design, they would not save money by switching to a lower-cost provider. Second, other factors were more important than price for respondents when choosing a provider, including quality and loyalty to current providers. We found a disconnect between respondents' enthusiasm for price shopping and their reported use of a price transparency tool to shop for care. However, many did find the tool useful for other purposes, including checking their claims history. Addressing the barriers to price shopping identified by respondents can help inform ongoing and future price transparency initiatives.

  14. Quantifying the risk of an increase in the prices of non-energy products by combining the portfolio and input-output approaches

    International Nuclear Information System (INIS)

    Suzuki, Kengo; Uchiyama, Yohji

    2010-01-01

    An increase in the price of imported fossil fuels indirectly increases the producer price in non-energy sectors; however, this indirect influence cannot be taken into account by the traditional portfolio approach. This study proposes an analytical framework combining the input-output (I-O) model and the portfolio approach that can take the indirect influence into account. A risk of an increase in the producer price in Japanese non-energy sectors during the period 1970-2000 is estimated, and the causes of a decrease in the risk through the analysis period are clarified by decomposing an index of the risk. The result indicates that almost all non-energy sectors have decreased this risk during the analysis period. The degree and cause of the decrease depends on a sector's location in the hierarchical structure of Japanese industries. For example, assembly sectors have decreased their risk mainly as the result of improvement in energy usage by upstream sectors, such as material sectors, rather than their own improvements. Proper policies considering such a structure are required to decrease the risk further because the effort taken to do so is seldom motivated by economic profit.

  15. Quantitative Model of Price Diffusion and Market Friction Based on Trading as a Mechanistic Random Process

    Science.gov (United States)

    Daniels, Marcus G.; Farmer, J. Doyne; Gillemot, László; Iori, Giulia; Smith, Eric

    2003-03-01

    We model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties of markets, such as the diffusion rate of prices (which is the standard measure of financial risk) and the spread and price impact functions (which are the main determinants of transaction cost). Guided by dimensional analysis, simulation, and mean-field theory, we find scaling relations in terms of order flow rates. We show that even under completely random order flow the need to store supply and demand to facilitate trading induces anomalous diffusion and temporal structure in prices.

  16. Dynamics of oil price, precious metal prices, and exchange rate

    International Nuclear Information System (INIS)

    Sari, Ramazan; Soytas, Ugur; Hammoudeh, Shawkat

    2010-01-01

    This study examines the co-movements and information transmission among the spot prices of four precious metals (gold, silver, platinum, and palladium), oil price, and the US dollar/euro exchange rate. We find evidence of a weak long-run equilibrium relationship but strong feedbacks in the short run. The spot precious metal markets respond significantly (but temporarily) to a shock in any of the prices of the other metal prices and the exchange rate. Furthermore, we discover some evidence of market overreactions in the palladium and platinum cases as well as in the exchange rate market. In conclusion, whether there are overreactions and re-adjustments or not, investors may diversify at least a portion of the risk away by investing in precious metals, oil, and the euro. Policy implications are provided. (author)

  17. Price volatility, hedging and variable risk premium in the crude oil market

    International Nuclear Information System (INIS)

    Ahmad Jalali-Naini; Maryam Kazemi Manesh

    2006-01-01

    The crude oil price exhibits a high degree of volatility which varies significantly over time. Such characteristics imply that the oil market is a promising area for testing volatility models. Testing and predicting volatility using ARCH and GARCH models have grown in the literature. A useful application of the volatility models is in the formulation of hedging strategies. In this paper we compare the optimal hedge ratio for the crude oil using the classical minimum risk approach and use ARCH to incorporate the effect of heteroskedasticity in the residuals on the hedge ratio. In addition, we test for the existence of a variable risk premium in the crude oil market. We find that, assuming rational expectations, there is a non-zero risk premium. We test for the variability of the risk premia and find evidence in its support when we employed a multivariate GARCH model. (author)

  18. NordREG report on the price peaks in the Nordic wholesale market during winter 2009-2010. Final report

    Energy Technology Data Exchange (ETDEWEB)

    2011-01-15

    improvements is transparency. Based on the consultancy study and the feedback from some stakeholders, NordREG finds that it should be assessed whether the area bidding curves at Nord Pool Spot could be publicized to enhance the transparency of the market and to enable all the market participants to have access to the trading data. Transparency in the Nord Pool Spot bid data would enhance confidence in market developments. NordREG also proposes that the trading mechanisms at the Nord Pool Spot should be assessed. This assessment should especially focus on how to increase flexibility into the market, how to improve pricing and offering of peak load reserves to the Nord Pool Spot and how to improve possibilities to hedge area price risks. NordREG emphasizes that the development of the Nord Pool Spot trading mechanism and its transparency should be prepared together with the Nord Pool Spot. Finally, one of the key issues for ensuring a well-functioning electricity wholesale market is the optimal and sufficient transmission network with its cross-border interconnectors that support the wholesale electricity market. Traditionally the Nordic TSOs used to cooperate in the area of grid planning and produced Nordic Grid Master Plans. The Nordic Council of Energy Ministers has underlined the importance of continued Nordic grid planning. The 3rd Legislative Package raised the cooperation of TSOs on grid planning to the European level and as a task for the European TSO organisation ENTSO-E, which has organised regional groupings of TSOs to work on grid planning. ENTSO-E published the pilot Ten Year Network Development Plan in June 2010 and the process for preparing the next one is already underway. This planning work and the results of it that will materialise themselves through transmission network investments will have a significant impact on the functioning of the Nordic, Northern and the whole European electricity wholesale market and its integration. This work needs to be analyzed and

  19. Short-term electricity price forecast based on the improved hybrid model

    International Nuclear Information System (INIS)

    Dong Yao; Wang Jianzhou; Jiang He; Wu Jie

    2011-01-01

    Highlights: → The proposed models can detach high volatility and daily seasonality of electricity price. → The improved hybrid forecast models can make full use of the advantages of individual models. → The proposed models create commendable improvements that are relatively satisfactorily for current research. → The proposed models do not require making complicated decisions about the explicit form. - Abstract: Half-hourly electricity price in power system are volatile, electricity price forecast is significant information which can help market managers and participants involved in electricity market to prepare their corresponding bidding strategies to maximize their benefits and utilities. However, the fluctuation of electricity price depends on the common effect of many factors and there is a very complicated random in its evolution process. Therefore, it is difficult to forecast half-hourly prices with traditional only one model for different behaviors of half-hourly prices. This paper proposes the improved forecasting model that detaches high volatility and daily seasonality for electricity price of New South Wales in Australia based on Empirical Mode Decomposition, Seasonal Adjustment and Autoregressive Integrated Moving Average. The prediction errors are analyzed and compared with the ones obtained from the traditional Seasonal Autoregressive Integrated Moving Average model. The comparisons demonstrate that the proposed model can improve the prediction accuracy noticeably.

  20. Short-term electricity price forecast based on the improved hybrid model

    Energy Technology Data Exchange (ETDEWEB)

    Dong Yao, E-mail: dongyao20051987@yahoo.cn [School of Mathematics and Statistics, Lanzhou University, Lanzhou 730000 (China); Wang Jianzhou, E-mail: wjz@lzu.edu.cn [School of Mathematics and Statistics, Lanzhou University, Lanzhou 730000 (China); Jiang He; Wu Jie [School of Mathematics and Statistics, Lanzhou University, Lanzhou 730000 (China)

    2011-08-15

    Highlights: {yields} The proposed models can detach high volatility and daily seasonality of electricity price. {yields} The improved hybrid forecast models can make full use of the advantages of individual models. {yields} The proposed models create commendable improvements that are relatively satisfactorily for current research. {yields} The proposed models do not require making complicated decisions about the explicit form. - Abstract: Half-hourly electricity price in power system are volatile, electricity price forecast is significant information which can help market managers and participants involved in electricity market to prepare their corresponding bidding strategies to maximize their benefits and utilities. However, the fluctuation of electricity price depends on the common effect of many factors and there is a very complicated random in its evolution process. Therefore, it is difficult to forecast half-hourly prices with traditional only one model for different behaviors of half-hourly prices. This paper proposes the improved forecasting model that detaches high volatility and daily seasonality for electricity price of New South Wales in Australia based on Empirical Mode Decomposition, Seasonal Adjustment and Autoregressive Integrated Moving Average. The prediction errors are analyzed and compared with the ones obtained from the traditional Seasonal Autoregressive Integrated Moving Average model. The comparisons demonstrate that the proposed model can improve the prediction accuracy noticeably.

  1. Multi-factor energy price models and exotic derivatives pricing

    Science.gov (United States)

    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.

  2. Nonlinear Pricing of Information Goods

    OpenAIRE

    Arun Sundararajan

    2003-01-01

    This paper analyzes optimal pricing for information goods under incomplete information, when both unlimited-usage (fixed-fee) pricing and usage-based pricing are feasible, and administering usage-based pricing may involve transaction costs. It is shown that offering fixed- fee pricing in addition to a non-linear usage-based pricing scheme is always profit-improving in the presence of any non-zero transaction costs, and there may be markets in which a pure fixed-fee is optimal. This implies th...

  3. Pricing of contract options for electric power; Precificacao de contrato de opcoes de energia eletrica

    Energy Technology Data Exchange (ETDEWEB)

    Takahashi, Leticia; Gunn, Laura Keiko; Correia, Paulo B. [Universidade Estadual de Campinas (FEM/UNICAMP), SP (Brazil). Fac. de Engenharia Mecanica. Dept. de Energia

    2008-07-01

    The reorganization of the electric sector has improved the opportunity of energy trade through contracts, which have to be considered on the risk evaluation for generating companies. Different types of contracts have been used in electric energy commercialization. This work develops a model for option contract pricing. The classic model of options pricing used in the financial market is based in Black- Scholes. Due to the inherent feature of the Brazilian electrical system, with a strong predominance of hydroelectricity, the seasonal swing of the electricity price is the main source of contractual risk. So, the Black-Scholes model very is not adjusted. To deal with the uncertainties, this work uses an approach based on analysis of scenarios and binomial trees. Case studies are analyzed with binomial tree to calculate the price of the option contract. (author)

  4. On the relationship between financial measures and contractor pricing strategy: Empirical tests in the defense aerospace industry

    OpenAIRE

    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...

  5. Modeling the relationship between the oil price and global food prices

    International Nuclear Information System (INIS)

    Chen, Sheng-Tung; Kuo, Hsiao-I; Chen, Chi-Chung

    2010-01-01

    The growth of corn-based ethanol production and soybean-based bio-diesel production following the increase in the oil prices have significantly affect the world agricultural grain productions and its prices. The main purpose of this paper is to investigate the relationships between the crude oil price and the global grain prices for corn, soybean, and wheat. The empirical results show that the change in each grain price is significantly influenced by the changes in the crude oil price and other grain prices during the period extending from the 3rd week in 2005 to the 20th week in 2008 which implies that grain commodities are competing with the derived demand for bio-fuels by using soybean or corn to produce ethanol or bio-diesel during the period of higher crude oil prices in these recent years. The subsidy policies in relation to the bio-fuel industries in some nations engaging in bio-fuel production should be considered to avoid the consequences resulting from high oil prices. (author)

  6. Reference-based pricing: an evidence-based solution for lab services shopping.

    Science.gov (United States)

    Melton, L Doug; Bradley, Kent; Fu, Patricia Lin; Armata, Raegan; Parr, James B

    2014-01-01

    To determine the effect of reference-based pricing (RBP) on the percentage of lab services utilized by members that were at or below the reference price. Retrospective, quasi-experimental, matched, case-control pilot evaluation of an RBP benefit for lab services. The study group included employees of a multinational grocery chain covered by a national health insurance carrier and subject to RBP for lab services; it had access to an online lab shopping tool and was informed about the RBP benefit through employer communications. The reference group was covered by the same insurance carrier but not subject to RBP. The primary end point was lab compliance, defined as the percentage of lab claims with total charges at or below the reference price. Difference-in-difference regression estimation evaluated changes in lab compliance between the 2 groups. Higher compliance per lab claim was evident for the study group compared with the reference group (69% vs 57%; Ponline shopping tool was used by 7% of the matched-adjusted study group prior to obtaining lab services. Lab compliance was 76% for study group members using the online tool compared with 68% among nonusers who were subject to RBP (P<.01). RBP can promote cost-conscious selection of lab services. Access to facilities that offer services below the reference price and education about RBP improve compliance. Evaluation of the effect of RBP on higher-cost medical services, including radiology, outpatient specialty, and elective inpatient procedures, is needed.

  7. Report of the Economy, Sustainable Development and Land Planning Commission aiming at authorizing electricity final user and small companies to go back to the electricity regulated price

    International Nuclear Information System (INIS)

    2010-01-01

    This report first presents the French regulated price system by recalling the legal bases for electricity and natural gas pricing, and by describing the progressive process of the electricity and natural gas market opening in France. It outlines that a reversibility principle has been introduced along with regulated pricing in most of the European Union countries. It also comments the complexity created on this issue by successive laws in France, the consequences of the soon coming law on the new organization of the electricity market. Then, the report comments the proposition which aims at authorizing electricity household users and small companies to go back to the regulated electricity price, thereby perpetuating the reversibility principle, while maintaining a criterion of installed electricity power, including natural gas prices and new consumption sites. A table proposes a comparison between existing texts, the present law project and this Commission proposition

  8. The impact of climate and price risks on agricultural land use and crop management decisions

    NARCIS (Netherlands)

    Lehmann, N.; Finger, R.

