WorldWideScience

Sample records for volatile wholesale prices

  1. Estimating the volatility of electricity prices: The case of the England and Wales wholesale electricity market

    International Nuclear Information System (INIS)

    Tashpulatov, Sherzod N.

    2013-01-01

    Price fluctuations that partially comove with demand are a specific feature inherent to liberalized electricity markets. The regulatory authority in Great Britain, however, believed that sometimes electricity prices were significantly higher than what was expected and, therefore, introduced price-cap regulation and divestment series. In this study, I analyze how the introduced institutional changes and regulatory reforms affected the dynamics of daily electricity prices in the England and Wales wholesale electricity market during 1990–2001. This research finds that the introduction of price-cap regulation did achieve the goal of lowering the price level at the cost of higher price volatility. Later, the first series of divestments is found to be successful at lowering price volatility, which however happens at the cost of a higher price level. Finally, this study also documents that the second series of divestments was more successful at lowering both the price level and volatility. - Author-Highlights: • The impact of regulation on the dynamics of electricity prices is examined. • Price-cap regulation has decreased the level at the cost of higher volatility. • The first series of divestments has reversed the trade-off. • The reversed trade-off is explained as an indication of tacit collusion. • The second series of divestments is found generally successful

  2. New evidence on the asymmetry in gasoline price: volatility versus margin?

    International Nuclear Information System (INIS)

    Abosedra, S.; Radchenko, S.

    2006-01-01

    This paper examines recent evidence on the role that gasoline margins and volatility play in the asymmetric response of gasoline prices to changes in oil prices at different stages of distribution process. In a regression model with margins, we find that margins are statistically significant in explaining asymmetry between crude oil and spot gasoline prices, spot gasoline prices and wholesale gasoline prices, and wholesale gasoline prices and retail prices. In a regression model with input volatility, we find evidence that volatility is responsible for asymmetry between wholesale gasoline prices and retail gasoline prices. When both, gasoline margins and gasoline volatility are included in the regression, we find evidence supporting margins, the search theory, volatility, the oligopolistic coordination theory and an explanation of asymmetry. (author)

  3. Stochastic price modeling of high volatility, mean-reverting, spike-prone commodities: The Australian wholesale spot electricity market

    International Nuclear Information System (INIS)

    Higgs, Helen; Worthington, Andrew

    2008-01-01

    It is commonly known that wholesale spot electricity markets exhibit high price volatility, strong mean-reversion and frequent extreme price spikes. This paper employs a basic stochastic model, a mean-reverting model and a regime-switching model to capture these features in the Australian national electricity market (NEM), comprising the interconnected markets of New South Wales, Queensland, South Australia and Victoria. Daily spot prices from 1 January 1999 to 31 December 2004 are employed. The results show that the regime-switching model outperforms the basic stochastic and mean-reverting models. Electricity prices are also found to exhibit stronger mean-reversion after a price spike than in the normal period, and price volatility is more than fourteen times higher in spike periods than in normal periods. The probability of a spike on any given day ranges between 5.16% in NSW and 9.44% in Victoria

  4. PRICING ELECTRIC POWER UNDER A HYBRID WHOLESALE MECHANISM: EVALUATING THE TURKISH ELECTRICITY MARKET

    Directory of Open Access Journals (Sweden)

    Hatice Karahan

    2013-01-01

    Full Text Available During the restructuring process, Turkish electricity sector has gone through significant changes both in wholesale and retail markets. In this framework, the Market Financial Settlement Mechanism established for handling market imbalances has become a spot market in time. So, it can be claimed that the wholesale electricity market in Turkey is a hybrid mechanism composed of bilateral contracts and the balancing market. On the other hand, the main target of liberalization program is providing consumers with affordable electric power. Hence, this study attempts to explore the link between retail tariffs for ineligible consumers and prices in the two wholesale mechanisms, in the period after the launch of the day-ahead market. Findings suggest that regulated wholesale prices are more effective in the determination of end-user prices, whereas unregulated ones might have a price reduction effect in case the free market dominates. However, the volatility in spot market prices implies that the sector would better continue with the hybrid mechanism for quite some time.

  5. 47 CFR 51.607 - Wholesale pricing standard.

    Science.gov (United States)

    2010-10-01

    ... 47 Telecommunication 3 2010-10-01 2010-10-01 false Wholesale pricing standard. 51.607 Section 51.607 Telecommunication FEDERAL COMMUNICATIONS COMMISSION (CONTINUED) COMMON CARRIER SERVICES (CONTINUED) INTERCONNECTION Resale § 51.607 Wholesale pricing standard. The wholesale rate that an incumbent LEC may charge...

  6. Fluctuation traits of Litchi wholesale price in China

    Science.gov (United States)

    Yan, F. F.; Qi, W. E.; Ouyang, X.

    2017-07-01

    This paper chose the wholesale price of litchi as research object based on the daily data of 11 main sales markets in China -- Beijing, Chengdu, Guangzhou, Hefei, Jiaxing, Nanjing, Shanghai, Shenyang, Changsha, Zhengzhou and Chongqing from April 1, 2012 to September 30, 2016. After analyzing the fluctuation characteristics with BP filter method and H-P filter method, and the fluctuation trends of litchi wholesale price in China obtained by BP filter are roughly consistent with the trends obtained by H-P filter. The main conclusions are as follows: there is strong cyclicality in the fluctuation of litchi wholesale price; the period of fluctuations of litchi wholesale prices are not repeatable; litchi wholesale price fluctuates asymmetrically in one fluctuation cycle.

  7. Assessing the impact of forward trading, retail liberalization, and white certificates on the Italian wholesale electricity prices

    International Nuclear Information System (INIS)

    Petrella, Andrea; Sapio, Alessandro

    2012-01-01

    How do policy actions affect the dynamics of deregulated electricity prices? We investigate this issue in the context of the Italian Power Exchange (IPEX), using data on the daily average day-ahead price (PUN) between April 2004 and December 2008. Estimates of baseline time series models (SARMAX and SARMAX-EGARCH) and their forecasting performances suggest that the trend in natural gas prices, market power indicators, deterministic weekly patterns, perceived temperatures, persistence in conditional volatility, and the inverse leverage effect are essential features of the PUN dynamics. We then augment the best-performing models with dummies that account for changes in the market architecture, such as the introduction of contracts for differences (CfDs) to support renewables, trading of white certificates for energy efficiency, and the demand-side liberalization. The findings show that changes in the market architecture affected both the PUN level and its volatility. Specifically, wholesale electricity prices and volatility appear to have decreased upon the introduction of CfDs, only to be pushed upwards following the start of white certificates' trading and retail liberalization. Moreover, after controlling for reforms the inverse leverage effect vanishes, and the persistence in volatility is lower than in the baseline estimates. - Highlights: ► We model Italian wholesale power prices using SARMAX and EGARCH models. ► We assess the price impact of contracts for differences, retail liberalization, white certificates. ► The electricity price level and its volatility have increased after the adoption of contracts for differences. ► Following retail liberalization and the start of white certificates trading, the price level and its volatility have increased.

  8. Wholesale pricing policies for energy in developing countries

    International Nuclear Information System (INIS)

    de Lucia, R. J.

    1990-01-01

    This chapter focuses on wholesale pricing policies with particular emphasis on domestic fuels. There are several characteristics of the supply system that affect wholesale pricing: Source of the fuel (imported or domestic); Characteristics of the fuel (tradable or non-tradable); Nature of the supply companies (public or private and, if private, local or multinational); and stage of development of the resource. Each of these characteristics has implications for how the components of the efficient wholesale price of fuels are determined. (author). 13 refs., 3 figs., 5 tabs

  9. Strategic wholesale pricing for an incumbent supplier facing with a competitive counterpart.

    Science.gov (United States)

    Sun, Jianwu

    2014-01-01

    We introduce a wholesale pricing strategy for an incumbent supplier facing with a competitive counterpart. We propose a profit function which considers both the present loss and future loss from a wholesale price and then study the optimal wholesale prices for different objectives about this profit function for the incumbent supplier. First, we achieve an optimal wholesale price for the incumbent supplier to maximize his expected profit. Then, to reduce the risk originating from the fluctuation in the competitive supplier's wholesale price, we integrate the conditional value-at-risk (CVaR) measure in financial risk management into this study and derive an optimal wholesale price to maximize CVaR about profit for the incumbent supplier. Besides, the properties of the two optimal wholesale prices are discussed. Finally, some management insights are suggested for the incumbent supplier in a competitive setting.

  10. Strategic Wholesale Pricing for an Incumbent Supplier Facing with a Competitive Counterpart

    Directory of Open Access Journals (Sweden)

    Jianwu Sun

    2014-01-01

    Full Text Available We introduce a wholesale pricing strategy for an incumbent supplier facing with a competitive counterpart. We propose a profit function which considers both the present loss and future loss from a wholesale price and then study the optimal wholesale prices for different objectives about this profit function for the incumbent supplier. First, we achieve an optimal wholesale price for the incumbent supplier to maximize his expected profit. Then, to reduce the risk originating from the fluctuation in the competitive supplier’s wholesale price, we integrate the conditional value-at-risk (CVaR measure in financial risk management into this study and derive an optimal wholesale price to maximize CVaR about profit for the incumbent supplier. Besides, the properties of the two optimal wholesale prices are discussed. Finally, some management insights are suggested for the incumbent supplier in a competitive setting.

  11. Testing causal relationships between wholesale electricity prices and primary energy prices

    International Nuclear Information System (INIS)

    Nakajima, Tadahiro; Hamori, Shigeyuki

    2013-01-01

    We apply the lag-augmented vector autoregression technique to test the Granger-causal relationships among wholesale electricity prices, natural gas prices, and crude oil prices. In addition, by adopting a cross-correlation function approach, we test not only the causality in mean but also the causality in variance between the variables. The results of tests using both techniques show that gas prices Granger-cause electricity prices in mean. We find no Granger-causality in variance among these variables. -- Highlights: •We test the Granger-causality among wholesale electricity and primary energy prices. •We test not only the causality in mean but also the causality in variance. •The results show that gas prices Granger-cause electricity prices in mean. •We find no Granger-causality in variance among these variables

  12. Strategic Wholesale Pricing for an Incumbent Supplier Facing with a Competitive Counterpart

    OpenAIRE

    Sun, Jianwu

    2014-01-01

    We introduce a wholesale pricing strategy for an incumbent supplier facing with a competitive counterpart. We propose a profit function which considers both the present loss and future loss from a wholesale price and then study the optimal wholesale prices for different objectives about this profit function for the incumbent supplier. First, we achieve an optimal wholesale price for the incumbent supplier to maximize his expected profit. Then, to reduce the risk originating from the fluctuati...

  13. Retail Price Levels and Concentrations of Wholesalers, Retailers and Hypermarkets

    OpenAIRE

    Asplund, Marcus; Friberg, Richard

    1999-01-01

    This paper examines retail grocery price levels with a very large (unbalanced) panel of stores that operate in well-defined local markets. We explain price variation across grocery retailers by the concentration of wholesalers and retailers, and the market share of hypermarkets (and control for a number of store and region specific factors). Our most important result is that concentration at the wholesale level is an important determinant of retail prices. The price effect of retail concentra...

  14. Market structure and price adjustment in the U.S. wholesale gasoline markets

    International Nuclear Information System (INIS)

    Oladunjoye, Olusegun

    2008-01-01

    The issue of sticky prices in U.S. wholesale gasoline market is re-examined allowing for the effect of market structure due to increased market concentration caused by mergers, acquisitions and joint ventures which started in the late 1990s in the U.S. oil industry. I investigate the effects of market structure on the pattern of price adjustment based on the notion that increased market concentration leads to downward price stickiness and asymmetric short run price adjustment in the transmission of crude price changes to wholesale gasoline price. I find that market concentration has an insignificant asymmetric effect on the speed of price adjustment but a significant asymmetric effect on short run price adjustments in the response of wholesale gasoline prices to crude price shocks in three U.S. wholesale markets. Furthermore, the signs on the coefficients of market concentration effects on price dynamics in the models support the assertion that increased market concentration leads to downward price stickiness in only one of the three markets examined. Overall, the results indicate that market structure does not have a strong effect on the dynamics of price adjustment. (author)

  15. Competition compliant wholesale electricity prices. An examination of the regulation on the integrity and transparency of wholesale energy market

    International Nuclear Information System (INIS)

    Konar, Selma

    2015-01-01

    The development of wholesale electricity prices showed in recent years a very fluctuating course. The starting point for ensuring competitive compliant electricity prices have uniform rules that establish effective competition in the overall wholesale electricity, ensure greater transparency in the market and prohibit market abuse influence exercised on the wholesale price. The REMIT regulation creates a first union-law rules to this standardized specifications. The volume first examines the transparency, competitiveness, and supervisory structures in the wholesale electricity before legislating a regulation. It is clear, as the transparency and supervisory structures should be designed from the wholesale electricity ideally. On this basis, the work is dealing with the REMIT regulation. The author works out to market participants relevant notification and publication requirements, the follow-up demands on the company as well as the now existing prohibitions on market abuse and the related penalty catalog and analyze the supervisory structures newly created in the wholesale electricity. Here, the work also identified the weaknesses of the regulation and shows suitable solution approaches. [de

  16. Theoretical Model of Pricing Behavior on the Polish Wholesale Fuel Market

    Directory of Open Access Journals (Sweden)

    Bejger Sylwester

    2016-12-01

    Full Text Available In this paper, we constructed a theoretical model of strategic pricing behavior of the players in a Polish wholesale fuel market. This model is consistent with the characteristics of the industry, the wholesale market, and the players. The model is based on the standard methodology of repeated games with a built-in adjustment to a focal price, which resembles the Import Parity Pricing (IPP mechanism. From the equilibrium of the game, we conclude that the focal price policy implies a parallel pricing strategic behavior on the market.

  17. 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.)

  18. Industrial customer response to wholesale prices in the restructured Texas electricity market

    International Nuclear Information System (INIS)

    Zarnikau, J.

    2007-01-01

    This paper estimates the demand responsiveness of the 20 largest industrial energy consumers in the Houston area to wholesale price signals in the restructured Electric Reliability Council of Texas (ERCOT) market. Statistical analysis of their load patterns employing a Symmetric Generalized McFadden cost function model suggests that ERCOT achieved limited success in establishing a market that facilitates demand response from the largest industrial energy consumers in the Houston area to wholesale price signals in its second year of retail competition. The muted price response is at least partially because energy consumers who opt to offer their ''interruptibility'' to the market as an ancillary service are constrained in their ability to respond to wholesale energy prices. (author)

  19. Oil industry consolidation and refined product prices. Evidence from US wholesale gasoline terminals

    International Nuclear Information System (INIS)

    Kendix, Michael; Walls, W.D.

    2010-01-01

    Our objective in this paper is to quantify the impact of petroleum industry consolidation on refined product prices, controlling for other important factors that could also impact prices. Our empirical analysis focuses on the US petroleum refining industry using data on industry consolidation and wholesale gasoline prices collected over the interval 2000-2008. We match refinery units to wholesale city-terminal gasoline markets, and then estimate pooled cross-section time-series regressions to quantify the impact of petroleum industry consolidation on wholesale gasoline prices at city-specific terminals. The results of the empirical analysis of mergers are mixed, showing that some petroleum industry mergers resulted in statistically significant increases in refined product prices; others resulted in statistically significant declines and still others had no statistical impact at all. Our analysis of the effects of measures of market concentration - one at the level of city-specific wholesale terminals and another at the level of regional spot markets - found evidence that less concentrated markets are associated with lower price levels. (author)

  20. Fruit and Vegetable Prices and Perceptions in Mercalaspalmas Wholesale Market

    Directory of Open Access Journals (Sweden)

    Santiago Rodríguez-Feijoó

    2015-01-01

    Full Text Available This paper studies the behavior of fruit and vegetable prices in a wholesale market. Its aims are: a to examine price behavior and changes; and b to identify statistically significant factors in the perception of prices and to quantify the effect of these factors on the market price. For this purpose, daily data were obtained on modal prices at the Mercalaspalmas wholesale market from 2006 until mid-2010. The results obtained show there is a similar degree of flexibility in price increases and decreases, and show the product to be the determinant element in setting prices. There was found to be a strong degree of price permanence, in the sense that changes take place slowly and following a lag. The following significant factors were identified in the perception of prices: the length of time a price has remained unchanged in the market; the period during which a product has been absent from the market; the quantities traded at a given price; and the index of market prices. However, the quantitative effect of this body of factors on the perceived price is very limited.

  1. Strategic Wholesale Pricing and Commonality Strategy in a Supply Chain with Quality Segmentation

    Directory of Open Access Journals (Sweden)

    Tiantian Xu

    2015-01-01

    Full Text Available We develop two game models of a one-supplier and one-manufacturer supply chain to investigate the supplier’s strategic wholesale pricing decision and the manufacturer’s commonality strategy. The manufacturer has three commonality strategies for the high-end and low-end products: common high-quality component, common low-quality component, and dedicated components. We consider both wholesale price first scenario and commonality strategy first scenario. Under the wholesale price first scenario, we identify the range of each commonality strategy and find that (i the common low-quality component strategy is harmful to the supplier; (ii if the quality of low-quality component and the unit production cost of high-quality component are sufficiently low, the supplier induces the common high-quality component strategy by strategically decreasing the unit wholesale price of high-quality component, while if they are sufficiently high, the supplier induces the dedicated components strategy by increasing the unit wholesale price of high-quality component and decreasing that of low-quality one. Under the commonality strategy first scenario, the common low-quality component strategy may exist. By comparing the two scenarios, we find that (i if the unit production cost of low-quality component is medium, the equilibrium outcomes under both scenarios are identical; (ii there exists a first-mover advantage for the two players.

  2. PRICE-RESPONSE ASYMMETRY IN DOMESTIC WHOLESALE AND RETAIL DIESEL 2 MARKETS IN PERU

    OpenAIRE

    Arturo Vasquez Cordano

    2005-01-01

    This paper tests and confirms the hypothesis that retail and wholesale Diesel 2 prices respond more quickly to increases than to decreases in wholesale and crude oil prices, respectively. Among the possible sources of this asymmetry, we find: production / inventory adjustment lags, refining adjustments, market power of some sellers, searching costs, among others. By analyzing price transmission at different points of the distribution chain, this paper attempts to shed light on these theories ...

  3. A history of prices in Canada, 1840-1871: a new wholesale price index

    OpenAIRE

    Donald G. Paterson; Ronald A. Shearer

    2003-01-01

    We present a new monthly wholesale price index for Canada, 1840-71, comparing fluctuations in the Canadian macroeconomy with fluctuations in similar U.S. and British indexes. Canadian prices move through distinct phases: the 1840s rise in prices and the decline in the depression of 1848-49; the mid-century economic boom and the 1857 depression; U.S. Civil War inflation and apparent Canadian price insulation through a flexible exchange rate created by U.S. withdrawal from gold; and the non-inf...

  4. Gas pricing in Europe. Pt. 1. Wholesale markets

    International Nuclear Information System (INIS)

    Donath, R.

    1996-01-01

    The article investigates gas pricing in the European procurement market and the wholesale markets of the most important EU consumer markets. It demonstrates that value-oriented pricing principles override cost-oriented pricing principles. For one thing, and independently of pricing principles, two- or three-part demand price systems or basic price systems are common. For another, the frequently encountered opportunities for the differentiation of prices show that as long as there is merely substitution competition instead of direct competition, gas suppliers have a certain degree of freedom in fixing their prices. By contrast, the introduction of direct competition in Great Britain has reduced suppliers' individual price fixing margins, because short-term supply and demand variations in the now created spot market are decisive for gas pricing. (orig.) [de

  5. Impacts of High Variable Renewable Energy Futures on Wholesale Electricity Prices, and on Electric-Sector Decision Making

    Energy Technology Data Exchange (ETDEWEB)

    Seel, Joachim [Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States); Mills, Andrew D. [Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States); Wiser, Ryan H. [Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States); Deb, Sidart [LCG Consulting, Los Altos, CA (United States); Asokkumar, Aarthi [LCG Consulting, Los Altos, CA (United States); Hassanzadeh, Mohammad [LCG Consulting, Los Altos, CA (United States); Aarabali, Amirsaman [LCG Consulting, Los Altos, CA (United States)

    2018-05-11

    Increasing penetrations of variable renewable energy (VRE) can affect wholesale electricity price patterns and make them meaningfully different from past, traditional price patterns. Many long-lasting decisions for supply- and demand-side electricity infrastructure and programs are based on historical observations or assume a business-as-usual future with low shares of VRE. Our motivating question is whether certain electric-sector decisions that are made based on assumptions reflecting low VRE levels will still achieve their intended objective in a high VRE future. We qualitatively describe how various decisions may change with higher shares of VRE and outline an analytical framework for quantitatively evaluating the impacts of VRE on long-lasting decisions. We then present results from detailed electricity market simulations with capacity expansion and unit commitment models for multiple regions of the U.S. for low and high VRE futures. We find a general decrease in average annual hourly wholesale energy prices with more VRE penetration, increased price volatility and frequency of very low-priced hours, and changing diurnal price patterns. Ancillary service prices rise substantially and peak net-load hours with high capacity value are shifted increasingly into the evening, particularly for high solar futures. While in this report we only highlight qualitatively the possible impact of these altered price patterns on other demand- and supply-side electric sector decisions, the core set of electricity market prices derived here provides a foundation for later planned quantitative evaluations of these decisions in low and high VRE futures.

  6. Electricity wholesale market prices in Europe: Convergence?

    International Nuclear Information System (INIS)

    Zachmann, Georg

    2008-01-01

    This paper tests the hypothesis that the ongoing restructuring process in the European electricity sector has led to a common European market for electricity. Based on a Principal Component Analysis (PCA) of wholesale electricity prices in 2002-2006, we reject the assumption of full market integration. For several pairs of countries, the weaker hypothesis of (bilateral) convergence is accepted based on unit root tests (KPSS and ADF) and a convergence test based on filtered pairwise price relations. This indicates that the efforts to develop a single European market for electricity were so far only partially successful. We show that the daily auction prices of scarce cross-border transmission capacities are insufficient to explain the persistence of international price differentials. Empirically, our findings confirm the insufficiency of explicit capacity auctions as stated in the theoretical literature. (author)

  7. Price formation and market power in the German wholesale electricity market in 2006

    International Nuclear Information System (INIS)

    Weigt, Hannes; Hirschhausen, Christian von

    2008-01-01

    From 2002 to 2006, German wholesale electricity prices more than doubled. The purpose of this paper is to estimate the price components in 2006 in order to identify the factors responsible for the increase. We develop a competitive benchmark model, taking into account power plant characteristics, fuel and CO 2 -allowance prices, wind generation, cross-border flows, unit commitment, and startup conditions, to estimate the difference between generation costs and observed market prices for every hour in 2006. We find that prices at the German wholesale market (European Energy Exchange - EEX) are above competitive levels for a large fraction of the observations. We verify the robustness of the results by carrying out sensitivity analyses. We also address the issue of revenue adequacy. (author)

  8. Estimating the volatility of electricity prices: the case of the England and Wales wholesale electricity market

    Czech Academy of Sciences Publication Activity Database

    Tashpulatov, Sherzod N.

    2013-01-01

    Roč. 60, September (2013), s. 81-90 ISSN 0301-4215 Institutional support: RVO:67985998 Keywords : conditional volatility * electricity prices * regulation Subject RIV: AH - Economics Impact factor: 2.696, year: 2013

  9. Estimating the volatility of electricity prices: the case of the England and Wales wholesale electricity market

    Czech Academy of Sciences Publication Activity Database

    Tashpulatov, Sherzod N.

    2013-01-01

    Roč. 60, September (2013), s. 81-90 ISSN 0301-4215 Institutional support: PRVOUK-P23 Keywords : conditional volatility * electricity prices * regulation Subject RIV: AH - Economics Impact factor: 2.696, year: 2013

  10. Aggregate industrial energy consumer response to wholesale prices in the restructured Texas electricity market

    International Nuclear Information System (INIS)

    Zarnikau, Jay; Hallett, Ian

    2008-01-01

    The aggregate response of consumers to wholesale price signals is very limited in the restructured Electric Reliability Council of Texas (ERCOT) market. An overall average own-price elasticity of demand of - 0.000008 for industrial energy consumers served at transmission voltage is estimated using a Symmetric Generalized McFadden cost function model. To date, ERCOT has sought to promote demand response to price signals without reliance on 'stand alone' demand response programs, but with a market structure that is designed to facilitate economic demand response. This very limited responsiveness to wholesale price signals may prove problematic in light of policy decisions to pursue an 'energy only' resource adequacy mechanism for ERCOT. (author)

  11. 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.

  12. 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)

  13. Effect of oil price on Nigeria’s food price volatility

    Directory of Open Access Journals (Sweden)

    Ijeoma C. Nwoko

    2016-12-01

    Full Text Available This study examines the effect of oil price on the volatility of food price in Nigeria. It specifically considers the long-run, short-run, and causal relationship between these variables. Annual data on oil price and individual prices of maize, rice, sorghum, soya beans, and wheat spanning from 2000 to 2013 were used. The price volatility for each crop was obtained using Generalized Autoregressive Conditional Heteroskedascity (GARCH (1, 1 model. Our measure of oil price is the Refiner acquisition cost of imported crude oil. The Augmented Dickey–Fuller and Phillip–Perron unit root tests show that all the variables are integrated of order one, I (1. Therefore, we use the Johansen co-integration test to examine the long-run relationship. Our results show that there is no long-run relationship between oil price and any of the individual food price volatility. Thus, we implement a VAR instead of a VECM to investigate the short-run relationship. The VAR model result revealed a positive and significant short-run relationship between oil price and each of the selected food price volatility with exception of that of rice and wheat price volatility. These results were further confirmed by the impulse response functions. The Granger causality test result indicates a unidirectional causality from oil price to maize, soya bean, and sorghum price volatilities but does not show such relationship for rice and wheat price volatilities. We draw some policy implications of these findings.

  14. The impact of intermittently renewable energy on Italian wholesale electricity prices: Additional benefits or additional costs?

    International Nuclear Information System (INIS)

    Gullì, Francesco; Balbo, Antonio Lo

    2015-01-01

    Most studies of the literature find that the development of renewable energy sources determines a decrease in the wholesale prices. Some authors use this finding to state that the current subsidies for renewable technologies cannot be considered as excessive. By carrying out a hybrid analysis (both simulation and ex-post empirical analyses) of the case of photovoltaic energy in Italy, this article demonstrates that this result cannot be generalised. Under market power, an increase in PV production can provide benefits in terms of a wholesale price decrease only beyond a specific threshold and especially if combined with other effects. Otherwise, it is likely that PV development could imply an increase in prices. Therefore, on the one hand, caution is necessary when using the estimated change in wholesale prices to evaluate the net cost for consumers of the supporting policies for renewables: either the simulation-based models or the full empirical analyses may be misleading. On the other hand, if 'decarbonisation' is the main objective, the energy policies should be designed in order to assure a deep and balanced penetration of the clean technologies, regardless of their estimated transitory impact on wholesale prices (and in the meantime reviewing the organisation of power markets). -- Highlights: •We use a hybrid analysis based on a combined approach (both simulation and ex-post empirical analyses). •There is a critical threshold of RES penetration within which prices may increase. •Price increases are more likely with PV rather than with wind power. •Either the simulation models or the full empirical analyses may be misleading. •Caution is necessary when using the results of these analyses for policy decisions

  15. Oil price and food price volatility dynamics: The case of Nigeria

    Directory of Open Access Journals (Sweden)

    Ijeoma C. Nwoko

    2016-12-01

    Full Text Available This study examines the long and short run relationships between oil price and food price volatility as well as the causal link between them. The study used annual food price volatility index from FAO from 2000 to 2013 and crude oil price from U.S. Energy Information and Administration (EIA from 2000 to 2013. The Johansen and Jesulius co-integration test revealed that there is a long run relationship between oil price and domestic food price volatility. The vector error correction model indicated a positive and significant short run relationship between oil price and food price volatility. The Granger causality test revealed a unidirectional causality with causality running from oil price to food price volatility but not vice versa. It is recommended that policies and interventions that will help reduce uncertainty about food prices such as improved market information, trade policies and investment in research and development among others should be encouraged. Also to reduce the effect of oil price shock, it is recommended that government should subsidise pump price of refined oil, seek alternative sources of energy and there should be less dependence on oil for fertilizer production.

  16. Volatility in energy prices

    International Nuclear Information System (INIS)

    Duffie, D.

    1999-01-01

    This chapter with 58 references reviews the modelling and empirical behaviour of volatility in energy prices. Constant volatility and stochastic volatility are discussed. Markovian models of stochastic volatility are described and the different classes of Markovian stochastic volatility model are examined including auto-regressive volatility, option implied and forecasted volatility, Garch volatility, Egarch volatility, multivariate Garch volatility, and stochastic volatility and dynamic hedging policies. Other volatility models and option hedging are considered. The performance of several stochastic volatility models as applied to heating oil, light oil, natural gas, electricity and light crude oil are compared

  17. The prerequisites for effective competition in restructured wholesale electricity markets

    International Nuclear Information System (INIS)

    Haas, R.; Auer, H.

    2006-01-01

    This paper argues that effective competition in reformed wholesale electricity markets can only be achieved if the following six prerequisites are met: (1) separation of the grid from generation and supply; (2) wholesale price deregulation; (3) sufficient transmission capacity for a competitive market and non-discriminating grid access; (4) excess generation capacity developed by a large number of competing generators; (5) an equilibrium relationship between short-term spot markets and the long-term financial instruments that marketers use to manage spot-market price volatility; (6) an essentially hands-off government policy that encompasses reduced oversight and privatization. The absence of any one of the first five conditions may result in an oligopoly or monopoly market whose economic performance does not meet the efficiency standards of a competently managed regulated electrical utility. (author)

  18. American option pricing with stochastic volatility processes

    Directory of Open Access Journals (Sweden)

    Ping LI

    2017-12-01

    Full Text Available In order to solve the problem of option pricing more perfectly, the option pricing problem with Heston stochastic volatility model is considered. The optimal implementation boundary of American option and the conditions for its early execution are analyzed and discussed. In view of the fact that there is no analytical American option pricing formula, through the space discretization parameters, the stochastic partial differential equation satisfied by American options with Heston stochastic volatility is transformed into the corresponding differential equations, and then using high order compact finite difference method, numerical solutions are obtained for the option price. The numerical experiments are carried out to verify the theoretical results and simulation. The two kinds of optimal exercise boundaries under the conditions of the constant volatility and the stochastic volatility are compared, and the results show that the optimal exercise boundary also has stochastic volatility. Under the setting of parameters, the behavior and the nature of volatility are analyzed, the volatility curve is simulated, the calculation results of high order compact difference method are compared, and the numerical option solution is obtained, so that the method is verified. The research result provides reference for solving the problems of option pricing under stochastic volatility such as multiple underlying asset option pricing and barrier option pricing.

  19. 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

  20. Distributional effects of the Australian Renewable Energy Target (RET) through wholesale and retail electricity price impacts

    International Nuclear Information System (INIS)

    Cludius, Johanna; Forrest, Sam; MacGill, Iain

    2014-01-01

    The Australian Renewable Energy Target (RET) has spurred significant investment in renewable electricity generation, notably wind power, over the past decade. This paper considers distributional implications of the RET for different energy users. Using time-series regression, we show that the increasing amount of wind energy has placed considerable downward pressure on wholesale electricity prices through the so-called merit order effect. On the other hand, RET costs are passed on to consumers in the form of retail electricity price premiums. Our findings highlight likely significant redistributive transfers between different energy user classes under current RET arrangements. In particular, some energy-intensive industries are benefiting from lower wholesale electricity prices whilst being largely exempted from contributing to the costs of the scheme. By contrast, many households are paying significant RET pass through costs whilst not necessarily benefiting from lower wholesale prices. A more equitable distribution of RET costs and benefits could be achieved by reviewing the scope and extent of industry exemptions and ensuring that methodologies to estimate wholesale price components in regulated electricity tariffs reflect more closely actual market conditions. More generally, these findings support the growing international appreciation that policy makers need to integrate distributional assessments into policy design and implementation. - Highlights: • The Australian RET has complex yet important distributional impacts on different energy users. • Likely wealth transfers from residential and small business consumers to large energy-intensive industry. • Merit order effects of wind likely overcompensate exempt industry for contribution to RET costs. • RET costs for households could be reduced if merit order effects were adequately passed through. • Need for distributional impact assessments when designing and implementing clean energy policy

  1. The long-run equilibrium impact of intermittent renewables on wholesale electricity prices

    OpenAIRE

    Newbery, D.

    2016-01-01

    High levels of low variable cost intermittent renewables lower wholesale electricity prices, and the depression of these prices could legitimately be recovered from consumers, preferably through capacity payments. Given that renewables are frequently subsidized for their learning benefits and carbon reduction, this paper asks what part of these subsidies should be recovered from final consumers. In long-run equilibrium, renewables have no impact on the number of hours peaking capacity runs, a...

  2. Electricity market price volatility: The case of Ontario

    International Nuclear Information System (INIS)

    Zareipour, Hamidreza; Bhattacharya, Kankar; Canizares, Claudio A.