    2013-01-01

    This article aims to investigate the impacts of climate change and of lower and more volatile crop price levels as currently observed in the European Union (EU) on optimal management decisions, average income and income risks in crop production in Western Switzerland. To this end, a bioeconomic

  9. The impact of electricity price changes on industrial prices and the general price level in Korea

    International Nuclear Information System (INIS)

    Lim, Seul-Ye; Yoo, Seung-Hoon

    2013-01-01

    Electricity has played an important role in the economic development of Korea and, thus, has become a critical factor in sustaining the well-being of the Korean people. This study attempts to investigate the impact of electricity price changes on industrial prices and the general price level using input–output (I–O) analysis. To this end, we apply the I–O price model to the 2011 I–O table recently produced by the Bank of Korea, paying particular attention to the electricity sector by considering it as exogenous and then investigating its impacts. The impacts of the electricity price changes on each industrial sector's prices and the general price level are quantitatively derived. For example, the overall impact of a 10% increase in electricity price on the Korean national economy is estimated to be 0.4367%. We also report the results from the model with the electricity sector endogenous and the model with endogenous electricity and labor sectors. This information can be usefully utilized in decision-making regarding price management for electricity. - Highlights: • We investigate the impact of electricity price changes on the Korean economy. • We use the input–output (I–O) analysis specifying the electricity sector as exogenous. • We apply the I–O price model to 2010 I–O table produced by the Bank of Korea. • The impact of a 10% increase in electricity price on the Korean economy is 0.2176%

  10. Distributed, price-based control approach to market-based operation of future power systems

    NARCIS (Netherlands)

    Jokic, A.; Bosch, van den P.P.J.; Hermans, R.M.

    2009-01-01

    In this paper we present, discuss and illustrate on examples the price-based control paradigm as a suitable approach to solve some of the challenging problems facing future, market-based power systems. It is illustrated how global objectives and constraints are optimally translated into time-varying

  11. Risk-based safety indicators

    International Nuclear Information System (INIS)

    Sedlak, J.

    2001-12-01

    The report is structured as follows: 1. Risk-based safety indicators: Typology of risk-based indicators (RBIs); Tools for defining RBIs; Requirements for the PSA model; Data sources for RBIs; Types of risks monitored; RBIs and operational safety indicators; Feedback from operating experience; PSO model modification for RBIs; RBI categorization; RBI assessment; RBI applications; Suitable RBI applications. 2. Proposal for risk-based indicators: Acquiring information from operational experience; Method of acquiring safety relevance coefficients for the systems from a PSA model; Indicator definitions; On-line indicators. 3. Annex: Application of RBIs worldwide. (P.A.)

  12. Potential of building-scale alternative energy to alleviate risk from the future price of energy

    International Nuclear Information System (INIS)

    Bristow, David; Kennedy, Christopher A.

    2010-01-01

    The energy used for building operations, the associated greenhouse gas emissions, and the uncertainties in future price of natural gas and electricity can be a cause of concern for building owners and policy makers. In this work we explore the potential of building-scale alternative energy technologies to reduce demand and emissions while also shielding building owners from the risks associated with fluctuations in the price of natural gas and grid electricity. We analyze the monetary costs and benefits over the life cycle of five technologies (photovoltaic and wind electricity generation, solar air and water heating, and ground source heat pumps) over three audience or building types (homeowners, small businesses, large commercial and institutional entities). The analysis includes a Monte Carlo analysis to measure risk that can be compared to other investment opportunities. The results indicate that under government incentives and climate of Toronto, Canada, the returns are relatively high for small degrees of risks for a number of technologies. Ground source heat pumps prove to be exceptionally good investments in terms of their energy savings, emission, reductions, and economics, while the bigger buildings tend also to be better economic choices for the use of these technologies.

  13. A broadened causality in variance approach to assess the risk dynamics between crude oil prices and the Jordanian stock market

    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

  14. Risk and Return under Shari’a Framework: An Attempt to Develop Shari’a Compliant Asset Pricing Model (SCAPM

    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.

  15. The effects of the vegetable prices insurance on the fluctuation of price: Based on Shanghai evidences

    Science.gov (United States)

    Qu, Chunhong; Li, Huishang; Hao, Shuai; Zhang, Xuebiao; Yang, Wei

    2017-10-01

    Taking Shanghai as an example, the influence of the vegetable price insurance on the fluctuation of prices was analyzed in the article. It was found that the sequence of seasonal fluctuations characteristics of leafy vegetable prices was changed by the vegetable cost-price insurance, the period of price fluctuation was elongated from 12-to-18 months to 37 months, and the influence of random factors on the price fluctuations was reduced in some degree. There was still great space for innovation of the vegetable prices insurance system in Shanghai. Some countermeasures would be suggested to develop the insurance system to better to play the role of insurance and promote the market running more smoothly in Shanghai such as prolonging the insurance cycle, improving the price information monitoring mechanism and innovating income insurance products and so on.

  16. Transfer Pricing And Taxation Implications Disclosure In Segmental Reporting: Malaysian Evidence

    OpenAIRE

    Mohammad Talha; Syed Shah Alam; Abdullah Sallehhuddin

    2011-01-01

    Transfer pricing has emerged as common practice among highly diversified companies. Company goes for either domestic transfer pricing or international transfer pricing for several distinctive reasons. While domestic transfer pricing aims for enhancing divisional autonomy and divisions managers, international transfer pricing expects for less taxes, tariff, duties and excises. Therefore, international transfer pricing has significant taxation implication. With expansion of transfer pricing, fi...

  17. Regime jumps in electricity prices

    NARCIS (Netherlands)

    R. Huisman (Ronald); R.J. Mahieu (Ronald)

    2003-01-01

    textabstractMany countries are liberalizing their energy markets. Participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics. Electricity prices are known to be mean-reverting very volatile and subject to frequent spikes. Models that describe

  18. NUKEM adjusts price definitions

    International Nuclear Information System (INIS)

    Anon.

    1994-01-01

    This article is the October-November 1994 market report, providing trading volume and prices in the Uranium market. During this period, there were five deals in the spot concentrates market, five deals in the medium and long-term market, one deal in the conversion market, and two deals in the enrichment market. Restricted prices strengthened while unrestricted prices held steady. Price re-definitions were also announced

  19. Cash Flow and Discount Rate Risk in Up and Down Markets: What is actually priced?

    NARCIS (Netherlands)

    Botshekan, M.; Kraeussl, R.G.W.; Lucas, A.

    2012-01-01

    We test whether asymmetric preferences for losses versus gains affect the prices of cash flow versus discount rate risk. We construct a return decomposition distinguishing cash flow and discount rate betas in up and down markets. Using U.S. data, we find that downside cash flow and discount rate

  20. The development of a value based pricing index for new drugs in metastatic colorectal cancer

    OpenAIRE

    Lubbe, Martha Susanna; Dranitsaris, George; Truter, Ilse

    2011-01-01

    Background Worldwide, prices for cancer drugs have been under downward pressure where several governments have mandated price cuts of branded products. A better alternative to government mandated price cuts would be to estimate a final price based on drug performance, cost effectiveness and a country’s ability to pay. We developed a global pricing index for new cancer drugs in patients with metastatic colorectal cancer (mCRC) that encompasses all of these attributes. Methods ...

  1. Pricing the Option to Surrender in Incomplete Markets

    DEFF Research Database (Denmark)

    Consiglio, Andrea; De Giovanni, Domenico

    New international accounting standards require insurers to reflect the value of embedded options and guarantees in their products. Pricing techniques based on the Black & Scholes paradigm are often used, however, the hypotheses underneath this model are rarely met. We propose a framework that enc......New international accounting standards require insurers to reflect the value of embedded options and guarantees in their products. Pricing techniques based on the Black & Scholes paradigm are often used, however, the hypotheses underneath this model are rarely met. We propose a framework...... that encompasses the most known sources of incompleteness. We show that the surrender option, joined with a wide range of claims embedded in insurance contracts, can be priced through our tool, and deliver hedging portfolios to mitigate the risk arising from their positions. We provide extensive empirical analysis...... to highlight the effect of incompleteness on the fair value of the option....

  2. A tree-based method to price American options in the Heston model

    NARCIS (Netherlands)

    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

  3. A New Availability-Payment Model for Pricing Performance-Based Logistics Contracts

    Science.gov (United States)

    2014-05-01

    Grant number: N00244‐13‐1‐0009 A New “Availability‐ Payment ”  Model  for Pricing Performance‐ Based Logistics Contracts A. KashaniPour, X. Zhu, P...DATE MAY 2014 2. REPORT TYPE 3. DATES COVERED 00-00-2014 to 00-00-2014 4. TITLE AND SUBTITLE A New ’Availability‐ Payment ’ Model for...is how the  payment   model  in the contract  quantifies the contractor’s  performance for awarding incentives  or penalties Discrete‐Event Simulator ut

  4. A price based automatic generation control using unscheduled ...

    African Journals Online (AJOL)

    In this paper, a model for price based automatic generation control is presented. A modified control scheme is proposed which will prevent unintended unscheduled interchanges among the participants. The proposed scheme is verified by simulating it on a model of isolated area system having four generators. It has been ...

  5. The study of the price of gold futures based on heterogeneous investors' overconfidence

    Institute of Scientific and Technical Information of China (English)

    Wei Jiang; Pupu Luan; Chunpeng Yang

    2014-01-01

    Purpose-The purpose of this paper is to research and analyze the price of gold futures based on heterogeneous investors' overconfidence.Design/methodology/approach-This paper divides the traders of gold futures market into two kinds:the speculators and arbitrageurs,and then constructs a market equilibrium model of futures pricing to analyze the behaviors of the two kinds of traders with overconfidence.After getting the decision-making function,the market equilibrium futures price is attained on the condition of market clearing.Then,this paper analyzes how the overconfidence impacts on futures price,volatility of the price of gold futures and the effects on individual utility.Findings-Under different market conditions,the overconfidence psychological impacts of heterogeneous investor on the price and volatility of futures are different,sometimes completely opposite.Originality/value-In the past literature,the relationships between overconfidence and the price or volatility are positive;however,the study shows that sometimes it is positive,and sometimes it is negative

  6. Incorporating price-responsive customers in day-ahead scheduling of smart distribution networks

    International Nuclear Information System (INIS)

    Mazidi, Mohammadreza; Monsef, Hassan; Siano, Pierluigi

    2016-01-01

    Highlights: • Proposing a model for incorporating price-responsive customers in day-ahead scheduling of smart distribution networks; this model provides a win–win situation. • Introducing a risk management model based on a bi-level information-gap decision theory and recasting it into its equivalent single-level robust optimization problem using Karush–Kuhn–Tucker optimality conditions. • Utilizing mixed-integer linear programing formulation that is efficiently solved by commercial optimization software. - Abstract: Demand response and real-time pricing of electricity are key factors in a smart grid as they can increase economic efficiency and technical performances of power grids. This paper focuses on incorporating price-responsive customers in day-ahead scheduling of smart distribution networks under a dynamic pricing environment. A novel method is proposed and formulated as a tractable mixed integer linear programming optimization problem whose objective is to find hourly sale prices offered to customers, transactions (purchase/sale) with the wholesale market, commitment of distribution generation units, dispatch of battery energy storage systems and planning of interruptible loads in a way that the profit of the distribution network operator is maximized while customers’ benefit is guaranteed. To hedge distribution network operator against financial risk arising from uncertainty of wholesale market prices, a risk management model based on a bi-level information-gap decision theory is proposed. The proposed bi-level problem is solved by recasting it into its equivalent single-level robust optimization problem using Karush–Kuhn–Tucker optimality conditions. Performance of the proposed model is verified by applying it to a modified version of the IEEE 33-bus distribution test network. Numerical results demonstrate the effectiveness and efficiency of the proposed method.

  7. Oil company profitability: observations on the use of oil product price assessments and associated errors

    International Nuclear Information System (INIS)

    Jenkins, Gilbert

    2000-01-01

    Oil companies often report the exact price obtained for crude oil sales. Furthermore, crude oil prices may be linked to the price of Brent crude oil which is actively and very transparently traded on the International Petroleum Exchange. Brent crude oil prices are reported worldwide electronically and in many newspapers on a daily basis. Gas oil (No. 2 Fuel oil in the USA) is actively traded on the IPE and on NYMEX and the prices are also reported worldwide almost instantaneously. One grade of unleaded gasoline is traded on NYMEX but all other oil products do not have regulated and transparent markets. The prices of these products are assessed by price reporters following daily discussions with active oil traders. Two prices are assessed and reported, the bid (low) and offer (high) even if no trade has taken place. The oil industry itself and oil products consumers make much use of these assessed prices. The object of this paper is to provide some statistical detail on the differences between various product price assessments made through 2000. From these differences, it is possible to provide an indication of the precision of oil product price assessments However, it is doubtful if precision data based on a simple determination of the standard deviation of the differences between the assessment made by the various price reporting services would be of practical use. (Author)

  8. Determinants of the Price of High-Tech Metals: An Event Study

    Energy Technology Data Exchange (ETDEWEB)

    Wanner, Markus, E-mail: markus.wanner@mrm.uni-augsburg.de; Gaugler, Tobias; Gleich, Benedikt; Rathgeber, Andreas [University of Augsburg, Institute for Materials Resource Management (Germany)

    2015-06-15

    The growing demand for high-tech products has resulted in strong growth in demand for certain minor metals. In combination with production concentrated in China, this caused strong and unpredicted price movements in recent years. As a result, manufacturing companies have to cope with additional risks. However, the detailed reasons for the price development are only partially understood. Therefore, we analyzed empirically which determinants can be assigned to price movements and performed an event study on the high-tech metals neodymium, indium, and gallium. Based on our dataset of news items, we were able to find coinciding events to almost 90% of all price jumps (recall). We showed that if any information about these events occurred with a probability of over 50% there would also be a price jump within 10 days (precision). However, the classical set of price determinants has to be extended for these specific markets, as we found unorthodox factors like holidays or weather that may be indicators for price movements. Therefore, we hope that our study supports industry for instance in performing more informed short-term planning of metals purchasing based on information about specific events.

  9. Determinants of the Price of High-Tech Metals: An Event Study

    International Nuclear Information System (INIS)

    Wanner, Markus; Gaugler, Tobias; Gleich, Benedikt; Rathgeber, Andreas

    2015-01-01

    The growing demand for high-tech products has resulted in strong growth in demand for certain minor metals. In combination with production concentrated in China, this caused strong and unpredicted price movements in recent years. As a result, manufacturing companies have to cope with additional risks. However, the detailed reasons for the price development are only partially understood. Therefore, we analyzed empirically which determinants can be assigned to price movements and performed an event study on the high-tech metals neodymium, indium, and gallium. Based on our dataset of news items, we were able to find coinciding events to almost 90% of all price jumps (recall). We showed that if any information about these events occurred with a probability of over 50% there would also be a price jump within 10 days (precision). However, the classical set of price determinants has to be extended for these specific markets, as we found unorthodox factors like holidays or weather that may be indicators for price movements. Therefore, we hope that our study supports industry for instance in performing more informed short-term planning of metals purchasing based on information about specific events

  10. Canadian natural gas market: dynamics and pricing

    International Nuclear Information System (INIS)

    2000-01-01

    This publication by the National Energy Board is part of a continuing program of assessing applications for long-term natural gas export licences. The market-based procedure used by the Board is based on the premise that the marketplace will generally operate in a way that will ensure that Canadian requirements for natural gas will be met at fair market prices. The market--based procedure consists of a public hearing and a monitoring component. The monitoring component involves the on-going assessment of Canadian energy markets to provide analyses of major energy commodities on either an individual or integrated commodity basis. This report is the result of the most recent assessment . It identifies factors that affect natural gas prices and describes the functioning of regional markets in Canada. It provides an overview of the energy demand, including recent trends, reviews the North American gas supply and markets, the natural gas pricing dynamics in Canada, and a regional analysis of markets, prices and dynamics in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec and the Atlantic provinces. In general, demand growth outstripped growth in supply, but natural gas producers throughout North America have been responding to the current high price environment with aggressive drilling programs. The Board anticipates that in time, there will be a supply and demand response and accompanying relief in natural gas prices. A review of the annual weighted average border price paid for Alberta gas indicates that domestic gas users paid less than export customers until 1998, at which point the two prices converged, suggesting that Canadians have had access to natural gas at prices no less favourable than export customers. The influence of electronic trading systems such as NYMEX and AECO-C/NIT have had significant impact on the pricing of natural gas. These systems, by providing timely information to market participants. enables them to manage price

  11. Pricing of brand extensions based on perceptions of brand equity

    Directory of Open Access Journals (Sweden)

    Panagiotis Arsenos

    2018-04-01

    Full Text Available The paper explores the role of brand equity when pricing hypothetical brand extensions. Companies tend to use different pricing techniques for their products, and their pricing decisions are based on many factors, including image and category fit of the product with the existing image and products of the company. Brand extensions are usually investigated from a consumer perspective, focusing on the extension attitude, however, it is essential to understand the corporate decision-making process regarding pricing. Exploring this matter using quantitative research methods, the study provides empirical evidence that companies that have invested heavily in marketing actions in the past and have built strong brand equity over-time, show flexibility in the mark-up during the cost decision-making process of a hypothetical brand extensions. Variations in mark-up percentages are also observed when there is a difference in image and category fit of the extension to the original brand. However, companies characterized by greater brand equity exhibited greater flexibility in the mark-up percentages, even for low fit extensions.

  12. The development of a value based pricing index for new drugs in metastatic colorectal cancer.

    Science.gov (United States)

    Dranitsaris, George; Truter, Ilse; Lubbe, Martie S

    2011-06-01

    Worldwide, prices for cancer drugs have been under downward pressure where several governments have mandated price cuts of branded products. A better alternative to government mandated price cuts would be to estimate a final price based on drug performance, cost effectiveness and a country's ability to pay. We developed a global pricing index for new cancer drugs in patients with metastatic colorectal cancer (mCRC) that encompasses all of these attributes. A pharmacoeconomic model was developed to simulate mCRC patients receiving chemotherapy plus a 'new drug' that improves survival by 1.4, 3 and 6months, respectively. Cost and utility data were obtained from cancer centres and oncology nurses (n=112) in Canada, Spain, India, South Africa and Malaysia. Multivariable analysis was then used to develop the pricing index, which considers survival benefit, per capita GDP and income dispersion (as measured by the Gini coefficient) as predictor variables. Higher survival benefits were associated with elevated drug prices, especially in higher income countries such as Canada. For Argentina with a per capita GDP of $15,000 and a Gini coefficient of 51, the index estimated that for a drug which provides a 4month survival benefit in mCRC, the value based price would be $US 630 per dose. In contrast, the same drug in a wealthier country like Norway (per capita GDP=$50,000) could command a price of $US 2,775 per dose. The application of this index to estimate a price based on cost effectiveness and the wealth of a nation would be important for opening dialogue between the key stakeholders and a better alternative to government mandated price cuts. Copyright © 2011 Elsevier Ltd. All rights reserved.

  13. 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.

  14. Reliability-Based Marginal Cost Pricing Problem Case with Both Demand Uncertainty and Travelers’ Perception Errors

    Directory of Open Access Journals (Sweden)

    Shaopeng Zhong

    2013-01-01

    Full Text Available Focusing on the first-best marginal cost pricing (MCP in a stochastic network with both travel demand uncertainty and stochastic perception errors within the travelers’ route choice decision processes, this paper develops a perceived risk-based stochastic network marginal cost pricing (PRSN-MCP model. Numerical examples based on an integrated method combining the moment analysis approach, the fitting distribution method, and the reliability measures are also provided to demonstrate the importance and properties of the proposed model. The main finding is that ignoring the effect of travel time reliability and travelers’ perception errors may significantly reduce the performance of the first-best MCP tolls, especially under high travelers’ confidence and network congestion levels. The analysis result could also enhance our understanding of (1 the effect of stochastic perception error (SPE on the perceived travel time distribution and the components of road toll; (2 the effect of road toll on the actual travel time distribution and its reliability measures; (3 the effect of road toll on the total network travel time distribution and its statistics; and (4 the effect of travel demand level and the value of reliability (VoR level on the components of road toll.

  15. 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...

  16. A Dynamic Pricing Reverse Auction-Based Resource Allocation Mechanism in Cloud Workflow Systems

    Directory of Open Access Journals (Sweden)

    Xuejun Li

    2016-01-01

    Full Text Available Market-oriented reverse auction is an efficient and cost-effective method for resource allocation in cloud workflow systems since it can dynamically allocate resources depending on the supply-demand relationship of the cloud market. However, during the auction the price of cloud resource is usually fixed, and the current resource allocation mechanisms cannot adapt to the changeable market properly which results in the low efficiency of resource utilization. To address such a problem, a dynamic pricing reverse auction-based resource allocation mechanism is proposed. During the auction, resource providers can change prices according to the trading situation so that our novel mechanism can increase the chances of making a deal and improve efficiency of resource utilization. In addition, resource providers can improve their competitiveness in the market by lowering prices, and thus users can obtain cheaper resources in shorter time which would decrease monetary cost and completion time for workflow execution. Experiments with different situations and problem sizes are conducted for dynamic pricing-based allocation mechanism (DPAM on resource utilization and the measurement of Time⁎Cost (TC. The results show that our DPAM can outperform its representative in resource utilization, monetary cost, and completion time and also obtain the optimal price reduction rates.

  17. THE IMPLEMENTATION OF ACTIVITY-BASED COSTING METHOD IN DETERMINING SELLING PRICES

    Directory of Open Access Journals (Sweden)

    Muhtarudin Muhtarudin

    2017-08-01

    Costing method. After applying the latter cost determining the method there turned out to be a significant difference in the shoe production cost resulted from the inaccurate price calculation in the former method, as here a selling price is fixed by marking-up efforts aiming to cover the production cost. Determining a selling price in this way causes the selling price to be too low; thus it cannot optimize the profit. Keywords: Activity-Based Costing; Production Cost; Selling Price

  18. Price changes in the gasoline market: Are Midwestern gasoline prices downward sticky?

    International Nuclear Information System (INIS)

    1999-03-01

    This report examines a recurring question about gasoline markets: why, especially in times of high price volatility, do retail gasoline prices seem to rise quickly but fall back more slowly? Do gasoline prices actually rise faster than they fall, or does this just appear to be the case because people tend to pay more attention to prices when they're rising? This question is more complex than it might appear to be initially, and it has been addressed by numerous analysts in government, academia and industry. The question is very important, because perceived problems with retail gasoline pricing have been used in arguments for government regulation of prices. The phenomenon of prices at different market levels tending to move differently relative to each other depending on direction is known as price asymmetry. This report summarizes the previous work on gasoline price asymmetry and provides a method for testing for asymmetry in a wide variety of situations. The major finding of this paper is that there is some amount of asymmetry and pattern asymmetry, especially at the retail level, in the Midwestern states that are the focus of the analysis. Nevertheless, both the amount asymmetry and pattern asymmetry are relatively small. In addition, much of the pattern asymmetry detected in this and previous studies could be a statistical artifact caused by the time lags between price changes at different points in the gasoline distribution system. In other words, retail gasoline prices do sometimes rise faster than they fall, but this is largely a lagged market response to an upward shock in the underlying wholesale gasoline or crude oil prices, followed by a return toward the previous baseline. After consistent time lags are factored out, most apparent asymmetry disappears

  19. Rate adaptation in ad hoc networks based on pricing

    CSIR Research Space (South Africa)

    Awuor, F

    2011-09-01

    Full Text Available that incorporates penalty (pricing) obtruded to users’ choices of transmission parameters to curb the self-interest behaviour. Therefore users determine their data rates and transmit power based on the perceived coupled interference at the intended receiver...

  20. Is macroeconomic announcement news priced?

    NARCIS (Netherlands)

    de Goeij, Peter; Hu, Jiehui; Werker, Bas

    2016-01-01

    We test whether news contained in macroeconomic announcements (MEAs) is priced in the cross-section of stock returns. When including news on a set of widely followed individual macroeconomic fundamentals in the cross-section of stock returns, estimates of their prices of risk are consistent with the

  1. When to "Fire" Customers: Customer Cost-Based Pricing

    OpenAIRE

    Jiwoong Shin; K. Sudhir; Dae-Hee Yoon

    2012-01-01

    The widespread adoption of activity-based costing enables firms to allocate common service costs to each customer, allowing for precise measurement of both the cost to serve a particular customer and the customer's profitability. In this paper, we investigate how pricing strategies based on customer cost information affects a firm's customer acquisition and retention dynamics, and ultimately its profit, using a two-period monopoly model with high- and low-cost customer segments. Although past...

  2. Weight-based pricing in the collection of household waste. The Oostzaan case

    International Nuclear Information System (INIS)

    Linderhof, Vincent; Kooreman, Peter; Allers, Maarten; Wiersma, Doede

    2001-01-01

    This paper provides an empirical analysis of the effects of weight-based pricing in the collection of household waste. Using a comprehensive panel data set on all households in a Dutch municipality we estimate short-run as well as long-run price effects for the amounts of both compostable and non-recyclable household waste. We find significant and sizeable price effects, with the elasticity for compostable waste being four times as large as the elasticity for non-recyclable waste. Long-run elasticities are about 30% larger than short-run elasticities

  3. "Price-quakes" shaking the world's stock exchanges.