    2007-01-01

    Price volatility analysis has been reported in the literature for most competitive electricity markets around the world. However, no studies have been published yet that quantify price volatility in the Ontario electricity market, which is the focus of the present paper. In this paper, a comparative volatility analysis is conducted for the Ontario market and its neighboring electricity markets. Volatility indices are developed based on historical volatility and price velocity concepts, previously applied to other electricity market prices, and employed in the present work. The analysis is carried out in two scenarios: in the first scenario, the volatility indices are determined for the entire price time series. In the second scenario, the price time series are broken up into 24 time series for each of the 24 h and volatility indices are calculated for each specific hour separately. The volatility indices are also applied to the locational marginal prices of several pricing points in the New England, New York, and PJM electricity markets. The outcomes reveal that price volatility is significantly higher in Ontario than the three studied neighboring electricity markets. Furthermore, comparison of the results of this study with similar findings previously published for 15 other electricity markets demonstrates that the Ontario electricity market is one of the most volatile electricity markets world-wide. This high volatility is argued to be associated with the fact that Ontario is a single-settlement, real-time market

  3. The impact of Australian ETS news on wholesale spot electricity prices. An exploratory analysis

    International Nuclear Information System (INIS)

    Chevallier, Julien

    2010-01-01

    This article investigates the impact of news concerning the development of emissions trading in Australia (such as the Carbon Pollution Reduction Scheme (CPRS)) on wholesale electricity spot prices, by using a database of 117 news announcements from December 1, 1998 to July 1, 2009. As power producers constitute the bulk of the participants of the proposed Australian emissions trading scheme, regulatory changes (about allocation, banking, coverage, targets) are indeed likely to affect the five interconnected electricity markets in New South Wales, Queensland, South Australia, Victoria, and Tasmania. We assess these effects with an ARMA(1,1)-GARCH(1,1) model, where daily electricity spot prices are regressed against exogenous variables in the mean and variance equations. This article constitutes the first empirical analysis of Australian ETS news effects on electricity wholesale spot prices. Our results show two asymmetric types of news effects, depending on their information content. (author)

  4. The impact of Australian ETS news on wholesale spot electricity prices. An exploratory analysis

    Energy Technology Data Exchange (ETDEWEB)

    Chevallier, Julien [Universite Paris Dauphine, Place du Marechal de Lattre de Tassigny, 75775 Paris Cedex 16 (France)

    2010-08-15

    This article investigates the impact of news concerning the development of emissions trading in Australia (such as the Carbon Pollution Reduction Scheme (CPRS)) on wholesale electricity spot prices, by using a database of 117 news announcements from December 1, 1998 to July 1, 2009. As power producers constitute the bulk of the participants of the proposed Australian emissions trading scheme, regulatory changes (about allocation, banking, coverage, targets) are indeed likely to affect the five interconnected electricity markets in New South Wales, Queensland, South Australia, Victoria, and Tasmania. We assess these effects with an ARMA(1,1)-GARCH(1,1) model, where daily electricity spot prices are regressed against exogenous variables in the mean and variance equations. This article constitutes the first empirical analysis of Australian ETS news effects on electricity wholesale spot prices. Our results show two asymmetric types of news effects, depending on their information content. (author)

  5. The impact of Australian ETS news on wholesale spot electricity prices: An exploratory analysis

    Energy Technology Data Exchange (ETDEWEB)

    Chevallier, Julien, E-mail: julien.chevallier@dauphine.f [Universite Paris Dauphine, Place du Marechal de Lattre de Tassigny, 75775 Paris Cedex 16 (France)

    2010-08-15

    This article investigates the impact of news concerning the development of emissions trading in Australia (such as the Carbon Pollution Reduction Scheme (CPRS)) on wholesale electricity spot prices, by using a database of 117 news announcements from December 1, 1998 to July 1, 2009. As power producers constitute the bulk of the participants of the proposed Australian emissions trading scheme, regulatory changes (about allocation, banking, coverage, targets) are indeed likely to affect the five interconnected electricity markets in New South Wales, Queensland, South Australia, Victoria, and Tasmania. We assess these effects with an ARMA(1,1)-GARCH(1,1) model, where daily electricity spot prices are regressed against exogenous variables in the mean and variance equations. This article constitutes the first empirical analysis of Australian ETS news effects on electricity wholesale spot prices. Our results show two asymmetric types of news effects, depending on their information content.

  6. Hedging electricity price volatility using nuclear power

    International Nuclear Information System (INIS)

    Mari, Carlo

    2014-01-01

    Highlights: • Nuclear power is an important asset to reduce the volatility of electricity prices. • Unpredictability of fossil fuels and carbon prices makes power prices very volatile. • The dynamics of fossil fuels and carbon prices is described by Brownian motions. • LCOE values, volatilities and correlations are obtained via Monte Carlo simulations. • Optimal portfolios of generating technologies are get using a mean–variance approach. - Abstract: The analysis presented in this paper aims to put in some evidence the role of nuclear power as hedging asset against the volatility of electricity prices. The unpredictability of natural gas and coal market prices as well as the uncertainty in environmental policies may affect power generating costs, thus enhancing volatility in electricity market prices. The nuclear option, allowing to generate electricity without carbon emissions, offers the possibility to reduce the volatility of electricity prices through optimal diversification of power generating technologies. This paper provides a methodological scheme to plan well diversified “portfolios” of generating capacity that minimize the electricity price risk induced by random movements of fossil fuels market prices and by unpredictable fluctuations of carbon credits prices. The analysis is developed within a stochastic environment in which the dynamics of fuel prices as well as the dynamics of carbon credits prices is assumed to evolve in time according to well defined Brownian processes. Starting from market data and using Monte Carlo techniques to simulate generating cost values, the hedging argument is developed by selecting optimal portfolio of power generating technologies using a mean–variance approach

  7. Pricing Volatility of Stock Returns with Volatile and Persistent Components

    DEFF Research Database (Denmark)

    Zhu, Jie

    In this paper a two-component volatility model based on the component's first moment is introduced to describe the dynamic of speculative return volatility. The two components capture the volatile and persistent part of volatility respectively. Then the model is applied to 10 Asia-Pacific stock m......, a positive or risk-premium effect exists between return and the volatile component, yet the persistent component is not significantly priced for return dynamic process....... markets. Their in-mean effects on return are also tested. The empirical results show that the persistent component accounts much more for volatility dynamic process than the volatile component. However the volatile component is found to be a significant pricing factor of asset returns for most markets...

  8. Modelling price and volatility inter-relationships in the Australian wholesale spot electricity markets

    International Nuclear Information System (INIS)

    Higgs, Helen

    2009-01-01

    This paper examines the inter-relationships of wholesale spot electricity prices among the four regional electricity markets in the Australian National Electricity Market (NEM): namely, New South Wales, Queensland, South Australia and Victoria using the constant conditional correlation and Tse and Tsui's (Tse, Y.K., Tsui, A.K.C., 2002. A multivariate generalised autoregressive conditional heteroscedasticity model with time-varying correlations. Journal of Business and Economic Statistics 20 (3), 351-362.) and Engle's (Engle, R., 2002. Dynamic conditional correlation: a sample class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business and Economic Statistics 20 (3), 339-350.) dynamic conditional correlation multivariate GARCH models. Tse and Tsui's (Tse, Y.K., Tsui, A.K.C., 2002. A multivariate generalised autoregressive conditional heteroscedasticity model with time-varying correlations. Journal of Business and Economic Statistics 20 (3), 351-362.) dynamic conditional correlation multivariate GARCH model which takes account of the Student t specification produces the best results. At the univariate GARCH(1,1) level, the mean equations indicate the presence of positive own mean spillovers in all four markets and little evidence of mean spillovers from the other lagged markets. In the dynamic conditional correlation equation, the highest conditional correlations are evident between the well-connected markets indicating the presence of strong interdependence between these markets with weaker interdependence between the not so well-interconnected markets. (author)

  9. The merit-order effect in the Italian power market: The impact of solar and wind generation on national wholesale electricity prices

    International Nuclear Information System (INIS)

    Clò, Stefano; Cataldi, Alessandra; Zoppoli, Pietro

    2015-01-01

    Italy promoted one of the most generous renewable support schemes worldwide which resulted in a high increase of solar power generation. We analyze the Italian day-ahead wholesale electricity market, finding empirical evidence of the merit-order effect. Over the period 2005–2013 an increase of 1 GWh in the hourly average of daily production from solar and wind sources has, on average, reduced wholesale electricity prices by respectively 2.3€/MWh and 4.2€/MWh and has amplified their volatility. The impact on prices has decreased over time in correspondence with the increase in solar and wind electricity production. We estimate that, over the period 2009–2013, solar production has generated higher monetary savings than wind production, mainly because the former is more prominent than the latter. However, in the solar case, monetary savings are not sufficient to compensate the cost of the related supporting schemes which are entirely internalized within end-user tariffs, causing a reduction of the consumer surplus, while the opposite occurs in the case of wind. - Highlights: • We find empirical evidence of the merit-order effect in the Italian market. • 1 GWh from solar and wind (hourly average) reduces prices by 2.3€/MW and 4.2€/MWh. • The impact of RES on price has declined as RES production has increased. • Monetary savings from solar production do not compensate the cost of the incentives. • Monetary savings from wind production are higher than the cost of the incentives

  10. Pricing Volatility of Stock Returns with Volatile and Persistent Components

    DEFF Research Database (Denmark)

    Zhu, Jie

    2009-01-01

    This paper introduces a two-component volatility model based on first moments of both components to describe the dynamics of speculative return volatility. The two components capture the volatile and the persistent part of volatility, respectively. The model is applied to 10 Asia-Pacific stock ma...... markets. A positive or risk-premium effect exists between the return and the volatile component, yet the persistent component is not significantly priced for the return dynamic process....... markets. Their in-mean effects on returns are tested. The empirical results show that the persistent component is much more important for the volatility dynamic process than is the volatile component. However, the volatile component is found to be a significant pricing factor of asset returns for most...

  11. Retrospective modeling of the merit-order effect on wholesale electricity prices from distributed photovoltaic generation in the Australian National Electricity Market

    International Nuclear Information System (INIS)

    McConnell, Dylan; Hearps, Patrick; Eales, Dominic; Sandiford, Mike; Dunn, Rebecca; Wright, Matthew; Bateman, Lachlan

    2013-01-01

    In electricity markets that use a merit order dispatch system, generation capacity is ranked by the price that it is bid into the market. Demand is then met by dispatching electricity according to this rank, from the lowest to the highest bid. The last capacity dispatched sets the price received by all generation, ensuring the lowest cost provision of electricity. A consequence of this system is that significant deployments of low marginal cost electricity generators, including renewables, can reduce the spot price of electricity. In Australia, this prospect has been recognized in concern expressed by some coal-fired generators that delivering too much renewable generation would reduce wholesale electricity prices. In this analysis we calculate the likely reduction of wholesale prices through this merit order effect on the Australian National Electricity Market. We calculate that for 5 GW of capacity, comparable to the present per capita installation of photovoltaics in Germany, the reduction in wholesale prices would have been worth in excess of A$1.8 billion over 2009 and 2010, all other factors being equal. We explore the implications of our findings for feed-in tariff policies, and find that they could deliver savings to consumers, contrary to prevailing criticisms that they are a regressive form of taxation. - Highlights: ► We model the impact of photovoltaic generation on the Australian electricity market. ► Photovoltaic generation depresses electricity prices, particularly in summer peaks. ► Over the course of a year, the depression in wholesale prices has significant value. ► 5 GW of solar generation would have saved $1.8 billion in the market over two years. ► The depression of wholesale prices offsets the cost of support mechanisms

  12. Detecting Chaos from Agricultural Product Price Time Series

    Directory of Open Access Journals (Sweden)

    Xin Su

    2014-12-01

    Full Text Available Analysis of the characteristics of agricultural product price volatility and trend forecasting are necessary to formulate and implement agricultural price control policies. Taking wholesale cabbage prices as an example, a multiple test methodology has been adopted to identify the nonlinearity, fractality, and chaos of the data. The approaches used include the R/S analysis, the BDS test, the power spectra, the recurrence plot, the largest Lyapunov exponent, the Kolmogorov entropy, and the correlation dimension. The results show that there is chaos in agricultural wholesale price data, which provides a good theoretical basis for selecting reasonable forecasting models as prediction techniques based on chaos theory can be applied to forecasting agricultural prices.

  13. Oil price volatility and the asymmetric response of gasoline prices to oil price increases and decreases

    International Nuclear Information System (INIS)

    Radchenko, S.

    2005-01-01

    This paper analyzes the effect of volatility in oil prices on the degree of asymmetry in the response of gasoline prices to oil price increases and decreases. Several time series measures of the asymmetry between the responses of gasoline prices to oil price increases and decreases and several measures of the oil price volatility are constructed. In all models, the degree of asymmetry in gasoline prices declines with an increase in oil price volatility. The results support the oligopolistic coordination theory as a likely explanation of the observed asymmetry and are not consistent with the standard search theory and the search theory with Bayesian updating. (author)

  14. The volatility of stock market prices.

    Science.gov (United States)

    Shiller, R J

    1987-01-02

    If the volatility of stock market prices is to be understood in terms of the efficient markets hypothesis, then there should be evidence that true investment value changes through time sufficiently to justify the price changes. Three indicators of change in true investment value of the aggregate stock market in the United States from 1871 to 1986 are considered: changes in dividends, in real interest rates, and in a direct measure of intertemporal marginal rates of substitution. Although there are some ambiguities in interpreting the evidence, dividend changes appear to contribute very little toward justifying the observed historical volatility of stock prices. The other indicators contribute some, but still most of the volatility of stock market prices appears unexplained.

  15. The price of fixed income market volatility

    CERN Document Server

    Mele, Antonio

    2015-01-01

    Fixed income volatility and equity volatility evolve heterogeneously over time, co-moving disproportionately during periods of global imbalances and each reacting to events of different nature. While the methodology for options-based "model-free" pricing of equity volatility has been known for some time, little is known about analogous methodologies for pricing various fixed income volatilities. This book fills this gap and provides a unified evaluation framework of fixed income volatility while dealing with disparate markets such as interest-rate swaps, government bonds, time-deposits and credit. It develops model-free, forward looking indexes of fixed-income volatility that match different quoting conventions across various markets, and uncovers subtle yet important pitfalls arising from naïve superimpositions of the standard equity volatility methodology when pricing various fixed income volatilities. The ultimate goal of the authors´ efforts is to make interest rate volatility standardization a valuable...

  16. Wholesale electricity markets indicators - September 2013

    International Nuclear Information System (INIS)

    2013-09-01

    The wholesale electricity markets indicators publication aims to provide general monitoring indicators about: wholesale electricity prices, electricity trade between France and neighboring countries, fuel prices, availability and capacity of power generation means, and grid interconnections

  17. Wholesale electricity market indicators - December 2013

    International Nuclear Information System (INIS)

    2013-12-01

    The wholesale electricity markets indicators publication aims to provide general monitoring indicators about: wholesale electricity prices, electricity trade between France and neighboring countries, fuel prices, availability and capacity of power generation means, and grid interconnections

  18. Dynamic pricing for demand response considering market price uncertainty

    DEFF Research Database (Denmark)

    Ghazvini, Mohammad Ali Fotouhi; Soares, Joao; Morais, Hugo

    2017-01-01

    Retail energy providers (REPs) can employ different strategies such as offering demand response (DR) programs, participating in bilateral contracts, and employing self-generation distributed generation (DG) units to avoid financial losses in the volatile electricity markets. In this paper......, the problem of setting dynamic retail sales price by a REP is addressed with a robust optimization technique. In the proposed model, the REP offers price-based DR programs while it faces uncertainties in the wholesale market price. The main contribution of this paper is using a robust optimization approach...

  19. Modelling oil price volatility with structural breaks

    International Nuclear Information System (INIS)

    Salisu, Afees A.; Fasanya, Ismail O.

    2013-01-01

    In this paper, we provide two main innovations: (i) we analyze oil prices of two prominent markets namely West Texas Intermediate (WTI) and Brent using the two recently developed tests by Narayan and Popp (2010) and Liu and Narayan, 2010 both of which allow for two structural breaks in the data series; and (ii) the latter method is modified to include both symmetric and asymmetric volatility models. We identify two structural breaks that occur in 1990 and 2008 which coincidentally correspond to the Iraqi/Kuwait conflict and the global financial crisis, respectively. We find evidence of persistence and leverage effects in the oil price volatility. While further extensions can be pursued, the consideration of asymmetric effects as well as structural breaks should not be jettisoned when modelling oil price volatility. - Highlights: ► We analyze oil price volatility using NP (2010) and LN (2010) tests. ► We modify the LN (2010) to account for leverage effects in oil price. ► We find two structural breaks that reflect major global crisis in the oil market. ► We find evidence of persistence and leverage effects in oil price volatility. ► Leverage effects and structural breaks are fundamental in oil price modelling.

  20. MACROECONOMIC VARIABLES AND STOCK PRICE VOLATILITY IN NIGERIA

    Directory of Open Access Journals (Sweden)

    OSAZEE GODWIN OMOROKUNWA

    2014-10-01

    Full Text Available The purpose of this paper is to examine the relationship between stock price volatility and few macroeconomic variables such as inflation, exchange rate, GDP and interest rate. Annual time series data ranging from 1980 to 2011 was used for this study. The generalized autoregressive conditional heteroskedasticity (GARCH model was used in the empirical analysis. The findings of the study showed that stock prices in Nigeria are volatile. And that past information in the market have effect on stock price volatility in Nigeria. In addition, the study showed that interest rate and exchange have a weak effect on stock price volatility while inflation is the main determinant of stock price volatility in Nigeria. The authors recommend that inflation should be targeted as the main monetary policy aimed at directing the stock market.

  1. Price volatility in wind dominant electricity markets

    DEFF Research Database (Denmark)

    Farashbashi-Astaneh, Seyed-Mostafa; Chen, Zhe

    2013-01-01

    High penetration of intermittent renewable energy sources causes price volatility in future electricity markets. This is specially the case in European countries that plan high penetration levels. This highlights the necessity for revising market regulations and mechanisms in accordance...... to generation combination portfolio. Proposed solutions should be able to tackle with emerging challenges which are mainly due to high variability and unpredictability of intermittent renewable resources. In this paper high price volatility will be introduced as an emerging challenge in wind dominant...... electricity markets. High price volatility is unappreciated because it imposes high financial risk levels to both electricity consumers and producers. Additionally high price variations impede tracking price signals by consumers in future smart grid and jeopardize implementation of demand response concepts...

  2. Detecting instability in the volatility of carbon prices

    Energy Technology Data Exchange (ETDEWEB)

    Chevallier, Julien [Univ. Paris Dauphine (France)

    2011-01-15

    This article investigates the presence of outliers in the volatility of carbon prices. We compute three different measures of volatility for European Union Allowances, based on daily data (EGARCH model), option prices (implied volatility), and intraday data (realized volatility). Based on the methodology developed by Zeileis et al. (2003) and Zeileis (2006), we detect instability in the volatility of carbon prices based on two kinds of tests: retrospective tests (OLS-/Recursive-based CUSUM processes, F-statistics, and residual sum of squares), and forward-looking tests (by monitoring structural changes recursively or with moving estimates). We show evidence of strong shifts mainly for the EGARCH and IV models during the time period. Overall, we suggest that yearly compliance events, and growing uncertainties in post-Kyoto international agreements, may explain the instability in the volatility of carbon prices. (author)

  3. 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

  4. 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.

  5. Oil prices and financial stress: A volatility spillover analysis

    International Nuclear Information System (INIS)

    Nazlioglu, Saban; Soytas, Ugur; Gupta, Rangan

    2015-01-01

    This paper examines whether there is a volatility transmission between oil prices and financial stress by means of the volatility spillover test. We employ WTI crude oil prices and Cleveland financial stress index for the period 1991–2014 and divide the sample into pre-crisis, in-crisis, and post-crisis periods due to the downward trend in oil price in 2008. The volatility model estimations indicate that oil prices and financial stress index are dominated by long-run volatility. The volatility spillover causality test supports evidence on risk transfer from oil prices to financial stress before the crisis and from financial stress to oil prices after the crisis. The impulse response analysis shows that the volatility transmission pattern has similar dynamics before and after the crisis and is characterized by higher and long-lived effects during the crisis. Our results have implications for both policy makers and investors, and for future work. -- Highlights: •Volatility spillover between oil prices and financial stress index is examined. •Analysis is conducted for sub-periods: pre-crisis, in-crisis, and post-crisis •Oil prices spill on financial stress before the crisis, but spillover reversed after the crisis. •Volatility transmission pattern has similar dynamics before and after the crisis. •Implications for investors and policy makers are discussed

  6. The Pricing of Options on Assets with Stochastic Volatilities.

    OpenAIRE

    Hull, John C; White, Alan D

    1987-01-01

    One option-pricing problem which has hitherto been unsolved is the pricing of European call on an asset which has a stochastic volatility. This paper examines this problem. The option price is determined in series form for the case in which the stochastic volatility is independent of the stock price. Numerical solutions are also produced for the case in which the volatility is correlated with the stock price. It is found that the Black-Scholes price frequently overprices options and that the ...

  7. 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.

  8. Stock price dynamics and option valuations under volatility feedback effect

    Science.gov (United States)

    Kanniainen, Juho; Piché, Robert

    2013-02-01

    According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations under the volatility feedback effect by modeling the joint dynamics of stock price, dividends, and volatility in continuous time. Most importantly, our model predicts the negative effect of an increase in squared return volatility on the value of deep-in-the-money call options and, furthermore, attempts to explain the volatility puzzle. We theoretically demonstrate a mechanism by which the market price of diffusion return risk, or an equity risk-premium, affects option prices and empirically illustrate how to identify that mechanism using forward-looking information on option contracts. Our theoretical and empirical results support the relevance of the volatility feedback effect. Overall, the results indicate that the prevailing practice of ignoring the time-varying dividend yield in option pricing can lead to oversimplification of the stock market dynamics.

  9. Wholesale gas market indicators - December 2013

    International Nuclear Information System (INIS)

    2013-12-01

    The wholesale gas market indicators publication aims to provide general monitoring indicators about: wholesale gas prices, gas trade between France and neighboring countries, infrastructures availability and utilisation

  10. Wholesale gas market indicators - September 2013

    International Nuclear Information System (INIS)

    2013-09-01

    The wholesale gas market indicators publication aims to provide general monitoring indicators about: wholesale gas prices, gas trade between France and neighboring countries, infrastructures availability and utilisation

  11. Option pricing under stochastic volatility: the exponential Ornstein–Uhlenbeck model

    International Nuclear Information System (INIS)

    Perelló, Josep; Masoliver, Jaume; Sircar, Ronnie

    2008-01-01

    We study the pricing problem for a European call option when the volatility of the underlying asset is random and follows the exponential Ornstein–Uhlenbeck model. The random diffusion model proposed is a two-dimensional market process that takes a log-Brownian motion to describe price dynamics and an Ornstein–Uhlenbeck subordinated process describing the randomness of the log-volatility. We derive an approximate option price that is valid when (i) the fluctuations of the volatility are larger than its normal level, (ii) the volatility presents a slow driving force, toward its normal level and, finally, (iii) the market price of risk is a linear function of the log-volatility. We study the resulting European call price and its implied volatility for a range of parameters consistent with daily Dow Jones index data

  12. CAM Stochastic Volatility Model for Option Pricing

    Directory of Open Access Journals (Sweden)

    Wanwan Huang

    2016-01-01

    Full Text Available The coupled additive and multiplicative (CAM noises model is a stochastic volatility model for derivative pricing. Unlike the other stochastic volatility models in the literature, the CAM model uses two Brownian motions, one multiplicative and one additive, to model the volatility process. We provide empirical evidence that suggests a nontrivial relationship between the kurtosis and skewness of asset prices and that the CAM model is able to capture this relationship, whereas the traditional stochastic volatility models cannot. We introduce a control variate method and Monte Carlo estimators for some of the sensitivities (Greeks of the model. We also derive an approximation for the characteristic function of the model.

  13. 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)

  14. 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)

  15. A Consistent Pricing Model for Index Options and Volatility Derivatives

    DEFF Research Database (Denmark)

    Kokholm, Thomas

    to be priced consistently, while allowing for jumps in volatility and returns. An affine specification using Lévy processes as building blocks leads to analytically tractable pricing formulas for volatility derivatives, such as VIX options, as well as efficient numerical methods for pricing of European options...... on the underlying asset. The model has the convenient feature of decoupling the vanilla skews from spot/volatility correlations and allowing for different conditional correlations in large and small spot/volatility moves. We show that our model can simultaneously fit prices of European options on S&P 500 across...

  16. A Consistent Pricing Model for Index Options and Volatility Derivatives

    DEFF Research Database (Denmark)

    Cont, Rama; Kokholm, Thomas

    2013-01-01

    to be priced consistently, while allowing for jumps in volatility and returns. An affine specification using Lévy processes as building blocks leads to analytically tractable pricing formulas for volatility derivatives, such as VIX options, as well as efficient numerical methods for pricing of European options...... on the underlying asset. The model has the convenient feature of decoupling the vanilla skews from spot/volatility correlations and allowing for different conditional correlations in large and small spot/volatility moves. We show that our model can simultaneously fit prices of European options on S&P 500 across...

  17. Transmission of prices and price volatility in Australian electricity spot markets: a multivariate GARCH analysis

    International Nuclear Information System (INIS)

    Worthington, A.; Kay-Spratley, A.; Higgs, H.

    2005-01-01

    This paper examines the transmission of spot electricity prices and price volatility among the five regional electricity markets in the Australian National Electricity Market: namely, New South Wales, Queensland, South Australia, the Snowy Mountains Hydroelectric Scheme and Victoria. A multivariate generalised autoregressive conditional heteroskedasticity model is used to identify the source and magnitude of price and price volatility spillovers. The results indicate the presence of positive own mean spillovers in only a small number of markets and no mean spillovers between any of the markets. This appears to be directly related to the physical transfer limitations of the present system of regional interconnection. Nevertheless, the large number of significant own-volatility and cross-volatility spillovers in all five markets indicates the presence of strong autoregressive conditional heteroskedasticity and generalised autoregressive conditional heteroskedasticity effects. This indicates that shocks in some markets will affect price volatility in others. Finally, and contrary to evidence from studies in North American electricity markets, the results also indicate that Australian electricity spot prices are stationary. (author)

  18. Essays on wholesale auctions in deregulated electricity markets

    Science.gov (United States)

    Baltaduonis, Rimvydas

    2007-12-01

    The early experience in the restructured electric power markets raised several issues, including price spikes, inefficiency, security, and the overall relationship of market clearing prices to generation costs. Unsatisfactory outcomes in these markets are thought to have resulted in part from strategic generator behaviors encouraged by inappropriate market design features. In this dissertation, I examine the performance of three auction mechanisms for wholesale power markets - Offer Cost Minimization auction, Payment Cost Minimization auction and Simple-Offer auction - when electricity suppliers act strategically. A Payment Cost Minimization auction has been proposed as an alternative to the traditional Offer Cost Minimization auction with the intention to solve the problem of inflated wholesale electricity prices. Efficiency concerns for this proposal were voiced due to insights predicated on the assumption of true production cost revelation. Using a game theoretic approach and an experimental method, I compare the two auctions, strictly controlling for the level of unilateral market power. A specific feature of these complex-offer auctions is that the sellers submit not only the quantities and the minimum prices that they are willing to sell at, but also the start-up fees, which are designed to reimburse the fixed start-up costs of the generation plants. I find that the complex structure of the offers leaves considerable room for strategic behavior, which consequently leads to anti-competitive and inefficient market outcomes. In the last chapter of my dissertation, I use laboratory experiments to contrast the performance of two complex-offer auctions against the performance of a simple-offer auction, in which the sellers have to recover all their generation costs - fixed and variable - through a uniform market-clearing price. I find that a simple-offer auction significantly reduces consumer prices and lowers price volatility. It mitigates anti-competitive effects

  19. Competition compliant wholesale electricity prices. An examination of the regulation on the integrity and transparency of wholesale energy market; Wettbewerbskonforme Stromgrosshandelspreise. Eine Untersuchung der Verordnung ueber die Integritaet und Transparenz des Energiegrosshandelsmarkts

    Energy Technology Data Exchange (ETDEWEB)

    Konar, Selma

    2015-07-01

    The development of wholesale electricity prices showed in recent years a very fluctuating course. The starting point for ensuring competitive compliant electricity prices have uniform rules that establish effective competition in the overall wholesale electricity, ensure greater transparency in the market and prohibit market abuse influence exercised on the wholesale price. The REMIT regulation creates a first union-law rules to this standardized specifications. The volume first examines the transparency, competitiveness, and supervisory structures in the wholesale electricity before legislating a regulation. It is clear, as the transparency and supervisory structures should be designed from the wholesale electricity ideally. On this basis, the work is dealing with the REMIT regulation. The author works out to market participants relevant notification and publication requirements, the follow-up demands on the company as well as the now existing prohibitions on market abuse and the related penalty catalog and analyze the supervisory structures newly created in the wholesale electricity. Here, the work also identified the weaknesses of the regulation and shows suitable solution approaches. [German] Die Entwicklung der Stromgrosshandelspreise zeigte in den letzten Jahren einen sehr schwankenden Verlauf. Ausgangspunkt fuer die Gewaehrleistung wettbewerbskonformer Strompreise sind einheitliche Bestimmungen, die im gesamten Stromgrosshandel einen funktionierenden Wettbewerb etablieren, fuer mehr Transparenz am Markt sorgen und marktmissbraeuchliche Einflussnahmen auf den Grosshandelspreis verbieten. Die REMIT-Verordnung schafft als erstes unionsrechtliches Regelwerk hierzu einheitliche Vorgaben. Der Band untersucht zunaechst die Transparenz-, Wettbewerbs-, und Aufsichtsstrukturen im Stromgrosshandel vor Erlass der Verordnung. Dabei wird deutlich, wie die Transparenz- und Aufsichtsstrukturen im Stromgrosshandel idealerweise ausgestaltet sein sollten. Auf dieser Grundlage

  20. Wholesale gas market indicators - 4. Quarter 2012

    International Nuclear Information System (INIS)

    2013-01-01

    The wholesale gas market indicators publication aims to provide general monitoring indicators about: wholesale gas prices, gas trade between France and neighboring countries, infrastructures availability and utilisation

  1. The integration of Price Responsive Demand into Regional Transmission Organization (RTO) wholesale power markets and system operations

    International Nuclear Information System (INIS)

    Centolella, Paul

    2010-01-01

    A number of states and utilities are pursuing demand response based on dynamic and time-differentiated retail prices and utility investments in Advanced Metering Infrastructure (AMI), often as part of Smart Grid initiatives. These developments could produce large amounts of Price Responsive Demand, demand that predictably responds to changes in wholesale prices. Price Responsive Demand could provide significant reliability and economic benefits. However, existing RTO tariffs present potential barriers to the development of Price Responsive Demand. Effectively integrating Price Responsive Demand into RTO markets and operations will require changes in demand forecasting, scarcity pricing reform, synchronization of scarcity pricing with capacity markets, tracking voluntary hedging by price responsive loads, and a non-discriminatory approach in curtailments in capacity emergencies. The article describes changes in RTO policies and systems needed incorporate Price Responsive Demand. (author)

  2. Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets

    NARCIS (Netherlands)

    Gardebroek, C.; Hernandez, M.A.

    2013-01-01

    This paper examines volatility transmission in oil, ethanol and corn prices in the United States between 1997 and 2011. We follow a multivariate GARCH approach to evaluate the level of interdependence and the dynamics of volatility across these markets. Preliminary results indicate a higher

  3. Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets

    NARCIS (Netherlands)

    Gardebroek, C.; Hernandez, M.A.

    2012-01-01

    This paper examines volatility transmission in oil, ethanol and corn prices in the United States between 1997 and 2011. We follow a multivariate GARCH approach to evaluate the level of interdependence and the dynamics of volatility across these markets. Preliminary results indicate a higher

  4. Do energy prices stimulate food price volatility? Examining volatility transmission between US oil, ethanol and corn markets

    NARCIS (Netherlands)

    Hernandez, M.A.; Gardebroek, C.

    2012-01-01

    This paper examines volatility transmission in oil, ethanol and corn prices in the United States between 1997 and 2011. We follow a multivariate GARCH approach to evaluate the level of interdependence and the dynamics of volatility across these markets. The estimation results indicate a higher

  5. Impacts of High Variable Renewable Energy Futures on Wholesale Electricity Prices, and on Electric-Sector Decision Making

    OpenAIRE

    Seel, J; Mills, AD; Wiser, RH

    2018-01-01

    Increasing penetrations of variable renewable energy (VRE) can affect wholesale electricity price patterns and make them meaningfully different from past, traditional price patterns. Many long-lasting decisions for supply- and demand-side electricity infrastructure and programs are based on historical observations or assume a business-as-usual future with low shares of VRE. Our motivating question is whether certain electric-sector decisions that are made based on assumptions reflecting low V...

  6. Dating breaks for global crude oil prices and their volatility : a possible price band for global crude prices

    International Nuclear Information System (INIS)

    Liao, H.C.; Suen, Y.B.