    Directory of Open Access Journals (Sweden)

    Jørgen Vitting Andersen

    Full Text Available BACKGROUND: Systemic risk has received much more awareness after the excessive risk taking by major financial instituations pushed the world's financial system into what many considered a state of near systemic failure in 2008. The IMF for example in its yearly 2009 Global Financial Stability Report acknowledged the lack of proper tools and research on the topic. Understanding how disruptions can propagate across financial markets is therefore of utmost importance. METHODOLOGY/PRINCIPAL FINDINGS: Here, we use empirical data to show that the world's markets have a non-linear threshold response to events, consistent with the hypothesis that traders exhibit change blindness. Change blindness is the tendency of humans to ignore small changes and to react disproportionately to large events. As we show, this may be responsible for generating cascading events--pricequakes--in the world's markets. We propose a network model of the world's stock exchanges that predicts how an individual stock exchange should be priced in terms of the performance of the global market of exchanges, but with change blindness included in the pricing. The model has a direct correspondence to models of earth tectonic plate movements developed in physics to describe the slip-stick movement of blocks linked via spring forces. CONCLUSIONS/SIGNIFICANCE: We have shown how the price dynamics of the world's stock exchanges follows a dynamics of build-up and release of stress, similar to earthquakes. The nonlinear response allows us to classify price movements of a given stock index as either being generated internally, due to specific economic news for the country in question, or externally, by the ensemble of the world's stock exchanges reacting together like a complex system. The model may provide new insight into the origins and thereby also prevent systemic risks in the global financial network.

  4. "Price-quakes" shaking the world's stock exchanges.

    Science.gov (United States)

    Andersen, Jørgen Vitting; Nowak, Andrzej; Rotundo, Giulia; Parrott, Lael; Martinez, Sebastian

    2011-01-01

    Systemic risk has received much more awareness after the excessive risk taking by major financial instituations pushed the world's financial system into what many considered a state of near systemic failure in 2008. The IMF for example in its yearly 2009 Global Financial Stability Report acknowledged the lack of proper tools and research on the topic. Understanding how disruptions can propagate across financial markets is therefore of utmost importance. Here, we use empirical data to show that the world's markets have a non-linear threshold response to events, consistent with the hypothesis that traders exhibit change blindness. Change blindness is the tendency of humans to ignore small changes and to react disproportionately to large events. As we show, this may be responsible for generating cascading events--pricequakes--in the world's markets. We propose a network model of the world's stock exchanges that predicts how an individual stock exchange should be priced in terms of the performance of the global market of exchanges, but with change blindness included in the pricing. The model has a direct correspondence to models of earth tectonic plate movements developed in physics to describe the slip-stick movement of blocks linked via spring forces. We have shown how the price dynamics of the world's stock exchanges follows a dynamics of build-up and release of stress, similar to earthquakes. The nonlinear response allows us to classify price movements of a given stock index as either being generated internally, due to specific economic news for the country in question, or externally, by the ensemble of the world's stock exchanges reacting together like a complex system. The model may provide new insight into the origins and thereby also prevent systemic risks in the global financial network.

  5. Pricing hospital care: Global budgets and marginal pricing strategies.

    Science.gov (United States)

    Sutherland, Jason M

    2015-08-01

    The Canadian province of British Columbia (BC) is adding financial incentives to increase the volume of surgeries provided by hospitals using a marginal pricing approach. The objective of this study is to calculate marginal costs of surgeries based on assumptions regarding hospitals' availability of labor and equipment. This study is based on observational clinical, administrative and financial data generated by hospitals. Hospital inpatient and outpatient discharge summaries from the province are linked with detailed activity-based costing information, stratified by assigned case mix categorizations. To reflect a range of operating constraints governing hospitals' ability to increase their volume of surgeries, a number of scenarios are proposed. Under these scenarios, estimated marginal costs are calculated and compared to prices being offered as incentives to hospitals. Existing data can be used to support alternative strategies for pricing hospital care. Prices for inpatient surgeries do not generate positive margins under a range of operating scenarios. Hip and knee surgeries generate surpluses for hospitals even under the most costly labor conditions and are expected to generate additional volume. In health systems that wish to fine-tune financial incentives, setting prices that create incentives for additional volume should reflect knowledge of hospitals' underlying cost structures. Possible implications of mis-pricing include no response to the incentives or uneven increases in supply. Copyright © 2015 The Authors. Published by Elsevier Ireland Ltd.. All rights reserved.

  6. An Electricity Price Forecasting Model by Hybrid Structured Deep Neural Networks

    Directory of Open Access Journals (Sweden)

    Ping-Huan Kuo

    2018-04-01

    Full Text Available Electricity price is a key influencer in the electricity market. Electricity market trades by each participant are based on electricity price. The electricity price adjusted with the change in supply and demand relationship can reflect the real value of electricity in the transaction process. However, for the power generating party, bidding strategy determines the level of profit, and the accurate prediction of electricity price could make it possible to determine a more accurate bidding price. This cannot only reduce transaction risk, but also seize opportunities in the electricity market. In order to effectively estimate electricity price, this paper proposes an electricity price forecasting system based on the combination of 2 deep neural networks, the Convolutional Neural Network (CNN and the Long Short Term Memory (LSTM. In order to compare the overall performance of each algorithm, the Mean Absolute Error (MAE and Root-Mean-Square error (RMSE evaluating measures were applied in the experiments of this paper. Experiment results show that compared with other traditional machine learning methods, the prediction performance of the estimating model proposed in this paper is proven to be the best. By combining the CNN and LSTM models, the feasibility and practicality of electricity price prediction is also confirmed in this paper.

  7. Social desirability and self-reported health risk behaviors in web-based research: three longitudinal studies

    Directory of Open Access Journals (Sweden)

    Göritz Anja S

    2010-11-01

    Full Text Available Abstract Background These studies sought to investigate the relation between social desirability and self-reported health risk behaviors (e.g., alcohol use, drug use, smoking in web-based research. Methods Three longitudinal studies (Study 1: N = 5612, 51% women; Study 2: N = 619, 60%; Study 3: N = 846, 59% among randomly selected members of two online panels (Dutch; German using several social desirability measures (Marlowe-Crowne Scale; Balanced Inventory of Desirable Responding; The Social Desirability Scale-17 were conducted. Results Social desirability was not associated with self-reported current behavior or behavior frequency. Socio-demographics (age; sex; education did not moderate the effect of social desirability on self-reported measures regarding health risk behaviors. Conclusions The studies at hand provided no convincing evidence to throw doubt on the usefulness of the Internet as a medium to collect self-reports on health risk behaviors.

  8. Crying wolf? On the price discrimination of online airline tickets

    OpenAIRE

    Vissers, Thomas; Nikiforakis, Nick; Bielova, Nataliia; Joosen, Wouter

    2014-01-01

    International audience; Price discrimination refers to the practice of dynamically varying the prices of goods based on a customer's purchasing power and willingness to pay. In this paper, motivated by several anecdotal ac-counts, we report on a three-week experiment, conducted in search of price discrimination in airline tickets. Despite presenting the companies with multiple opportunities for discriminating us, and contrary to our expectations, we do not find any evidence for systematic pri...

  9. Photovoltaic power: the inadequate purchase price

    International Nuclear Information System (INIS)

    Finon, D.

    2009-01-01

    The current policy of guaranteed purchase prices applied to photovoltaic power lacks rationality: prices are not graduated, commitment times are too long, there is no capping to capacity developed, subsidies (tax credit, direct subsidy, etc) are complex and give too favourable a return time. The lack of differentiation between products may also delay the emergence of new PV technologies. As a result, it is legitimate to envisage a cost/benefit analysis of future subsidies and to wonder about Frances ability, as a second rank player, to catch up with the leaders (Germany, Japan, United States). The report does not criticize policy based on purchase prices in itself: this is suitable or technology close to commercial operation in that it guarantees stable terms close to wholesale electricity market prices. It does, however, criticize adequacy in terms of less advanced PV technology, which results in purchase prices five times that of wind power. The report proposes re-targeting the system to take account of the significant stakes in PV power. Costly incentives for installing land PV cells and units should be quickly reduced, while industrial demonstration budgets deserve increases to further the development of new technologies (improved crystal silicon and thin layers). The demonstration phase and industrial development should be the primary focus, where a large part of potentially promising reductions in costs are likely to be achieved. (author)

  10. Michigan residential heating oil and propane price survey: 1995-1996 heating season. Final report

    International Nuclear Information System (INIS)

    Moriarty, C.

    1996-05-01

    This report summarizes the results of a survey of residential No. 2 distillate fuel (home heating oil) and liquefied petroleum gas (propane) prices over the 1995--1996 heating season in Michigan. The Michigan's Public Service Commission (MPSC) conducted the survey under a cooperative agreement with the US Department of Energy's (DOE) Energy Information Administration (EIA). This survey was funded in part by a grant from the DOE. From October 1995 through March 1996, the MPSC surveyed participating distributors by telephone for current residential retail home heating oil and propane prices. The MPSC transmitted the data via a computer modem to the EIA using the Petroleum Electronic Data Reporting Option (PEDRO). Survey results were published in aggregate on the MPSC World Wide Web site at http://ermisweb.state.mi.us/shopp. The page was updated with both residential and wholesale prices immediately following the transmission of the data to the EIA. The EIA constructed the survey using a sample of Michigan home heating oil and propane retailers. The sample accounts for different sales volumes, geographic location, and sources of primary supply

  11. EVT in electricity price modeling : extreme value theory not only on the extreme events

    International Nuclear Information System (INIS)

    Marossy, Z.

    2007-01-01

    The extreme value theory (EVT) is commonly used in electricity and financial risk modeling. In this study, EVT was used to model the distribution of electricity prices. The model was built on the price formation in electricity auction markets. This paper reviewed the 3 main modeling approaches used to describe the distribution of electricity prices. The first approach is based on a stochastic model of the electricity price time series and uses this stochastic model to generate the given distribution. The second approach involves electricity supply and demand factors that determine the price distribution. The third approach involves agent-based models which use simulation techniques to write down the price distribution. A fourth modeling approach was then proposed to describe the distribution of electricity prices. The new approach determines the distribution of electricity prices directly without knowing anything about the data generating process or market driving forces. Empirical data confirmed that the distribution of electricity prices have a generalized extreme value (GEV) distribution. 8 refs., 2 tabs., 5 figs

  12. Deregulated power prices: comparison of volatility

    International Nuclear Information System (INIS)

    Li Ying; Flynn, P.C.

    2004-01-01

    We examine electrical power price variability for 14 deregulated markets. Power price volatility is measured by price velocity, the daily average of the absolute value of price change per hour. Deregulated markets show a wide variability in price velocity. Some price velocity is expected and arises from the daily diurnal price pattern, which differs significantly between markets. Even when the expected daily variability in price is removed, the residual unexpected variability differs between markets. Some deregulated markets, most notably Britain and Spain, show patterns that are predictable and consistent and have low values of unexpected price velocity. These markets create a climate conducive to consumers facing the market through real time pricing and shaping consumption behaviors in response to price changes. Other markets, for example, South Australia and Alberta, have patterns that are inconsistent and irregular, and hence are hard for a customer to interpret; a customer in such a market will have a higher incentive to avoid demand side management and escape risk through hedging mechanisms

  13. Analysing the relationship between wholesale and end-user prices in the Nordic electricity market

    International Nuclear Information System (INIS)

    Lewis, P.E.; Johnsen, T.A.; Naervae, T.; Wasti, S.

    2004-09-01

    Efficient pricing in a deregulated market means prices which closely reflect the cost of obtaining electricity in the wholesale market. This research report analyses and explains the relationship between wholesale prices (especially Spot Prices) and end-user prices for residential, industrial and commercial users in the Finnish, Swedish and Norwegian electricity markets. The report primarily analyses the closeness of wholesale and end-user price patterns (the primary tracking period is 1998-2003, focusing especially closely on Finland and the period 2002-2003). The report reveals that Finnish, Norwegian and Swedish end- user prices can all be said to follow spot prices (and other wholesale prices) to a greater or lesser extent. The relationship is however complex and, especially regarding spot prices, clearly closest in Norway, followed by Sweden and then Finland. Whilst, overall, Finnish prices seem quite competitive and Nordic end-user prices currently seem to be extremely similar, there is some cause for concern in Finland. In particular, very few customers have spot based tariffs; wholesale prices (including spot prices) appear to sometimes have been used as an excuse for end-user price rises; Finnish suppliers have often been slow to respond to post-spike spot price reductions; offer prices are currently often higher than standard variable prices; and suppliers seem quite free to follow any pricing strategy, regardless of the presence of competition. Six factors are identified which influence end-user prices and their relationship with wholesale (and particularly spot) prices: hydro-dependency; concentration and entry barriers; cultural and historical determination; legislation; pricing strategies; the competitive environment. The report additionally specifically illustrates a wide variety of possible supplier strategies which might explain Finnish end-user pricing. Spot prices seem to provide only a minor explanation for Finnish end-user prices. (orig.)

  14. The price facade: Symbolic and behavioural price cues in service environments

    NARCIS (Netherlands)

    Verhoeven, J.W.M.; van Rompay, Thomas Johannes Lucas; Pruyn, Adriaan T.H.