    2006-01-01

    Global oil prices are among the most visible of all historical commodity records. This paper presented and applied the multiple structural change method developed by Baie and Perron (BP) to investigate daily West Texas Intermediate (WTI) spot prices from January 2, 1986 to December 30, 2004 as collected by the United States Department of Energy. In particular, the BP statistical method was used to estimate the number and location of structural breaks in global oil price series and their volatility. The objective was to precisely determine the exact structural break in the global oil market. The breaks for both the price of oil and its volatility were successfully located and dated. It was shown that the break for the structural change in oil prices occurred on November 12, 1999, where the average oil price was U$19.02 per barrel previously, and U$30.90 afterwards. Two breaks for oil price volatility were also found, the first in March 1991 and the other in December 1995. The volatility was measured in 3 regimes by dividing these 2 breaks. It was suggested that since oil prices increased more rapidly during the second half of 2004 and 2005, it is possible that another structural break may be found during this period. However, it wa cautioned that it is difficult to find another significant break until more data becomes available, particularly for periods characterized by a rapid increase in price. 24 refs., 5 tabs., 2 figs

  7. Estimating Price Volatility Structure in Iran’s Meat Market: Application of General GARCH Models

    Directory of Open Access Journals (Sweden)

    Z. Rasouli Birami

    2016-10-01

    Full Text Available Introduction: Over the past few years, the price volatility of agricultural products and food markets has attracted attention of many researchers and policy makers. This growing attention was started from the food price crisis in 2007 and 2008 when major agricultural products faced accelerated price increases and then rapidly decreased. This paper focused on the price volatility of major commodities related to three market levels of Iran’s meat market, including hay (the input level, calf and sheep (the wholesale level and beef and mutton (the retail level. In particular, efforts will made to find more appropriate models for explaining the behavior of volatility of the return series and to identify which return series are more volatile. The effects of good and bad news on the volatility of prices in each return series will also be studied. Materials and Methods: Different GARCH type models have been considered the best for modeling volatility of return series. Nonlinear GARCH models were introduced to capture the effect of good and bad news separately. The paper uses some GARCH type models including GARCH, Exponential GARCH (EGARCH, GJR-GARCH, Threshold GARCH (TGARCH, Simple Asymmetric GARCH (SAGARCH, Power GARCH (PGARCH, Non-linear GARCH (NGARCH, Asymmetric Power GARCH (APGARCH and Non-linear Power GARCH (NPGARCH to model the volatility of hay, calf, sheep, beef and mutton return series. The data on hay, calf, sheep, and beef and mutton monthly prices are published by Iran’s livestock support firm. The paper uses monthly data over the sample period of the May 1992 to the March 2014. Results and Discussion: Descriptive statistics of the studied return series show evidence of skewness and kurtosis. The results here show that all the series has fat tails. The significant p-values for the Ljung-Box Q-statistics mean that the auto-correlation exists in the squared residuals. The presence of unit roots in the return series is confirmed by the

  8. Forward and Spot Prices in Multi-Settlement Wholesale Electricity Markets

    Science.gov (United States)

    Larrieu, Jeremy

    In organized wholesale electricity markets, power is sold competitively in a multi-unit multi-settlement single-price auction comprised of a forward and a spot market. This dissertation attempts to understand the structure of the forward premium in these markets, and to identify the factors that may lead forward and spot prices to converge or diverge. These markets are unique in that the forward demand is price-sensitive, while spot residual demand is perfectly inelastic and must be met in full, a crucial design feature the literature often glosses over. An important contribution of this dissertation is the explicit modeling of each market separately in order to understand how generation and load choose to act in each one, and the consequences of these actions on equilibrium prices and quantities given that firms maximize joint profits over both markets. In the first essay, I construct a two-settlement model of electricity prices in which firms that own asymmetric capacity-constrained units facing convex costs compete to meet demand from consumers, first in quantities, then in prices. I show that the forward premium depends on the costliness of spot production relative to firms' ability to exercise market power by setting quantities in the forward market. In the second essay, I test the model from the first essay with unit-level capacity and marginal cost data from the California Independent System Operator (CAISO). I show that the model closely replicates observed price formation in the CAISO. In the third essay, I estimate a time series model of the CAISO forward premium in order to measure the impact that virtual bidding has had on forward and spot price convergence in California between April 2009 and March 2014. I find virtual bidding to have caused forward and spot prices to diverge due to the large number of market participants looking to hedge against - or speculate on - the occurrence of infrequent but large spot price spikes by placing virtual demand bids.

  9. The effect of virtual bidding on forward premiums in the New York wholesale energy market

    Science.gov (United States)

    Knudsen, Andrew D.

    In many parts of the United States, the power industry has been deregulated and replaced with regional wholesale energy markets, where utilities purchase electricity from generators at competitive market rates for subsequent distribution to customers. Numerous studies have shown that in each of these markets, the price of energy purchased in the Day Ahead (futures) market exceeds the price in the Real Time (spot) market on average. The existence of this "forward premium" is evidence of market inefficiency and may indicate participants' aversion to risk in the Real Time market or the exercise of market power by generators. To address this inefficiency, the New York Independent System Operator introduced a virtual bidding system within its wholesale market, which permitted participants to engage in purely financial transactions and hedge their exposure to risk. The new policy was expected to promote price convergence by allowing bidders to arbitrage expected differences between Day Ahead and Real Time prices. This study examines whether the presence of virtual bidding was associated with a change in the mean value and magnitude of forward premiums in the NYISO energy market. The study applies a GARCH model to hourly pricing data from 2001 to 2009, controlling for temperature and economic activity. The results indicate that prior to 2005, virtual bidding was associated with significantly lower and less volatile forward premiums in New York's five most congested zones but with increased premiums in the remaining less congested zones. However, when the entire period from 2001 to 2009 is examined, the results suggest that prices have become significantly more divergent in the presence of virtual bidding. Closer examination of the data reveals a dramatic increase in forward premium volatility across all zones beginning in 2005 that is not accounted for by temperature or economic activity and may have biased the results. This study attempts to account for this unexplained

  10. Real-Time Pricing Decision Making for Retailer-Wholesaler in Smart Grid Based on Game Theory

    Directory of Open Access Journals (Sweden)

    Yeming Dai

    2014-01-01

    Full Text Available Real-time pricing DSM (demand side management is widely used to dynamically change or shift the electricity consumption in the smart grid. In this paper, a game decision making scheme is proposed in the smart grid with DSM. The interaction between two retailers and their wholesaler is modeled as a two-stage game model. Considering the competition between two retailers, two different game models are developed in terms of the different action order between retailers and their wholesaler. Through analyzing the equilibrium revenues of the retailers for different situations we find that although the wholesaler expects to decentralize certain management powers to the retailers, it has retained the right to change the rules of the game and frequently reneged on the promises. More specifically, the law should ensure that any change of the revenue-sharing formula must go through certain legal procedures. Imposing legal restrictions on the wholesaler’s discretionary policy suggests that the time-inconsistency problem is mitigated. Numerical simulation shows the effectiveness of proposed scheme.

  11. Effects of Idiosyncratic Volatility in Asset Pricing

    Directory of Open Access Journals (Sweden)

    André Luís Leite

    2016-04-01

    Full Text Available This paper aims to evaluate the effects of the aggregate market volatility components - average volatility and average correlation - on the pricing of portfolios sorted by idiosyncratic volatility, using Brazilian data. The study investigates whether portfolios with high and low idiosyncratic volatility - in relation to the Fama and French model (1996 - have different exposures to innovations in average market volatility, and consequently, different expectations for return. The results are in line with those found for US data, although they portray the Brazilian reality. Decomposition of volatility allows the average volatility component, without the disturbance generated by the average correlation component, to better price the effects of a worsening or an improvement in the investment environment. This result is also identical to that found for US data. Average variance should thus command a risk premium. For US data, this premium is negative. According to Chen and Petkova (2012, the main reason for this negative sign is the high level of investment in research and development recorded by companies with high idiosyncratic volatility. As in Brazil this type of investment is significantly lower than in the US, it was expected that a result with the opposite sign would be found, which is in fact what occurred.

  12. Price volatility and banking in green certificate markets

    DEFF Research Database (Denmark)

    Amundsen, Eirik Schrøder; Baldursson, Fridrik M.; Mortensen, Jørgen Birk

    2006-01-01

    the paper shows that the introduction of banking of GCs may reduce price volatility considerably and lead to increased social surplus. Banking lowers average prices and is therefore not necessarily to the benefit of 'green producers'. Prooposed price bounds on GC-prices will reduce the importance of banking...

  13. Jumps and stochastic volatility in oil prices: Time series evidence

    International Nuclear Information System (INIS)

    Larsson, Karl; Nossman, Marcus

    2011-01-01

    In this paper we examine the empirical performance of affine jump diffusion models with stochastic volatility in a time series study of crude oil prices. We compare four different models and estimate them using the Markov Chain Monte Carlo method. The support for a stochastic volatility model including jumps in both prices and volatility is strong and the model clearly outperforms the others in terms of a superior fit to data. Our estimation method allows us to obtain a detailed study of oil prices during two periods of extreme market stress included in our sample; the Gulf war and the recent financial crisis. We also address the economic significance of model choice in two option pricing applications. The implied volatilities generated by the different estimated models are compared and we price a real option to develop an oil field. Our findings indicate that model choice can have a material effect on the option values.

  14. Volatilities, Traded Volumes, and Price Increments in Derivative Securities

    Science.gov (United States)

    Kim, Kyungsik; Lim, Gyuchang; Kim, Soo Yong; Scalas, Enrico

    2007-03-01

    We apply the detrended fluctuation analysis (DFA) to the statistics of the Korean treasury bond (KTB) futures from which the logarithmic increments, volatilities, and traded volumes are estimated over a specific time lag. For our case, the logarithmic increment of futures prices has no long-memory property, while the volatility and the traded volume exhibit the existence of long-memory property. To analyze and calculate whether the volatility clustering is due to the inherent higher-order correlation not detected by applying directly the DFA to logarithmic increments of the KTB futures, it is of importance to shuffle the original tick data of futures prices and to generate the geometric Brownian random walk with the same mean and standard deviation. It is really shown from comparing the three tick data that the higher-order correlation inherent in logarithmic increments makes the volatility clustering. Particularly, the result of the DFA on volatilities and traded volumes may be supported the hypothesis of price changes.

  15. Stock Price Informativeness and Idiosyncratic Return Volatility in Emerging Markets: Evidence from China

    OpenAIRE

    Karen Jingrong Lin; Khondkar Karim; Clairmont Carter

    2014-01-01

    This study attempts to address two research questions on the idiosyncratic return volatility and stock price informativeness. First, whether idiosyncratic return volatility is a valid proxy for stock price informativeness in emerging markets, and if it is, whether there exists a monotonic relationship between the idiosyncratic return volatility and stock price informativeness throughout the whole sample. We find that the idiosyncratic return volatility reflects the stock price informativeness...

  16. Food price volatility and hunger alleviation – can Cannes work?

    Directory of Open Access Journals (Sweden)

    Hajkowicz Stefan

    2012-06-01

    Full Text Available Abstract Recent years have seen global food prices rise and become more volatile. Price surges in 2008 and 2011 held devastating consequences for hundreds of millions of people and negatively impacted many more. Today one billion people are hungry. The issue is a high priority for many international agencies and national governments. At the Cannes Summit in November 2011, the G20 leaders agreed to implement five objectives aiming to mitigate food price volatility and protect vulnerable persons. To succeed, the global community must now translate these high level policy objectives into practical actions. In this paper, we describe challenges and unresolved dilemmas before the global community in implementing these five objectives. The paper describes recent food price volatility trends and an evaluation of possible causes. Special attention is given to climate change and water scarcity, which have the potential to impact food prices to a much greater extent in coming decades. We conclude the world needs an improved knowledge base and new analytical capabilities, developed in parallel with the implementation of practical policy actions, to manage food price volatility and reduce hunger and malnutrition. This requires major innovations and paradigm shifts by the global community.

  17. 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

  18. 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)

  19. Higher prices at Canadian gas pumps: international crude oil prices or local market concentration? An empirical investigation

    International Nuclear Information System (INIS)

    Anindya Sen

    2003-01-01

    There is little consensus on whether higher retail gasoline prices in Canada are the result of international crude oil price fluctuations or local market power exercised by large vertically-integrated firms. I find that although both increasing local market concentration and higher average monthly wholesale prices are positively and significantly associated with higher retail prices, wholesale prices are more important than local market concentration. Similarly, crude oil prices are more important than the number of local wholesalers in determining wholesale prices. These results suggest that movements in gasoline prices are largely the result of input price fluctuations rather than local market structure. (author)

  20. Asymptotic Behavior of the Stock Price Distribution Density and Implied Volatility in Stochastic Volatility Models

    International Nuclear Information System (INIS)

    Gulisashvili, Archil; Stein, Elias M.

    2010-01-01

    We study the asymptotic behavior of distribution densities arising in stock price models with stochastic volatility. The main objects of our interest in the present paper are the density of time averages of the squared volatility process and the density of the stock price process in the Stein-Stein and the Heston model. We find explicit formulas for leading terms in asymptotic expansions of these densities and give error estimates. As an application of our results, sharp asymptotic formulas for the implied volatility in the Stein-Stein and the Heston model are obtained.

  1. Assessing the impact of wind generation on wholesale prices and generator dispatch in the Australian National Electricity Market

    International Nuclear Information System (INIS)

    Forrest, Sam; MacGill, Iain

    2013-01-01

    Growing climate change and energy security concerns are driving major wind energy deployment in electricity industries around the world. Despite its many advantages, growing penetrations of this highly variable and somewhat unpredictable energy source pose new challenges for electricity industry operation. One issue receiving growing attention is the so-called ‘merit order effect’ of wind generation in wholesale electricity markets. Wind has very low operating costs and therefore tends to displace higher cost conventional generation from market dispatch, reducing both wholesale prices and conventional plant outputs. This paper extends the current literature on this effect through an empirical study employing a range of econometric techniques to quantify the impacts of growing wind penetrations in the Australian National Electricity Market (NEM). The results suggest that wind is having a marked impact on spot market prices and, while wind is primarily offsetting higher operating cost gas generation, it is now also significantly reducing dispatch of emissions intensive brown coal generation. Great care needs to be taken in extrapolating these results to longer-term implications, however, the study does propose a methodology for assessing this effect, highlights the impacts that wind is already having on NEM outcomes and suggests promising directions for future research. - Highlights: ► Proposes methodologies to estimate short run impact of wind on electricity markets. ► Quantifies the merit order effect of wind generation on wholesale spot price. ► Wind is found to be significantly effecting gas fired generation. ► Evidence is found for wind having a notable impact on baseload coal generation. ► Discusses the implications for development of wind generation in Australia

  2. DOES FEAR (VIX INDEX INCITE VOLATILITY IN FOOD PRICES?

    Directory of Open Access Journals (Sweden)

    Gökhan Çınar

    2017-04-01

    Full Text Available Globally, the volatility trend in food prices has continued to increase. Different data give the impression that this volatility may be caused by the international finance markets’ propagation effect. For this reason, the study focused on the VIX (fear index that is used to measure the movement in Standard & Poor’s 500 index. The main objective of the study is to analyze the degree of volatility between the VIX index and the wheat market. The research is comprised of monthly data obtained from year 2000 to 2015. The study employs the BEKK GARCH method. The findings show that the variance shocks in the fear index damage food prices. The results may be useful to policy makers in researching the causes of changes in the prices of food commodity and taking necessary measures.

  3. The effect of oil price volatility on strategic investment

    International Nuclear Information System (INIS)

    Henriques, Irene; Sadorsky, Perry

    2011-01-01

    In this paper, we investigate how oil price volatility affects the strategic investment decisions of a large panel of US firms. This paper uses key insights from the real options literature to develop a model of a company's strategic investment and shows how changes in oil price volatility can impact strategic investment decisions. The model is estimated using recently developed generalized method of moment estimation techniques for panel data sets. Empirical results are presented to show that there is a U shaped relationship between oil price volatility and firm investment. This is consistent with the predictions from the strategic growth options literature. The results should be useful to decision makers, investors, managers, policy makers and others who need to make strategic investment decisions in an uncertain world. (author)

  4. What can price volatility tell us about market efficiency? Conditional heteroscedasticity in historical commodity price series

    NARCIS (Netherlands)

    Földvári, P.; van Leeuwen, B.

    2011-01-01

    The development in the working of markets has been an important topic in economic history for decades. The volatility of market prices is often used as an indicator of market efficiency in the broadest sense. Yet, the way in which volatility is estimated often makes it difficult to compare price

  5. Modelling electricity futures prices using seasonal path-dependent volatility

    International Nuclear Information System (INIS)

    Fanelli, Viviana; Maddalena, Lucia; Musti, Silvana

    2016-01-01

    Highlights: • A no-arbitrage term structure model is applied to the electricity market. • Volatility parameters of the HJM model are estimated by using German data. • The model captures the seasonal price behaviour. • Electricity futures prices are forecasted. • Call options are evaluated according to different strike prices. - Abstract: The liberalization of electricity markets gave rise to new patterns of futures prices and the need of models that could efficiently describe price dynamics grew exponentially, in order to improve decision making for all of the agents involved in energy issues. Although there are papers focused on modelling electricity as a flow commodity by using Heath et al. (1992) approach in order to price futures contracts, the literature is scarce on attempts to consider a seasonal volatility as input to models. In this paper, we propose a futures price model that allows looking into observed stylized facts in the electricity market, in particular stochastic price variability, and periodic behavior. We consider a seasonal path-dependent volatility for futures returns that are modelled in Heath et al. (1992) framework and we obtain the dynamics of futures prices. We use these series to price the underlying asset of a call option in a risk management perspective. We test the model on the German electricity market, and we find that it is accurate in futures and option value estimates. In addition, the obtained results and the proposed methodology can be useful as a starting point for risk management or portfolio optimization under uncertainty in the current context of energy markets.

  6. A Consistent Pricing Model for Index Options and Volatility Derivatives

    DEFF Research Database (Denmark)

    Cont, Rama; Kokholm, Thomas

    observed properties of variance swap dynamics and allows for jumps in volatility and returns. An affine specification using L´evy processes as building blocks leads to analytically tractable pricing formulas for options on variance swaps as well as efficient numerical methods for pricing of European......We propose and study a flexible modeling framework for the joint dynamics of an index and a set of forward variance swap rates written on this index, allowing options on forward variance swaps and options on the underlying index to be priced consistently. Our model reproduces various empirically...... options on the underlying asset. The model has the convenient feature of decoupling the vanilla skews from spot/volatility correlations and allowing for different conditional correlations in large and small spot/volatility moves. We show that our model can simultaneously fit prices of European options...

  7. Oil Price Volatility, Economic Growth and the Hedging Role of Renewable Energy

    OpenAIRE

    Rentschler, Jun E.

    2013-01-01

    This paper investigates the adverse effects of oil price volatility on economic activity and the extent to which countries can hedge against such effects by using renewable energy. By considering the Realized Volatility of oil prices, rather than following the standard approach of considering oil price shocks in levels, the effects of factor price uncertainty on economic activity are analy...

  8. Modeling energy price dynamics: GARCH versus stochastic volatility

    International Nuclear Information System (INIS)

    Chan, Joshua C.C.; Grant, Angelia L.

    2016-01-01

    We compare a number of GARCH and stochastic volatility (SV) models using nine series of oil, petroleum product and natural gas prices in a formal Bayesian model comparison exercise. The competing models include the standard models of GARCH(1,1) and SV with an AR(1) log-volatility process, as well as more flexible models with jumps, volatility in mean, leverage effects, and t distributed and moving average innovations. We find that: (1) SV models generally compare favorably to their GARCH counterparts; (2) the jump component and t distributed innovations substantially improve the performance of the standard GARCH, but are unimportant for the SV model; (3) the volatility feedback channel seems to be superfluous; (4) the moving average component markedly improves the fit of both GARCH and SV models; and (5) the leverage effect is important for modeling crude oil prices—West Texas Intermediate and Brent—but not for other energy prices. Overall, the SV model with moving average innovations is the best model for all nine series. - Highlights: • We compare a variety of GARCH and SV models for fitting nine series of energy prices. • We find that SV models generally compare favorably to their GARCH counterparts. • The SV model with moving average innovations is the best model for all nine series.

  9. Impact of Oil Price Shocks and Exchange Rate Volatility on Stock Market Behavior in Nigeria

    Directory of Open Access Journals (Sweden)

    Adedoyin I. Lawal

    2016-09-01

    Full Text Available The impact of exchange rate and oil prices fluctuation on the stock market has been a subject of hot debate among researchers. This study examined the impact of both the exchange rate volatility and oil price volatility on stock market volatility in Nigeria, so as to guide policy formulation based on the fact that the nation’s economy was foreign induced and mono-cultured with heavy dependence on oil. EGARCH estimation techniques were employed to examine if either the volatility in exchange rate, oil price volatility or both experts on stock market volatility in Nigeria. The result shows that share price volatility is induced by both the exchange rate volatility and oil price volatility. Thus, it is recommended that policymakers should pursue policies that tend to stabilize the exchange rate regime on the one hand, and guarantee the net oil exporting position for the economy, that market practitioners should formulate portfolio strategies in such a way that volatility in both exchange rates and oil price will be factored in time when investment decisions are being made.

  10. 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

  11. Forecasting prices and price volatility in the Nordic electricity market

    International Nuclear Information System (INIS)

    2001-01-01

    We develop a stochastic model for long term price forecasting in a competitive electricity market environment. It is demonstrated both theoretically and through model simulations that non-stochastic models may give biased forecasts both with respect to price level and volatility. In the paper, the model concept is applied on the restructured Nordic electricity market. It is specially in peak load hours that a stochastic model formulation provides significantly different results than an expected value model. (author)

  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. Eastern European retailers and wholesalers' buying behaviour

    DEFF Research Database (Denmark)

    Esbjerg, Lars; Stacey, Julia

    1999-01-01

    During the last ten years, retailing in Eastern Europe has undergone considerable changes. The entry of Western European retail chains into Eastern Europe has helped accelerate the distributive trade of Eastern Europe. But what does it take to sell fish and cheese to retailers and wholesalers...... in Eastern Europe compared to Western Europe? Eastern European buyers attach great importance to other aspects when they list new suppliers and products than does Western European retailing. These are the results of a MAPP study of Eastern European retail and wholesale buying behaviour for fish and cheese....... Low prices and favourable terms of payment are most important when retailers in Eastern Europe buy fish and cheese. Then follows the supplier's range of products, trustworthiness of the supplier and product quality. Eastern European wholesalers also rank price and financial conditions as most...

  14. 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

  15. Taking the mystery out of gasoline prices

    International Nuclear Information System (INIS)

    Anon.

    2000-01-01

    Gasoline price variations in different markets of Canada are primarily driven by market forces, not necessarily by costs, according to a petroleum valuation consultant of the Newfoundland Department of Mines and Energy. Market forces include wholesale prices, the number and efficiency of stations in an area, companies' marketing strategies and customer buying preferences. Prices can be affected by any one of these forces at any time. The prediction is that wholesale prices will continue to be volatile in the next few months as the market adjusts to the changes in crude oil prices determined by OPEC as well as the summer season for gasoline. Changes in crude oil prices are usually reflected in the price of gasoline at the pump, although they do not necessarily move together. Demand which is an important factor in price, is cyclical in both the US and Canada, being lowest in the first quarter of the year, picking up during the second and third quarters with increased driving during good weather, and usually declining again in the fourth quarter with the onset of colder weather. Taxes are also a very significant component of the retail price of gasoline; in July 1998 the combined federal and provincial taxes accounted for 54 per cent of the average retail price of regular unleaded gasoline in Canada. Refining and marketing costs, the distance gasoline has to be transported to market, also influence prices at the pump

  16. 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.

  17. An analysis of price and volatility transmission in butter, palm oil and crude oil markets

    Directory of Open Access Journals (Sweden)

    Dennis Bergmann

    2016-11-01

    Full Text Available Abstract Recent changes to the common agricultural policy (CAP saw a shift to greater market orientation for the EU dairy industry. Given this reorientation, the volatility of EU dairy commodity prices has sharply increased, creating the need to develop proper risk management tools to protect farmers’ income and to ensure stable prices for processors and consumers. In addition, there is a perceived threat that these commodities may be replaced by cheaper substitutes, such as palm oil, as dairy commodity prices become more volatile. Global production of palm oil almost doubled over the last decade while butter production remained relatively flat. Palm oil also serves as a feedstock for biodiesel production, thus establishing a new link between agricultural commodities and crude oil. Price and volatility transmission effects between EU and World butter prices, as well as between butter, palm oil and crude oil prices, before and after the Luxembourg agreement, are analysed. Vector autoregression (VAR models are applied to capture price transmission effects between these markets. These are combined with a multivariate GARCH model to account for potential volatility transmission. Results indicate strong price and volatility transmission effects between EU and World butter prices. EU butter shocks further spillover to palm oil volatility. In addition, there is evidence that oil prices spillover to World butter prices and World butter volatility.

  18. Market-oriented ethanol and corn-trade policies can reduce climate-induced US corn price volatility

    International Nuclear Information System (INIS)

    Verma, Monika; Diffenbaugh, Noah; Hertel, Thomas

    2014-01-01

    Agriculture is closely affected by climate. Over the past decade, biofuels have emerged as another important factor shaping the agricultural sector. We ask whether the presence of the US ethanol sector can play a role in moderating increases in US corn price variability, projected to occur in response to near-term global warming. Our findings suggest that the answer to this question depends heavily on the underlying forces shaping the ethanol industry. If mandate-driven, there is little doubt that the presence of the corn-ethanol sector will exacerbate price volatility. However, if market-driven, then the emergence of the corn-ethanol sector can be a double-edged sword for corn price volatility, possibly cushioning the impact of increased climate driven supply volatility, but also inheriting volatility from the newly integrated energy markets via crude oil price fluctuations. We find that empirically the former effect dominates, reducing price volatility by 27%. In contrast, mandates on ethanol production increase future price volatility by 54% in under future climate after 2020. We also consider the potential for liberalized international corn trade to cushion corn price volatility in the US. Our results suggest that allowing corn to move freely internationally serves to reduce the impact of near-term climate change on US corn price volatility by 8%. (letter)

  19. Market-oriented ethanol and corn-trade policies can reduce climate-induced US corn price volatility

    Science.gov (United States)

    Verma, Monika; Hertel, Thomas; Diffenbaugh, Noah

    2014-05-01

    Agriculture is closely affected by climate. Over the past decade, biofuels have emerged as another important factor shaping the agricultural sector. We ask whether the presence of the US ethanol sector can play a role in moderating increases in US corn price variability, projected to occur in response to near-term global warming. Our findings suggest that the answer to this question depends heavily on the underlying forces shaping the ethanol industry. If mandate-driven, there is little doubt that the presence of the corn-ethanol sector will exacerbate price volatility. However, if market-driven, then the emergence of the corn-ethanol sector can be a double-edged sword for corn price volatility, possibly cushioning the impact of increased climate driven supply volatility, but also inheriting volatility from the newly integrated energy markets via crude oil price fluctuations. We find that empirically the former effect dominates, reducing price volatility by 27%. In contrast, mandates on ethanol production increase future price volatility by 54% in under future climate after 2020. We also consider the potential for liberalized international corn trade to cushion corn price volatility in the US. Our results suggest that allowing corn to move freely internationally serves to reduce the impact of near-term climate change on US corn price volatility by 8%.

  20. The French wholesale electricity and natural gas markets. 2009-2010 Report

    International Nuclear Information System (INIS)

    2010-10-01

    This report on the operation of French wholesale electricity and natural gas markets deals with CRE wholesale market surveillance activities. It capitalizes on the experience gained in this area since the Law of the 7 December 2006 gave the CRE market surveillance powers. It is also based on feedback from discussions and interaction with the different stakeholders through public consultations. Market surveillance applies to: - electricity and gas, - bilateral transactions, trading on exchanges and cross-border transactions, - all maturities, from short-term markets to long-term contracts, - all French wholesale market counter-parties, whatever nationality they may have, - contracts for physical delivery, as well as to financial products. The Law also allows extensive surveillance of market participants' behaviour, in that the CRE can oversee not only transactions between operators but also their bids and the correspondence between the prices charged and the position of each operator. In order to address these different subjects, the electricity and gas sections of this report are divided into four main chapters dealing with the development of trading, wholesale market price trends, the fundamentals (generation, infrastructures) and, finally, the analysis of electricity transactions and the supply of alternative gas operators. Contents: A - Introduction, Summary of the report; B - Section 1 - The wholesale electricity markets: The development of the main segments of the wholesale market, Electricity prices, Analysis of generation and its transparency, Analysis of transactions; C - Section 2 - The wholesale gas markets: The development of gas trading, Gas prices, The gas infrastructures, The supply of players/new entrants; D - Section 3 - Appendices: Glossary, Index to graphs, Index to tables, Index to boxes

  1. Bayesian Option Pricing Framework with Stochastic Volatility for FX Data

    Directory of Open Access Journals (Sweden)

    Ying Wang

    2016-12-01

    Full Text Available The application of stochastic volatility (SV models in the option pricing literature usually assumes that the market has sufficient option data to calibrate the model’s risk-neutral parameters. When option data are insufficient or unavailable, market practitioners must estimate the model from the historical returns of the underlying asset and then transform the resulting model into its risk-neutral equivalent. However, the likelihood function of an SV model can only be expressed in a high-dimensional integration, which makes the estimation a highly challenging task. The Bayesian approach has been the classical way to estimate SV models under the data-generating (physical probability measure, but the transformation from the estimated physical dynamic into its risk-neutral counterpart has not been addressed. Inspired by the generalized autoregressive conditional heteroskedasticity (GARCH option pricing approach by Duan in 1995, we propose an SV model that enables us to simultaneously and conveniently perform Bayesian inference and transformation into risk-neutral dynamics. Our model relaxes the normality assumption on innovations of both return and volatility processes, and our empirical study shows that the estimated option prices generate realistic implied volatility smile shapes. In addition, the volatility premium is almost flat across strike prices, so adding a few option data to the historical time series of the underlying asset can greatly improve the estimation of option prices.

  2. Nodal price volatility reduction and reliability enhancement of restructured power systems considering demand-price elasticity

    International Nuclear Information System (INIS)

    Goel, L.; Wu, Qiuwei; Wang, Peng

    2008-01-01

    With the development of restructured power systems, the conventional 'same for all customers' electricity price is getting replaced by nodal prices. Electricity prices will fluctuate with time and nodes. In restructured power systems, electricity demands will interact mutually with prices. Customers may shift some of their electricity consumption from time slots of high electricity prices to those of low electricity prices if there is a commensurate price incentive. The demand side load shift will influence nodal prices in return. This interaction between demand and price can be depicted using demand-price elasticity. This paper proposes an evaluation technique incorporating the impact of the demand-price elasticity on nodal prices, system reliability and nodal reliabilities of restructured power systems. In this technique, demand and price correlations are represented using the demand-price elasticity matrix which consists of self/cross-elasticity coefficients. Nodal prices are determined using optimal power flow (OPF). The OPF and customer damage functions (CDFs) are combined in the proposed reliability evaluation technique to assess the reliability enhancement of restructured power systems considering demand-price elasticity. The IEEE reliability test system (RTS) is simulated to illustrate the developed techniques. The simulation results show that demand-price elasticity reduces the nodal price volatility and improves both the system reliability and nodal reliabilities of restructured power systems. Demand-price elasticity can therefore be utilized as a possible efficient tool to reduce price volatility and to enhance the reliability of restructured power systems. (author)

  3. The transitory and permanent volatility of oil prices: What implications are there for the US industrial production?

    International Nuclear Information System (INIS)

    Ali Ahmed, Huson Joher; Bashar, Omar H.M.N.; Wadud, I.K.M. Mokhtarul

    2012-01-01

    Highlights: ► This study examines the impact of oil price uncertainty on the US industrial production (IPI). ► The transitory component of the oil price volatility has an adverse impact on the US IPI. ► The transitory oil price volatility induces higher volatility in CPI, commodity prices and IPI. -- Abstract: This study examines the impact of oil price uncertainty on the US industrial production by decomposing oil price volatility into permanent and transitory components. The decompositions provide important evidence on sources and asymmetric effects of oil price volatility. To estimate the component structure of volatility and to analyse the dynamic impacts of the volatility components, the study uses a threshold based CGARCH and VAR modelling over a period from 1980 to 2010 for the US economy. The CGARCH model estimates show significant asymmetric effect of oil price shock on the transitory oil price volatility. Dynamic impulse response functions obtained from the estimated VAR models reveal that there is a significant and prolonged dampening impact of increased transitory oil price volatility on industrial production. The results also suggest that shocks to transitory component induce increased volatility in the general price level and non-fuel commodity prices in the US. Variance decomposition analysis reconfirms that the transitory volatility is the second most important factor to explain the variance of industrial production. These results provide additional insights on the sources of oil price uncertainty and point to the need to direct US energy policies towards stabilising short-term uncertainties in oil prices.

  4. Measuring and testing natural gas and electricity markets volatility : evidence from Alberta's deregulated markets

    International Nuclear Information System (INIS)

    Serletis, A.; Shahmoradi, A.

    2005-01-01

    A number of innovative methods for modelling spot wholesale electricity prices have recently been developed. However, these models have primarily used a univariate time series approach to the analysis of electricity prices. This paper specified and estimated a multivariate GARCH-M model of natural gas and electricity price changes and their volatilities, using data over the deregulated period between January 1996 to November 2004 from Alberta's spot power and natural gas markets. The primary objective of the model was to investigate the relationship between electricity and natural gas prices. It was noted that the model allows for the possibilities of spillovers and asymmetries in the variance-covariance structure for natural gas and electricity price changes, and also for the separate examination of the effects of the volatility of anticipated and unanticipated changes in natural gas and electricity prices. Section 2 of the paper provided a description of the model used to test for causality between natural gas and electricity price changes, while section 3 discussed the data and presented the empirical results. It was concluded that there is a bidirectional causality between natural gas and electricity price changes. However, neither anticipated nor unanticipated natural gas price volatility causes electricity price changes. Anticipated electricity price volatility has a causal effect on natural gas. 10 refs., 2 tabs., 3 figs

  5. Adaptation of warrant price with Black Scholes model and historical volatility

    Science.gov (United States)

    Aziz, Khairu Azlan Abd; Idris, Mohd Fazril Izhar Mohd; Saian, Rizauddin; Daud, Wan Suhana Wan

    2015-05-01

    This project discusses about pricing warrant in Malaysia. The Black Scholes model with non-dividend approach and linear interpolation technique was applied in pricing the call warrant. Three call warrants that are listed in Bursa Malaysia were selected randomly from UiTM's datastream. The finding claims that the volatility for each call warrants are different to each other. We have used the historical volatility which will describes the price movement by which an underlying share is expected to fluctuate within a period. The Black Scholes model price that was obtained by the model will be compared with the actual market price. Mispricing the call warrants will contribute to under or over valuation price. Other variables like interest rate, time to maturity date, exercise price and underlying stock price are involves in pricing call warrants as well as measuring the moneyness of call warrants.