    2009-01-01

    Although the role of price expectations in predicting consumer behavior has been widely acknowledged, little is known about the way in which price expectations depend on environmental elements in hospitality settings. We propose that restaurant guests base price expectations on (1) perceptions of

  15. The role of storage dynamics in annual wheat prices

    Science.gov (United States)

    Schewe, Jacob; Otto, Christian; Frieler, Katja

    2017-05-01

    Identifying the drivers of global crop price fluctuations is essential for estimating the risks of unexpected weather-induced production shortfalls and for designing optimal response measures. Here we show that with a consistent representation of storage dynamics, a simple supply-demand model can explain most of the observed variations in wheat prices over the last 40 yr solely based on time series of annual production and long term demand trends. Even the most recent price peaks in 2007/08 and 2010/11 can be explained by additionally accounting for documented changes in countries’ trade policies and storage strategies, without the need for external drivers such as oil prices or speculation across different commodity or stock markets. This underlines the critical sensitivity of global prices to fluctuations in production. The consistent inclusion of storage into a dynamic supply-demand model closes an important gap when it comes to exploring potential responses to future crop yield variability under climate and land-use change.

  16. Equilibrium prices supported by dual price functions in markets with non-convexities

    International Nuclear Information System (INIS)

    Bjoerndal, Mette; Joernsten, Kurt

    2004-06-01

    The issue of finding market clearing prices in markets with non-convexities has had a renewed interest due to the deregulation of the electricity sector. In the day-ahead electricity market, equilibrium prices are calculated based on bids from generators and consumers. In most of the existing markets, several generation technologies are present, some of which have considerable non-convexities, such as capacity limitations and large start up costs. In this paper we present equilibrium prices composed of a commodity price and an uplift charge. The prices are based on the generation of a separating valid inequality that supports the optimal resource allocation. In the case when the sub-problem generated as the integer variables are held fixed to their optimal values possess the integrality property, the generated prices are also supported by non-linear price-functions that are the basis for integer programming duality. (Author)

  17. Derivative pricing based on local utility maximization

    OpenAIRE

    Jan Kallsen

    2002-01-01

    This paper discusses a new approach to contingent claim valuation in general incomplete market models. We determine the neutral derivative price which occurs if investors maximize their local utility and if derivative demand and supply are balanced. We also introduce the sensitivity process of a contingent claim. This process quantifies the reliability of the neutral derivative price and it can be used to construct price bounds. Moreover, it allows to calibrate market models in order to be co...

  18. Price and Profit Optimization for Financial Services

    Directory of Open Access Journals (Sweden)

    Catalina Bolancé

    2018-02-01

    Full Text Available Prospective customers of financial and insurance products can be targeted based on the profit the provider expects to earn from them. We present a model for individual expected profit and two alternatives for calculating optimal personalized prices that maximize the expected profit. For one of these alternatives, we obtain a closed-form expression for the price offered to each prospective customer; for the other, we need to use a numerical approximation. In both approaches, the profits generated by prospective customers are not immediately observed, given that the products sold by these companies have a risk component. We assume that willingness to pay is heterogeneous and apply our methodology using real data from a European insurance company. Our study indicates that a substantial boost in profits can be expected when applying the simplest optimal pricing method proposed.

  19. Nonlinear joint dynamics between prices of crude oil and refined products

    Science.gov (United States)

    Zhang, Tao; Ma, Guofeng; Liu, Guangsheng

    2015-02-01

    In this paper, we investigate the relationships between crude oil and refined product prices. We find that nonlinear correlations are stronger in the long-term than in the short-term. Crude oil and product prices are cointegrated and financial crisis in 2007-2008 caused a structural break of the cointegrating relationship. Moreover, different from the findings in most studies, we reveal that the relationships are almost symmetric based on a threshold error correction model. The so-called 'asymmetric relationships' are caused by some outliers and financial crisis. Most of the time, crude oil prices play the major role in the adjustment process of the long-term equilibrium. However, refined product prices dominated crude oil prices during the period of financial crisis. Important policy and risk management implications can be learned from the empirical findings.

  20. Price signals and end consumer flexibility in shortage situations

    International Nuclear Information System (INIS)

    Hunnes, Arngrim; Grande, Ove S.

    2002-08-01

    This report is written as a part of the project ''Consumer flexibility and efficient use of ICT''. The project aim is 1) to provide a decision basis and suggest external conditions for a priority guided development of an infrastructure based on future ICT solutions and 2) develop, test and evaluate various measures which stimulate flexibility in consumption with consideration to power price, network rent and new market solutions. The central question in the report is how to stimulate the end consumer to be flexible in the consumption of electric power. The use of power price and system rent is desired tools for communicating the right price signals to the end consumers and thereby give the end users an incentive. The focus is primarily on the short term flexibility. The first chapter in the report gives an introduction to the price signals and the two way communication. There is a clear distinction between price signals from power suppliers and price signals from network companies. The two following chapters contain a more thorough discussion. As to the price signals from the power suppliers it is pointed out that most of the existing power contracts have a design so that they in the short term do not give the right price signals to the end users. It is proposed that two new contract types are tested: 1) Spot price and time settling. 2) Contract for reduced power price in a certain period provided the consumer is willing to reduce the load when 1) the spot price exceeds a level given by the end user, 2) the present load exceeds the subscribed level. In the chapter about the price signals from network companies there is first a brief introduction to the natural monopoly and the demands of the authorities to network tariffs. There is also a survey of the size of the system tariffs in the various counties. The central section of the chapter contains suggestions for designing network tariffs. Based on the deductions it is proposed that the project will test the

  1. Auction development for the price-based electric power industry

    Science.gov (United States)

    Dekrajangpetch, Somgiat

    The restructuring of the electric power industry is to move away from the cost-based monopolistic environment of the past to the priced-based competitive environment. As the electric power industry is restructuring in many places, there are still many problems that need to be solved. The work in this dissertation contributes to solve some of the electric power auction problems. The majority of this work is aimed to help develop good markets. A LaGrangian relaxation (LR) Centralized Daily Commitment Auction (CDCA) has been implemented. It has been shown that the solution might not be optimal nor fair to some generation companies (GENCOs) when identical or similar generating units participate in a LR CDCA based auction. Supporting information for bidding strategies on how to change unit data to enhance the chances of bid acceptance has been developed. The majority of this work is based on Single Period Commodity Auction (SPCA). Alternative structures for the SPCA are outlined. Whether the optimal solution is degenerated is investigated. Good pricing criteria are summarized and the pricing method following good pricing criteria is developed. Electricity is generally considered as a homogeneous product. When availability level is used as additional characteristic to distinct electricity, electricity can be considered a heterogeneous product. The procedure to trade electricity as a heterogeneous product is developed. The SPCA is formulated as a linear program. The basic IPLP algorithm has been extended so that sensitivity analysis can be performed as in the simplex method. Sensitivity analysis is used to determine market reach. Additionally, sensitivity analysis is used in combination with the investigation of historical auction results to provide raw data for power system expansion. Market power is a critical issue in electric power deregulation. Firms with market power have an advantage over other competitor firms in terms of market reach. Various approaches to

  2. Downside Risk And Empirical Asset Pricing

    NARCIS (Netherlands)

    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

  3. Perpetual American vanilla option pricing under single regime change risk: an exhaustive study

    Science.gov (United States)

    Montero, Miquel

    2009-07-01

    Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in which some of the properties—volatility and dividend policy—of the underlying stock can change at a random instant of time but in such a way that we can forecast their final values. Under this assumption we can model actual market conditions because most relevant facts usually entail sharp predictable consequences. The effect of this potential risk on perpetual American vanilla options is remarkable: the very equation that will determine the fair price depends on the solution to be found. Sound results are found under the optics both of finance and physics. In particular, a parallelism among the overall outcome of this problem and a phase transition is established.

  4. The relation between food price, energy density and diet quality

    Directory of Open Access Journals (Sweden)

    Margareta Bolarić

    2013-01-01

    Full Text Available Low energy density diet, high in fruits and vegetables, is related to lower obesity risk and to better health status, but is more expensive. High energy density diet, high in added sugar and fats, is more affordable, but is related to higher obesity and chronic diseases risk. The aim of this study was to report prices according to energy density (low vs. high of food items and to show how food affordability could affect food choice and consumers’ health. Data was collected for 137 raw and processed foods from three purchase sites in Zagreb (one representative for supermarket, one smaller shop and green market. Results showed that low energy density food is more expensive than high energy density food (for example, the price of 1000 kcal from green zucchini (15 kcal/100 g is 124.20 kn while the price of 1000 kcal from sour cream (138 kcal/100 g is 13.99 kn. Food energy price was significantly different (p<0.05 between food groups with highest price for vegetable products (159.04 ± 36.18 kn/1000 kcal and raw vegetables (97.90 ± 50.13 kn/1000 kcal and lowest for fats (8.49 ± 1.22 kn/1000 kcal and cereals and products (5.66 ± 0.76 kn/1000 kcal. Negative correlation (Spearman r=-0.72, p<0.0001 was observed for energy density (kcal/100 g and price of 1000 kcal. Therefore, it is advisable to develop strategies in order to reduce price of low energy density food and encourage its intake since it would improve diet quality, which could lead to better costumers’ health.

  5. Comparison of China's oil import risk. Results based on portfolio theory and a diversification index approach

    International Nuclear Information System (INIS)

    Wu, Gang; Liu, Lan-Cui; Wei, Yi-Ming

    2009-01-01

    In recent years, the international oil price has fluctuated violently, bringing about huge risk for the international oil trade. In fact, the risk of crude oil and petroleum product imports is different because of the different import origins and prices. Which import risk is lower for China? From the perspective of oil supply security, how should China portfolio crude oil and petroleum product imports to minimize its oil import risk? Using portfolio theory and a diversification index approach, this paper compares and analyzes the supply, price and transport risks of crude oil and petroleum product imports. Our results show that the following: (1) Specific risk (diversification risk) and marine transport risk of China's petroleum product imports are lower than that of crude oil imports. (2) The average rate of return of China's petroleum product imports is higher than that of crude oil imports. Moreover, the average import price variance of petroleum product imports is lower than that of crude oil imports. Thus, the systematic risk (price risk) of petroleum products is lower too. Therefore, from the perspective of oil supply security, China should increase petroleum product imports to decrease its oil import risk. (author)

  6. Complex dynamics of a MC-MS pricing model for a risk-averse supply chain with after-sale investment

    Science.gov (United States)

    Ma, Junhai; Sun, Lijian

    2015-09-01

    In this paper, we investigate the pricing strategy of the manufacturers and that of a common retailer, including their after-sale investment in a risk-averse supply chain. As the demand is not always for sure, the supply chain follows Manufacturers Cooperating (MC) and Manufacturers Stackelberg (MS). The main objective of the paper is to investigate the influence of the decision parameters such as the after-sale investment, wholesale price adjustment speed and risk preference on the stability and utilities of the risk-averse supply chain. The dynamic phenomena, such as the bifurcation, chaos and sensitivity to initial values are analyzed with 2D-bifurcation diagrams, double largest Lyapunov exponent and basins of attraction. The study shows that the faster the adjustment speed is, the more profits the retailer can make, but on the other hand, it is no good to manufacturers. Risk tolerance levels (RM and RR) affect the utility of the manufacturers and that of the retailer differently. A feedback control method is used to control the chaos in the supply chain.

  7. VaR and CVaR Implied in Option Prices

    Directory of Open Access Journals (Sweden)

    Giovanni Barone Adesi

    2016-02-01

    Full Text Available VaR (Value at Risk and CVaR (Conditional Value at Risk are implied by option prices. Their relationships to option prices are derived initially under the pricing measure. It does not require assumptions about the distribution of portfolio returns. The effects of changes of measure are modest at the short horizons typically used in applications. The computation of CVaR from option price is very convenient, because this measure is not elicitable, making direct comparisons of statistical inferences from market data problematic.

  8. Selection in reported epidemiological risks: an empirical assessment.

    Directory of Open Access Journals (Sweden)

    Fotini K Kavvoura

    2007-03-01

    Full Text Available Epidemiological studies may be subject to selective reporting, but empirical evidence thereof is limited. We empirically evaluated the extent of selection of significant results and large effect sizes in a large sample of recent articles.We evaluated 389 articles of epidemiological studies that reported, in their respective abstracts, at least one relative risk for a continuous risk factor in contrasts based on median, tertile, quartile, or quintile categorizations. We examined the proportion and correlates of reporting statistically significant and nonsignificant results in the abstract and whether the magnitude of the relative risks presented (coined to be consistently > or =1.00 differs depending on the type of contrast used for the risk factor. In 342 articles (87.9%, > or =1 statistically significant relative risk was reported in the abstract, while only 169 articles (43.4% reported > or =1 statistically nonsignificant relative risk in the abstract. Reporting of statistically significant results was more common with structured abstracts, and was less common in US-based studies and in cancer outcomes. Among 50 randomly selected articles in which the full text was examined, a median of nine (interquartile range 5-16 statistically significant and six (interquartile range 3-16 statistically nonsignificant relative risks were presented (p = 0.25. Paradoxically, the smallest presented relative risks were based on the contrasts of extreme quintiles; on average, the relative risk magnitude was 1.41-, 1.42-, and 1.36-fold larger in contrasts of extreme quartiles, extreme tertiles, and above-versus-below median values, respectively (p < 0.001.Published epidemiological investigations almost universally highlight significant associations between risk factors and outcomes. For continuous risk factors, investigators selectively present contrasts between more extreme groups, when relative risks are inherently lower.

  9. An assessment of innovative pricing schemes for the communication of value: is price discrimination and two-part pricing a way forward?

    Science.gov (United States)

    Hertzman, Peter; Miller, Paul; Tolley, Keith

    2018-02-01

    With the introduction of new expensive medicines, traditional pricing schemes based on constructs such as price per pill/vial have been challenged. Potential innovative schemes could be either financial-based or performance-based. Within financial-based schemes the use of price discrimination is an emerging option, which we explore in this assessment. Areas covered: In the short term the price per indication approach is likely to become more prevalent for high cost, high benefit new pharmaceuticals, such as those emerging in oncology (e.g. new combination immunotherapies). 'Two-Part Pricing' (2PP) is a frequently used payment method in other industries, which consists of an Entry Fee, giving the buyer the right to use the product, and a Usage Price charged every time the product is purchased. Introducing 2PP into biopharma could have cross-stakeholder benefits including broader patient access, and improvement in budget/revenue predictability. A concern however is the potential complexity of the negotiation between manufacturer and payer. Expert commentary: We believe 'price discrimination' and 2PP in particular can be relevant for some new, expensive specialist medicines. A recommended first step would be to initiate pilots to test to what degree the 2PP approach meets stakeholder objectives and is practical to implement within specialty care.

  10. 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

  11. Cuba's transition to market-based energy prices

    International Nuclear Information System (INIS)

    Perez-Lopez, J.F.

    1992-01-01

    Since 1960 the Soviet Union has been, for all practical purposes, Cuba's exclusive supplier of energy products. For certain time periods, Soviet sales of oil and oil products to Cuba were made at concessional prices; prior to 1991, they were priced using transferable rubles and were essentially bartered for Cuban goods, especially sugar. Effective January 1, 1991, the Soviet Union shifted to world market prices and convertible currency payments for all traded commodities, including energy products. The shift to market prices and convertible currencies in Cuban-Soviet energy trade has already brought - or is likely to bring - a number of adjustments in four areas: (1) the trade balance; (2) the ability to reexport oil and oil products; (3) energy consumption patterns; (4) and the structure of energy supplies. 33 refs., 8 tabs

  12. Theoretical and practical bases of transfer pricing formation at the microlevel in terms of national economy

    OpenAIRE

    Oksana Desyatniuk; Olga Cherevko

    2015-01-01

    The theoretical and methodological bases of transfer pricing formation at microlevel are studied. The factors acting upon transfer pricing are analysed and the algorithm to form transfer price at an enterprise is suggested. The model example to choose the method of transfer pricing and calculate the profitability interval meeting modern legal requirements is considered.

  13. INCOME AND PRICE AS A BARRIER TO ORGANIC FOOD CHOICE

    OpenAIRE

    Aschemann-Witzel, Jessica; Zielke, Stephan; Thøgersen, John

    2014-01-01

    From the barriers said to potentially hamper the further development of the sector, the consumer demand side and herein the high prices are handled as crucial. We reviewed the literature since 2000 regarding the role of perceived price and income. We find that self-report based studies nearly unequivocally find price is the primary barrier to choice, deviations from this appear to occur when researching organic consumers and developed organic markets. There are mixed findings regarding income...

  14. TRICARE revision to CHAMPUS DRG-based payment system, pricing of hospital claims. Final rule.

    Science.gov (United States)

    2014-05-21

    This Final rule changes TRICARE's current regulatory provision for inpatient hospital claims priced under the DRG-based payment system. Claims are currently priced by using the rates and weights that are in effect on a beneficiary's date of admission. This Final rule changes that provision to price such claims by using the rates and weights that are in effect on a beneficiary's date of discharge.

  15. Energy markets and price relations

    International Nuclear Information System (INIS)

    Bergendahl, P.A.

    1986-10-01

    The aim of the report is to elucidate the way and extent of the dependence of the price of different energy species of one another and particularly of crude oil prices. Oil, coal and natural gas can substitute each other at many applications. The prices are dependent on mining, processing and transporting. Forecasting of prices and future trends are discussed

  16. Fuel consumption: short term and long term price impacts per population type

    International Nuclear Information System (INIS)

    2011-01-01

    This report presents assessments of the price sensitivity of household fuel consumption. After a literature review on price-elasticity assessments and the use of pseudo-panels, the investigation analyses the deciding factors of the household fuel expense and its evolution between 1985 and 2006. It proposes a short term price-elasticity assessment based on the most recent survey, and also proposes price-elasticity assessments for sub-populations, notably in terms of income level or location (rural or urban areas)

  17. Factors Influencing Pricing Decision: Evidence from Non-Financial Firms in Nigeria

    Directory of Open Access Journals (Sweden)

    Luqman Olawale

    2017-02-01

    Full Text Available This study examines the significant factors influencing pricing decision in Nigeria. The study is based on the appraisal of the factors that influence pricing decision using 100 non-financial companies listed on the Nigeria Stock Exchange (NSE in 2013. The cross sectional data was obtained from annual reports of the sampled firms which were analyzed based on OrdinaryRegression model. The results revealed that cost of sales has an insignificant positive effect on pricing policy, while company’s objective and consumer perception has significant positive relationship on pricing policy. On the external determinants, market demand and availability of close substitute has a significant negative effect on pricing policy while macroeconomic trend and market segment has insignificant negative effect on pricing policy. This study therefore suggests among others that, effort should be made on reducing cost of production in order to maximize profit.

  18. Risk handling in the power market

    International Nuclear Information System (INIS)

    Lindbaek-Nilsen, Brian; Strand, Krister

    2004-01-01

    In 1991 a new energy law was implemented in Norway. The Norwegian power market became deregulated and the law created a basis for a market based trade of electrical energy in Norway. In 1998 Nord Pool was founded and this has gradually become a common Nordic power exchange. The power market is characterized by large price fluctuations periodically. The reason is a variable resource supply and demand. In important factor in this context is that electricity cannot be stored after production. The large variations in supply and demand lead to large market risks for the involved parties. The derivate markets make hedging possible and thereby make it possible for the parties to guard against risks connected to future prices. This study presents risk elements in the power market, supplier and consumer sectors in view of the deregulation. In addition the present and future risk management is studied in with focus upon power suppliers that offer one-year fixed price contracts to the consumers. A study focuses on how a supplier may secure a certain volume of power in a year against price fluctuations in the market. As a basis the term market at Nord Pool is used and based on historical facts an estimated price for a supplier to eliminate the price risk for the volume is stipulated. This price is called the hedging cost and is compared with the offer a selection of power suppliers have for their one-year fixed price contracts. The possible difference between the two prices may be regarded as the power supplier risk price (premium) by offering these one-year fixed price contracts to the end consumers. The most surprising in the results in this study is how close the hedging costs are to the prices on the fixed price contracts. This means that compared to the hedging costs in the study the power suppliers operated with a small margin. Another tendency is that the fixed price contracts do not seem to have a high correlation to the hedging costs even if some companies follow the

  19. Trends in College Pricing, 2011. Trends in Higher Education Series

    Science.gov (United States)

    Baum, Sandy; Ma, Jennifer

    2011-01-01

    The published prices on which the analysis in "Trends in College Pricing" is based come from data reported by institutions on the College Board's Annual Survey of Colleges. This survey, which is distributed to nearly 4,000 postsecondary institutions across the country, collects a wealth of data on enrollment, admission, degrees and majors,…

  20. Regulation of Pharmaceutical Prices

    DEFF Research Database (Denmark)

    Kaiser, Ulrich; Mendez, Susan J.; Rønde, Thomas

    On April 1, 2005, Denmark changed the way references prices, a main determinant of reimbursements for pharmaceutical purchases, are calculated. The previous reference prices, which were based on average EU prices, were substituted to minimum domestic prices. Novel to the literature, we estimate...... the joint eects of this reform on prices and quantities. Prices decreased more than 26 percent due to the reform, which reduced patient and government expenditures by 3.0 percent and 5.6 percent, respectively, and producer revenues by 5.0 percent. The prices of expensive products decreased more than...

  1. On cost-informed pricing and customer value: a resource-advantage perspective on industrial innovation pricing practices

    OpenAIRE

    Ingenbleek, Paul; Debruyne, Marion; Frambach, Ruud T.

    2001-01-01

    By empirically testing a framework of pricing strategies and their determinants in an industrial setting, Noble and Gruca (1999a) help to overcome the lack of empirical validation of pricing theory. In a commentary to the article, Cressman (1999) (1) expresses worries about the high percentage of firms that engages in cost-based pricing; (2) raises a definition question on value-based pricing; and (3) stresses that empirical pricing literature does not provide ideas on successful pricing prac...

  2. How Do Drug Prices Respond to a Change from External to Internal Reference Pricing?

    DEFF Research Database (Denmark)

    Kaiser, Ulrich; Mendez, Susan J.

    (where they are based on the cheapest domestic substitute). We analyze three therapeutic classes with different treatment durations and show that the reform led to substantial price decreases for our lifelong treatment and to less substantial price reductions for our medium duration treatment while we do......We study the effects of a change in the way patient reimbursements are calculated on the prices of pharmaceuticals using quasi-experimental data for Denmark which switched from external (where reimbursements are based on prices of similar products in foreign countries) to internal reference pricing...

  3. Optimizing Human Diet Problem Based on Price and Taste Using

    Directory of Open Access Journals (Sweden)

    Hossein EGHBALI

    2012-07-01

    Full Text Available Low price and good taste of foods are regarded as two major factors for optimal human nutrition. Due to price fluctuations and taste diversity, these two factors cannot be certainly and determinately evaluated. This problem must be viewed from another perspective because of the uncertainty about the amount of nutrients per unit of foods and also diversity of people’s daily needs to receive them.This paper discusses human diet problem in fuzzy environment. The approach deals with multi-objective fuzzy linear programming problem using a fuzzy programming technique for its solution. By prescribing a diet merely based on crisp data, some ofthe realities are neglected. For the same reason, we dealt with human diet problem through fuzzy approach. Results indicated uncertainty about factors of nutrition diet -including taste and price, amount of nutrients and their intake- would affect diet quality, making the proposed diet more realistic.

  4. PRICE AND PRICING STRATEGIES

    OpenAIRE

    SUCIU Titus

    2013-01-01

    In individual companies, price is one significant factor in achieving marketing success. In many purchase situations, price can be of great importance to customers. Marketers must establish pricing strategies that are compatible with the rest of the marketing mix. Management should decide whether to charge the same price to all similar buyers of identical quantities of a product (a one-price strategy) or to set different prices (a flexible price strategy). Many organizations, especially retai...

  5. Early evaluation and value-based pricing of regenerative medicine technologies.

    Science.gov (United States)

    Koerber, Florian; Rolauffs, Bernd; Rogowski, Wolf

    2013-11-01

    Since the first pioneering scientists explored the potential of using human cells for therapeutic purposes the branch of regenerative medicine has evolved to become a mature industry. The focus has switched from 'what can be done' to 'what can be commercialized'. Timely health economic evaluation supports successful marketing by establishing the value of a product from a healthcare system perspective. This article reports results from a research project on early health economic evaluation in collaboration with developers, clinicians and manufacturers. We present an approach to determine an early value-based price for a new treatment of cartilage defects of the knee from the area of regenerative medicine. Examples of using evaluation results for the purpose of business planning, market entry, preparing the coverage decision and managed entry are discussed.

  6. Commodity futures markets: are they an effective price risk management tool for the European wheat supply chain?

    Directory of Open Access Journals (Sweden)

    Cesar Revoredo-Giha

    2013-12-01

    Full Text Available The instability of commodity prices and the hypothesis that speculative behaviour was one of its causes has brought renewed interest in futures markets. The paper analyses the European wheat futures markets (feed and milling and the Chicago Board of Trade’s wheat contract as a comparison. Although the main purpose of the paper is to analyse whether futures markets are still useful for hedging (considering the demands from different market participants, implicitly this can be seen as testing whether the increasing presence of speculation has made futures markets divorced from physical markets. The results indicate that hedging with futures markets is still a viable alternative for dealing with price risk. This is particularly true in short period hedges (e.g. merchants and processors, where the basis seems to have been affected by the observed price instability.

  7. Exploration of approaches to adjusting brand-name drug prices in Mainland of China: based on comparison and analysis of some brand-name drug prices of Mainland and Taiwan, China.