  6. Generators' bidding behavior in the NYISO day-ahead wholesale electricity market

    International Nuclear Information System (INIS)

    Zhang, Ning

    2009-01-01

    This paper proposes a statistical and econometric model to analyze the generators' bidding behavior in the NYISO day-ahead wholesale electricity market. The generator level bidding data show very strong persistence in generators' grouping choices over time. Using dynamic random effect ordered probit model, we find that persistence is characterized by positive state dependence and unobserved heterogeneity and state dependence is more important than unobserved heterogeneity. The finding of true state dependence suggests a scope for economic policy intervention. If NYISO can implement an effective policy to switch generators from higher price groups to lower price groups, the effect is likely to be lasting. As a result, the market price can be lowered in the long-run. Generators' offered capacity is estimated by a two-stage sample selection model. The estimated results show that generators in higher-priced groups tend to withhold their capacity strategically to push up market prices. It further confirms the importance of an effective policy to turn generators into lower price groups in order to mitigate unexpected price spikes. The simulated market prices based on our estimated aggregate supply curve can replicate most volatility of actual DA market prices. Applying our models to different demand assumptions, we find that demand conditions can affect market prices significantly. It validates the importance of introducing demand side management during the restructure of electricity industry. (author)

  7. Dynamics Model Applied to Pricing Options with Uncertain Volatility

    Directory of Open Access Journals (Sweden)

    Lorella Fatone

    2012-01-01

    model is proposed. The data used to test the calibration problem included observations of asset prices over a finite set of (known equispaced discrete time values. Statistical tests were used to estimate the statistical significance of the two parameters of the Black-Scholes model: the volatility and the drift. The effects of these estimates on the option pricing problem were investigated. In particular, the pricing of an option with uncertain volatility in the Black-Scholes framework was revisited, and a statistical significance was associated with the price intervals determined using the Black-Scholes-Barenblatt equations. Numerical experiments involving synthetic and real data were presented. The real data considered were the daily closing values of the S&P500 index and the associated European call and put option prices in the year 2005. The method proposed here for calibrating the Black-Scholes dynamics model could be extended to other science and engineering models that may be expressed in terms of stochastic dynamical systems.

  8. Surveillance report 2015-2016. Functioning of the wholesale electricity, CO_2 and natural gas markets

    International Nuclear Information System (INIS)

    2016-01-01

    After a presentation of some key figures regarding the electric power and natural gas markets, this reports, illustrated by many data tables, discusses the integration of wholesale market surveillance in the European system: a complete and operational framework, constitution of a European register of participants, data reporting at the European level, link with financial regulation, and surveillance of wholesale agents. In the second part, it gives an overview of the context of the energy markets: drop in raw material prices, temperatures above normal with a particularly mild winter, sharp drop in the price of emission allowances. The third section proposes an analysis of wholesale electricity markets: fundamentals (evolutions of production and consumption, of production sources, D-7 nuclear availability), wholesale prices, major growth in exchanged volumes. The last section addresses wholesale natural gas markets: review of the gas system (evolution of demand and supply), evolution of gas prices, evolution of trading (global deliveries, spot and forward market)

  9. 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.

  10. 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)

  11. 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)

  12. Can Equity Volatility Explain the Global Loan Pricing Puzzle?

    OpenAIRE

    Lewis Gaul; Pinar Uysal

    2013-01-01

    This paper examines whether unobservable differences in firm volatility are responsible for the global loan pricing puzzle, which is the observation that corporate loan interest rates appear to be lower in Europe than in the United States. We analyze whether equity volatility, an error prone measure of firm volatility, can explain this difference in loan spreads. We show that using equity volatility in OLS regressions will result in biased and inconsistent estimates of the difference in U.S. ...

  13. A study of Canadian retail gasoline prices

    International Nuclear Information System (INIS)

    Eckert, A.L.

    1999-05-01

    Retail gasoline pricing in Canadian markets was examined to demonstrate why retail prices tend to follow one of two distinct patterns and that neither pattern is observable in the wholesale price. In many cities, retail prices are more rigid than wholesale prices, while in other markets, retail prices follow a cyclic pattern not seen in wholesale prices. This study examined why constant prices are observed in some cities, while other cities have cyclic prices. Theoretical justification was given to the argument that prices will remain constant only in markets in which there are only few gasoline companies with a small number of stations, but a large per-station capacity. It was shown that when one firm operates significantly more stations than its rival, a constant cost equilibrium cannot be maintained. However, a cycle equilibrium can be constructed in this case, and also when the two companies are similarly sized. An initial examination of available price, cost and market structure data shows that there is a positive correlation between price stability and concentration. The response of retail prices to wholesale price movements in the presence of a retail price cycle was also examined through the use of a simple model based on the predictions of the above theory. Data for the city of Windsor, Ontario was used for the modelling approach. A new cycle is created by an increase in price whenever the distance between the previous retail price and the current wholesale prices is very small. Retail prices are more responsive to wholesale prices over the increasing portion of the cycle. It was shown that when the asymmetric error correction model of Borenstein, Cameron and Gilbert is estimated, it indicates a more rapid response to wholesale price increases than to decreases. 72 refs., 22 tabs., 8 figs

  14. The European power industry : asymmetries and price volatility

    International Nuclear Information System (INIS)

    Isabel, M.; Soares, R.T.

    2005-01-01

    A time series model was used to obtain empirical evidence on the spot price volatility of the Spanish electricity market. The model was based on a single market operator and 2 system operators. A generalized autoregressive conditional heteroskedasticity (GARCH) model was used to model and forecast conditional variances related to the spot price volatility of the Spanish electricity market. A correlogram analysis was used to model the processes behind the time series. Autocorrelation and partial autocorrelation functions were used to demonstrate that the the derived electricity spot price series was not a random walk. Lags in various areas were attributed to the fact that a large proportion of electricity is consumed by industry. Weekly cycles justified values presented by a lags multiple of 7. Results of the modelling study showed that the method can be used in the risk management of electricity portfolios as well as in the pricing and hedging of different types of derivatives in electricity markets. It was concluded that further work is needed to reduce instability and asymmetries between generators, consumers and regulators. 16 refs., 5 tabs., 5 figs

  15. Ethanol, Corn, and Soybean Price Relations in a Volatile Vehicle-Fuels Market

    Directory of Open Access Journals (Sweden)

    Cesar Escalante

    2009-06-01

    Full Text Available The rapid upward shift in ethanol demand has raised concerns about ethanol’s impact on the price level and volatility of agricultural commodities. The popular press attributes much of this volatility in commodity prices to a price bubble in ethanol fuel and recent deflation. Market economics predicts not only a softening of demand to high commodity prices but also a positive supply response. This volatility in ethanol and commodity prices are investigated using cointegration, vector error corrections (VECM, and multivariate generalized autoregressive conditional heteroskedascity (MGARCH models. In terms of derived demand theory, results support ethanol and oil demands as derived demands from vehicle-fuel production. Gasoline prices directly influence the prices of ethanol and oil. However, of greater significance for the fuel versus food security issue, results support the effect of agricultural commodity prices as market signals which restore commodity markets to their equilibriums after a demand or supply event (shock. Such shocks may in the short-run increase agricultural commodity prices, but decentralized freely operating markets will mitigate the persistence of these shocks. Results indicate in recent years there are no long-run relations among fuel (ethanol, oil and gasoline prices and agricultural commodity (corn and soybean prices.

  16. The French wholesale electricity and natural gas markets. 2008 report

    International Nuclear Information System (INIS)

    2009-12-01

    This second report on the operation of French wholesale electricity and natural gas markets deals with CRE wholesale market surveillance activities. It follows on from the different work undertaken or announced in the first surveillance report and in the proceedings of the CRE deliberation held on the 8 January 2009. It capitalizes on the experience gained in this area since the Law of the 7 December 2006 gave the CRE market surveillance powers. It is also based on feedback from discussions and interaction with the different stakeholders, through the public consultations held by CRE in 2008 and 2009. market surveillance applies to: - electricity and gas, - bilateral transactions, trading on exchanges and cross-border transactions, - all maturities, from short-term markets to long-term contracts, - all French wholesale market counter-parties, whatever nationality they may have, - contracts for physical delivery, as well as to financial products. The Law also allows extensive surveillance of market participants' behaviour, in that the CRE can oversee not only transactions between operators but also their bids and the correspondence between the prices charged and the position of each operator. In order to address these different subjects, the electricity and gas sections of this report are divided into four main chapters dealing with the development of trading, wholesale market price trends, the fundamentals (generation, infrastructures) and, finally, the analysis of electricity transactions and the supply of alternative gas operators. Contents: A - Methodology notice, Introduction, Summary of the report; B - Section 1 - Wholesale electricity markets: The development of the main wholesale market segments, Monitoring of price formation in France in terms of fundamentals and in comparison with the main interconnected European markets, Analysis and transparency of generation, The analysis of transactions; C - Section 2 - Wholesale natural gas markets: The

  17. PRICE GENERATING PROCESS AND VOLATILITY IN NIGERIAN AGRICULTURAL COMMODITIES MARKET

    Directory of Open Access Journals (Sweden)

    Osaihiomwan Ojogho

    2015-10-01

    Full Text Available The literature on agricultural commodity price volatility in Nigeria has constantly reflected that an excessive price movement is harmful for both producers and consumers, particularly for those who are not able to cope with that new source of economic uncertainty. It has also raised an extensive debate on the main determinants behind the large agricultural commodity price swings observed in the last years without recourse for the price generating process. To narrow this gap, the study examined the price generating process and volatility in the Nigerian agricultural commodities market using secondary data for price series on meat, cereals, sugar, dairy and aggregate food for the period of January 1990 to February 2014. The data were analysed using the linear Gaussian State-Space (SS model. The results of the descriptive statistics showed that the coefficients of variation for cereals (39.88%, food (32.65% and dairy price (43.08% were respectively higher during the overall time period (January 1990 to February 2014 than during the first (January 1990 to January 2002 and second (February 2002 to February 2014 sub-time periods. The results of the inferential statistics showed that authoregressive moving average (ARMA model is the most selected Nigeria agricultural commodity price generating model for the time periods, that a unit increase in the past price state of cereals, dairy, sugar, meat and aggregate food would increase the future price of sugar, meat and aggregate food by N0.14, N0.28 and N0.15 respectively but decrease future price of cereals and dairy by about N1.00 and N0.21 respectively, and that the one-step ahead predicted value for the first out-ofsample period for cereals, meat, dairy and sugar price were 6317.86, 10.24 and 2.06 respectively. The Nigerian agricultural commodity prices have experienced high variability over the period, and such volatility, price-generating process and the determinants of the Nigerian food commodities

  18. Forward Volatility Contract Pricing in the Brazilian Market

    Directory of Open Access Journals (Sweden)

    Sandro Magalhães Manteiga

    2004-06-01

    Full Text Available In this work we consider the pricing of a special class of volatility derivatives, the so-called variance swaps. The fair value of a variance swap is equal to the expected value of the realized variance of the underlying of the swap during the lifetime of the contract. It is shown how this expected value can be computed by means of an exotic option with logarithmic pay-off. We show how to statically replicate this pay-off in terms of a basket of synthetic vanilla call and put options. We apply this construction to the TNLP4 ticker of BOVESPA and synthetize a basket with pure exposure to volatility using actual market prices.

  19. Financial news predicts stock market volatility better than close price

    Directory of Open Access Journals (Sweden)

    Adam Atkins

    2018-06-01

    Full Text Available The behaviour of time series data from financial markets is influenced by a rich mixture of quantitative information from the dynamics of the system, captured in its past behaviour, and qualitative information about the underlying fundamentals arriving via various forms of news feeds. Pattern recognition of financial data using an effective combination of these two types of information is of much interest nowadays, and is addressed in several academic disciplines as well as by practitioners. Recent literature has focused much effort on the use of news-derived information to predict the direction of movement of a stock, i.e. posed as a classification problem, or the precise value of a future asset price, i.e. posed as a regression problem. Here, we show that information extracted from news sources is better at predicting the direction of underlying asset volatility movement, or its second order statistics, rather than its direction of price movement. We show empirical results by constructing machine learning models of Latent Dirichlet Allocation to represent information from news feeds, and simple naïve Bayes classifiers to predict the direction of movements. Empirical results show that the average directional prediction accuracy for volatility, on arrival of new information, is 56%, while that of the asset close price is no better than random at 49%. We evaluate these results using a range of stocks and stock indices in the US market, using a reliable news source as input. We conclude that volatility movements are more predictable than asset price movements when using financial news as machine learning input, and hence could potentially be exploited in pricing derivatives contracts via quantifying volatility. Keywords: Machine learning, Natural language processing, Volatility forecasting, Technical analysis, Computational finance

  20. Oil Price Volatility and Economic Growth in Nigeria: a Vector Auto-Regression (VAR Approach

    Directory of Open Access Journals (Sweden)

    Edesiri Godsday Okoro

    2014-02-01

    Full Text Available The study examined oil price volatility and economic growth in Nigeria linking oil price volatility, crude oil prices, oil revenue and Gross Domestic Product. Using quarterly data sourced from the Central Bank of Nigeria (CBN Statistical Bulletin and World Bank Indicators (various issues spanning 1980-2010, a non‐linear model of oil price volatility and economic growth was estimated using the VAR technique. The study revealed that oil price volatility has significantly influenced the level of economic growth in Nigeria although; the result additionally indicated a negative relationship between the oil price volatility and the level of economic growth. Furthermore, the result also showed that the Nigerian economy survived on crude oil, to such extent that the country‘s budget is tied to particular price of crude oil. This is not a good sign for a developing economy, more so that the country relies almost entirely on revenue of the oil sector as a source of foreign exchange earnings. This therefore portends some dangers for the economic survival of Nigeria. It was recommended amongst others that there should be a strong need for policy makers to focus on policy that will strengthen/stabilize the economy with specific focus on alternative sources of government revenue. Finally, there should be reduction in monetization of crude oil receipts (fiscal discipline, aggressive saving of proceeds from oil booms in future in order to withstand vicissitudes of oil price volatility in future.

  1. Measuring and testing natural gas and electricity markets volatility : evidence from Alberta's deregulated markets

    Energy Technology Data Exchange (ETDEWEB)

    Serletis, A.; Shahmoradi, A. [Calgary Univ., AB (Canada). Dept. of Economics

    2005-03-01

    A number of innovative methods for modelling spot wholesale electricity prices have recently been developed. However, these models have primarily used a univariate time series approach to the analysis of electricity prices. This paper specified and estimated a multivariate GARCH-M model of natural gas and electricity price changes and their volatilities, using data over the deregulated period between January 1996 to November 2004 from Alberta's spot power and natural gas markets. The primary objective of the model was to investigate the relationship between electricity and natural gas prices. It was noted that the model allows for the possibilities of spillovers and asymmetries in the variance-covariance structure for natural gas and electricity price changes, and also for the separate examination of the effects of the volatility of anticipated and unanticipated changes in natural gas and electricity prices. Section 2 of the paper provided a description of the model used to test for causality between natural gas and electricity price changes, while section 3 discussed the data and presented the empirical results. It was concluded that there is a bidirectional causality between natural gas and electricity price changes. However, neither anticipated nor unanticipated natural gas price volatility causes electricity price changes. Anticipated electricity price volatility has a causal effect on natural gas. 10 refs., 2 tabs., 3 figs.

  2. 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

  3. 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.

  4. Option Pricing with Stochastic Volatility and Jump Diffusion Processes

    Directory of Open Access Journals (Sweden)

    Radu Lupu

    2006-03-01

    Full Text Available Option pricing by the use of Black Scholes Merton (BSM model is based on the assumption that asset prices have a lognormal distribution. In spite of the use of these models on a large scale, both by practioners and academics, the assumption of lognormality is rejected by the history of returns. The objective of this article is to present the methods that developed after the Black Scholes Merton environment and deals with the option pricing model adjustment to the empirical properties of asset returns. The main models that appeared after BSM allowed for special changes of the returns that materialized in jump-diffusion and stochastic volatility processes. The article presents the foundations of risk neutral options evaluation and the empirical evidence that fed the amendment of the lognormal assumption in the first part and shows the evaluation procedure under the assumption of stock prices following the jump-diffusion process and the stochastic volatility process.

  5. Volatilities, traded volumes, and the hypothesis of price increments in derivative securities

    Science.gov (United States)

    Lim, Gyuchang; Kim, SooYong; Scalas, Enrico; Kim, Kyungsik

    2007-08-01

    A detrended fluctuation analysis (DFA) is applied to the statistics of Korean treasury bond (KTB) futures from which the logarithmic increments, volatilities, and traded volumes are estimated over a specific time lag. In this study, the logarithmic increment of futures prices has no long-memory property, while the volatility and the traded volume exhibit the existence of the long-memory property. To analyze and calculate whether the volatility clustering is due to a inherent higher-order correlation not detected by with the direct application of the DFA to logarithmic increments of KTB futures, it is of importance to shuffle the original tick data of future prices and to generate a geometric Brownian random walk with the same mean and standard deviation. It was found from a comparison of the three tick data that the higher-order correlation inherent in logarithmic increments leads to volatility clustering. Particularly, the result of the DFA on volatilities and traded volumes can be supported by the hypothesis of price changes.

  6. Smart Meter Tariff Design to Minimise Wholesale Risk

    OpenAIRE

    Rogers, William; Carroll, Paula

    2016-01-01

    Smart metering in electricity markets offers an opportunity to explore more diversetariff structures. In this article a Genetic Algorithm (GA) is used to design Time ofUse tariffs that minimise the wholesale risk to the supplier in residential markets.Residential demand and the System Marginal Price of Ireland's Single ElectricityMarket are simulated to estimate the wholesale risk associated with each tariff.

  7. Price generating process and volatility in the Nigerian agricultural ...

    African Journals Online (AJOL)

    The study examined the price generating process and volatility of Nigerian agricultural commodities market using secondary data for price series on meat, cereals, sugar, dairy and food for the period of January 1990 to February 2014. The data were analysed using both descriptive and inferential statistics. The descriptive ...

  8. The impacts of oil price shocks on stock market volatility: Evidence from the G7 countries

    International Nuclear Information System (INIS)

    Bastianin, Andrea; Conti, Francesca; Manera, Matteo

    2016-01-01

    We study the effects of crude oil price shocks on the stock market volatility of the G7 countries. We identify the causes underlying oil price shocks and gauge the impacts that oil supply and oil demand innovations have on financial volatility. We show that stock market volatility does not respond to oil supply shocks. On the contrary, demand shocks impact significantly on the volatility of the G7 stock markets. Our results suggest that economic policies and financial regulation activities designed to mitigate the adverse effects of unexpected oil price movements should be designed by looking at the source of the oil price shocks. - Highlights: • Effects of oil price shocks on the stock market volatility of the G7 countries. • Econometric identification of the different causes of oil shocks. • Stock market volatility does not respond to oil supply shocks. • Demand shocks impact significantly on stock market volatility. • Policy measures should be designed by considering the source of oil shocks.

  9. The French wholesale electricity, natural gas and CO2 markets in 2010-2011

    International Nuclear Information System (INIS)

    2011-10-01

    CRE's mission of monitoring wholesale markets aims to ensure that wholesale market energy prices are consistent with the technical and economic fundamentals of these markets. In particular, CRE strives to verify that no market power is exercised in such a way that a participant abuses its situation to attain abnormal prices, notably with regard to its costs. During 2010, the volumes traded on the intermediated wholesale electricity markets declined by 7% compared to 2009, mainly on the futures markets. The availability of production facilities, in particular nuclear plants, significantly increased and market volatility declined. The average spot price of electricity increased by 10.4% in 2010 compared to 2009, to euro 47.5 /MWh. The average peak price increased by 1.3% in 2010 to euro 59.0 /MWh. Prices for calendar products (Y+1) went from euro 51.7 /MWh on average in 2009 to euro 52.4 /MWh in 2010. These increases mainly reflect the resumption in consumption following the recovery in economic activity and the severe weather conditions in 2010. Since the beginning of 2010, the recovery in availability of nuclear production facilities has contributed to improving the French electricity trade balance at the borders. The expansion of the trilateral coupling (France, Belgium, and the Netherlands) to Germany and, more recently, the German moratorium on nuclear production of electricity has had effects on the European wholesale electricity markets. French term contracts prices are now below German prices. The transparency of the market has increased, notably due to the publication of unplanned outages at production sites within 30 minutes since the end of 2010. On the wholesale gas markets, volumes traded increased significantly in 2010 and in the first six months of 2011. This development extends the dynamic already observed in 2009. The context is still marked by a discrepancy between gas prices on the market and the price of long-term contracts indexed to oil

  10. Wholesale electricity markets in Europe

    International Nuclear Information System (INIS)

    Rios, J. L.

    2010-01-01

    Electricity Wholesale Markets provide efficient operation of power stations, facilitate hedging instruments for generators and retailers and deliver price signals for new investments. Despite having a common regulatory framework at European level whose last aim is a single electricity market, Wholesale markets have been unevenly developed in each Member State. The evolution form a spot-based market towards a forward-based market needs a certain level of liquidity, transparency and regulatory stability. Interconnections are the key element to promote the integration of electricity markets. To facilitate this, European Regional Initiatives have pushed regulatory harmonization between countries and market coupling projects. (Author)

  11. The Information Content of Treasury Bond Options Concerning Future Volatility and Price Jumps

    DEFF Research Database (Denmark)

    Busch, Thomas; Christensen, Bent Jesper; Nielsen, Morten Ørregaard

    We study the relation between realized and implied volatility in the bond market. Realizedvolatility is constructed from high-frequency (5-minute) returns on 30 year Treasury bond futures.Implied volatility is backed out from prices of associated bond options. Recent nonparametric statisticaltech......We study the relation between realized and implied volatility in the bond market. Realizedvolatility is constructed from high-frequency (5-minute) returns on 30 year Treasury bond futures.Implied volatility is backed out from prices of associated bond options. Recent nonparametric...... components. We also introduce a new vector HAR (VecHAR) modelfor the resulting simultaneous system, controlling for possible endogeneity of implied volatility inthe forecasting equations. We show that implied volatility is a biased and inefficient forecast in thebond market. However, implied volatility does...

  12. Consequences for option pricing of a long memory in volatility

    OpenAIRE

    Taylor, S J

    2001-01-01

    The economic consequences of a long memory assumption about volatility are documented, by comparing implied volatilities for option prices obtained from short and long memory volatility processes. Numerical results are given for options on the S&P 100 index from 1984 to 1998, with lives up to two years. The long memory assumption is found to have a significant impact upon the term structure of implied volatilities and a relatively minor impact upon smile effects. These conclusions are importa...

  13. Use of Bayesian Estimates to determine the Volatility Parameter Input in the Black-Scholes and Binomial Option Pricing Models

    Directory of Open Access Journals (Sweden)

    Shu Wing Ho

    2011-12-01

    Full Text Available The valuation of options and many other derivative instruments requires an estimation of exante or forward looking volatility. This paper adopts a Bayesian approach to estimate stock price volatility. We find evidence that overall Bayesian volatility estimates more closely approximate the implied volatility of stocks derived from traded call and put options prices compared to historical volatility estimates sourced from IVolatility.com (“IVolatility”. Our evidence suggests use of the Bayesian approach to estimate volatility can provide a more accurate measure of ex-ante stock price volatility and will be useful in the pricing of derivative securities where the implied stock price volatility cannot be observed.

  14. A Generic Decomposition Formula for Pricing Vanilla Options under Stochastic Volatility Models

    Directory of Open Access Journals (Sweden)

    Raúl Merino

    2015-01-01

    Full Text Available We obtain a decomposition of the call option price for a very general stochastic volatility diffusion model, extending a previous decomposition formula for the Heston model. We realize that a new term arises when the stock price does not follow an exponential model. The techniques used for this purpose are nonanticipative. In particular, we also see that equivalent results can be obtained by using Functional Itô Calculus. Using the same generalizing ideas, we also extend to nonexponential models the alternative call option price decomposition formula written in terms of the Malliavin derivative of the volatility process. Finally, we give a general expression for the derivative of the implied volatility under both the anticipative and the nonanticipative cases.

  15. Rockets and Feathers: The Asymmetric Effect between China’s Refined Oil Prices and International Crude Oil Prices

    Directory of Open Access Journals (Sweden)

    Yufeng Chen

    2017-03-01

    Full Text Available This paper employs an asymmetric error-correction model (AECM, and uses monthly data on wholesale prices of gasoline and diesel products in China and international crude oil prices from February 2006 to October 2013 to examine whether China’s gasoline and diesel prices adjust asymmetrically to international crude oil price changes. Our empirical results suggest that increases and decreases in international oil prices have asymmetric effects on both wholesale prices of gasoline and diesel fuel in China, and that both increases and decreases in international oil prices have a greater effect on diesel prices than on gasoline prices in China. If there is no change in the maximum retail price, the asymmetry results from the transmission of wholesale prices in China with international oil prices. However, if there is a change in maximum retail prices, both international oil prices and maximum retail prices cause the asymmetry.

  16. Analysis of the Perolera and Gold pineapple into two main wholesalers central Colombia

    Directory of Open Access Journals (Sweden)

    Ana María Neira García

    2016-05-01

    Full Text Available In this work the behavior of the price of two varieties of pineapple Gold and wholesalers Perolera two plants in Colombia is analyzed. The techniques used were the cointegration and Granger causality test, for which prices were taken pineapple, in the period 2006-2011 of wholesale markets Corabastos (in the case of Bogotá and the Central Wholesale Itagui (for Medellin. The theoretical framework was the law of one price. The work proved that there is market integration in the process of price formation. The results allow us to see that there is independence between the prices of the two markets. Cointegration tests indicate that the series are cointegrated itself, so that in the absence of external shocks, the series converge in the long term. We conclude that, although there is no causal link between the markets, these are themselves integrated in the long run, evidencing a fulfillment of the law of one price. The study does not include an analysis of the distances between production areas and consumption centers to consider the effect of transport costs when setting the price. Future research could consider such variables as quality and consumer preferences.

  17. Option Price Decomposition in Spot-Dependent Volatility Models and Some Applications

    Directory of Open Access Journals (Sweden)

    Raúl Merino

    2017-01-01

    Full Text Available We obtain a Hull and White type option price decomposition for a general local volatility model. We apply the obtained formula to CEV model. As an application we give an approximated closed formula for the call option price under a CEV model and an approximated short term implied volatility surface. These approximated formulas are used to estimate model parameters. Numerical comparison is performed for our new method with exact and approximated formulas existing in the literature.

  18. Study of Volatility of New Ship Building Prices in LNG Shipping

    Directory of Open Access Journals (Sweden)

    T. Bangar Raju

    2016-12-01

    Full Text Available The natural gas market has been expanding in size and has attracted particular attention across the global energy market. Although most natural gas transportation is carried out through pipelines, almost one third of it is done with the help of merchant vessels, capable of carrying liquefied natural gas. These LNG carriers have a special design and thus can be treated as a separate class of global fleet. New vessels are huge capital investments by vessel owning companies and just like other vessel classes; the new shipbuilding prices for the LNG segment continue to be a key aspect in the decision making of business players. Additionally these prices can be volatile as new ship building prices fluctuate with time. This paper attempts to analyse the volatility of new ship building prices of LNG carriers. For the study, the average ship building prices for all the LNG carriers having volume carrying capacity is between 160,000 – 173,000 cbm to be delivered between 2016 – 2019 were taken into account. For the analysis, GARCH and EGARCH methods were applied on the data set. The analysis concluded that there is a great deal of volatility in the new ship building prices of LNG vessels. It was also identified that negative shocks were more persistent the positive shocks.

  19. Joint Pricing of VIX and SPX Options with Stochastic Volatility and Jump models

    DEFF Research Database (Denmark)

    Kokholm, Thomas; Stisen, Martin

    2015-01-01

    to existing literature, we derive numerically simpler VIX option and futures pricing formulas in the case of the SVJ model. Moreover, the paper is the first to study the pricing performance of three widely used models to SPX options and VIX derivatives.......With the existence of active markets for volatility derivatives and options on the underlying instrument, the need for models that are able to price these markets consistently has increased. Although pricing formulas for VIX and vanilla options are now available for commonly employed models...... and variance (SVJJ) are jointly calibrated to market quotes on SPX and VIX options together with VIX futures. The full flexibility of having jumps in both returns and volatility added to a stochastic volatility model is essential. Moreover, we find that the SVJJ model with the Feller condition imposed...

  20. Market information and price volatility in petroleum derivatives spot and future markets

    International Nuclear Information System (INIS)

    Khalid Nainar, S.M.

    1993-01-01

    This paper examines the relationship between petroleum futures trading, market information and spot prices. It tests the hypothesis that there is increased spot market information with futures trading of various petroleum derivatives for weekly data during the period January 1970 to July 1985 at the new York Mercantile Exchange. Increased market information with futures trading is indicated by the insignificance of coefficients of past prices in spot price regressions in periods with futures trading. However, the estimates of the coefficient of variation indicate that price volatility tends to increase with futures trading. Thus, traders seem better informed with futures trading although the advantages of increased market information might potentially be undermined by increased price volatility as in the case of regular gasoline. (author)

  1. FDI Inflows, Price and Exchange Rate Volatility: New Empirical Evidence from Latin America

    Directory of Open Access Journals (Sweden)

    Silvia Dal Bianco

    2017-02-01

    Full Text Available This paper investigates the impact of price and real exchange rate volatility on Foreign Direct Investment (FDI inflows in a panel of 10 Latin American and Caribbean countries, observed between 1990 and 2012. Both price and exchange rate volatility series are estimated through the Generalized Autoregressive Conditional Heteroscedasticity model (GARCH. Our results obtained, employing the Fixed Effects estimator, confirm the theory of hysteresis and option value, in so far as a statistically significant negative effect of exchange rate volatility on FDI is found. Price volatility, instead, turns out to be positive but insignificant. Moreover, we show that human capital and trade openness are key for attracting foreign capital. From the policy perspective, our analysis suggests the importance of stabilization policies as well as the policy of government credibility in promoting trade openness and human capital formation.

  2. 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

  3. Carbon price volatility: Evidence from EU ETS

    International Nuclear Information System (INIS)

    Feng, Zhen-Hua; Zou, Le-Le; Wei, Yi-Ming

    2011-01-01

    This paper examines carbon price volatility using data from the European Union Emission Trading Scheme from a nonlinear dynamics point of view. First, we use a random walk model, including serial correlation and variance ratio tests, to determine whether carbon price history information is fully reflected in current carbon price. The empirical research results show that carbon price is not a random walk: the price history information is not fully reflected in current carbon price. Second, use R/S, modified R/S and ARFIMA to analyse the memory of carbon price history. For the period April 2005-December 2008, the modified Hurst index of the carbon price is 0.4859 and the d value of ARFIMA is -0.1191, indicating short-term memory of the carbon price. Third, we use chaos theory to analyse the influence of the carbon market internal mechanism on carbon price, i.e., the market's positive and negative feedback mechanism and the heterogeneous environment. Chaos theory proves that the correlation dimension of carbon price increases. The maximal Lyapunov exponent is positive and large. There is no obvious complex endogenous phenomenon of nonlinear dynamics the carbon price fluctuation. The carbon market is mildly chaotic, showing both market and fractal market characteristics. Price fluctuation is not only influenced by the internal market mechanism, but is also impacted by the heterogeneous environment. Finally, we provide suggestions for regulation and development of carbon market.

  4. An agent-based approach with collaboration among agents. Estimation of wholesale electricity price on PJM and artificial data generated by a mean reverting model

    International Nuclear Information System (INIS)

    Sueyoshi, Toshiyuki

    2010-01-01

    This study examines the performance of MAIS (Multi-Agent Intelligent Simulator) equipped with various learning capabilities. In addition to the learning capabilities, the proposed MAIS incorporates collaboration among agents. The proposed MAIS is applied to estimate a dynamic change of wholesale electricity price in PJM (Pennsylvania-New Jersey-Mainland) and an artificial data set generated by a mean reverting model. Using such different types of data sets, the methodological validity of MAIS is confirmed by comparing it with other well-known alternatives in computer science. This study finds that the MAIS needs to incorporate both the mean reverting model and the collaboration behavior among agents in order to enhance its estimation capability. The MAIS discussed in this study will provide research on energy economics with a new numerical capability that can investigate a dynamic change of not only wholesale electricity price but also speculation and learning process of traders. (author)

  5. Price Limit and Volatility in Taiwan Stock Exchange: Some Additional Evidence from the Extreme Value Approach

    OpenAIRE

    Aktham I. Maghyereh; Haitham A. Al Zoubi; Haitham Nobanee

    2007-01-01

    We reexamine the effects of price limits on stock volatility of Taiwan Stock Exchange using a new methodology based on the Extreme-Value technique. Consistent with the advocates of price limits, we find that stock market volatility is sharply moderated under more restrictive price limits.

  6. Stock Price Volatility and Role of Dividend Policy: Empirical Evidence from Pakistan

    OpenAIRE

    Shah, Syed Akif; Noreen, Umara

    2016-01-01

    Despite years of empirical research, the linkage between dividend policy and stock price volatility remains controversial among the researchers and scholars. This research endeavors to figure out the relationship between stock price volatility and dividend policy of listed companies in Pakistan. A sample of fifty firms, based upon consistent dividend paying behavior, listed on Karachi Stock Exchange has been selected from non-financial sectors, for the period of 2005 to 2012. Multiple regress...