    Science.gov (United States)

    Weng, Geng; Han, Sheng; Pu, Run; Pan, Wynn H T; Shi, Luwen

    2014-01-01

    Under the circumstance of the New Medical Reform in Mainland of China, lowering drug prices has become an approach to relieving increase of medical expenses, and lowering brand-name medication price is a key strategy. This study, by comparing and analyzing brand-name medication prices between Mainland of China and Taiwan, explores how to adjust brand-name medication prices in Mainland of China in the consideration of the drug administrative strategies in Taiwan. By selecting brand-name drug with generic name and dose types matched in Mainland and Taiwan, calculate the average unit price and standard deviation and test it with the paired t-test. In the mean time, drug administrative strategies between Mainland and Taiwan are also compared systematically. Among the 70 brand-name medications with generic names and matched dose types, 54 are at higher prices in Mainland of China than Taiwan, which is statistically significant in t-test. Also, among the 47 medications with all of matched generic names, dose types, and manufacturing enterprises, 38 are at higher prices in Mainland than Taiwan, and the gap is also statistically significant in t-test. In Mainland of China, brand-name medication took cost-plus pricing and price-based price adjustment, while in Taiwan, brand-name medication took internal and external reference pricing and market-based price adjustment. Brand-name drug prices were higher in Mainland of China than in Taiwan. The adjustment strategies of drug prices are scientific in Taiwan and are worth reference by Mainland of China.

  8. Real-time Pricing in Power Markets

    DEFF Research Database (Denmark)

    Boom, Anette; Schwenen, Sebastian

    We examine welfare e ects of real-time pricing in electricity markets. Before stochastic energy demand is known, competitive retailers contract with nal consumers who exogenously do not have real-time meters. After demand is realized, two electricity generators compete in a uniform price auction...... to satisfy demand from retailers acting on behalf of subscribed customers and from consumers with real-time meters. Increasing the number of consumers on real-time pricing does not always increase welfare since risk-averse consumers dislike uncertain and high prices arising through market power...

  9. Real-time Pricing in Power Markets

    DEFF Research Database (Denmark)

    Boom, Anette; Schwenen, Sebastian

    We examine welfare eects of real-time pricing in electricity markets. Before stochastic energy demand is known, competitive retailers contract with nal consumers who exogenously do not have real-time meters. After demand is realized, two electricity generators compete in a uniform price auction...... to satisfy demand from retailers acting on behalf of subscribed customers and from consumers with real-time meters. Increasing the number of consumers on real-time pricing does not always increase welfare since risk-averse consumers dislike uncertain and high prices arising through market power...

  10. Customizing Prices in Online Markets

    OpenAIRE

    Werner Reinartz

    2002-01-01

    Dynamic pricing is the dynamic adjustment of prices to consumers depending on the value these customers attribute to a good. Underlying the concept of dynamic pricing is what marketers call price customization. Price customization is the charging of different prices to end consumers based on a discriminatory variable. Internet technology will serve as a great enabling tool for making dynamic pricing accessible to many industries.

  11. Multivariate EMD-Based Modeling and Forecasting of Crude Oil Price

    Directory of Open Access Journals (Sweden)

    Kaijian He

    2016-04-01

    Full Text Available Recent empirical studies reveal evidence of the co-existence of heterogeneous data characteristics distinguishable by time scale in the movement crude oil prices. In this paper we propose a new multivariate Empirical Mode Decomposition (EMD-based model to take advantage of these heterogeneous characteristics of the price movement and model them in the crude oil markets. Empirical studies in benchmark crude oil markets confirm that more diverse heterogeneous data characteristics can be revealed and modeled in the projected time delayed domain. The proposed model demonstrates the superior performance compared to the benchmark models.

  12. Trading network predicts stock price.

    Science.gov (United States)

    Sun, Xiao-Qian; Shen, Hua-Wei; Cheng, Xue-Qi

    2014-01-16

    Stock price prediction is an important and challenging problem for studying financial markets. Existing studies are mainly based on the time series of stock price or the operation performance of listed company. In this paper, we propose to predict stock price based on investors' trading behavior. For each stock, we characterize the daily trading relationship among its investors using a trading network. We then classify the nodes of trading network into three roles according to their connectivity pattern. Strong Granger causality is found between stock price and trading relationship indices, i.e., the fraction of trading relationship among nodes with different roles. We further predict stock price by incorporating these trading relationship indices into a neural network based on time series of stock price. Experimental results on 51 stocks in two Chinese Stock Exchanges demonstrate the accuracy of stock price prediction is significantly improved by the inclusion of trading relationship indices.

  13. STS pricing policy

    Science.gov (United States)

    Lee, C. M.; Stone, B.

    1982-01-01

    In 1977 NASA published Shuttle Reimbursement Policies for Civil U.S. Government, DOD and Commercial and Foreign Users. These policies were based on the principle of total cost recovery over a period of time with a fixed flat price for initial period to time to enhance transition. This fixed period was to be followed with annual adjustments thereafter, NASA is establishing a new price for 1986 and beyond. In order to recover costs, that price must be higher than the initial fixed price through FY 1985. NASA intends to remain competitive. Competitive posture includes not only price, but other factors such as assured launch, reliability, and unique services. NASA's pricing policy considers all these factors.

  14. Regulation of Pharmaceutical Prices

    DEFF Research Database (Denmark)

    Kaiser, Ulrich; Méndez, Susan J.; Rønde, Thomas

    2014-01-01

    Reference prices constitute a main determinant of patient health care reimbursement in many countries. We study the effects of a change from an "external" (based on a basket of prices in other countries) to an "internal" (based on comparable domestic products) reference price system. We find...... that while our estimated consumer compensating variation is small, the reform led to substantial reductions in list and reference prices as well as co-payments, and to sizeable decreases in overall producer revenues, health care expenditures, and co-payments. These effects differ markedly between branded...

  15. Regulation of Pharmaceutical Prices

    DEFF Research Database (Denmark)

    Kaiser, Ulrich; Méndez, Susan J.; Rønde, Thomas

    Reference prices constitute a main determinant of patient health care reimbursement in many countries. We study the effects of a change from an "external" (based on a basket of prices in other countries) to an "internal" (based on comparable domestic products) reference price system. We find...... that while our estimated consumer compensating variation is small, the reform led to substantial reductions in list and reference prices as well as co-payments, and to sizeable decreases in overall producer revenues, health care expenditures, and co-payments. These effects differ markedly between branded...

  16. Strategic Generation with Conjectured Transmission Price Responses in a Mixed Transmission Pricing System. Part 2. Application

    International Nuclear Information System (INIS)

    Wals, A.F.; Hobbs, B.F.; Rijkers, F.A.M.

    2004-05-01

    The conjectured transmission price response model presented in the first of this two-paper series considers the expectations of oligopolistic generators regarding how demands for transmission services affect the prices of those services. Here, the model is applied to northwest Europe, simulating a mixed transmission pricing system including export fees, a path-based auction system for between-country interfaces, and implicit congestion-based pricing of internal country constraints. The path-based system does not give credit for counterflows when calculating export capability. The application shows that this no-netting policy can exacerbate the economic inefficiencies caused by oligopolistic pricing by generators. The application also illustrates the effects of different generator conjectures regarding rival supply responses and transmission prices. If generators anticipate that their increased demand for transmission services will increase transmission prices, then competitive intensity diminishes and energy prices rise. In the example here, the effect of this anticipation is to double the price increase that results from oligopolistic (Cournot) competition among generators

  17. Rising prices squeeze gas marketer

    Energy Technology Data Exchange (ETDEWEB)

    Lunan, D.

    2000-06-19

    Apollo Gas, a Toronto-based gas marketer, is considering options to enhance unit holder value, including sale of its 21,000 gas supply contracts, just weeks after it was forced out of the Alberta market by rising gas prices. Although the company had reported first quarter revenues of more than $15 million and earnings through that period of about $2.1 million, increases of 33 per cent and 38 per cent respectively over the same period in 1999, the company is resigned to the fact that such performance markers are not likely to be reached again in the foreseeable future, hence the decision to sell. About 95 per cent of Apollo's current transportation service volumes are matched to existing fixed-price supply contract which are due to expire in November 2000. After that, it is about 75 per cent matched for the balance of the term of its customer contracts (mostly five years). This means that the company is exposed to market prices that are likely to continue to increase. If this prediction holds true, Apollo would be forced to purchase the unhedged volumes of gas it needs to service its customers in the spot market at prices higher than prices the company is charging to its customers.

  18. Rising prices squeeze gas marketer

    International Nuclear Information System (INIS)

    Lunan, D.

    2000-01-01

    Apollo Gas, a Toronto-based gas marketer, is considering options to enhance unit holder value, including sale of its 21,000 gas supply contracts, just weeks after it was forced out of the Alberta market by rising gas prices. Although the company had reported first quarter revenues of more than $15 million and earnings through that period of about $2.1 million, increases of 33 per cent and 38 per cent respectively over the same period in 1999, the company is resigned to the fact that such performance markers are not likely to be reached again in the foreseeable future, hence the decision to sell. About 95 per cent of Apollo's current transportation service volumes are matched to existing fixed-price supply contract which are due to expire in November 2000. After that, it is about 75 per cent matched for the balance of the term of its customer contracts (mostly five years). This means that the company is exposed to market prices that are likely to continue to increase. If this prediction holds true, Apollo would be forced to purchase the unhedged volumes of gas it needs to service its customers in the spot market at prices higher than prices the company is charging to its customers

  19. Risk profile modification of energy projects

    International Nuclear Information System (INIS)

    Larson, B.O.

    1992-01-01

    The commodity futures and swaps markets are thought by some to be the invention of speculators, the bane of the oil business, or possibly something confined to finance departments of major corporations. In actuality, they should be considered more as insurance and can be utilized at the project level to modify the risk profile of a property. In this context, an increased familiarity with them can be useful for an engineer. This paper reports that either futures or swaps can be used to guarantee or modify product prices, an accomplishment very difficult or impossible to duplicate through other means, particularly with such integrity. Participation in futures or swaps does not necessarily maximize cashflow or present worth, it can either guarantee the price, put a minimum price in place or offer a combination of the above. A project or company can be protected for several years from downside price risk using swaps. Not being subject to market price swings substantially reduces the risk of the venture. This can be particularly important if lower product prices would cause unacceptable cashflows or net incomes

  20. Structural change and forecasting long-run energy prices

    International Nuclear Information System (INIS)

    Bernard, J.T.; Khalaf, L.

    2004-01-01

    Fluctuating energy prices have a significant impact on the economies of industrialized nations. A recent study has shown a strong non-linear relationship between changes in oil prices and growth in gross domestic product (GDP). In order to forecast the behaviour of energy prices, a complete model must take into account domestic and international supply and demand conditions, market regulations, technological advances and geopolitics. In 1999, Pindyck suggested that for long-term forecasting, a simple model should be adopted where prices grow in real terms and at a fixed rate. This paper tests the statistical significance of Pindyck's suggested class of econometric equations that model the behaviour of long-run real energy prices. The models assume mean-reverting prices with continuous and random changes in their level and trend. They are estimated using Kalman filtering. The authors used simulation-based procedures to address the issue of non-standard test statistics and nuisance parameters. Results were reported for a standard Monte Carlo test and a maximized Monte Carlo test. Results shown statistically significant instabilities for coal and natural gas prices, but not for crude oil prices. Various models were differentiated using out-of-sample forecasting exercises. 25 refs., 3 tabs

  1. 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)

  2. Price performance following stock's IPO in different price limit systems

    Science.gov (United States)

    Wu, Ting; Wang, Yue; Li, Ming-Xia

    2018-01-01

    An IPO burst occurred in China's stock markets in 2015, while price limit trading rules usually help to reduce the short-term trading mania on individual stocks. It is interesting to make clear the function of the price limits after IPOs. We firstly make a statistical analysis based on all the IPO stocks listed from 1990 to 2015. A high dependency exists between the activities in stock's IPO and various market environment. We also focus on the price dynamics in the first 40 trading days after the stock listed. We find that price limit system will delay the price movement, especially for the up-trend movements, which may lead to longer continuous price limit hits. Similar to our previous work, many results such as ;W; shape can be also observed in the future daily return after the price limit open. At last, we find most IPO measures show evident correlations with the following price limit hits. IPO stocks with lower first-day turnover and earning per share will be followed with a longer continuous price limit hits and lower future daily return under the newest trading rules, which give us a good way to estimate the occurrence of price limit hits and the following price dynamics. Our analysis provides a better understanding of the price dynamics after IPO events and offers potential practical values for investors.

  3. Operationalizing value-based pricing of medicines : a taxonomy of approaches.

    Science.gov (United States)

    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

  4. Value-Based Pricing and Reimbursement in Personalised Healthcare: Introduction to the Basic Health Economics.

    Science.gov (United States)

    Garrison, Louis P; Towse, Adrian

    2017-09-04

    'Value-based' outcomes, pricing, and reimbursement are widely discussed as health sector reforms these days. In this paper, we discuss their meaning and relationship in the context of personalized healthcare, defined as receipt of care conditional on the results of a biomarker-based diagnostic test. We address the question: "What kinds of pricing and reimbursement models should be applied in personalized healthcare?" The simple answer is that competing innovators and technology adopters should have incentives that promote long-term dynamic efficiency. We argue that-to meet this social objective of optimal innovation in personalized healthcare-payers, as agents of their plan participants, should aim to send clear signals to their suppliers about what they value. We begin by revisiting the concept of value from an economic perspective, and argue that a broader concept of value is needed in the context of personalized healthcare. We discuss the market for personalized healthcare and the interplay between price and reimbursement. We close by emphasizing the potential barrier posed by inflexible or cost-based reimbursement systems, especially for biomarker-based predictive tests, and how these personalized technologies have global public goods characteristics that require global value-based differential pricing to achieve dynamic efficiency in terms of the optimal rate of innovation and adoption.

  5. Risk-profile modification of energy projects

    International Nuclear Information System (INIS)

    Larson, B.O.

    1992-01-01

    The commodity futures and swaps markets are thought to be the invention of speculators, the bane of the oil business, or possibly something confined to finance departments of major corporations. In actuality, they should be considered more as an insurance vehicle and can be used at the project level to modify the risk profile of a property. In this context, an increased familiarity with them can be useful for an engineer. Either futures of swaps can be used to guarantee or modify product prices. While this does not necessarily maximize cash flow or present worth, it can protect a project or company for several years from downside price risk, thereby reducing the risk of the venture. This can be particularly important if lower product prices would cause unacceptable cash flows or net incomes. This paper reports that reducing risk by limiting downside price exposure could alter budgeting decisions, allow continued or expanded operations of a particular property, or increase debt capacity

  6. Prices and Price Setting

    NARCIS (Netherlands)

    R.P. Faber (Riemer)

    2010-01-01

    textabstractThis thesis studies price data and tries to unravel the underlying economic processes of why firms have chosen these prices. It focuses on three aspects of price setting. First, it studies whether the existence of a suggested price has a coordinating effect on the prices of firms.

  7. Modeling the stock price returns volatility using GARCH(1,1) in some Indonesia stock prices

    Science.gov (United States)

    Awalludin, S. A.; Ulfah, S.; Soro, S.

    2018-01-01

    In the financial field, volatility is one of the key variables to make an appropriate decision. Moreover, modeling volatility is needed in derivative pricing, risk management, and portfolio management. For this reason, this study presented a widely used volatility model so-called GARCH(1,1) for estimating the volatility of daily returns of stock prices of Indonesia from July 2007 to September 2015. The returns can be obtained from stock price by differencing log of the price from one day to the next. Parameters of the model were estimated by Maximum Likelihood Estimation. After obtaining the volatility, natural cubic spline was employed to study the behaviour of the volatility over the period. The result shows that GARCH(1,1) indicate evidence of volatility clustering in the returns of some Indonesia stock prices.

  8. A cost-based empirical model of the aggregate price determination for the Turkish economy: A multivariate cointegration approach

    Directory of Open Access Journals (Sweden)

    Zeren Fatma

    2010-01-01

    Full Text Available This paper tries to examine the long run relationships between the aggregate consumer prices and some cost-based components for the Turkish economy. Based on a simple economic model of the macro-scaled price formation, multivariate cointegration techniques have been applied to test whether the real data support the a priori model construction. The results reveal that all of the factors, related to the price determination, have a positive impact on the consumer prices as expected. We find that the most significant component contributing to the price setting is the nominal exchange rate depreciation. We also cannot reject the linear homogeneity of the sum of all the price data as to the domestic inflation. The paper concludes that the Turkish consumer prices have in fact a strong cost-push component that contributes to the aggregate pricing.

  9. DIREM's prices. Prices and margins of petroleum products in France and in the European Union

    International Nuclear Information System (INIS)

    2002-08-01

    This report presents in a series of graphs and tables the prices and margins of petroleum products in France and in the European Union (EU) according to the data compiled by the Direction of energy and mineral resources (DIREM) of the French general direction of energy and raw materials (DGEMP, Ministry of economy, finances and industry): evolution of crude prices, evolution of Rotterdam's quotation of petroleum products, raw margin of brent refining, French fuel prices (automotive and domestic fuels, evolution, comparison with EU and Rotterdam's prices), comparison with prices in other European countries, evolution of average retail prices in France. (J.S.)

  10. The effects of recent volatility in international petroleum markets on Canadian wholesale and retail gasoline prices : a report prepared for the Competition Bureau

    International Nuclear Information System (INIS)

    Roseman, F.

    2005-03-01

    This report addresses concern over high retail prices of gasoline and the low margins earned on gasoline sales in the Greater Toronto Area and in Ottawa, Ontario. The focus of this report was to understand reasons behind fluctuating prices, and to ascertain whether or not escalations in price were in fact anti-competitive acts that the Competition Bureau would have authority to take action over. Information requests were made by the author to all principal petroleum companies and to importers and marketers of gasoline. Detailed information on pricing was provided. Issues of supply and demand were responsible for spikes in prices. Information on petroleum refining and retailing of gasoline was reviewed, as well as information provided from dialogue and shareholder reports. Average refinery and retail margins in Ontario were discussed. It was concluded that fluctuating prices are the result of the petroleum industry's struggle to meet high demand. Any unscheduled maintenance or unanticipated increases in demand resulted in temporary shortfalls in supply, which led to higher prices. Exports were not a factor in increases in retail prices. In addition, domestic supply and the high cost of meeting environmental regulations with regard to sulphur levels in gasoline and diesel may have also played a role. It was also suggested that prices in Canada reflect overall pricing trends in the United States. tabs., figs

  11. 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

  12. Petroleum price

    International Nuclear Information System (INIS)

    Maurice, J.

    2001-01-01

    The oil market is the most volatile of all markets, with the exception of the Nasdaq. It is also the biggest commodity market in the world. Therefore one cannot avoid forecasting oil prices, nor can one expect to avoid the forecasting errors that have been made in the past. In his report, Joel Maurice draws a distinction between the short term and the medium-long term in analysing the outlook for oil prices. (author)

  13. 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

  14. Bitumen still seen as potential anchor on crude prices

    International Nuclear Information System (INIS)

    Jaremko, G.

    2001-01-01

    Researchers at the Canadian Energy Research Institute have released a 225-page technical report on downstream oil-refining markets entitled 'Markets for Canadian bitumen-based feedstock'. The report claims that 22 of 27 refineries that buy western Canadian production are not planning to improve their ability to process heavy grades of oil any time soon. Instead, investments will focus on complying with environmental requirements for reformulated refined products, particularly to eliminate sulphur impurities in gasoline and diesel fuel. Another focus will be to upgrade raw bitumen output into synthetic crude. It was shown that over the next 7 years, Canadian and U.S. oil markets have the potential to increase growth in bitumen production from 244,000 barrels per day (bpd) to 555,000 bpd. The potential for additional, upgraded synthetic crude oil is even greater, from 450,000 bpd to 806,000 bpd. Increasing the output of synthetic crude oil is considered to be an effective way to reduce North America's reliance on imported oil. Untreated, discount-priced bitumen can replace diminishing Canadian and U.S. production of refinery-ready light oil. The report projects that a US$1-per-barrel discount for Canadian heavy oil would generate sales of 140,000 barrels daily. The effect of a $1 discount would be almost twice as great for synthetic crude oil. Heavy oil sales rely greatly on maintaining a discount off prices for light grades. A $1-per-barrel premium could destroy demand for bitumen-based blends. Moody's Investors Service claims that deep discounting reflects global market conditions, risking Canadian production of heavy oil grades and seasonal lows in demand for bitumen as a raw material for asphalt

  15. Cost and Price Collaboration

    Science.gov (United States)

    2016-04-30

    described below which relies on questionnaires administered to subject matter experts in both cost analysis and price analysis to determine the value of...additional reports or data that the price analyst used in determining their final negotiated position. The cost analyst section of the questionnaire...an analysis at the individual element level rather than at a total price level to determine the major changes from the awarded contract to the new

  16. Saving-Based Asset Pricing

    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...

  17. GENERAL RISKS AND UNCERTAINTIES OF REPORTING AND MANAGEMENT REPORTING RISKS

    Directory of Open Access Journals (Sweden)

    CAMELIA I. LUNGU

    2011-04-01

    Full Text Available Purpose: Highlighting risks and uncertainties reporting based on a literature review research. Objectives: The delimitation of risk management models and uncertainties in fundamental research. Research method: Fundamental research study directed to identify the relevant risks’ models presented in entities’ financial statements. Uncertainty is one of the fundamental coordinates of our world. As showed J.K. Galbraith (1978, the world now lives under the age of uncertainty. Moreover, we can say that contemporary society development could be achieved by taking decisions under uncertainty, though, risks. Growing concern for the study of uncertainty, its effects and precautions led to the rather recent emergence of a new science, science of hazards (les cindyniques - l.fr. (Kenvern, 1991. Current analysis of risk are dominated by Beck’s (1992 notion that a risk society now exists whereby we have become more concerned about our impact upon nature than the impact of nature upon us. Clearly, risk permeates most aspects of corporate but also of regular life decision-making and few can predict with any precision the future. The risk is almost always a major variable in real-world corporate decision-making, and managers that ignore it are in a real peril. In these circumstances, a possible answer is assuming financial discipline with an appropriate system of incentives.

  18. The value of innovation under value-based pricing

    Science.gov (United States)

    Moreno, Santiago G.; Ray, Joshua A.

    2016-01-01

    Objective The role of cost-effectiveness analysis (CEA) in incentivizing innovation is controversial. Critics of CEA argue that its use for pricing purposes disregards the ‘value of innovation’ reflected in new drug development, whereas supporters of CEA highlight that the value of innovation is already accounted for. Our objective in this article is to outline the limitations of the conventional CEA approach, while proposing an alternative method of evaluation that captures the value of innovation more accurately. Method The adoption of a new drug benefits present and future patients (with cost implications) for as long as the drug is part of clinical practice. Incidence patients and off-patent prices are identified as two key missing features preventing the conventional CEA approach from capturing 1) benefit to future patients and 2) future savings from off-patent prices. The proposed CEA approach incorporates these two features to derive the total lifetime value of an innovative drug (i.e., the value of innovation). Results The conventional CEA approach tends to underestimate the value of innovative drugs by disregarding the benefit to future patients and savings from off-patent prices. As a result, innovative drugs are underpriced, only allowing manufacturers to capture approximately 15% of the total value of innovation during the patent protection period. In addition to including the incidence population and off-patent price, the alternative approach proposes pricing new drugs by first negotiating the share of value of innovation to be appropriated by the manufacturer (>15%?) and payer (price that satisfies this condition. Conclusion We argue for a modification to the conventional CEA approach that integrates the total lifetime value of innovative drugs into CEA, by taking into account off-patent pricing and future patients. The proposed approach derives a price that allows manufacturers to capture an agreed share of this value, thereby incentivizing

  19. The value of innovation under value-based pricing.

    Science.gov (United States)

    Moreno, Santiago G; Ray, Joshua A

    2016-01-01

    The role of cost-effectiveness analysis (CEA) in incentivizing innovation is controversial. Critics of CEA argue that its use for pricing purposes disregards the 'value of innovation' reflected in new drug development, whereas supporters of CEA highlight that the value of innovation is already accounted for. Our objective in this article is to outline the limitations of the conventional CEA approach, while proposing an alternative method of evaluation that captures the value of innovation more accurately. The adoption of a new drug benefits present and future patients (with cost implications) for as long as the drug is part of clinical practice. Incidence patients and off-patent prices are identified as two key missing features preventing the conventional CEA approach from capturing 1) benefit to future patients and 2) future savings from off-patent prices. The proposed CEA approach incorporates these two features to derive the total lifetime value of an innovative drug (i.e., the value of innovation). The conventional CEA approach tends to underestimate the value of innovative drugs by disregarding the benefit to future patients and savings from off-patent prices. As a result, innovative drugs are underpriced, only allowing manufacturers to capture approximately 15% of the total value of innovation during the patent protection period. In addition to including the incidence population and off-patent price, the alternative approach proposes pricing new drugs by first negotiating the share of value of innovation to be appropriated by the manufacturer (>15%?) and payer (price that satisfies this condition. We argue for a modification to the conventional CEA approach that integrates the total lifetime value of innovative drugs into CEA, by taking into account off-patent pricing and future patients. The proposed approach derives a price that allows manufacturers to capture an agreed share of this value, thereby incentivizing innovation, while supporting health

  20. Reporting risk, producing prejudice: how news reporting on obesity shapes attitudes about health risk, policy, and prejudice.

    Science.gov (United States)

    Saguy, Abigail C; Frederick, David; Gruys, Kjerstin

    2014-06-01

    News reporting on research studies may influence attitudes about health risk, support for public health policies, or attitudes towards people labeled as unhealthy or at risk for disease. Across five experiments (N = 2123) we examined how different news framings of obesity research influence these attitudes. We exposed participants to either a control condition, a news report on a study portraying obesity as a public health crisis, a news report on a study suggesting that obesity may not be as much of a problem as previously thought, or an article discussing weight-based discrimination. Compared to controls, exposure to the public health crisis article did not increase perception of obesity-related health risks but did significantly increase the expression of antifat prejudice in four out of seven comparisons. Across studies, compared to controls, participants who read an article about weight-based discrimination were less likely to agree that overweight constitutes a public health crisis or to support various obesity policies. Effects of exposure to an article questioning the health risks associated with overweight and obesity were mixed. These findings suggest that news reports on the "obesity epidemic" - and, by extension, on public health crises commonly blamed on personal behavior - may unintentionally activate prejudice. Copyright © 2014 Elsevier Ltd. All rights reserved.