  7. The operation of wholesale electricity, CO2 and natural gas markets in 2010-2011

    International Nuclear Information System (INIS)

    2011-01-01

    The first part analyses the electricity wholesale markets: development of the main wholesale market segments, electricity price, electricity production analysis and transparency of production data, transaction analysis. The second part analyses CO 2 markets: evolution of the institutional framework and perspectives, exchanges volumes on the CO 2 market, the CO 2 price in Europe, fundamentals of the European CO 2 market. The third part addresses the gas market: development of gas trade, gas price, gas infrastructures, supply and outlets for stake holders and new comers

  8. Option Valuation with Volatility Components, Fat Tails, and Nonlinear Pricing Kernels

    DEFF Research Database (Denmark)

    Babaoglu, Kadir Gokhan; Christoffersen, Peter; Heston, Steven

    We nest multiple volatility components, fat tails and a U-shaped pricing kernel in a single option model and compare their contribution to describing returns and option data. All three features lead to statistically significant model improvements. A second volatility factor is economically most i...

  9. Price volatility, trading volume, and market depth in Asian commodity futures exchanges

    Directory of Open Access Journals (Sweden)

    Tanachote Boonvorachote

    2016-01-01

    Full Text Available This paper empirically investigates the impact of trading activity including trading volume and open interest on price volatility in Asian futures exchanges. Trading volume and open interest represent market information for investors. This study uses three different definitions of volatility: (1 daily volatility measured by close-to-close returns, (2 non-trading volatility measured by close-to-open returns, and (3 trading volatility measured by open-to-close returns. The impact of trading volume and open interest on price volatility is investigated. Following Bessembinder and Seguin (1993, volume and open interest are divided into expected and unexpected components. The GARCH (1,1 model is employed using expected and unexpected components of trading activity (volume and open interest as explanatory variables. The results show a positive contemporaneous relationship between expected and unexpected trading volume and volatility, while open interest mitigates volatility. Policy makers can use these findings to suggest to investors that trading activity (volume and open interest is a proxy of market information flowing to exchanges, especially unexpected trading activity. New information flowing to exchanges can mostly be noticed in unexpected trading volumes and open interests.

  10. Volatile behaviour of enrichment uranium in the total nuclear fuel price

    International Nuclear Information System (INIS)

    Arnaiz, J.; Inchausti, J. M.; Tarin, F.

    2004-01-01

    In this article the historical high volatile behaviour of the total nuclear fuel price is evaluated quantitatively and it is concluded that it has been due mainly to the fluctuations of the price of the principal components of enriched uranium (concentrates and enrichment). In order to avoid the negative effects of this volatiles behaviour as far as possible, a basic strategy in the uranium procurement activities is recommended (union of buyers, diversification of supplier, stock management, optimisation of contract portfolio and suitable currency management that guarantees a reliable uranium supply at reasonable prices. These guidelines are those that ENUSA has been following on behalf of the Spanish Utilities in the Commission of Uranium Procurement (CAU in Spanish). (Author) 11 refs

  11. RESPONSIVENESS OF SPATIAL PRICE VOLATILITY TO INCREASED GOVERNMENT PARTICIPATION IN MAIZE GRAIN AND MAIZE MEAL MARKETING IN ZAMBIA

    OpenAIRE

    Syampaku, E.M; Mafimisebi, Taiwo Ejiola

    2014-01-01

    The study analyzed the responsiveness of maize grain and maize meal spatial price volatilities to increased government participation in maize grain marketing in Zambia using descriptive statistics and vector auto-regression (VAR). This was achieved by comparing spatial price volatility means and spatial price means for the period under increased government participation with respective means for periods under limited government participation. Also, spatial price volatilities were regressed ag...

  12. The transmission and management of price volatility in food supply chains

    NARCIS (Netherlands)

    Assefa, Tsion Taye

    2016-01-01

    The 2006-2011 period has been marked by increased volatility in food an agricultural commodity prices at a global level. In the EU, the continuous liberalization of agricultural markets under the Common Agricultural Policy has led to the exposure of EU agricultural to increasing market price

  13. Forward curves, scarcity and price volatility in oil and natural gas markets

    International Nuclear Information System (INIS)

    Geman, Helyette; Ohana, Steve

    2009-01-01

    The role of inventory in explaining the shape of the forward curve and spot price volatility in commodity markets is central in the theory of storage developed by Kaldor [Kaldor, N. (1939) ''Speculation and Economic Stability'', The Review of Economic Studies 7, 1-27] and Working [Working, H. (1949) ''The theory of the price of storage'', American Economic Review, 39, 1254-1262] and has since been documented in a vast body of financial literature, including the reference paper by Fama and French [Fama, E.F. and K.R. French (1987) ''Commodity futures prices: some evidence on forecast power, premiums and the theory of storage'', Journal of Business 60, 55-73] on metals. The goal of this paper is twofold: 1. validate in the case of oil and natural gas the use of the slope of the forward curve as a proxy for inventory (the slope being defined in a way that filters out seasonality); 2. analyze directly for these two major commodities the relationship between inventory and price volatility. In agreement with the theory of storage, we find that: 1. the negative correlation between price volatility and inventory is globally significant for crude oil; 2. this negative correlation prevails only during those periods of scarcity when the inventory is below the historical average and increases importantly during the winter periods for natural gas. Our results are illustrated by the analysis of a 15 year-database of US oil and natural gas prices and inventory. (author)

  14. Pricing long-dated insurance contracts with stochastic interest rates and stochastic volatility

    NARCIS (Netherlands)

    van Haastrecht, A.; Lord, R.; Pelsser, A.; Schrager, D.

    2009-01-01

    We consider the pricing of long-dated insurance contracts under stochastic interest rates and stochastic volatility. In particular, we focus on the valuation of insurance options with long-term equity or foreign exchange exposures. Our modeling framework extends the stochastic volatility model of

  15. Regulated electricity retailing in Chile

    Energy Technology Data Exchange (ETDEWEB)

    Galetovic, Alexander, E-mail: alexander@galetovic.cl [Facultad de Ciencias Economicas y Empresariales, Universidad de los Andes, Santiago, Chile. Av. San Carlos de Apoquindo 2200, Las Condes, Santiago (Chile); Munoz, Cristian M., E-mail: cmunozm@aes.com [AES Gener and Departamento de Ingenieria Electrica, Universidad Catolica de Chile (Chile)

    2011-10-15

    While some countries have unbundled distribution and retailing, skeptics argue that the physical attributes of electricity make retailers redundant. Instead, it is claimed that passive pass through of wholesale prices plus regulated charges for transmission and distribution suffice for customers to benefit from competitive generation markets. We review the Chilean experience with regulated retailing and pass through of wholesale prices. We argue that when energy wholesale prices are volatile and prices are stabilized, distortions emerge. Regulated retailers gain little by mitigating or correcting them. On the contrary, sometimes price distortions increase their profits. We estimate the cost of three distortions that neither regulated retailers nor the regulator have shown any interest in correcting. - Highlights: > We review Chile's experience with regulated electricity retailing. > Distortions emerge when energy wholesale prices are volatile and prices stabilized. > Regulated retailers gain little by mitigating or correcting distortions. > Sometimes price distortions increase retailers' profits. > We estimate the cost of three distortions, which retailers have not corrected.

  16. Regulated electricity retailing in Chile

    International Nuclear Information System (INIS)

    Galetovic, Alexander; Munoz, Cristian M.

    2011-01-01

    While some countries have unbundled distribution and retailing, skeptics argue that the physical attributes of electricity make retailers redundant. Instead, it is claimed that passive pass through of wholesale prices plus regulated charges for transmission and distribution suffice for customers to benefit from competitive generation markets. We review the Chilean experience with regulated retailing and pass through of wholesale prices. We argue that when energy wholesale prices are volatile and prices are stabilized, distortions emerge. Regulated retailers gain little by mitigating or correcting them. On the contrary, sometimes price distortions increase their profits. We estimate the cost of three distortions that neither regulated retailers nor the regulator have shown any interest in correcting. - Highlights: → We review Chile's experience with regulated electricity retailing. → Distortions emerge when energy wholesale prices are volatile and prices stabilized. → Regulated retailers gain little by mitigating or correcting distortions. → Sometimes price distortions increase retailers' profits. → We estimate the cost of three distortions, which retailers have not corrected.

  17. Analysis of relationships between hourly electricity price and load in deregulated real-time power markets

    International Nuclear Information System (INIS)

    Lo, K.L.; Wu, Y.K.

    2004-01-01

    Risk management in the electric power industry involves measuring the risk for all instruments owned by a company. The value of many of these instruments depends directly on electricity prices. In theory, the wholesale price in a real-time market should reflect the short-run marginal cost. However, most markets are not perfectly competitive, therefore by understanding the degree of correlation between price and physical drivers, electric traders and consumers can manage their risk more effectively and efficiently. Market data from two power-pool architectures, both pre-2003 ISO-NE and Australia's NEM, have been studied. The dynamic character of electricity price is mean-reverting, and consists of intra-day and weekly variations, seasonal fluctuations, and instant jumps. Parts of them are affected by load demands. Hourly signals on both price and load are divided into deterministic and random components with a discrete Fourier transform algorithm. Next, the real-time price-load relationship for periodic and random signals is examined. In addition, time-varying volatility models are constructed on random price and random load with the GARCH model, and the correlation between them analysed. Volatility plays a critical role on evaluating option pricing and risk management. (author)

  18. Excessive price reduction and extreme volatility in wind dominant electricity markets; solutions and emerging challenges

    DEFF Research Database (Denmark)

    Farashbashi-Astaneh, Seyed-Mostafa; Chen, Zhe; Mousavi, Omid Alizadeh

    2013-01-01

    High intermittency in the nature of wind power emphasize conceptual revising in the mechanisms of electricity markets with high wind power penetration levels. This paper introduces overmuch price reduction and high price volatility as two adverse consequences in future wind dominant electricity...... is developed. The paper indicates discriminatory pricing approach can be beneficial in high penetration of wind power because it alleviates high price variations and spikiness in one hand and prevents overmuch price reduction in wind dominant electricity markets on the other hand....... markets. While high price volatility imposes elevated risk levels for both electricity suppliers and consumers, excessive price reduction of electricity is a disincentive for investment in new generation capacity and might jeopardizes system adequacy in long term. A comparative study between marginal...

  19. French wholesale electricity and gas markets in 2007. Monitoring report

    International Nuclear Information System (INIS)

    2008-12-01

    Settled on 24 March 2000, the French Energy Regulatory Commission (CRE) is an independent authority. CRE supports an efficient functioning of the electricity and natural gas markets, to the advantage of final consumers. CRE ensures the absence of any discrimination, cross subsidy or obstacle to competition. CRE has examined the functioning of the wholesale markets for electricity and gas for the year 2007. The report discloses the results of a first set of analyses, as well as the next actions to be conducted in order to explain some observed behaviour. On the basis of analyses led on the electricity market, CRE observes that nuclear generation was marginal during 15% of the hours in 2007. Hydraulic generation was marginal during 25% of the hours, coal generation during 25% to 30% of the hours and oil generation during less than 2% of the hours in 2007. Finally, prices on the border markets were of high importance on the French prices which they determined during 20% to 25% of the hours of the year. On an efficient market, the price is driven by the marginal power plant among all those which contribute to satisfy the demand. Therefore the wholesale price formation is conditioned by the frequency of marginality of each generation sector and by the associated valuation of production. On the day-ahead market, when nuclear or hydraulic generation was marginal, the day-ahead price reflected the associated valuation which was decided by EDF. The level of this valuation was generally higher than the marginal generation cost of these plants. As a matter of fact, a producer, even market dominant, may legitimately seek to optimise its income, provided that there is no abuse of a dominant position or any price manipulation. Consequently, at this stage, the relevance of the valuation method for nuclear and hydraulic generation on the wholesale market is still to be checked. CRE has also demonstrated that generation transparency, even if it gradually increased, still needs to

  20. Forward curves, scarcity and price volatility in oil and natural gas markets

    Energy Technology Data Exchange (ETDEWEB)

    Geman, Helyette [Birkbeck, University of London (United Kingdom); ESCP-EAP (France); Ohana, Steve [ESCP-EAP (France)

    2009-07-15

    The role of inventory in explaining the shape of the forward curve and spot price volatility in commodity markets is central in the theory of storage developed by Kaldor [Kaldor, N. (1939) ''Speculation and Economic Stability'', The Review of Economic Studies 7, 1-27] and Working [Working, H. (1949) ''The theory of the price of storage'', American Economic Review, 39, 1254-1262] and has since been documented in a vast body of financial literature, including the reference paper by Fama and French [Fama, E.F. and K.R. French (1987) ''Commodity futures prices: some evidence on forecast power, premiums and the theory of storage'', Journal of Business 60, 55-73] on metals. The goal of this paper is twofold: 1. validate in the case of oil and natural gas the use of the slope of the forward curve as a proxy for inventory (the slope being defined in a way that filters out seasonality); 2. analyze directly for these two major commodities the relationship between inventory and price volatility. In agreement with the theory of storage, we find that: 1. the negative correlation between price volatility and inventory is globally significant for crude oil; 2. this negative correlation prevails only during those periods of scarcity when the inventory is below the historical average and increases importantly during the winter periods for natural gas. Our results are illustrated by the analysis of a 15 year-database of US oil and natural gas prices and inventory. (author)

  1. How Volatilities Nonlocal in Time Affect the Price Dynamics in Complex Financial Systems

    Science.gov (United States)

    Tan, Lei; Zheng, Bo; Chen, Jun-Jie; Jiang, Xiong-Fei

    2015-01-01

    What is the dominating mechanism of the price dynamics in financial systems is of great interest to scientists. The problem whether and how volatilities affect the price movement draws much attention. Although many efforts have been made, it remains challenging. Physicists usually apply the concepts and methods in statistical physics, such as temporal correlation functions, to study financial dynamics. However, the usual volatility-return correlation function, which is local in time, typically fluctuates around zero. Here we construct dynamic observables nonlocal in time to explore the volatility-return correlation, based on the empirical data of hundreds of individual stocks and 25 stock market indices in different countries. Strikingly, the correlation is discovered to be non-zero, with an amplitude of a few percent and a duration of over two weeks. This result provides compelling evidence that past volatilities nonlocal in time affect future returns. Further, we introduce an agent-based model with a novel mechanism, that is, the asymmetric trading preference in volatile and stable markets, to understand the microscopic origin of the volatility-return correlation nonlocal in time. PMID:25723154

  2. How volatilities nonlocal in time affect the price dynamics in complex financial systems.

    Directory of Open Access Journals (Sweden)

    Lei Tan

    Full Text Available What is the dominating mechanism of the price dynamics in financial systems is of great interest to scientists. The problem whether and how volatilities affect the price movement draws much attention. Although many efforts have been made, it remains challenging. Physicists usually apply the concepts and methods in statistical physics, such as temporal correlation functions, to study financial dynamics. However, the usual volatility-return correlation function, which is local in time, typically fluctuates around zero. Here we construct dynamic observables nonlocal in time to explore the volatility-return correlation, based on the empirical data of hundreds of individual stocks and 25 stock market indices in different countries. Strikingly, the correlation is discovered to be non-zero, with an amplitude of a few percent and a duration of over two weeks. This result provides compelling evidence that past volatilities nonlocal in time affect future returns. Further, we introduce an agent-based model with a novel mechanism, that is, the asymmetric trading preference in volatile and stable markets, to understand the microscopic origin of the volatility-return correlation nonlocal in time.

  3. The price level and monetary policy

    Directory of Open Access Journals (Sweden)

    Charles P. Kindleberger

    2002-03-01

    Full Text Available Most central banks are required to or choose to stabilize a price index, largely by manipulating short term interest rates. A serious problem is which index to choose among the national income deflator, wholesale prices, the cost of living, with or eliminating highly volatile commodities such as food and energy, to produce a core index, plus others such as housing, including or without imputed rent of owner-occupied houses, or assets, whether equities or houses. No obvious and widely agreed index exists. Even if there were a clear choice, there remains a question whether a central bank should carefully consider action in order to achieve other goals: full employment, adjustment of the balance of payments, of the exchange rate, prevention of bubbles in asset prices, or recovery from financial crises. If so, the question of central bank weapons remains: monetary expansion or contraction, credit controls, for overall or for particular purposes, and moral suasion.

  4. Hidden wholesale: The drug diffusing capacity of online drug cryptomarkets.

    Science.gov (United States)

    Aldridge, Judith; Décary-Hétu, David

    2016-09-01

    In spite of globalizing processes 'offline' retail drug markets remain localized and - in recent decades - typically 'closed', in which dealers sell primarily to known customers. We characterize drug cryptomarkets as 'anonymous open' marketplaces that allow the diffusion of drugs across locales. Where cryptomarket customers make stock-sourcing purchases for offline distribution, the cryptomarket may indirectly serve drug users who are not themselves cryptomarket customers, thereby increasing the drug diffusing capacity of these marketplaces. Our research aimed to identify wholesale activity on the first major cryptomarket, Silk Road 1. Data were collected 13-15 September 2013. A bespoke web crawler downloaded content from the first major drug cryptomarket, Silk Road 1. This generated data on 1031 vendors and 10,927 drug listings. We estimated monthly revenues to ascertain the relative importance of wholesale priced listings. Wholesale-level revenue generation (sales for listings priced over USD $1000.00) accounted for about a quarter of the revenue generation on SR1 overall. Ecstasy-type drugs dominated wholesale activity on this marketplace, but we also identified substantial wholesale transactions for benzodiazepines and prescription stimulants. Less important, but still generating wholesale revenue, were cocaine, methamphetamine and heroin. Although vendors on the marketplace were located in 41 countries, wholesale activity was confined to only a quarter of these, with China, the Netherlands, Canada and Belgium prominent. The cryptomarket may function in part as a virtual broker, linking wholesalers with offline retail-level distributors. For drugs like ecstasy, these marketplaces may link vendors in producer countries directly with retail level suppliers. Wholesale activity on cryptomarkets may serve to increase the diffusion of new drugs - and wider range of drugs - in offline drug markets, thereby indirectly serving drug users who are not cryptomarket

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

    DEFF Research Database (Denmark)

    Jensen, Thomas Christian; Møller, Flemming

    2010-01-01

    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...

  6. Option Valuation with Volatility Components, Fat Tails, and Non-Monotonic Pricing Kernels

    DEFF Research Database (Denmark)

    Babaoglu, Kadir; Christoffersen, Peter; Heston, Steven L.

    We nest multiple volatility components, fat tails and a U-shaped pricing kernel in a single option model and compare their contribution to describing returns and option data. All three features lead to statistically significant model improvements. A U-shaped pricing kernel is economically most im...

  7. Co-Movement Analysis of Italian and Greek Electricity Market Wholesale Prices by Using a Wavelet Approach

    Directory of Open Access Journals (Sweden)

    George P. Papaioannou

    2015-10-01

    Full Text Available We study the co-evolution of the dynamics or co-movement of two electricity markets, the Italian and Greek, by studying the dynamics of their wholesale day-ahead prices, simultaneously in the time-frequency domain. Co-movement is alternatively referred as market integration in financial economics and markets are internationally integrated if the reward for risk is identical regardless the market one trades in. The innovation of this work is the application of wavelet analysis and more specifically the wavelet coherence to estimate the dynamic interaction between these two prices. Our method is compared to other generic econometric tools used in Economics and Finance namely the dynamic correlation and coherence analysis, to study the co-movement of variables of the type related to these two fields. Our study reveals valuable information that we believe will be extremely useful to the authorities as well as other agents participating in these markets to better prepare the national markets towards the European target model, a framework in which the two markets will be coupled.

  8. Trader types and volatility of emission allowance prices. Evidence from EU ETS Phase I

    International Nuclear Information System (INIS)

    Balietti, Anca Claudia

    2016-01-01

    This paper studies the relation between the trading activity of market participants and the volatility of the European Emission Allowance price during Phase I of the European Union Emission Trading System (EU ETS). We focus on the contrasting roles of different trader types. We find evidence of a positive and significant trading activity–volatility relation, which appears to be stronger when accounting for trader type. The positive relation can be mainly attributed to energy providers. In contrast, industrial companies seem to have traded more frequently when volatility levels were lower. Finally, the non-liable players, represented by financial intermediaries, appear to have acted as a flexible counterparty, trading more with the energy sector when volatility was higher, and more with the industrial firms when volatility was lower. We discuss possible explanations for these contrasted positions. Understanding the trading activity–volatility link is relevant for evaluating the efficiency of the EU ETS. Although the relation is generally positive, many players remained often inactive and traded mostly when volatility levels were lower. Policies targeting the engagement of less active players could lead to a smoother incorporation of information into prices and to an increase in market efficiency. - Highlights: • We study the permit price volatility–trading activity link in the EU ETS Phase I. • We focus on the contrasting roles of different market players. • We show that the relation was overall positive, mainly due to energy providers. • Many other players remained inactive and traded more when volatility was lower. • Policies for the engagement of less active traders could increase market efficiency.

  9. CORPORATE DIVIDEND POLICY AND SHARE PRICE VOLATILITY:A STUDY OF THE BOMBAY STOCK EXCHANGE

    OpenAIRE

    Vijayakumar, Arvind

    2012-01-01

    Purpose: The research paper aims to identify the empirical relationship between Corporate Dividend policy in India and share price volatility. Design/Methodology/Approach: A sample of 197 dividend paying companies listed on the Bombay stock exchange (BSE 500) was examined from 2006 to 2010.A panel data approach was applied to identify the relationship between price volatility against dividend yield and dividend payout ratio. Findings: The findings observe a significant relationship be...

  10. The Effects of High and Volatile Oil Prices

    International Nuclear Information System (INIS)

    Artus, Patrick; Autume, Antoine d'; Chalmin, Philippe; Chevalier, Jean-Marie; Coeure, Benoit; Kalantizs, Yannick; Klein, Caroline; Guesnerie, Roger; Callonnec, Gael; Gaudin, Thomas; Moisan, Francois; Lescaroux, Francois; Clerc, Marie; Marcus, Vincent; Lalanne, Guy; Pouliquen, Erwan; Simon, Olivier; Mignon, Valerie

    2010-01-01

    Forecasting work carried out by a number of institutions shows how difficult it is to accurately predict trends in oil prices. The authors of this report do not carry out this forecasting exercise, but they share the same conclusions about the main features of oil price trends in the near and medium term: a rise in oil prices is inevitable, and will be accompanied by significant volatility. This expectation is based on detailed analysis of oil price determinants, their past variations and forecasts as to their future trends. On the supply side, like with all goods, the price of oil reflects production costs: extraction, transport and refining costs. Alongside this essentially technological component, more specific determinants are at play: the noncompetitive economic rent, which largely stems from OPEC's hold on the market, the scarcity rent on all non-renewable natural resources (this rent increases at a rate equal to the real interest rate according to Hotelling's rule), various taxes (mainly the TIPP domestic tax on oil products in France) and a new component that is set to gain importance in the years ahead, namely the implicit price of carbon emissions (which may take the form of a carbon tax or the cost of emission permits). It is difficult to isolate these different components and even more difficult to quantify them, but the authors' detailed analysis shows that most predictable supply-side developments will concur to bring about a rise in oil prices. On the demand side, too, forecasts and projections converge towards a rise in oil prices. Demand trends depend on crude oil prices, taxes, economic growth and energy and environmental policies. In most developed countries, the trend is towards a slowdown in demand growth and some countries are even seeing a decline in demand. In addition to the economic crisis, two explanations are put forward. The levels reached by crude oil and fuel prices in July 2008 clearly brought the price-elasticity of

  11. Helping consumers manage their exposure to volatile natural gas prices

    International Nuclear Information System (INIS)

    Campion, A.

    2004-01-01

    This presentation provided a customer's view of forward gas prices and outlined different buying behaviours in terms of characteristics of novice and seasoned buyers. It presented a portfolio overview of natural gas and described the risks facing customers in terms of fixed prices and fixed volumes. An energy smart price plan considers floating gas prices instead of a fixed market price. An automobile manufacturer was presented as an example of a gas consumer that would prefer to manage internal costs of production rather than manage gas volatility. The importance of understanding the drivers of individual businesses was emphasized. Natural Resources Canada and the Office of Energy Efficiency offer financial incentives for manufacturers for energy retrofit feasibility studies that result in energy retrofit projects in lighting, heating, boiler replacement, chiller upgrades, and heat recovery. tabs., figs

  12. 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

  13. 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.

  14. A DG approach to the numerical solution of the Stein-Stein stochastic volatility option pricing model

    Science.gov (United States)

    Hozman, J.; Tichý, T.

    2017-12-01

    Stochastic volatility models enable to capture the real world features of the options better than the classical Black-Scholes treatment. Here we focus on pricing of European-style options under the Stein-Stein stochastic volatility model when the option value depends on the time, on the price of the underlying asset and on the volatility as a function of a mean reverting Orstein-Uhlenbeck process. A standard mathematical approach to this model leads to the non-stationary second-order degenerate partial differential equation of two spatial variables completed by the system of boundary and terminal conditions. In order to improve the numerical valuation process for a such pricing equation, we propose a numerical technique based on the discontinuous Galerkin method and the Crank-Nicolson scheme. Finally, reference numerical experiments on real market data illustrate comprehensive empirical findings on options with stochastic volatility.

  15. Can producer currency pricing models generate volatile real exchange rates?

    OpenAIRE

    Povoledo, L.

    2012-01-01

    If the elasticities of substitution between traded and nontraded and between Home and Foreign traded goods are sufficiently low, then the real exchange rate generated by a model with full producer currency pricing is as volatile as in the data.

  16. Modeling agricultural commodity prices and volatility in response to anticipated climate change

    Science.gov (United States)

    Lobell, D. B.; Tran, N.; Welch, J.; Roberts, M.; Schlenker, W.

    2012-12-01

    Food prices have shown a positive trend in the past decade, with episodes of rapid increases in 2008 and 2011. These increases pose a threat to food security in many regions of the world, where the poor are generally net consumers of food, and are also thought to increase risks of social and political unrest. The role of global warming in these price reversals have been debated, but little quantitative work has been done. A particular challenge in modeling these effects is that they require understanding links between climate and food supply, as well as between food supply and prices. Here we combine the anticipated effects of climate change on yield levels and volatility with an empirical competitive storage model to examine how expected climate change might affect prices and social welfare in the international food commodity market. We show that price level and volatility do increase over time in response to decreasing yield, and increasing yield variability. Land supply and storage demand both increase, but production and consumption continue to fall leading to a decrease in consumer surplus, and a corresponding though smaller increase in producer surplus.

  17. Scaling and volatility of breakouts and breakdowns in stock price dynamics.

    Science.gov (United States)

    Liu, Lu; Wei, Jianrong; Huang, Jiping

    2013-01-01

    Because the movement of stock prices is not only ubiquitous in financial markets but also crucial for investors, extensive studies have been done to understand the law behind it. In particular, since the financial crisis in 2008, researchers have a more interest in investigating large market volatilities in order to grasp changing market trends. In this work, we analyze the breakouts and breakdowns of both the Standard & Poor's 500 Index in the US stock market and the Shanghai Composite Index in the Chinese stock market. The breakout usually represents an ongoing upward trend in technical analysis while the breakdown represents an ongoing downward trend. Based on the renormalization method, we introduce two parameters to quantize breakouts and breakdowns, respectively. We discover scaling behavior, characterized by power-law distributions for both the breakouts and breakdowns in the two financial markets with different power-law exponents, which reflect different market volatilities. In detail, the market volatility for breakdowns is usually larger than that for breakouts. Moreover, as an emerging market, the Chinese stock market has larger market volatilities for both the breakouts and breakdowns than the US stock market (a mature market). Further, the short-term volatilities show similar features for both the US stock market and the Chinese stock market. However, the medium-term volatilities in the US stock market are almost symmetrical for the breakouts and breakdowns, whereas those in the Chinese stock market appear to be asymmetrical for the breakouts and breakdowns. The methodology presented here provides a way to understand scaling and hence volatilities of breakouts and breakdowns in stock price dynamics. Our findings not only reveal the features of market volatilities but also make a comparison between mature and emerging financial markets.

  18. Scaling and volatility of breakouts and breakdowns in stock price dynamics.

    Directory of Open Access Journals (Sweden)

    Lu Liu

    Full Text Available BACKGROUND: Because the movement of stock prices is not only ubiquitous in financial markets but also crucial for investors, extensive studies have been done to understand the law behind it. In particular, since the financial crisis in 2008, researchers have a more interest in investigating large market volatilities in order to grasp changing market trends. METHODOLOGY/PRINCIPAL FINDINGS: In this work, we analyze the breakouts and breakdowns of both the Standard & Poor's 500 Index in the US stock market and the Shanghai Composite Index in the Chinese stock market. The breakout usually represents an ongoing upward trend in technical analysis while the breakdown represents an ongoing downward trend. Based on the renormalization method, we introduce two parameters to quantize breakouts and breakdowns, respectively. We discover scaling behavior, characterized by power-law distributions for both the breakouts and breakdowns in the two financial markets with different power-law exponents, which reflect different market volatilities. In detail, the market volatility for breakdowns is usually larger than that for breakouts. Moreover, as an emerging market, the Chinese stock market has larger market volatilities for both the breakouts and breakdowns than the US stock market (a mature market. Further, the short-term volatilities show similar features for both the US stock market and the Chinese stock market. However, the medium-term volatilities in the US stock market are almost symmetrical for the breakouts and breakdowns, whereas those in the Chinese stock market appear to be asymmetrical for the breakouts and breakdowns. CONCLUSIONS/SIGNIFICANCE: The methodology presented here provides a way to understand scaling and hence volatilities of breakouts and breakdowns in stock price dynamics. Our findings not only reveal the features of market volatilities but also make a comparison between mature and emerging financial markets.

  19. 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)

  20. The impact of crude oil price volatility on agricultural employment in the United States

    International Nuclear Information System (INIS)

    Uri, N.D.

    1996-01-01

    This study addresses the question of whether fluctuations in the price of crude oil have affected agricultural employment in the United States. After reviewing previous assessments of the issue, the existence of an empirical relationship between agricultural employment and crude oil price volatility is established using cointegration tests. Subsequently, the nature of the relationship is estimated with the results suggesting that at least three full years are required before the measurable impacts of a percentage change in the real price of crude oil on the change in agricultural employment are exhausted. Finally, the structural stability of the functional relationship between the change in agricultural employment and the volatility of the price of crude oil, the percentage changes in expected net farm income, realized technological innovation, and the wage rate is examined. (author)

  1. Customer response to day-ahead wholesale market electricity prices: Case study of RTP program experience in New York

    Energy Technology Data Exchange (ETDEWEB)

    Goldman, C.; Hopper, N.; Sezgen, O.; Moezzi, M.; Bharvirkar, R.; Neenan, B.; Boisvert, R.; Cappers, P.; Pratt, D.

    2004-07-01

    There is growing interest in policies, programs and tariffs that encourage customer loads to provide demand response (DR) to help discipline wholesale electricity markets. Proposals at the retail level range from eliminating fixed rate tariffs as the default service for some or all customer groups to reinstituting utility-sponsored load management programs with market-based inducements to curtail. Alternative rate designs include time-of-use (TOU), day-ahead real-time pricing (RTP), critical peak pricing, and even pricing usage at real-time market balancing prices. Some Independent System Operators (ISOs) have implemented their own DR programs whereby load curtailment capabilities are treated as a system resource and are paid an equivalent value. The resulting load reductions from these tariffs and programs provide a variety of benefits, including limiting the ability of suppliers to increase spot and long-term market-clearing prices above competitive levels (Neenan et al., 2002; Boren stein, 2002; Ruff, 2002). Unfortunately, there is little information in the public domain to characterize and quantify how customers actually respond to these alternative dynamic pricing schemes. A few empirical studies of large customer RTP response have shown modest results for most customers, with a few very price-responsive customers providing most of the aggregate response (Herriges et al., 1993; Schwarz et al., 2002). However, these studies examined response to voluntary, two-part RTP programs implemented by utilities in states without retail competition.1 Furthermore, the researchers had limited information on customer characteristics so they were unable to identify the drivers to price response. In the absence of a compelling characterization of why customers join RTP programs and how they respond to prices, many initiatives to modernize retail electricity rates seem to be stymied.

  2. Welfare Impact of Virtual Trading on Wholesale Electricity Markets

    Science.gov (United States)

    Giraldo, Juan S.

    Virtual bidding has become a standard feature of multi-settlement wholesale electricity markets in the United States. Virtual bids are financial instruments that allow market participants to take financial positions in the Day-Ahead (DA) market that are automatically reversed/closed in the Real-Time (RT) market. Most U.S. wholesale electricity markets only have two types of virtual bids: a decrement bid (DEC), which is virtual load, and an increment offer (INC), which is virtual generation. In theory, financial participants create benefits by seeking out profitable bidding opportunities through arbitrage or speculation. Benefits have been argued to take the form of increased competition, price convergence, increased market liquidity, and a more efficient dispatch of generation resources. Studies have found that price convergence between the DA and RT markets improved following the introduction of virtual bidding into wholesale electricity markets. The improvement in price convergence was taken as evidence that market efficiency had increased and many of the theoretical benefits realized. Persistent price differences between the DA and RT markets have led to calls to further expand virtual bidding as a means to address remaining market inefficiencies. However, the argument that price convergence is beneficial is extrapolated from the study of commodity and financial markets and the role of futures for increasing market efficiency in that context. This viewpoint largely ignores details that differentiate wholesale electricity markets from other commodity markets. This dissertation advances the understanding of virtual bidding by evaluating the impact of virtual bidding based on the standard definition of economic efficiency which is social welfare. In addition, an examination of the impacts of another type of virtual bid, up-to-congestion (UTC) transactions is presented. This virtual product significantly increased virtual bidding activity in the PJM interconnection

  3. Impact of Dividend Policy on Share Price Volatility: UK Evidence

    OpenAIRE

    ZHANG, YIDING

    2012-01-01

    This research attempts to shed light on the linkage between dividend policy and share price volatility in the context of UK. As a rework and extension of pervious research, the study is expected to reveal the potential impact of dividend change on the fluctuation of stock price, taking existing theoretical and empirical framework as basis. A snapshot of UK economy is provided after the preceding introductory section. The third chapter consists of a review of theories and empirical studies. Wi...

  4. Correlations and clustering in wholesale electricity markets

    Science.gov (United States)

    Cui, Tianyu; Caravelli, Francesco; Ududec, Cozmin

    2018-02-01

    We study the structure of locational marginal prices in day-ahead and real-time wholesale electricity markets. In particular, we consider the case of two North American markets and show that the price correlations contain information on the locational structure of the grid. We study various clustering methods and introduce a type of correlation function based on event synchronization for spiky time series, and another based on string correlations of location names provided by the markets. This allows us to reconstruct aspects of the locational structure of the grid.

  5. Correlations and clustering in wholesale electricity markets

    International Nuclear Information System (INIS)

    Cui, Tianyu; Caravelli, Francesco; Ududec, Cozmin

    2017-01-01

    We study the structure of locational marginal prices in day-ahead and real-time wholesale electricity markets. In particular, we consider the case of two North American markets and show that the price correlations contain information on the locational structure of the grid. We study various clustering methods and introduce a type of correlation function based on event synchronization for spiky time series, and another based on string correlations of location names provided by the markets. As a result, this allows us to reconstruct aspects of the locational structure of the grid.

  6. Functioning of the wholesale electricity, CO_2 and natural gas markets. Report 2015-2016 Surveillance

    International Nuclear Information System (INIS)

    2016-01-01

    No major tightness was observed in 2015 in the French wholesale electricity and gas markets, against a drop in raw material prices, with another year warmer than usual and a particularly mild winter 2015-2016. The drop in oil prices, which was fast in 2014, continued in 2015, down an average 36 % between the two years. Coal prices dropped. However, raw material prices rebounded in the first months of 2016. Therefore, between the first and second quarter of 2016, oil prices increased 26 % reaching euro-31/barrel. Similarly, the price of coal increased from euro-32.4/t in January to euro-50.1/t at the end of June (+55 %). Developments in supply, and especially in demand, related to growth prospects are responsible in part for these changes. These trends are reflected in the wholesale energy price developments. The price of CO_2 allowances was disconnected from the raw material trends, first with an increase in 2015 exceeding euro-8/ton, followed by a sharp decline early 2016. This fall is due in particular to sales carried out by electricity producers in Europe against a backdrop of excess allowances. In this context, the French government proposed a national minimum price for the ton of CO_2 for thermal power stations. On 11 July 2016, the government announced that this mechanism would be applied only to coal plants. CRE recommends that the effects of such a mechanism should be studied specifically given the potential effects on the functioning of markets. The following in particular should be analysed: - the effects on wholesale electricity prices in France and on border exchanges; - the resulting carbon footprint since the expected rise in French wholesale electricity prices could lead to high-carbon electricity imports from bordering countries according to the periods of the year; - the micro-economic effects for the plants concerned and the macro-economic effects in terms of supply security; - and lastly, how it will link with the European framework, in

  7. End user prices in liberalised energy markets

    Energy Technology Data Exchange (ETDEWEB)

    Lijesen, M.G. [Afdeling Energie en Grondstoffen, Centraal Planbureau CPB, Den Haag (Netherlands)

    2002-12-01

    As European energy markets move towards deregulation, energy prices shift from classic 'cost plus' prices towards market prices. We develop a model for the retail and wholesale energy markets in Europe, based on Bertrand competition in a two part pricing structure with switching costs. We use the model to forecast end user electricity and natural gas prices and find that the introduction of competition in energy retail and wholesale markets will decrease standing charges, lowering total costs for energy users. A larger number of entrants, a cost advantage for one of the suppliers, or lower switching costs reduces standing charges further.

  8. The role of vibrant retail electricity markets in assuring that wholesale power markets operate effectively

    International Nuclear Information System (INIS)

    Goulding, A.J.; Rufin, C.; Swinand, G.

    1999-01-01

    Barriers to competitive supplier entry such as California's wholesale-price pass-through model can provide an almost insurmountable barrier to effective retail competition. The telecommunications, airline, and software industries provide lessons--positive and negative--on how creating competitive wholesale markets is insufficient to bring the benefits of competition to smaller consumers

  9. Modeling prices of wholesale market of electric energy and power by the example of the UPS of the Ural

    Directory of Open Access Journals (Sweden)

    Mokhov V.G.

    2017-01-01

    Full Text Available The article oversees forecasting model for deviations of the balancing market index and day-ahead market index according to the maximum similarity sample for different levels of approximation in the context of positive and negative time-series value. The model was being tested on the factual data of the Integrated Power system of the Ural, Wholesale market for electricity and power of Russian Federation. Describes the price formation on the day-ahead market and the balancing market index. The necessity to use accurate forecasting methods consumption and prices of electrical energy and power to reduce penalties when the electric power industry entities on the energy exchange. The testing of mathematical models to predict the balancing market index deviations and day-ahead market based on a sample of maximum similarity with certain approximation equations for positive and negative values gave the prediction error of 3.3%.

  10. The Pricing of European Options Under the Constant Elasticity of Variance with Stochastic Volatility

    Science.gov (United States)

    Bock, Bounghun; Choi, Sun-Yong; Kim, Jeong-Hoon

    This paper considers a hybrid risky asset price model given by a constant elasticity of variance multiplied by a stochastic volatility factor. A multiscale analysis leads to an asymptotic pricing formula for both European vanilla option and a Barrier option near the zero elasticity of variance. The accuracy of the approximation is provided in a rigorous manner. A numerical experiment for implied volatilities shows that the hybrid model improves some of the well-known models in view of fitting the data for different maturities.

  11. Revisiting short-term price and volatility dynamics in day-ahead electricity markets with rising wind power

    International Nuclear Information System (INIS)

    Li, Yuanjing

    2015-01-01

    This paper revisits the short-term price and volatility dynamics in day-ahead electricity markets in consideration of an increasing share of wind power, using an example of the Nord Pool day-ahead market and the Danish wind generation. To do so, a GARCH process is applied, and market coupling and the counterbalance effect of hydropower in the Scandinavian countries are additionally accounted for. As results, we found that wind generation weakly dampens spot prices with an elasticity of 0.008 and also reduces price volatility with an elasticity of 0.02 in the Nordic day-ahead market. The results shed lights on the importance of market coupling and interactions between wind power and hydropower in the Nordic system through cross-border exchanges, which play an essential role in price stabilization. Additionally, an EGARCH specification confirms an asymmetric influence of the price innovations, whereby negative shocks produce larger volatility in the Nordic spot market. While considering heavy tails in error distributions can improve model fits significantly, the EGARCH model outperforms the GARCH model on forecast evaluations. (author)

  12. How Well Does the Price of Unleaded Gasoline Predict the Price of Ethanol?

    OpenAIRE

    Swenson, David A.

    2008-01-01

    This paper looks at the historical relationship of unleaded gasoline prices relative to ethanol prices. It uses several basic measures to determine the usefulness of wholesale unleaded gasoline price as a determinant of ethanol price, and it looks at the stability of that simple model over this decade.

  13. Energy prices, volatility, and the stock market. Evidence from the Eurozone

    International Nuclear Information System (INIS)

    Oberndorfer, Ulrich

    2009-01-01

    This paper constitutes a first analysis on stock returns of energy corporations from the Eurozone. It focuses on the relationship between energy market developments and the pricing of European energy stocks. According to our results, oil price hikes negatively impact on stock returns of European utilities. However, they lead to an appreciation of oil and gas stocks. Interestingly, forecastable oil market volatility negatively affects European oil and gas stocks, implying profit opportunities for strategic investors. In contrast, the gas market does not play a role for the pricing of Eurozone energy stocks. Coal price developments affect the stock returns of European utilities. However, this effect is small compared to oil price impacts, although oil is barely used for electricity generation in Europe. This suggests that for the European stock market, the oil price is the main indicator for energy price developments as a whole. (author)

  14. Price rigidity in the downstream petroleum industry in New Zealand: where does it happen?

    International Nuclear Information System (INIS)

    Delpachitra, S.B.

    2002-01-01

    This paper examines the pricing behaviour of the downstream petroleum product market in New Zealand using multivariate error correction models. The unique feature of these models is the use of actual weekly wholesale and retail prices of diesel and unleaded petrol to measure the relative rigidity of domestic prices. The results suggest that price adjustments in domestic markets in response to price changes in world crude oil markets and refined product markets are very weak. Domestic wholesale prices appear to be the key variable in determining retail prices. Lack of competition in the wholesale sector is found to be the main reason for weak price adjustments. (author)

  15. Price rigidity in the downstream petroleum industry in New Zealand. Where does it happen?

    International Nuclear Information System (INIS)

    Delpachitra, Sarath B.

    2002-01-01

    This paper examines the pricing behaviour of the downstream petroleum product market in New Zealand using multivariate error correction models. The unique feature of these models is the use of actual weekly wholesale and retail prices of diesel and unleaded petrol to measure the relative rigidity of domestic prices. The results suggest that price adjustments in domestic markets in response to price changes in world crude oil markets and refined product markets are very weak. Domestic wholesale prices appear to be the key variable in determining retail prices. Lack of competition in the wholesale sector is found to be the main reason for weak price adjustments

  16. The role of vibrant retail electricity markets in assuring that wholesale power markets operate effectively

    Energy Technology Data Exchange (ETDEWEB)

    Goulding, A.J.; Rufin, C.; Swinand, G.

    1999-12-01

    Barriers to competitive supplier entry such as California's wholesale-price pass-through model can provide an almost insurmountable barrier to effective retail competition. The telecommunications, airline, and software industries provide lessons--positive and negative--on how creating competitive wholesale markets is insufficient to bring the benefits of competition to smaller consumers.

  17. Modelling the Asymmetric Volatility in Hog Prices in Taiwan : The Impact of Joining the WTO

    NARCIS (Netherlands)

    C-L. Chang (Chia-Lin); B-W. Huang (Bing-Wen); M-G. Chen (Meng-Gu)

    2010-01-01

    textabstractPrices in the hog industry in Taiwan are determined according to an auction system. There are significant differences in hog prices before, during and after joining the World Trade Organization (WTO). The paper models growth rates and volatility in daily hog prices in Taiwan from 23

  18. Pricing European option with transaction costs under the fractional long memory stochastic volatility model

    Science.gov (United States)

    Wang, Xiao-Tian; Wu, Min; Zhou, Ze-Min; Jing, Wei-Shu

    2012-02-01

    This paper deals with the problem of discrete time option pricing using the fractional long memory stochastic volatility model with transaction costs. Through the 'anchoring and adjustment' argument in a discrete time setting, a European call option pricing formula is obtained.

  19. Effects of interest rate, exchange rate and their volatilities on stock prices: evidence from banking industry of Pakistan

    Directory of Open Access Journals (Sweden)

    Syed Tehseen JAWAID

    2012-08-01

    Full Text Available This study investigates the effects of exchange rate, interest rates, and their volatilities on stock prices of banking industry of Pakistan. Cointegration results suggests the existance of significant negative long run relationship between exchange rate and short term interest rate with stock prices. On the other hand, positive and significant relationship exists between volatilities of exchange rate and interest rate with stock prices. Causality analysis confirms bidirectional causality between exchange rate and stock prices. Whereas, unidirectional causality runs from short term interest rate to stock prices. Sensitivity analysis confirms that the results are robust. It is suggested that investors should invest in banking sector stocks when exchange rate and interest rates are highly volatile. The result also supports the view that exchange rate and interest rate can be used as an indicator for investment decision making in banking sector stocks.

  20. Impacts of subsidized renewable electricity generation on spot market prices in Germany: evidence from a Garch model with panel data

    International Nuclear Information System (INIS)

    Pham, Thao; Lemoine, Killian

    2015-01-01

    Electricity generated by renewable energy sources creates a downward pressure on wholesale prices through - the so-called 'merit order effect'. This effect tends to lower average power prices and average market revenue that renewables producers should have received, making integration costs of renewables very high at large penetration rate. It is therefore crucial to determine the amplitude of this merit order effect particularly in the context of increasing burden of renewable support policies borne by final consumers. Using hourly data for the period 2009-2012 in German electricity wholesale market for GARCH model under panel data framework, we find that wind and solar power generation injected into German electricity network during this period induces a decrease of electricity spot prices and a slight increase of their volatility. The model-based results suggest that the merit-order effect created by renewable production ranges from 3.86 to 8.34 euro/MWh which implies to the annual volume of consumers' surplus from 1.89 to 3.92 billion euros. However this surplus has not been re-distributed equally among different types of electricity consumers. (authors)

  1. Wealth Transfers from Implementing Real-Time Retail Electricity Pricing

    OpenAIRE

    Borenstein, Severin

    2005-01-01

    Adoption of real-time electricity pricing %u2014 retail prices that vary hourly to reflect changing wholesale prices %u2014 removes existing cross-subsidies to those customers that consume disproportionately more when wholesale prices are highest. If their losses are substantial, these customers are likely to oppose RTP initiatives unless there is a supplemental program to offset their loss. Using data on a random sample of 636 industrial and commercial customers in southern California, I sho...

  2. Transitional rates, risk and the Ontario wholesale power market

    International Nuclear Information System (INIS)

    Rothman, M.

    2001-01-01

    Navigant Consulting is a large investor-owned management consulting firm specializing in energy-based and other networked and regulated industries across Canada. The company works with clients to create delivery and protect shareholder value in the face of uncertainty and change. This presentation discussed the issue of price volatility in competitive electricity markets. The points to keep in mind for pricing in competitive power markets is that: (1) electricity should be generated simultaneously with use, (2) rates in administered markets are average over some time period, (3) competitive pool markets do not average costs, (4) in competitive pool markets, prices are set in very short (hourly or less) intervals, (5) prices in competitive markets are more volatile than in administered markets for both economic and market structure reasons, and (6) the degree of volatility and price levels can change quickly. The Ontario power market was also discussed with reference to price volatility in Ontario and what this means for electricity customers. tabs., figs

  3. Is the price squeeze doctrine still viable in fully-regulated energy markets?

    International Nuclear Information System (INIS)

    Spiwak, L.J.

    1993-01-01

    Simply stated, a price squeeze occurs when a firm with monopoly power on the primary, or wholesale, level engages in a prolonged price increase that drives competitors out of the secondary, or retail level, and thereby extends its monopoly power to the secondary market. A price squeeze will not be found, however, for any short-term exercise in market power. Rather, because anticompetitive effects of a price squeeze are indirect, the price squeeze must last long enough and be severe enough to produce effects on actual or potential competition in the secondary market. In regulated electric industries, a price squeeze claim usually arises from the complex relationship between the supplier, the wholesale customer, the retail customer, and the federal and state regulators. The supplier sells electric power to both wholesale and retail customers. Wholesale transactions are regulated by federal regulators, and retail transactions are regulated at the state level. The wholesale customers in turn sell power to their retail customers. Over the last several years, there have been substantial developments in the application of the price squeeze doctrine to fully-regulated electric utilities. This article will examine the current developments in this area, and attempt to highlight the burdens potential litigants, both plaintiffs and defendants, must overcome to succeed

  4. European CO2 prices and carbon capture investments

    International Nuclear Information System (INIS)

    Abadie, Luis M.; Chamorro, Jose M.

    2008-01-01

    We assess the option to install a carbon capture and storage (CCS) unit in a coal-fired power plant operating in a carbon-constrained environment. We consider two sources of risk, namely the price of emission allowance and the price of the electricity output. First we analyse the performance of the EU market for CO 2 emission allowances. Specifically, we focus on the contracts maturing in the Kyoto Protocol's first commitment period (2008 to 2012) and calibrate the underlying parameters of the allowance price process. Then we refer to the Spanish wholesale electricity market and calibrate the parameters of the electricity price process. We use a two-dimensional binomial lattice to derive the optimal investment rule. In particular, we obtain the trigger allowance prices above which it is optimal to install the capture unit immediately. We further analyse the effect of changes in several variables on these critical prices, among them allowance price volatility and a hypothetical government subsidy. We conclude that, at current permit prices, immediate installation does not seem justified from a financial point of view. This need not be the case, though, if carbon market parameters change dramatically, carbon capture technology undergoes significant improvements, and/or a specific governmental policy to promote these units is adopted. (author)

  5. Effects of exchange rate volatility on export volume and prices of forest products

    Science.gov (United States)

    Sijia Zhang; Joseph Buongiorno

    2010-01-01

    The relative value of currencies varies considerably over time. These fluctuations bring uncertainty to international traders. As a result, the volatility in exchange rate movements may influence the volume and the price of traded commodities. The volatility of exchange rates was measured by the variance of residuals in a GARCH(1,1) model of the exchange rate. We...

  6. Loss aversion and price volatility as determinants of attitude towards and preference for variable price in the Swedish electricity market

    International Nuclear Information System (INIS)

    Juliusson, E. Asgeir; Gamble, Amelie; Gaerling, Tommy

    2007-01-01

    The results of a survey of a random sample of 488 Swedish residents showed that a positive attitude towards and preference for a variable price agreement with the incumbent electricity supplier was negatively affected by loss aversion, and a positive attitude also negatively affected by beliefs about price volatility. Although correlated with attitude and preference, age, education, and current choice of a variable price agreement had no independent effects. Income and current electricity costs had no effects. (author)

  7. Structural and behavioural foundations of competitive electricity prices

    International Nuclear Information System (INIS)

    Bunn, D.W.

    2004-01-01

    This chapter presents a basic introduction to price formation in the new electricity markets and examines power system economics and electricity market liberalisation. Topics discussed include wholesale electricity prices, the case of gas, the effect of the instantaneous nature of the electricity product, spot markets for electricity, and the ability of industrial companies to influence prices. Market fundamentals are reviewed, and institutional reform and strategic evolution are explored. British daily average power and gas prices, monthly forward prices on the British power and gas markets, seasonal demand profile, electricity demand UK 98/00, annual cost of each plant, price formation in 1997, and monthly demand and wholesale prices in England and Wales 1990-1998 are among the graphs provided

  8. The supply of petrol: a report on the supply in the United Kingdom of petrol by wholesale

    International Nuclear Information System (INIS)

    1990-01-01

    A report by the UK Monopolies and Mergers Commission on the supply of petrol examines the extent of vertical control within the industry and concludes that it is a competitive market. Topics covered include petrol prices, profits, petrol exchange agreements, wholesaler agreements with retailers, wholesalers' ownership of retail sites and control over prices and barriers to the entry to the market. In addition to concluding that none of the facts found operate against the public interest, some recommendations regarding the future are made. (UK)

  9. Pricing of American Put Option under a Jump Diffusion Process with Stochastic Volatility in an Incomplete Market

    Directory of Open Access Journals (Sweden)

    Shuang Li

    2014-01-01

    Full Text Available We study the pricing of American options in an incomplete market in which the dynamics of the underlying risky asset is driven by a jump diffusion process with stochastic volatility. By employing a risk-minimization criterion, we obtain the Radon-Nikodym derivative for the minimal martingale measure and consequently a linear complementarity problem (LCP for American option price. An iterative method is then established to solve the LCP problem for American put option price. Our numerical results show that the model and numerical scheme are robust in capturing the feature of incomplete finance market, particularly the influence of market volatility on the price of American options.

  10. Alberta's electricity forwards market

    International Nuclear Information System (INIS)

    Andrews, D.

    2002-01-01

    This paper outlined how the province of Alberta is starting over with a wholesale electricity market. Wholesalers have retreated back to the real-time market. The Watt-Ex standard market design position paper, issued in October 2002, examines wholesale market issues. The author notes that the biggest constraint to competitive electricity market is the reliance on real-time markets to price a good portion of transactions. Doing so, creates extreme price volatility and ineffective price signals because demand and supply have only a limited ability to respond to prices

  11. Market structure and the stability and volatility of electricity prices

    International Nuclear Information System (INIS)

    Bask, Mikael; Widerberg, Anna

    2009-01-01

    By using a novel approach in this paper, (λ,σ 2 )-analysis, we have found that electricity prices most of the time have increased in stability and decreased in volatility when the Nordic power market has expanded and the degree of competition has increased. That electricity prices at Nord Pool have been generated by a stochastic dynamic system that most often has become more stable during the step-wise integration of the Nordic power market means that this market is less sensitive to shocks after the integration process than it was before this process. This is good news

  12. Price and volatility transmissions between natural gas, fertilizer, and corn markets

    NARCIS (Netherlands)

    Etienne, Xiaoli Liao; Trujillo-Barrera, Andrés; Wiggins, Seth

    2016-01-01

    Purpose – The purpose of this paper is to investigate the price and volatility transmission between natural gas, fertilizer (ammonia), and corn markets, an issue that has been traditionally ignored in the literature despite its significant importance. Design/methodology/approach – The authors

  13. 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

  14. The supply function equilibrium and its policy implications for wholesale electricity auctions

    International Nuclear Information System (INIS)

    Holmberg, Paer; Newbery, David

    2010-01-01

    The supply function equilibrium provides a game-theoretic model of strategic bidding in oligopolistic wholesale electricity auctions. This paper presents an intuitive account of current understanding and shows how welfare losses depend on the number of firms in the market and their asymmetry. Previous results and general recommendations for divisible-good/multi-unit auctions provides guidance on the design of the auction format, setting the reservation price, the rationing rule, and restrictions on the offer curves in wholesale electricity auctions. (author)

  15. The Effect of Exchange Rate Volatility on Iran’s Raisin Export

    Directory of Open Access Journals (Sweden)

    2014-10-01

    Full Text Available Exchange rate volatility is one of the effective and ambiguous factors in agricultural product export. Considering the importance of agricultural trade to avoid single-product economy, the main aim of this study was to investigate the impact of exchange rate volatility on the Raisin export of Iran during the years1959-2011. For this purpose, exchange rate volatility index was estimated using Moving Average Standard Deviation (MASD. Then, the impact of exchange rate volatility on the value of Raisin export was examined using Johansen's and Juselius's cointegration method and Vector Error Correction Model (VECM.The results showed that in the long-term and short-term there is a significant relationship between Raisin exports and its main variables (weighted average of Gross income of importers, Wholesale Prices, real exchange rate, Value-added of agricultural sector; as according to the theory it has negative relationship with exchange rate volatility. The error correction coefficient sentence ECM (-1 significantly and its sign was negative as expected. The value of this coefficient is equal to the -0/20 and indicates that about 20 percent of Raisin exports imbalance from its long-term value, after of a period will be Elapse.

  16. Oil price volatility: An Econometric Analysis of the WTI Market

    International Nuclear Information System (INIS)

    Hache, Emmanuel; Lantz, Frederic

    2011-04-01

    The aim of this paper is to study the oil price volatility in West Texas Intermediate (WTI) market in the US. By using statistical and econometric tools, we first attempt to identify the long-term relationship between WTI spot prices and the prices of futures contracts on the New York Mercantile Exchange (NYMEX). Subsequently we model the short-term dynamic between these two prices and this analysis points up several breaks. On this basis, a short term Markov Switching Vectorial Error Correction model (MS-VECM) with two distinct states (standard state and crisis state) has been estimated. Finally we introduce the volumes of transactions observed on the NYMEX for the WTI contracts and we estimate the influence of the non-commercial players. We conclude that the hypothesis of an influence of noncommercial players on the probability for being in the crisis state cannot be rejected. In addition, we show that the rise in liquidity of the first financial contracts, as measured by the volume of open interest, is a key element to understand the dynamics in market prices. (authors)

  17. 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

  18. 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.

  19. The welfare effects of different pricing schemes for electricity distribution in Finland

    International Nuclear Information System (INIS)

    Kopsakangas-Savolainen, Maria

    2004-01-01

    The main components of electricity prices can be divided into the wholesale price, the price of network operations and taxes. Even if the wholesale price is determined efficiently, total welfare can be significantly disturbed if network operations are priced inefficiently. In this study, we calculate network prices based on four alternative methods. These are marginal cost pricing, Ramsey pricing, FDC-pricing and optimal two-part tariffs. The welfare effects on the prevailing pricing system are compared. We show that potentially significant improvements in welfare can be achieved by using marginal cost prices or optimal two-part tariffs. Also Ramsey pricing indicates that prevailing prices are inefficient

  20. The welfare effects of different pricing schemes for electricity distribution in Finland

    International Nuclear Information System (INIS)

    Kopsakangas-Savolainen, Maria

    2004-01-01

    The main components of electricity prices can be divided into the wholesale price, the price of network operations and taxes. Even if the wholesale price is determined efficiently, total welfare can be significantly disturbed if network operations are priced inefficiently. In this study, we calculate network prices based on four alternative methods. These are marginal cost pricing, Ramsey pricing, FDC-pricing and optimal two-part tariffs. The welfare effects on the prevailing pricing system are compared. We show that potentially significant improvements in welfare can be achieved by using marginal cost prices or optimal two-part tariffs. Also Ramsey pricing indicates that prevailing prices are inefficient. (Author)

  1. The analysis of volatility of gold coin price fluctuations in Iran using ARCH & VAR models

    Directory of Open Access Journals (Sweden)

    Younos Vakilolroaya

    2014-03-01

    Full Text Available The aim of this study is to investigate the changes in gold price and modeling of its return volatility and conditional variance model. The study gathers daily prices of gold coins as the dependent variable and the price of gold in world market, the price of oil in OPEC, exchange rate USD to IRR and index of Tehran Stock Exchange from March 2007 to July 2013 and using ARCH family models and VAR methods, the study analysis the data. The study first examines whether the data are stationary or not and then it reviews the household stability, Arch and Garch models. The proposed study investigates the causality among variables, selects different factors, which could be blamed of uncertainty in the coin return. The results indicate that the effect of sudden changes of standard deviation and after a 14-day period disappears and gold price goes back to its initial position. In addition, in this study we observe the so-called leverage effect in Iran’s Gold coin market, which means the good news leads to more volatility in futures market than bad news in an equal size. Finally, the result of analysis of variance implies that in the short-term, a large percentage change in uncertainty of the coin return is due to changes in the same factors and volatility of stock returns in the medium term, global gold output, oil price and exchange rate fluctuation to some extent will show the impact. In the long run, the effects of parameters are more evident.

  2. Functioning of the Finnish electricity wholesale markets; Saehkoen tukkumarkkinan toimivuus Suomessa

    Energy Technology Data Exchange (ETDEWEB)

    Vehvilainen, I.; Broeckl, M.; Hakala, L.; Vanhanen, J.

    2012-12-15

    The purpose of common Nordic electricity market has been to increase competition and efficiency. Market seems to be moving to the opposite direction in the 2010s. Wholesale market has become more fragmented as the market is split to larger number of price areas more often. Poor functioning of the wholesale markets is also the largest contributor to problems in the retail market. Politicians, market regulators, transmission system operators, and market players need to take action to improve the functioning of the market. Separation of price areas reduces competition in all market areas. The Finnish wholesale market is moderately or highly concentrated when Finland is separated from other price areas. Concentration is moderate, if all production capacity is considered. If only price setting hydropower and condensing power capacity are considered, the market is highly concentrated. High concentration can provide opportunities for the biggest producers to use strategic bidding to increase market prices. Larger number of price areas has reduced competition and liquidity with the financial area price products or CfDs. Poor functioning of CfD markets is emphasized by the low competition within the price areas. Bottlenecks between market areas create income for the Transmission System Operators (TSOs) that are responsible of the border transmissions. TSOs have no economic incentives to maintain and repair the border transmission lines, which seems peculiar when compared to e.g. regulation of electricity distribution companies. Finnish Fingrid shows a good example on transparent disclosure of received income and how the accrued funds are used. Import of electricity from Russia to Finland has been reduced since the end of 2011 because of the changes made in the Russian electricity market. Market liberalization in Russia has lead to a market structure that is different from the Nordic markets. Despite the differences, the two markets are becoming more integrated as the

  3. Pricing Models of e-Books When Competing with p-Books

    Directory of Open Access Journals (Sweden)

    Yan Li

    2013-01-01

    Full Text Available With the rise in popularity of e-books, there is a growing need to reexamine the pricing strategy in the e-book supply chain. In this paper, we study two forms of pricing models widely used in the book industry: wholesale and agency pricing models. We first assume a stylized deterministic demand model in which the demand depends on the price, the degree of substitution, and the overall market potential. Subsequently, we employ the game theory to determine the price equilibriums and profit distribution under different pricing models. Finally, we explore the behavior of the publisher and the retailer under different preferences and degrees of substitution through a computational study. Our findings indicate that the e-book price will be lower under the agency pricing model than under the wholesale pricing model, which is counterintuitive. The publishers have higher incentives to adopt the agency pricing model than the wholesale pricing model. The agency pricing model benefits the whole system and can provide readers with books at lower prices. The degree of substitution between the two forms of books and the readers’ preference toward e-book will affect the books’ price and the profit distribution between the publisher and the retailers.

  4. Efficient "Myopic" Asset Pricing in General Equilibrium: A Potential Pitfall in Excess Volatility Tests

    OpenAIRE

    Willem H. Buiter

    1987-01-01

    Excess volatility tests for financial market efficiency maintain the hypothesis of risk-neutrality. This permits the specification of the benchmark efficient market price as the present discounted value of expected future dividends. By departing from the risk-neutrality assumption in a stripped-down version of Lucas's general equilibrium asset pricing model, I show that asset prices determined in a competitive asset market and efficient by construction can nevertheless violate the variance bo...

  5. Fractional Black–Scholes option pricing, volatility calibration and implied Hurst exponents in South African context

    Directory of Open Access Journals (Sweden)

    Emlyn Flint

    2017-03-01

    Full Text Available Background: Contingent claims on underlying assets are typically priced under a framework that assumes, inter alia, that the log returns of the underlying asset are normally distributed. However, many researchers have shown that this assumption is violated in practice. Such violations include the statistical properties of heavy tails, volatility clustering, leptokurtosis and long memory. This paper considers the pricing of contingent claims when the underlying is assumed to display long memory, an issue that has heretofore not received much attention. Aim: We address several theoretical and practical issues in option pricing and implied volatility calibration in a fractional Black–Scholes market. We introduce a novel eight-parameter fractional Black–Scholes-inspired (FBSI model for the implied volatility surface, and consider in depth the issue of calibration. One of the main benefits of such a model is that it allows one to decompose implied volatility into an independent long-memory component – captured by an implied Hurst exponent – and a conditional implied volatility component. Such a decomposition has useful applications in the areas of derivatives trading, risk management, delta hedging and dynamic asset allocation. Setting: The proposed FBSI volatility model is calibrated to South African equity index options data as well as South African Rand/American Dollar currency options data. However, given the focus on the theoretical development of the model, the results in this paper are applicable across all financial markets. Methods: The FBSI model essentially combines a deterministic function form of the 1-year implied volatility skew with a separate deterministic function for the implied Hurst exponent, thus allowing one to model both observed implied volatility surfaces as well as decompose them into independent volatility and long-memory components respectively. Calibration of the model makes use of a quasi-explicit weighted

  6. Finite Volume Method for Pricing European Call Option with Regime-switching Volatility

    Science.gov (United States)

    Lista Tauryawati, Mey; Imron, Chairul; Putri, Endah RM

    2018-03-01

    In this paper, we present a finite volume method for pricing European call option using Black-Scholes equation with regime-switching volatility. In the first step, we formulate the Black-Scholes equations with regime-switching volatility. we use a finite volume method based on fitted finite volume with spatial discretization and an implicit time stepping technique for the case. We show that the regime-switching scheme can revert to the non-switching Black Scholes equation, both in theoretical evidence and numerical simulations.

  7. An analysis of factors affecting price volatility of the US oil market

    International Nuclear Information System (INIS)

    Yang, C.W.; Hwang, M.J.; Huang, B.N.

    2002-01-01

    This paper studies the price volatility of the crude oil market by examining the market structure of OPEC, the stable and unstable demand structure, and related elasticity of demand. In particular, the impacts of prosperity and recession of the world economy and the resulting demand shift on crude oil price are investigated. The error correction model is used to estimate the demand relations and related elasticity. The income effect on demand functions is evaluated to shed light on future prices. A simulation of potential oil prices under different scenarios on a cut of one million barrels per day by OPEC is evaluated. From our simulation, given the 4% cut in OPEC production, the oil price is expected to increase unless the recession is severe. The magnitude and scope of a price hike would be diminished if non-OPEC or domestic production were greatly expanded

  8. The functioning of the electricity, CO2 and natural gas wholesale markets in 2011-2012

    International Nuclear Information System (INIS)

    2012-11-01

    The Commission for Energy Regulation (CRE) monitors electricity and natural gas transactions carried out between suppliers, traders and producers, transactions carried out on the organised markets as well as cross-border trades. CRE's mission of monitoring wholesale markets aims to ensure that wholesale market energy prices are consistent with the technical and economic fundamentals of these markets. In particular, CRE strives to verify that no market power is exercised in such a way that a participant abuses its situation to attain abnormal prices, notably with regard to its costs. This task is now also in line with the Regulation on Energy Market Integrity and Transparency known as REMIT. This fifth surveillance report of the CRE presents and analyses the developments of wholesale markets in France in 2011 and the first semester of 2012 for electricity, gas and CO 2 . It also details the investigations carried out in relation to the behaviour of stakeholders or in case of particular market events. On the electricity market, the average spot price increased slightly and was established at euro 49/MWh (base-load), i.e. an increase of 3% compared with 2010; the price of the Calendar 2013 product increased following the German moratorium on nuclear energy before gradually decreasing over the second half of the year. The announcement of the moratorium also resulted in a price differential reversal with Germany (German prices becoming more expensive) until February 2012. Volumes traded also remained stable despite a drop in trade on the futures market. On the gas market, the LNG offer in Europe and France clearly fell on account of trade-offs with the Asian market where demand greatly increased following the accident of Fukushima, with gas replacing nuclear in electricity generation. Gas prices rose on average but remained more stable than in 2010 both on spot markets and futures markets. They progressed, however, at a lower rate than oil products on which long

  9. Volatility Spillovers for Spot, Futures, and ETF Prices in Energy and Agriculture

    NARCIS (Netherlands)

    C-L. Chang (Chia-Lin); C-P. Liu (Chia-Ping); M.J. McAleer (Michael)

    2016-01-01

    textabstractThe agricultural and energy industries are closely related, both biologically and financially. The paper discusses the relationship and the interactions on price and volatility, with special focus on the covolatility spillover effects for these two industries. The interaction and

  10. Investigating banks’ financial structure on profitability and price volatility of banks’ shares: Evidence from Tehran Stock Exchange

    OpenAIRE

    Zeinab Mirzaei; Mohsen Hamidian; Mohammad Khodaei Valahzaghard

    2014-01-01

    This paper presents an empirical investigation to study the relationship between financial structure on profitability and price volatility of banks’ shares, which are operating in Iran. The proposed study considers the information of 21 Iranian banks over the period 2006-2012. Using some regression techniques, the study has determined that there was a negative relationship between leverage and return on assets but there was not any meaningful relationship between leverage and price volatility...

  11. Development of risk management strategies for state DOTs to effectively deal with volatile prices of transportation construction materials.

    Science.gov (United States)

    2014-06-01

    Volatility in price of critical materials used in transportation projects, such as asphalt cement, leads to : considerable uncertainty about project cost. This uncertainty may lead to price speculation and inflated : bid prices submitted by highway c...

  12. Wholesale electricity markets in Europe; Mercados Mayoristas de Electricidad en Europa

    Energy Technology Data Exchange (ETDEWEB)

    Rios, J. L.

    2010-07-01

    Electricity Wholesale Markets provide efficient operation of power stations, facilitate hedging instruments for generators and retailers and deliver price signals for new investments. Despite having a common regulatory framework at European level whose last aim is a single electricity market, Wholesale markets have been unevenly developed in each Member State. The evolution form a spot-based market towards a forward-based market needs a certain level of liquidity, transparency and regulatory stability. Interconnections are the key element to promote the integration of electricity markets. To facilitate this, European Regional Initiatives have pushed regulatory harmonization between countries and market coupling projects. (Author)

  13. Volatility Discovery

    DEFF Research Database (Denmark)

    Dias, Gustavo Fruet; Scherrer, Cristina; Papailias, Fotis

    The price discovery literature investigates how homogenous securities traded on different markets incorporate information into prices. We take this literature one step further and investigate how these markets contribute to stochastic volatility (volatility discovery). We formally show...... that the realized measures from homogenous securities share a fractional stochastic trend, which is a combination of the price and volatility discovery measures. Furthermore, we show that volatility discovery is associated with the way that market participants process information arrival (market sensitivity......). Finally, we compute volatility discovery for 30 actively traded stocks in the U.S. and report that Nyse and Arca dominate Nasdaq....

  14. Examining the Impact of Corporate Dividend Policy On Stock Price Volatility In Singapore : Does Financial Crisis Matter?

    OpenAIRE

    Hussain, Muhammad Asjad

    2016-01-01

    One of the most puzzling and widely researched topics in the field of corporate finance is corporate dividend policy and the probable impact it has on firms’ stock price volatility. Despite years of research and extensive empirical examination of the dividend policy-stock price volatility linkage, conflicting evidence across a multitude of studies implies that no solid conclusion regarding the veracity and validity of this relationship has yet been reached. Furthermore, there is a dearth of s...

  15. The Volatility of Oil Prices on Stock Exchanges in the Context of Recent Events

    Directory of Open Access Journals (Sweden)

    Popescu Maria-Floriana

    2016-04-01

    Full Text Available Oil along with currencies and gold are the main indicators of the most important processes which take place in the world economy, quotations’ volatility being always followed by economic and social events. Quiet periods of oil prices, when quotations have a constant evolution or only suffer minor fluctuations, are very rare. Most of the time, very sharp price increases or decreases are happening over night or week. This is mostly due to the fact that the oil market is extremely speculative, being influenced by political, military, social, or meteorological events. Since the major oil price shocks of the 70s, the impact of oil price changes on the economic reality of a country or region has been widely studied by academic researchers. Moreover, the stock market plays an important role in the economic welfare and development of a country. Therefore, a vast number of studies have investigated the relationship between oil prices and stock market returns, being discovered significant effects of oil price shocks on the macroeconomic activity for both developed and emerging countries. The purpose of this study is to investigate the volatility of oil prices on stock exchanges taking into consideration the recent events that have affected the oil markets around the globe. Furthermore, based on the findings of this research, some possible scenarios will be developed, taking into account various events that might take place and their potential outcome for oil prices’ future.

  16. THE VOLATILITY OF TEMPERATURE AND PRICING OF WEATHER DERIVATIVES

    OpenAIRE

    Benth, Fred Espen; Saltyte-Benth, Jurate

    2005-01-01

    We propose an Ornstein-Uhlenbeck process with seasonal volatility to model the time dynamics of daily average temperatures. The model is fitted to almost 43 years of daily observations recorded in Stockholm, one of the European cities for which there is a trade in weather futures and options on the Chicago Mercantile Exchange (CME). Explicit pricing dynamics for futures contracts written on the number of heating/cooling degree-days (so-called HDD/CDD-futures) and the cumulative average daily ...

  17. Dividend Policy and Price Volatility. Empirical Evidence from Jordan

    OpenAIRE

    Imad Zeyad Ramadan

    2013-01-01

    The aim of this paper is to investigate the influence of the dividend policy on the share price volatility for the Jordanian industrial firms. All the 77 Jordanian industrial firms listed at Amman Stock Exchange for twelve years from 2000 to 2011 have been selected. Descriptive analysis, correlation analysis and a cross-sectional time series multiple least square regression method have been used to present data analysis, test hypotheses, and achieve the objective of the study. The experientia...

  18. Wealth Transfers Among Large Customers from Implementing Real-Time Retail Electricity Pricing

    OpenAIRE

    Borenstein, Severin

    2007-01-01

    Adoption of real-time electricity pricing — retail prices that vary hourly to reflect changing wholesale prices — removes existing cross-subsidies to those customers that consume disproportionately more when wholesale prices are highest. If their losses are substantial, these customers are likely to oppose RTP initiatives unless there is a supplemental program to offset their loss. Using data on a sample of 1142 large industrial and commercial customers in northern California, I show that RTP...

  19. 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

  20. The Volatility of Indonesia Shari’ah Capital Market Stock Price Toward Macro Economics Variable

    Directory of Open Access Journals (Sweden)

    Helma Malini

    2014-08-01

    Full Text Available Shari’ah stock market is also affected by many highly interrelated economic, social, political andother factor, same as the conventional stock market, the interaction between macroeconomic variablesand Shari’ah stock market creating volatility in the stock price as a response towards severalshocks. The sensitivity of Shari’ah stock market towards shocks happened related with the futureexpectation of micro and macro factor in one country which can be predict or unpredictable.There are six macroeconomic variables that used in this research; inflation, exchange rate, interestrate, dow jones index, crude oil palm price, and FED rate. Using vector error correction model(VECM, the result shows that domestic macroeconomic variables that significantly affect IndonesiaShari’ah compliance for long term, while for international macroeconomic variables the selectedvariable such as FED rate and Dow Jones Index are not significantly affected Indonesia Shari’ahcompliance both in short term and long term. Keywords: Indonesia Shari’ah compliance, Macro Economic Indicators, Impulse Response Function,Stock Price Volatility

  1. Volatilidad de precios internacionales recibidos por los productores de kiwis y manzanas frescas chilenas Volatility of international prices received by chilean fresh kiwi and apple farmers

    Directory of Open Access Journals (Sweden)

    Germán Lobos Andrade

    2008-03-01

    Full Text Available El objetivo de este trabajo fue analizar el comportamiento de los precios medios FOB y el de los precios medios recibidos por los productores de kiwis y manzanas frescas chilenas, usando datos mensuales del periodo enero 1998 a diciembre 2005. Los valores fueron expresados en moneda de diciembre de 2005 usando como deflactor el WPI de EE.UU. Las series de precios medios recibidos por los productores se estimaron indirectamente restando a los precios medios FOB las comisiones y tarifas de exportación. Como medida de volatilidad se usó la desviación estándar de los retornos (variación de precios continuos de cada serie. Se utilizó el método del promedio geométrico móvil para estimar patrones de estacionalidad ajustada de los precios recibidos por los productores de kiwis y manzanas frescas chilenas. Se observó una mayor volatilidad de los retornos en kiwis (47,5% que en manzanas (17,3%. Los resultados mostraron: a una menor estacionalidad de precios para kiwis que manzanas; b una estabilidad de precios en marzo y desde julio a noviembre para kiwis, y desde febrero a junio y desde agosto a diciembre para manzanas; c un valor máximo en diciembre y más bajo en junio para kiwis, un valor máximo en julio y más bajo en enero para manzanas.The purpose of this study is to analyze the behavior of FOB average prices and the average prices received by fresh kiwi and apple producers, using monthly figures for the period spanning from January 1998 to December 2005. The values were expressed in December 2005 currency rates using the U.S.A. WPI (Wholesale Price Index as a deflator. The series of average prices received by the producers were estimated indirectly by subtracting the commissions and export tariffs from the FOB average prices. As a measure of volatility, the standard deviation of the continuous returns (prices variation of each series was used. The patterns of seasonally adjusted price fluctuations, received by Chilean fresh kiwi and

  2. Vertical price transmission in the Danish food chain

    DEFF Research Database (Denmark)

    Jensen, Jørgen Dejgård; Møller, Anja Skadkær

    2005-01-01

    This purpose of this paper is to investigate price transmission patterns through selected Danish food chains – from primary production to processing, from processing to wholesale and from wholesale to retail prices. Specifically, the study addresses the following research questions: To what extent...... are commodity prices transmitted from one stage to another in the food chain? What is the time horizon in the price transmission? Is price transmission symmetric – in the short run and in the long run? Is the degree of price transmission affected by the degree of concentration in the supply and demand stage...... considered? These questions are analysed theoretically and empirically using econometric analysis. 6 food chains are investigated: pork, chicken, eggs, milk, sugar and apples. Preliminary empirical results suggest that for most commodities, price transmission tends to be upward asymmetric, i.e. stronger...

  3. Empirical assessment of market power in the Alberta wholesale electricity market

    International Nuclear Information System (INIS)

    Qu, F.

    2007-01-01

    In the 1990s, many countries began to unbundle regulated electricity monopolies into generation, transmission, distribution and retail companies. Transmission and distribution services remained regulated, but generation and retail services were open for competition. Wholesale and retail electricity markets were created. This paper presented a newly developed competitiveness index specifically for the Alberta market through a simple and standard economic approach. The Alberta Electric Utilities Act came into effect in January 1996. This paper described how the Alberta wholesale electricity market works and demonstrated how to model market power in the electricity market. In this study, power generating companies in Alberta were divided into 2 groups. The first group contained the 5 largest firms called strategic firms, while the other group contained the small generating companies called non-strategic firms or the competitive fringe. In the sample years 2003 and 2004, strategic firms withheld capacity when price was above marginal cost and behaved within the range of competitive pricing. They were more likely to price competitively than to use unilateral market power prices. In addition, firms had higher price-cost margins during the off-peak season. This paper explained in detail the reason for this unusual off-peak pattern. The index to measure a firm's strategic behaviour in the Alberta electricity market was developed according to price-cost margin data where firm-behaviour effect was distinguished from the demand-elasticity effect. It was concluded that policy-makers and regulations should consider the magnitude and source of market power when designing market structure, rules and trading practices. 9 refs., 5 tabs., 2 figs

  4. Modeling the return and volatility of the Greek electricity marginal system price

    International Nuclear Information System (INIS)

    Theodorou, Petros; Karyampas, Dimitrios

    2008-01-01

    Traditional cost based optimization models (WASP) for expansion planning do not allow for mark-to-market valuation and cannot satisfy arbitrage free requirements. This work will fill this gap by developing and estimating models for mark-to-market valuation. Furthermore the present paper examines the return and volatility of the newly born Greek's electricity market's marginal system price. A detailed description of the market mechanism and regulation is used to describe how prices are determined in order to proceed with return and volatility modeling. Continuous time mean reverting and time varying mean reverting stochastic processes have been solved in discrete time processes and estimated econometrically along with ARMAX and GARCH models. It was found that GARCH model gave much better estimation and forecasting ability. Strong persistence in mean has been found giving suspicions of market inefficiency and strong incentives for arbitrage opportunities. Finally, the change in the regulatory framework has been controlled and found to have significant impact. (author)

  5. 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)

  6. 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.

  7. The correlation between dividend policy measures and share price volatility on OMX Helsinki

    OpenAIRE

    Lindeman, Tuomas

    2016-01-01

    Dividend policy refers to the decision whether a firm decides to distribute some of its earnings as dividends to shareholders or not. Two significant variables are related to it: dividend yield and payout ratio. The former indicates how much a firm pays out in dividends each year relative to its share price, whereas the latter refers to the percentage of earnings paid to shareholders in dividends. Dividend policy is seen as one indicator of share price volatility, which measures the dispersio...

  8. Multivariate Option Pricing with Time Varying Volatility and Correlations

    DEFF Research Database (Denmark)

    Rombouts, Jeroen V.K.; Stentoft, Lars Peter

    In recent years multivariate models for asset returns have received much attention, in particular this is the case for models with time varying volatility. In this paper we consider models of this class and examine their potential when it comes to option pricing. Specifically, we derive the risk...... neutral dynamics for a general class of multivariate heteroskedastic models, and we provide a feasible way to price options in this framework. Our framework can be used irrespective of the assumed underlying distribution and dynamics, and it nests several important special cases. We provide an application...... to options on the minimum of two indices. Our results show that not only is correlation important for these options but so is allowing this correlation to be dynamic. Moreover, we show that for the general model exposure to correlation risk carries an important premium, and when this is neglected option...

  9. Functioning of the wholesale electricity, CO2 and natural gas markets - 2013-2014 Report

    International Nuclear Information System (INIS)

    Monteil, Anne; Casadei, Cecile

    2014-11-01

    The Energy Regulatory Commission (CRE) monitors transactions by participants on the French wholesale electricity and gas markets since 2006 and it monitors CO 2 trading since late 2010 in cooperation with the AMF. This power is granted by Articles L. 131-2 and L. 131-3 of the Energy Code. Therefore, in the context of its monitoring mission, CRE ensures that wholesale energy market prices are consistent with the technical and economic fundamentals of these markets. In particular, CRE strives to verify that no market power is exercised in such a way that a participant abuses its situation to attain abnormal prices, notably with regard to its costs. This mission is now also part of the European Regulation on Energy Market Integrity and Transparency of 25 October 2011 (REMIT). The REMIT organises wholesale energy market monitoring, prohibits market abuse (insider trading and market manipulation), and requires market participants to disclose any inside information they hold. It entrusts market monitoring, at European level, to the Agency for the Cooperation of Energy Regulators (ACER) in cooperation with national regulatory authorities responsible for national investigations and sanctions. The French law of 15 April 2013 on the transition towards green growth expressly entrusted CRE with the mission of ensuring REMIT implementation and CoRDiS jurisdiction to sanction any breaches of the regulation. The present report reviews the development of wholesale markets over the course of 2013 and the first half of 2014. It also presents detailed completed or ongoing analyses related to market participants' behaviour or to market events. The difficulties encountered by energy producers were confirmed during 2013 and the first half of 2014, in particular for electricity producers. The costs of production for coal-fired power stations remained particularly low, due especially to a continued drop in the coal prices and despite a slight increase in the CO 2 prices. Production

  10. Essays on pricing electricity and electricity derivatives in deregulated markets

    Science.gov (United States)

    Popova, Julia

    2008-10-01

    wholesale electricity prices. It is well known that electricity prices exhibit both cyclicity and high volatility which varies through time. Results indicate that heterogeneity in unconditional variance---which is not detected by classical unit root tests---may contribute to the appearance of non-stationarity.

  11. Oil price volatility, financial regulation and energy policy

    International Nuclear Information System (INIS)

    Chevalier, J.M.

    2010-01-01

    In October of 2009, the French Ministry of Economy asked the author to chair a work group on oil price volatility. The report resulting from that work was submitted to the minister on February 9, 2010. Based on the report, this article focuses on three major elements: (i) the operation of the oil market, with interacting physical basics and financial basics (ii) financial market regulation, more specifically commodities-derived product markets and current work in that area and (iii) the lessons one can draw from that exercise in terms of energy policy. Significant projects have been initiated on global, European and national levels. (author)

  12. Volatility Analysis of Bitcoin Price Time Series

    Directory of Open Access Journals (Sweden)

    Lukáš Pichl

    2017-12-01

    Full Text Available Bitcoin has the largest share in the total capitalization of cryptocurrency markets currently reaching above 70 billion USD. In this work we focus on the price of Bitcoin in terms of standard currencies and their volatility over the last five years. The average day-to-day return throughout this period is 0.328%, amounting in exponential growth from 6 USD to over 4,000 USD per 1 BTC at present. Multi-scale analysis is performed from the level of the tick data, through the 5 min, 1 hour and 1 day scales. Distribution of trading volumes (1 sec, 1 min, 1 hour and 1 day aggregated from the Kraken BTCEUR tick data is provided that shows the artifacts of algorithmic trading (selling transactions with volume peaks distributed at integer multiples of BTC unit. Arbitrage opportunities are studied using the EUR, USD and CNY currencies. Whereas the arbitrage spread for EUR-USD currency pair is found narrow at the order of a percent, at the 1 hour sampling period the arbitrage spread for USD-CNY (and similarly EUR-CNY is found to be more substantial, reaching as high as above 5 percent on rare occasions. The volatility of BTC exchange rates is modeled using the day-to-day distribution of logarithmic return, and the Realized Volatility, sum of the squared logarithmic returns on 5-minute basis. In this work we demonstrate that the Heterogeneous Autoregressive model for Realized Volatility Andersen et al. (2007 applies reasonably well to the BTCUSD dataset. Finally, a feed-forward neural network with 2 hidden layers using 10-day moving window sampling daily return predictors is applied to estimate the next-day logarithmic return. The results show that such an artificial neural network prediction is capable of approximate capture of the actual log return distribution; more sophisticated methods, such as recurrent neural networks and LSTM (Long Short Term Memory techniques from deep learning may be necessary for higher prediction accuracy.

  13. A discontinuous Galerkin method for numerical pricing of European options under Heston stochastic volatility

    Science.gov (United States)

    Hozman, J.; Tichý, T.

    2016-12-01

    The paper is based on the results from our recent research on multidimensional option pricing problems. We focus on European option valuation when the price movement of the underlying asset is driven by a stochastic volatility following a square root process proposed by Heston. The stochastic approach incorporates a new additional spatial variable into this model and makes it very robust, i.e. it provides a framework to price a variety of options that is closer to reality. The main topic is to present the numerical scheme arising from the concept of discontinuous Galerkin methods and applicable to the Heston option pricing model. The numerical results are presented on artificial benchmarks as well as on reference market data.

  14. Il livello dei prezzi e la politica monetaria (The Price Level and Monetary Policy

    Directory of Open Access Journals (Sweden)

    Charles P. Kindleberger

    2002-06-01

    Full Text Available Most central banks are required or choose to stabilize a price index, largely by manipulating short term interest rates. A serious problem is what index to choose among the national income deflator, wholesale prices, the cost of living, with or eliminating highly volatile commodities such as food and energy, to produce a core index, plus others such as housing, including or without imputed rent of owner-occupied houses, or assets, whether equities or houses. No obvious and widely agreed index exists. Even if there were a clear choice, there remains a question whether a central bank should carefully consider action to achieve other goals: full employment, adjustment of the balance of payments, of the exchange rate, prevention of bubbles in asset prices, or recovery from financial crises. If so, the question of central bank weapons remains: monetary expansion or contraction, credit controls, overall or for particular purposes, and moral suasion.

  15. Oil-Price Volatility and Macroeconomic Spillovers in Central and Eastern Europe: Evidence from a Multivariate GARCH Model

    Directory of Open Access Journals (Sweden)

    Hegerty Scott W.

    2015-11-01

    Full Text Available Recent commodity price declines have added to worldwide macroeconomic risk, which has had serious effects on both commodity exporters and manufacturers that use oil and raw materials. These effects have been keenly felt in Central and Eastern Europe—particularly in Russia, but also in European Union member states. This study tests for spillovers among commodity-price and macroeconomic volatility by applying a VAR(1-MGARCH model to monthly time series for eight CEE countries. Overall, we find that oil prices do indeed have effects throughout the region, as do spillovers among exchange rates, inflation, interest rates, and output, but that they differ from country to country—particularly when different degrees of transition and integration are considered. While oil prices have a limited impact on the currencies of Russia and Ukraine, they do make a much larger contribution to the two countries’ macroeconomic volatility than do spillovers among the other macroeconomic variables.

  16. Pricing and reimbursement of drugs in Ireland.

    Science.gov (United States)

    Barry, Michael; Tilson, Lesley; Ryan, Máirín

    2004-06-01

    Expenditure on healthcare in Ireland, which is mainly derived from taxation, has increased considerably in recent years to an estimated 9.2 billion euro in 2003. Pharmaceuticals account for approximately 10% of total healthcare expenditure. Approximately one-third of patients receive their medications free of charge whilst the remaining two-thirds are subject to a co-payment threshold of 78 euro per month, i.e. 936 euro per year. The price of medications in Ireland is linked to those of five other member states where the price to the wholesaler of any medication will not exceed the lesser of the currency-adjusted wholesale price in the United Kingdom or the average of wholesale prices in Denmark, France, Germany, The Netherlands and the United Kingdom. A price freeze at the introduction price has been in existence since 1993. Despite the price freeze, expenditure on medicines on the community drugs scheme has increased from 201 million euro in 1993 to 898 million euro in 2002. The two main factors contributing to the increased expenditure on medicines include "product mix", the prescribing of new and more expensive medication, and "volume effect" comprising growth in the number of prescription items. Changing demographics and the extension of the General Medical Services (GMS) Scheme to provide free medicines for all those over the age of 70 years have also contributed. Prior to reimbursement under the community drugs schemes, a medicine must be included in the GMS code book or positive list. A demonstration of cost-effectiveness is not a pre-requisite for reimbursement.

  17. 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.

  18. Role of Exchange Rate Volatility in Exchange Rate Pass-Through to Import Prices: Some Evidence from Japan

    OpenAIRE

    Guneratne Banda Wickremasinghe; Param Silvapulle

    2004-01-01

    This paper investigates the effect of exchange rate volatility on the degree of exchange rate pass-through in Japan for the period January 1975 to June 1997. Although several studies put forward theoretical arguments for the volatility-domestic import price relationship, only a very few studies produced empirical evidence. The volatility of contractual currency based exchange rate index returns was modelled using GARCH-type processes with skewed student t-distribution, capturing the typical n...

  19. Oil market prices 1989/1990

    International Nuclear Information System (INIS)

    Jenkins, G.

    1991-01-01

    There are many oil markets. Oil Market Prices lists the markets, provides statistics on prices and the volumes of trade, analyses the price structures in the markets and provides supplementary information on ocean freight rates and oil refining margins. Oil Market Prices will serve as a permanent record of crude oil prices including those quoted on the futures and forward markets, the many wholesale prices for refined oil products, prices consumers pay and the average prices received by the oil companies. In all instances the sources of the statistics are given together with comprehensive listing of alternative sources. (Author)

  20. Influence of generic reference pricing on medicine cost in Slovenia: a retrospective study

    Science.gov (United States)

    Marđetko, Nika; Kos, Mitja

    2018-01-01

    Aim To assess the impact of the generic reference pricing (GRP) system on the prices and cost of medicines in Slovenia approximately 8 years after its introduction in 2003 and before the implementation of the therapeutic reference pricing system. Methods A retrospective study of all medicines (N = 789) included in the GRP system on January 31, 2012 was performed. Medicine prices and cost were analyzed between January 31, 2012 and December 31, 2013 after every update (N = 11) of the maximum reimbursable price (MRP) and were compared to the price and cost on January 31, 2012 (index date). Time trends of different types of medicine prices (maximum allowed price, MRP, and actual wholesale price) were graphically analyzed, and actual wholesale price adjustments to the MRP changes and the budget impact of the GRP were assessed. Results In the 2-year study period, the long-term performance of the GRP system was associated with an approximate 45% decrease in the average MRP or an approximate 20% cost reduction. For each MRP update period, the GRP reduced the cost based on the maximum allowed price for approximately 30%. The wholesale price adjustments were mostly made for medicines priced above the MRP and reduced patients’ out-of-pocket cost. Conclusions In the long term, the GRP system effectively reduced medicine prices and the cost of reimbursed products. PMID:29740992

  1. Influence of generic reference pricing on medicine cost in Slovenia: a retrospective study.

    Science.gov (United States)

    Marđetko, Nika; Kos, Mitja

    2018-04-30

    To assess the impact of the generic reference pricing (GRP) system on the prices and cost of medicines in Slovenia approximately 8 years after its introduction in 2003 and before the implementation of the therapeutic reference pricing system. A retrospective study of all medicines (N=789) included in the GRP system on January 31, 2012 was performed. Medicine prices and cost were analyzed between January 31, 2012 and December 31, 2013 after every update (N=11) of the maximum reimbursable price (MRP) and were compared to the price and cost on January 31, 2012 (index date). Time trends of different types of medicine prices (maximum allowed price, MRP, and actual wholesale price) were graphically analyzed, and actual wholesale price adjustments to the MRP changes and the budget impact of the GRP were assessed. In the 2-year study period, the long-term performance of the GRP system was associated with an approximate 45% decrease in the average MRP or an approximate 20% cost reduction. For each MRP update period, the GRP reduced the cost based on the maximum allowed price for approximately 30%. The wholesale price adjustments were mostly made for medicines priced above the MRP and reduced patients' out-of-pocket cost. In the long term, the GRP system effectively reduced medicine prices and the cost of reimbursed products.

  2. Strategies to keep your business operating through times of price volatility

    International Nuclear Information System (INIS)

    Spearman, C.

    2002-01-01

    The past (the promises), the present (the reality), and the future (the dream) of electricity deregulation in Alberta are reviewed. According to this outspoken critic of the system the promise was orderly transition, the introduction of industry structure and regulatory reforms that would preserve the 'Alberta advantage' of competitive electricity prices. The reality is government indecision, price volatility, uncertainty and complexity, resulting in poor understanding of the system on the part of consumers, hence bad decisions, rapidly declining confidence, high prices, and eroded competitiveness. In short, costs have skyrocketed and benefits are nowhere to be seen. As far as the dream is concerned the picture is cloudy, based on the following factors: load settlement is still in a mess, transmission remains a major issue, market power of former monopolies is still a concern, and future supply is uncertain in the absence of additional capacity. What is needed to make good on the original promises is a clear vision, stability, a cohesive plan, leadership, decisiveness, certainty and simplicity

  3. Wholesale electricity, CO2, and gas market functioning. 2012-2013 report

    International Nuclear Information System (INIS)

    2013-10-01

    The Energy Regulatory Commission (CRE) monitors transactions by participants on the French wholesale electricity and gas markets since 2006 and it monitors CO 2 trading since late 2010 in cooperation with the AMF. This power is granted by Articles L. 131-2 and L. 131-3 of the Energy Code. Therefore, in the context of its monitoring mission, CRE ensures that wholesale energy market prices are consistent with the technical and economic fundamentals of these markets. In particular, CRE strives to verify that no market power is exercised in such a way that a participant abuses its situation to attain abnormal prices, notably with regard to its costs. This mission is now also part of the European Regulation on Energy Market Integrity and Transparency of 25 October 2011 (REMIT). The REMIT organises wholesale energy market monitoring, prohibits market abuse (insider trading and market manipulation), and requires market participants to disclose any inside information they hold. It entrusts market monitoring, at European level, to the Agency for the Cooperation of Energy Regulators (ACER) in cooperation with national regulatory authorities responsible for national investigations and sanctions. The Brottes law of 15 April 2013 expressly entrusted CRE with the mission of ensuring REMIT implementation and CoRDis jurisdiction to sanction any breaches of the regulation. The energy markets are experiencing major change. The emergence of unconventional hydrocarbons in North America has profoundly changed the global balance of gas and oil production. American gas market prices dropped due to abundant supply causing a significant decline in imports of liquefied natural gas (LNG) from across the Atlantic and a strong incentive to produce electricity in gas-fired plants to the detriment of coal-fired plants. This significant decline in demand for coal in the United States significantly weakened global coal prices. World energy demand is mainly driven by emerging markets, particularly

  4. Price leadership within a marketing channel: A cointegration study

    NARCIS (Netherlands)

    Kuiper, W.E.; Meulenberg, M.T.G.

    2004-01-01

    Building upon a multiple-product channel structure, this paper develops a model to test channel price leadership on the basis of time series observations on retail and wholesale prices and using absence of double marginalisation as a criterion for channel price leadership. The model studies

  5. American options under stochastic volatility

    NARCIS (Netherlands)

    Chockalingam, A.; Muthuraman, K.

    2011-01-01

    The problem of pricing an American option written on an underlying asset with constant price volatility has been studied extensively in literature. Real-world data, however, demonstrate that volatility is not constant, and stochastic volatility models are used to account for dynamic volatility

  6. Fractional Black-Scholes option pricing, volatility calibration and implied Hurst exponents in South African context

    OpenAIRE

    Flint, Emlyn; Maré, Eben

    2017-01-01

    Background: Contingent claims on underlying assets are typically priced under a framework that assumes, inter alia, that the log returns of the underlying asset are normally distributed. However, many researchers have shown that this assumption is violated in practice. Such violations include the statistical properties of heavy tails, volatility clustering, leptokurtosis and long memory. This paper considers the pricing of contingent claims when the underlying is assumed to display long memor...

  7. 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. .

  8. The Economics of Biofuel Policies. Impacts on Price Volatility in Grain and Oilseed Markets

    NARCIS (Netherlands)

    Gorter, de H.; Drabik, D.

    2015-01-01

    The global food crises of 2008 and 2010 and the increased price volatility revolve around biofuels policies and their interaction with each other, farm policies and between countries. The Economics of Biofuel Policies focuses on the role of biofuel policies in creating turmoil in the world grains

  9. The pricing effect of the common pattern in firm-level idiosyncratic volatility: Evidence from A-Share stocks of China

    Science.gov (United States)

    Su, Zhi; Shu, Tengjia; Yin, Libo

    2018-05-01

    Inspired by Herskovic et al. (2016), we investigate the pricing effect of the firm-level common idiosyncratic volatility (CIV) in China's A-Share market. Return tests indicate that lower CIV risk loadings bring higher returns significantly, while the pricing function of market volatility (MV) is inconsistent. Strategy that goes long the highest CIV-beta quintile and short the lowest CIV-beta quintile brings an annualized average return of 5%-7%. Our findings supplement Herskovic et al. (2016) by confirming a significantly negative relationship between CIV and stock returns in a developing market.

  10. Plant life extensions for German nuclear power plants? Controversial discussion on potential electricity price effects

    International Nuclear Information System (INIS)

    Matthes, Felix C.; Hermann, Hauke

    2009-06-01

    The discussions on electricity price effects in case of the plant life extension of German nuclear power plants covers the following topics: (1) Introduction and methodology. (2) Electricity generation in nuclear power plants and electricity price based on an empirical view: electricity generation in nuclear power plants and final consumption price for households and industry in the European Union; electricity generation in nuclear power plants and electricity wholesale price in case of low availability of nuclear power plants in Germany; comparison of electricity wholesale prices in Germany and France. (3) Model considerations in relation to electricity prices and nuclear phase-out. (4) Concluding considerations.

  11. Assessment of the impact of market regulation in Mali on the price of essential medicines provided through the private sector.

    Science.gov (United States)

    Maïga, Diadié; Williams-Jones, Bryn

    2010-10-01

    In 1998, the government of Mali adopted a national pharmaceutical policy aimed at promoting a supply system for generic essential medicines that would guarantee equal access for all citizens. Distribution and delivery is a shared responsibility of both public and private sectors (wholesalers and pharmacies). To influence private sector behaviour, the national policy uses a combination of government regulation and market forces. In 2006, the government issued a decree fixing maximum prices in the private sector for 107 prescription drugs from the national list of 426 essential medicines. The current study assessed the impact of this intervention on the evolution of market prices (wholesale and retail), and the subsequent availability and public access to essential medicines in Mali. A cross-sectional descriptive survey was conducted in February and May 2006, and January 2009, with 16 wholesalers and 30 private drugstores in Bamako, Mali. The overall availability of essential medicines at private wholesalers (p=1) and pharmacies (p=0.53) was identical before and after the enforcement of the 2006 decree fixing maximum drug prices. Contrary to concerns expressed by wholesalers and pharmacies, and the other stakeholders, the decree did not impact negatively on availability of essential medicines. In fact, median wholesale prices in 2009 were 25.6% less than those fixed by the decree. In private pharmacies, retail prices were only 3% more expensive than the recommended prices, compared with being 25.5% more expensive prior to enforcement of the decree. The study shows that prices of essential medicines in Mali have evolved favourably towards the prices recommended by the government decree. Further, the study contributes to mounting evidence that market regulation by governments does not necessarily negatively affect drug availability; in fact, given the reduction in prices, the study shows that Malians arguably have better access to more affordable essential medicines

  12. Homotopy Analysis Method for Boundary-Value Problem of Turbo Warrant Pricing under Stochastic Volatility

    Directory of Open Access Journals (Sweden)

    Hoi Ying Wong

    2013-01-01

    Full Text Available Turbo warrants are liquidly traded financial derivative securities in over-the-counter and exchange markets in Asia and Europe. The structure of turbo warrants is similar to barrier options, but a lookback rebate will be paid if the barrier is crossed by the underlying asset price. Therefore, the turbo warrant price satisfies a partial differential equation (PDE with a boundary condition that depends on another boundary-value problem (BVP of PDE. Due to the highly complicated structure of turbo warrants, their valuation presents a challenging problem in the field of financial mathematics. This paper applies the homotopy analysis method to construct an analytic pricing formula for turbo warrants under stochastic volatility in a PDE framework.

  13. Regulated and unregulated Nordic retail prices

    DEFF Research Database (Denmark)

    Olsen, Ole Jess; Johnsen, Tor Arnt

    2011-01-01

    in Sweden but higher than in Norway and Finland. Because of market design Norwegian default contracts are competitive whereas Swedish contracts provide the retailer with some market power. We interpret the low Finnish margins as a result of municipal retailers continuing traditional pricing from...... competitive prices....... default prices are regulated whereas default prices in the other countries are unregulated. Systematic price differences exist among the Nordic countries. However, as wholesale prices sometimes differ the gross margin is a more relevant indicator. Regulated gross margins are lower in Denmark than...

  14. Are stock prices too volatile to be justified by the dividend discount model?

    Science.gov (United States)

    Akdeniz, Levent; Salih, Aslıhan Altay; Ok, Süleyman Tuluğ

    2007-03-01

    This study investigates excess stock price volatility using the variance bound framework of LeRoy and Porter [The present-value relation: tests based on implied variance bounds, Econometrica 49 (1981) 555-574] and of Shiller [Do stock prices move too much to be justified by subsequent changes in dividends? Am. Econ. Rev. 71 (1981) 421-436.]. The conditional variance bound relationship is examined using cross-sectional data simulated from the general equilibrium asset pricing model of Brock [Asset prices in a production economy, in: J.J. McCall (Ed.), The Economics of Information and Uncertainty, University of Chicago Press, Chicago (for N.B.E.R.), 1982]. Results show that the conditional variance bounds hold, hence, our hypothesis of the validity of the dividend discount model cannot be rejected. Moreover, in our setting, markets are efficient and stock prices are neither affected by herd psychology nor by the outcome of noise trading by naive investors; thus, we are able to control for market efficiency. Consequently, we show that one cannot infer any conclusions about market efficiency from the unconditional variance bounds tests.

  15. Long-term projections for electricity and gas prices

    International Nuclear Information System (INIS)

    Borggrefe, Frieder; Lochner, Stefan

    2009-01-01

    The article analyses potential developments of wholesale electricity prices in Germany until 2030. The relevant determinants and their effects on prices are shown. Several projections demonstrate the impact of future fuel prices taking the political framework into account. The importance of carbon and gas prices - and the latter's relationship to oil prices - are discussed extensively. Although forecasting electricity prices is associated with great uncertainties, the article illustrates the relative impacts of the various price determinants and their interactions. (orig.)

  16. A Quantitative Analysis of the Impact of Wind Energy Penetration on Electricity Prices in Ireland

    OpenAIRE

    O'Flaherty, Micheál; Riordan, Niall; O'Neill, Noel; Ahern, Ciara

    2014-01-01

    The maturity of wind technology combined with availability of suitable sites means Ireland is on course to generate 40% of its electricity from the wind by 2020.This work sets out to quantify, to what degree, if any, increased wind penetration translates into reduced wholesale and retail prices for electricity. The consensus from the literature is that increasing wind penetration reduces wholesale electricity prices, but views vary as to what degree this translates into reduced retail prices ...

  17. Vertical price leadership : a cointegration analysis

    NARCIS (Netherlands)

    Kuiper, W.E.; Meulenberg, M.T.G.

    2002-01-01

    Here we detail a method to test whether or not retailers allow suppliers to set the wholesale price not only on the basis of the costs faced by the suppliers but also on the basis of consumer demand. Using standard theory, long-run price relationships between the stages in the channel are derived.

  18. A Reduced Form Framework for Modeling Volatility of Speculative Prices based on Realized Variation Measures

    DEFF Research Database (Denmark)

    Andersen, Torben G.; Bollerslev, Tim; Huang, Xin

    Building on realized variance and bi-power variation measures constructed from high-frequency financial prices, we propose a simple reduced form framework for effectively incorporating intraday data into the modeling of daily return volatility. We decompose the total daily return variability...

  19. Entity’s Irregular Demand Scheduling of the Wholesale Electricity Market based on the Forecast of Hourly Price Ratios

    Directory of Open Access Journals (Sweden)

    O. V. Russkov

    2015-01-01

    Full Text Available The article considers a hot issue to forecast electric power demand amounts and prices for the entities of wholesale electricity market (WEM, which are in capacity of a large user with production technology requirements prevailing over hourly energy planning ones. An electric power demand of such entities is on irregular schedule. The article analyses mathematical models, currently applied to forecast demand amounts and prices. It describes limits of time-series models and fundamental ones in case of hourly forecasting an irregular demand schedule of the electricity market entity. The features of electricity trading at WEM are carefully analysed. Factors that influence on irregularity of demand schedule of the metallurgical plant are shown. The article proposes method for the qualitative forecast of market price ratios as a tool to reduce a dependence on the accuracy of forecasting an irregular schedule of demand. It describes the differences between the offered method and the similar ones considered in research studies and scholarly works. The correlation between price ratios and relaxation in the requirements for the forecast accuracy of the electric power consumption is analysed. The efficiency function of forecast method is derived. The article puts an increased focus on description of the mathematical model based on the method of qualitative forecast. It shows main model parameters and restrictions the electricity market imposes on them. The model prototype is described as a programme module. Methods to assess an effectiveness of the proposed forecast model are examined. The positive test results of the model using JSC «Volzhsky Pipe Plant» data are given. A conclusion is drawn concerning the possibility to decrease dependence on the forecast accuracy of irregular schedule of entity’s demand at WEM. The effective trading tool has been found for the entities of irregular demand schedule at WEM. The tool application allows minimizing cost

  20. Least Squares Inference on Integrated Volatility and the Relationship between Efficient Prices and Noise

    DEFF Research Database (Denmark)

    Nolte, Ingmar; Voev, Valeri

    The expected value of sums of squared intraday returns (realized variance) gives rise to a least squares regression which adapts itself to the assumptions of the noise process and allows for a joint inference on integrated volatility (IV), noise moments and price-noise relations. In the iid noise...

  1. Price competition and equilibrium analysis in multiple hybrid channel supply chain

    Science.gov (United States)

    Kuang, Guihua; Wang, Aihu; Sha, Jin

    2017-06-01

    The amazing boom of Internet and logistics industry prompts more and more enterprises to sell commodity through multiple channels. Such market conditions make the participants of multiple hybrid channel supply chain compete each other in traditional and direct channel at the same time. This paper builds a two-echelon supply chain model with a single manufacturer and a single retailer who both can choose different channel or channel combination for their own sales, then, discusses the price competition and calculates the equilibrium price under different sales channel selection combinations. Our analysis shows that no matter the manufacturer and retailer choose same or different channel price to compete, the equilibrium price does not necessarily exist the equilibrium price in the multiple hybrid channel supply chain and wholesale price change is not always able to coordinate supply chain completely. We also present the sufficient and necessary conditions for the existence of equilibrium price and coordination wholesale price.

  2. Auditor Tenure and Stock Price Volatility: TheModerating Role of Auditor Industry Specialization

    Directory of Open Access Journals (Sweden)

    Mehran Jorjani

    2018-04-01

    Full Text Available Purpose The present study aims to investigate the relationship between auditor tenure and stock return volatility and to study the moderating effect of auditor’s industry specialization on this relationship in the firms listed on the Tehran Stock Exchange (TSE. Design/methodology/approach A sample of 95 companies listed on the Tehran Stock Exchange during the period 2011 to 2015 was selected and two hypotheses were formulated and analyzed using multivariate regression and econometric models. Findings The results of the study indicate that with the increase of auditor tenure, the volatility of stock returns is reduced. However, the results showed that the use of auditors specializing in the client's industry does not affect the relationship between the length of auditor tenure and the volatility of stock returns. Originality/value The findings of current study not only extend the extant theoretical literature concerning the stock price volatility in developing countries including emerging capital market of Iran, but also help investors, capital market and audit profession regulators to make informed decisions.

  3. Resale Price Maintenance and Manufacturer Competition for Exclusive Dealerships.

    OpenAIRE

    Perry, Martin K; Besanko, David

    1991-01-01

    Two manufacturers distribute their brands through exclusive retail dealers and must compete for consumers indirectly by inducing retailers to carry their brands. The authors compare equilibrium outcomes with and without resale price maintenance. Maximum resale price maintenance lowers the retail price if manufacturers cannot employ franchise fees. Minimum retail price maintenance raises the retail price if manufacturers cannot set a wholesale price above marginal cost and must employ only a f...

  4. 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

  5. Social Welfare implications of demand response programs in competitive electricity markets

    Energy Technology Data Exchange (ETDEWEB)

    Boisvert, Richard N.; Neenan, Bernard F.

    2003-08-01

    The price volatility exhibited by wholesale electricity markets has stymied the movement to restructure the industry, and may derail it altogether. Market designers argue that prices are superior to regulation for directing long-term investments to the proper location and function, and that price volatility is a natural manifestation of a robustly competitive market. However, episodes of prices that soar to previously unimaginable heights try customers' patience and cause policy makers to reconsider if the prize is worth the consequences.

  6. Quantifying the value that wind power provides as a hedge against volatile natural gas prices

    Energy Technology Data Exchange (ETDEWEB)

    Bolinger, Mark; Wiser, Ryan; Golove, William

    2002-05-31

    Advocates of renewable energy have long argued that wind power and other renewable technologies can mitigate fuel price risk within a resource portfolio. Such arguments--made with renewed vigor in the wake of unprecedented natural gas price volatility during the winter of 2000/2001--have mostly been qualitative in nature, however, with few attempts to actually quantify the price stability benefit that wind and other renewables provide. This paper attempts to quantify this benefit by equating it with the cost of achieving price stability through other means, particularly gas-based financial derivatives (futures and swaps). We find that over the past two years, natural gas consumers have had to pay a premium of roughly 0.50 cents/kWh over expected spot prices to lock in natural gas prices for the next 10 years. This incremental cost is potentially large enough to tip the scales away from new investments in natural gasfired generation and in favor of investments in wind power and other renewable technologies.

  7. An empirical analysis of freight rate and vessel price volatility transmission in global dry bulk shipping market

    Directory of Open Access Journals (Sweden)

    Lei Dai

    2015-10-01

    Full Text Available Global dry bulk shipping market is an important element of global economy and trade. Since newbuilding and secondhand vessels are often traded as assets and the freight rate is the key determinant of vessel price, it is important for shipping market participants to understand the market dynamics and price transmission mechanism over time to make suitable strategic decisions. To address this issue, a multi-variate GARCH model was applied in this paper to explore the volatility spillover effects across the vessel markets (including newbuilding and secondhand vessel markets and freight market. Specifically, the BEKK parameterization of the multi-variate GARCH model (BEKK GARCH was proposed to capture the volatility transmission effect from the freight market, newbuilding and secondhand vessel markets in the global dry bulk shipping industry. Empirical results reveal that significant volatility transmission effects exist in each market sector, i.e. capesize, panamax, handymax and handysize. Besides, the market volatility transmission mechanism varies among different vessel types. Moreover, some bilateral effects are found in the dry bulk shipping market, showing that lagged variances could affect the current variance in a counterpart market, regardless of the volatility transmission. A simple ratio is proposed to guide investors optimizing their portfolio allocations. The findings in this paper could provide unique insights for investors to understand the market and hedge their portfolios well.

  8. News impact for Turkish food prices

    Directory of Open Access Journals (Sweden)

    Meltem Chadwick

    2017-06-01

    Full Text Available Asymmetric volatility is a widely encountered concept particularly in financial series. It refers to the case that “bad news” generates more volatility than “good news” of equal magnitude. In an inflationary environment “bad news” is disclosed as increasing inflation that is expected to generate higher volatility. The present article examines whether unexpected price changes affect the volatility of prices asymmetrically for 90 retail food items of the Turkish consumer price index. These 90 food items have a weight of approximately 20 percent in headline consumer price index (CPI. We employ exponential generalized autoregressive conditional heteroscedastic (EGARCH model to extract asymmetric volatility, using monthly data between January 2003 and January 2017. Our results reveal that volatility of food prices respond asymmetrically to unexpected price shocks for 62 percent of the retail food items.

  9. From quantum mechanics to finance: Microfoundations for jumps, spikes and high volatility phases in diffusion price processes

    Science.gov (United States)

    Henkel, Christof

    2017-03-01

    We present an agent behavior based microscopic model that induces jumps, spikes and high volatility phases in the price process of a traded asset. We transfer dynamics of thermally activated jumps of an unexcited/excited two state system discussed in the context of quantum mechanics to agent socio-economic behavior and provide microfoundations. After we link the endogenous agent behavior to price dynamics we establish the circumstances under which the dynamics converge to an Itô-diffusion price processes in the large market limit.

  10. Recovery of time-dependent volatility in option pricing model

    Science.gov (United States)

    Deng, Zui-Cha; Hon, Y. C.; Isakov, V.

    2016-11-01

    In this paper we investigate an inverse problem of determining the time-dependent volatility from observed market prices of options with different strikes. Due to the non linearity and sparsity of observations, an analytical solution to the problem is generally not available. Numerical approximation is also difficult to obtain using most of the existing numerical algorithms. Based on our recent theoretical results, we apply the linearisation technique to convert the problem into an inverse source problem from which recovery of the unknown volatility function can be achieved. Two kinds of strategies, namely, the integral equation method and the Landweber iterations, are adopted to obtain the stable numerical solution to the inverse problem. Both theoretical analysis and numerical examples confirm that the proposed approaches are effective. The work described in this paper was partially supported by a grant from the Research Grant Council of the Hong Kong Special Administrative Region (Project No. CityU 101112) and grants from the NNSF of China (Nos. 11261029, 11461039), and NSF grants DMS 10-08902 and 15-14886 and by Emylou Keith and Betty Dutcher Distinguished Professorship at the Wichita State University (USA).

  11. State cigarette minimum price laws - United States, 2009.

    Science.gov (United States)

    2010-04-09

    Cigarette price increases reduce the demand for cigarettes and thereby reduce smoking prevalence, cigarette consumption, and youth initiation of smoking. Excise tax increases are the most effective government intervention to increase the price of cigarettes, but cigarette manufacturers use trade discounts, coupons, and other promotions to counteract the effects of these tax increases and appeal to price-sensitive smokers. State cigarette minimum price laws, initiated by states in the 1940s and 1950s to protect tobacco retailers from predatory business practices, typically require a minimum percentage markup to be added to the wholesale and/or retail price. If a statute prohibits trade discounts from the minimum price calculation, these laws have the potential to counteract discounting by cigarette manufacturers. To assess the status of cigarette minimum price laws in the United States, CDC surveyed state statutes and identified those states with minimum price laws in effect as of December 31, 2009. This report summarizes the results of that survey, which determined that 25 states had minimum price laws for cigarettes (median wholesale markup: 4.00%; median retail markup: 8.00%), and seven of those states also expressly prohibited the use of trade discounts in the minimum retail price calculation. Minimum price laws can help prevent trade discounting from eroding the positive effects of state excise tax increases and higher cigarette prices on public health.

  12. Resource externalities and the persistence of heterogeneous pricing behavior in an energy commodity market

    International Nuclear Information System (INIS)

    Bunn, Derek; Koc, Veli; Sapio, Alessandro

    2015-01-01

    In competitive product markets, repeated interaction among producers with similar economic characteristics would be expected to result in convergence of their behaviors. If convergence does not occur, it raises fundamental questions related to the sustainability of heterogeneous competitive strategies. This paper examines the prices submitted to the British wholesale electricity market by four coal-fired plants, separately owned, approximately of the same age, size and efficiency, and located in the same transmission network zone. Due to the repetitive nature of the spot market, one would expect convergence in strategies. Yet, we find evidence of persistent price dispersion and heterogeneous strategies. We consider several propositions for these effects including market power, company size, forward commitments, vertical integration and the management of interrelated assets. - Highlights: • Time series models of offer prices from 4 companies, UK electricity spot market • Focus on coal-fired plants of similar size, efficiency, age, same network zone • Low, less volatile offers by small, not vertically integrated, only-coal company • Operational risks of nuclear plants in a portfolio imply finer tracking of PX prices • Market leadership from private information on the Anglo-French interconnector flows

  13. Modelling prices in competitive electricity markets

    International Nuclear Information System (INIS)

    Bunn, D.W.

    2004-04-01

    Electricity markets are structurally different to other commodities, and the real-time dynamic balancing of the electricity network involves many external factors. Because of this, it is not a simple matter to transfer conventional models of financial time series analysis to wholesale electricity prices. The rationale for this compilation of chapters from international authors is, therefore, to provide econometric analysis of wholesale power markets around the world, to give greater understanding of their particular characteristics, and to assess the applicability of various methods of price modelling. Researchers and professionals in this sector will find the book an invaluable guide to the most important state-of-the-art modelling techniques which are converging to define the special approaches necessary for unravelling and forecasting the behaviour of electricity prices. It is a high-quality synthesis of the work of financial engineering, industrial economics and power systems analysis, as they relate to the behaviour of competitive electricity markets. (author)

  14. Juxtaposition of micro and macro dynamics of dividend policy on stock price volatility in financial sector of Pakistan : (comparative analysis through common, fixed, random and GMM effect)

    OpenAIRE

    Hamid, Kashif; Khurram, Muhammad Usman; Ghaffar, Wasim

    2017-01-01

    The purpose of this study is to analyze the dividend policy dynamics in context to firm specific and macroeconomic variables with stock price volatility in the financial sector of Pakistan. Panel data is used for the period 2006-2014 to identify the common, fixed, random and GMM effect. It is concluded that dividend payout ratio, market value, interest volatility and inflation volatility have positive significant correlation with price volatility. Common effect model shows that dividend payou...

  15. Uncertainty of Volatility Estimates from Heston Greeks

    Directory of Open Access Journals (Sweden)

    Oliver Pfante

    2018-01-01

    Full Text Available Volatility is a widely recognized measure of market risk. As volatility is not observed it has to be estimated from market prices, i.e., as the implied volatility from option prices. The volatility index VIX making volatility a tradeable asset in its own right is computed from near- and next-term put and call options on the S&P 500 with more than 23 days and less than 37 days to expiration and non-vanishing bid. In the present paper we quantify the information content of the constituents of the VIX about the volatility of the S&P 500 in terms of the Fisher information matrix. Assuming that observed option prices are centered on the theoretical price provided by Heston's model perturbed by additive Gaussian noise we relate their Fisher information matrix to the Greeks in the Heston model. We find that the prices of options contained in the VIX basket allow for reliable estimates of the volatility of the S&P 500 with negligible uncertainty as long as volatility is large enough. Interestingly, if volatility drops below a critical value of roughly 3%, inferences from option prices become imprecise because Vega, the derivative of a European option w.r.t. volatility, and thereby the Fisher information nearly vanishes.

  16. Stochastic volatility models and Kelvin waves

    Science.gov (United States)

    Lipton, Alex; Sepp, Artur

    2008-08-01

    We use stochastic volatility models to describe the evolution of an asset price, its instantaneous volatility and its realized volatility. In particular, we concentrate on the Stein and Stein model (SSM) (1991) for the stochastic asset volatility and the Heston model (HM) (1993) for the stochastic asset variance. By construction, the volatility is not sign definite in SSM and is non-negative in HM. It is well known that both models produce closed-form expressions for the prices of vanilla option via the Lewis-Lipton formula. However, the numerical pricing of exotic options by means of the finite difference and Monte Carlo methods is much more complex for HM than for SSM. Until now, this complexity was considered to be an acceptable price to pay for ensuring that the asset volatility is non-negative. We argue that having negative stochastic volatility is a psychological rather than financial or mathematical problem, and advocate using SSM rather than HM in most applications. We extend SSM by adding volatility jumps and obtain a closed-form expression for the density of the asset price and its realized volatility. We also show that the current method of choice for solving pricing problems with stochastic volatility (via the affine ansatz for the Fourier-transformed density function) can be traced back to the Kelvin method designed in the 19th century for studying wave motion problems arising in fluid dynamics.

  17. Stochastic volatility models and Kelvin waves

    International Nuclear Information System (INIS)

    Lipton, Alex; Sepp, Artur

    2008-01-01

    We use stochastic volatility models to describe the evolution of an asset price, its instantaneous volatility and its realized volatility. In particular, we concentrate on the Stein and Stein model (SSM) (1991) for the stochastic asset volatility and the Heston model (HM) (1993) for the stochastic asset variance. By construction, the volatility is not sign definite in SSM and is non-negative in HM. It is well known that both models produce closed-form expressions for the prices of vanilla option via the Lewis-Lipton formula. However, the numerical pricing of exotic options by means of the finite difference and Monte Carlo methods is much more complex for HM than for SSM. Until now, this complexity was considered to be an acceptable price to pay for ensuring that the asset volatility is non-negative. We argue that having negative stochastic volatility is a psychological rather than financial or mathematical problem, and advocate using SSM rather than HM in most applications. We extend SSM by adding volatility jumps and obtain a closed-form expression for the density of the asset price and its realized volatility. We also show that the current method of choice for solving pricing problems with stochastic volatility (via the affine ansatz for the Fourier-transformed density function) can be traced back to the Kelvin method designed in the 19th century for studying wave motion problems arising in fluid dynamics

  18. Stochastic volatility models and Kelvin waves

    Energy Technology Data Exchange (ETDEWEB)

    Lipton, Alex [Merrill Lynch, Mlfc Main, 2 King Edward Street, London EC1A 1HQ (United Kingdom); Sepp, Artur [Merrill Lynch, 4 World Financial Center, New York, NY 10080 (United States)], E-mail: Alex_Lipton@ml.com, E-mail: Artur_Sepp@ml.com

    2008-08-29

    We use stochastic volatility models to describe the evolution of an asset price, its instantaneous volatility and its realized volatility. In particular, we concentrate on the Stein and Stein model (SSM) (1991) for the stochastic asset volatility and the Heston model (HM) (1993) for the stochastic asset variance. By construction, the volatility is not sign definite in SSM and is non-negative in HM. It is well known that both models produce closed-form expressions for the prices of vanilla option via the Lewis-Lipton formula. However, the numerical pricing of exotic options by means of the finite difference and Monte Carlo methods is much more complex for HM than for SSM. Until now, this complexity was considered to be an acceptable price to pay for ensuring that the asset volatility is non-negative. We argue that having negative stochastic volatility is a psychological rather than financial or mathematical problem, and advocate using SSM rather than HM in most applications. We extend SSM by adding volatility jumps and obtain a closed-form expression for the density of the asset price and its realized volatility. We also show that the current method of choice for solving pricing problems with stochastic volatility (via the affine ansatz for the Fourier-transformed density function) can be traced back to the Kelvin method designed in the 19th century for studying wave motion problems arising in fluid dynamics.

  19. Pricing stock options under stochastic volatility and interest rates with efficient method of moments estimation

    NARCIS (Netherlands)

    Jiang, George J.; Sluis, Pieter J. van der

    1999-01-01

    While the stochastic volatility (SV) generalization has been shown to improve the explanatory power over the Black-Scholes model, empirical implications of SV models on option pricing have not yet been adequately tested. The purpose of this paper is to first estimate a multivariate SV model using

  20. 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.

  1. The pass through of oil prices into euro area consumer liquid fuel prices in an environment of high and volatile oil prices

    Energy Technology Data Exchange (ETDEWEB)

    Meyler, Aidan [European Central Bank, Frankfurt am Main (Germany)

    2009-11-15

    Crude and refined oil prices have been relatively high and volatile on a sustained basis since 1999. This paper considers the pass through of oil prices into consumer liquid (i.e. petrol, diesel and heating) fuel prices in such an environment. The pass through of oil prices into consumer liquid fuel prices has already been addressed extensively in the literature. Nonetheless much of this literature has either focused on the United States or on a time period when oil prices were relatively stable, or has used monthly data. The main contribution of this paper is a comprehensive combination of many features that have been considered before but rarely jointly. These features include: (1) the analysis of the euro area as an aggregate and a large number of countries (the initial 12 member states); (2) the consideration of different time periods; (3) the modelling of the data in raw levels rather than in log levels. This turns out to have important implications for our findings; (4) the use of high frequency (weekly) data, which, as results will suggest, are the lowest frequency one should consider; (5) the investigation of the different stages of the production chain from crude oil prices to retail distribution - refining costs and margins, distribution and retailing costs and margins; (6) the examination of prices including and excluding taxes - excise and value-added; (7) the modelling of prices for three fuel types - passenger car petrol and diesel separately and home heating fuel oil; (8) lastly we also address the issue of possible asymmetries, allowing for the pass through to vary according to (a) whether price are increasing or decreasing and (b) whether price levels are above or below their equilibrium level. The main findings are as follows: First, as distribution and retailing costs and margins have been broadly stable on average, the modelling of the relationship between consumer prices excluding taxes and upstream prices in raw levels rather than in

  2. The pass through of oil prices into euro area consumer liquid fuel prices in an environment of high and volatile oil prices

    International Nuclear Information System (INIS)

    Meyler, Aidan

    2009-01-01

    Crude and refined oil prices have been relatively high and volatile on a sustained basis since 1999. This paper considers the pass through of oil prices into consumer liquid (i.e. petrol, diesel and heating) fuel prices in such an environment. The pass through of oil prices into consumer liquid fuel prices has already been addressed extensively in the literature. Nonetheless much of this literature has either focused on the United States or on a time period when oil prices were relatively stable, or has used monthly data. The main contribution of this paper is a comprehensive combination of many features that have been considered before but rarely jointly. These features include: (1) the analysis of the euro area as an aggregate and a large number of countries (the initial 12 member states); (2) the consideration of different time periods; (3) the modelling of the data in raw levels rather than in log levels. This turns out to have important implications for our findings; (4) the use of high frequency (weekly) data, which, as results will suggest, are the lowest frequency one should consider; (5) the investigation of the different stages of the production chain from crude oil prices to retail distribution - refining costs and margins, distribution and retailing costs and margins; (6) the examination of prices including and excluding taxes - excise and value-added; (7) the modelling of prices for three fuel types - passenger car petrol and diesel separately and home heating fuel oil; (8) lastly we also address the issue of possible asymmetries, allowing for the pass through to vary according to (a) whether price are increasing or decreasing and (b) whether price levels are above or below their equilibrium level. The main findings are as follows: First, as distribution and retailing costs and margins have been broadly stable on average, the modelling of the relationship between consumer prices excluding taxes and upstream prices in raw levels rather than in

  3. Modeling the Effect of Oil Price on Global Fertilizer Prices

    NARCIS (Netherlands)

    P-Y. Chen (Ping-Yu); C-L. Chang (Chia-Lin); C-C. Chen (Chi-Chung); M.J. McAleer (Michael)

    2010-01-01

    textabstractThe main purpose of this paper is to evaluate the effect of crude oil price on global fertilizer prices in both the mean and volatility. The endogenous structural breakpoint unit root test, the autoregressive distributed lag (ARDL) model, and alternative volatility models, including the

  4. Estimation of stochastic volatility with long memory for index prices of FTSE Bursa Malaysia KLCI

    Energy Technology Data Exchange (ETDEWEB)

    Chen, Kho Chia; Kane, Ibrahim Lawal; Rahman, Haliza Abd [Department of Mathematical Sciences, Faculty of Science, Universiti Teknologi Malaysia, 81310, Johor Bahru (Malaysia); Bahar, Arifah [UTM Centre for Industrial and Applied Mathematics (UTM-CIAM), Universiti Teknologi Malaysia, 81310, Johor Bahru and Department of Mathematical Sciences, Faculty of Science, Universiti Teknologi Malaysia, 81310, Johor Bahru (Malaysia); Ting, Chee-Ming [Center for Biomedical Engineering, Universiti Teknologi Malaysia, 81310, Johor Bahru (Malaysia)

    2015-02-03

    In recent years, modeling in long memory properties or fractionally integrated processes in stochastic volatility has been applied in the financial time series. A time series with structural breaks can generate a strong persistence in the autocorrelation function, which is an observed behaviour of a long memory process. This paper considers the structural break of data in order to determine true long memory time series data. Unlike usual short memory models for log volatility, the fractional Ornstein-Uhlenbeck process is neither a Markovian process nor can it be easily transformed into a Markovian process. This makes the likelihood evaluation and parameter estimation for the long memory stochastic volatility (LMSV) model challenging tasks. The drift and volatility parameters of the fractional Ornstein-Unlenbeck model are estimated separately using the least square estimator (lse) and quadratic generalized variations (qgv) method respectively. Finally, the empirical distribution of unobserved volatility is estimated using the particle filtering with sequential important sampling-resampling (SIR) method. The mean square error (MSE) between the estimated and empirical volatility indicates that the performance of the model towards the index prices of FTSE Bursa Malaysia KLCI is fairly well.

  5. Estimation of stochastic volatility with long memory for index prices of FTSE Bursa Malaysia KLCI

    Science.gov (United States)

    Chen, Kho Chia; Bahar, Arifah; Kane, Ibrahim Lawal; Ting, Chee-Ming; Rahman, Haliza Abd

    2015-02-01

    In recent years, modeling in long memory properties or fractionally integrated processes in stochastic volatility has been applied in the financial time series. A time series with structural breaks can generate a strong persistence in the autocorrelation function, which is an observed behaviour of a long memory process. This paper considers the structural break of data in order to determine true long memory time series data. Unlike usual short memory models for log volatility, the fractional Ornstein-Uhlenbeck process is neither a Markovian process nor can it be easily transformed into a Markovian process. This makes the likelihood evaluation and parameter estimation for the long memory stochastic volatility (LMSV) model challenging tasks. The drift and volatility parameters of the fractional Ornstein-Unlenbeck model are estimated separately using the least square estimator (lse) and quadratic generalized variations (qgv) method respectively. Finally, the empirical distribution of unobserved volatility is estimated using the particle filtering with sequential important sampling-resampling (SIR) method. The mean square error (MSE) between the estimated and empirical volatility indicates that the performance of the model towards the index prices of FTSE Bursa Malaysia KLCI is fairly well.

  6. Estimation of stochastic volatility with long memory for index prices of FTSE Bursa Malaysia KLCI

    International Nuclear Information System (INIS)

    Chen, Kho Chia; Kane, Ibrahim Lawal; Rahman, Haliza Abd; Bahar, Arifah; Ting, Chee-Ming

    2015-01-01

    In recent years, modeling in long memory properties or fractionally integrated processes in stochastic volatility has been applied in the financial time series. A time series with structural breaks can generate a strong persistence in the autocorrelation function, which is an observed behaviour of a long memory process. This paper considers the structural break of data in order to determine true long memory time series data. Unlike usual short memory models for log volatility, the fractional Ornstein-Uhlenbeck process is neither a Markovian process nor can it be easily transformed into a Markovian process. This makes the likelihood evaluation and parameter estimation for the long memory stochastic volatility (LMSV) model challenging tasks. The drift and volatility parameters of the fractional Ornstein-Unlenbeck model are estimated separately using the least square estimator (lse) and quadratic generalized variations (qgv) method respectively. Finally, the empirical distribution of unobserved volatility is estimated using the particle filtering with sequential important sampling-resampling (SIR) method. The mean square error (MSE) between the estimated and empirical volatility indicates that the performance of the model towards the index prices of FTSE Bursa Malaysia KLCI is fairly well

  7. Medium-term load forecasting and wholesale transaction profitability

    International Nuclear Information System (INIS)

    Selker, F.K.; Wroblewski, W.R.

    1996-01-01

    The volume of wholesale transactions quoted at firm prices is increasing. The cost, and thus profitability, of serving these contracts strongly depends upon native load during the time of delivery. However, transactions extend beyond load forecasts based on weather information, and long-term resource planning forecasts of load peaks and energy provide inadequate detail. To address this need, Decision Focus Inc. (DFI) and Commonwealth Edison (ComEd) developed a probabilistic, medium-term load forecasting capability. In this paper the authors use a hypothetical utility to explore the impact of uncertain medium-term loads on transaction profitability

  8. Price signals and investment incentives in wholesale electricity spot markets

    International Nuclear Information System (INIS)

    Vassilopoulos, Philippe

    2007-01-01

    We look at how prices from energy-only power markets can send the right signals and give the correct incentives for investments in production capacity. Through numerical simulations of spot prices over 2003-2005 we compare the investment signal sent by observed electricity prices in France and what would be competitive prices with an optimal mix and with the installed capacity. Observed prices tend to overestimate profitability for the base-load, making the signal too strong and underestimate profitability for the peak load, making the signal too weak. However, as a large share of consumers is still paying regulated tariffs, scarcity rents are capped. We simulate future prices for France for 2010 to 2020 to understand the incentives to invest. When the entry is free, the incentives to invest given by the future prices are consistent with the optimal mix including the interconnections and nuclear build is strong. With political or regulatory barriers to the construction of new power plants for new entrants (i.e. finding new sites), there are no incentives for the incumbent (that owns all existing base-load and peak load capacity) to add more nuclear capacity. In this situation, new entry would have to be coal or gas except if units are bid strategically to maintain profitability and market share. Moreover, it can also be profitable to limit prices and restrain entry in order to receive higher future revenues. When the base-load is less concentrated and instead of a dominant firm the nuclear capacity is divided into five (equal share) firms, the incentives to invest reappear and the threat of entry becomes more credible. (author) [fr

  9. Separated influence of crude oil prices on regional natural gas import prices

    International Nuclear Information System (INIS)

    Ji, Qiang; Geng, Jiang-Bo; Fan, Ying

    2014-01-01

    This paper analyses the impact of global economic activity and international crude oil prices on natural gas import prices in three major natural gas markets using the panel cointegration model. It also investigates the shock impacts of the volatility and the increase and decrease of oil prices on regional natural gas import prices. The results show that both global economic activity and international crude oil prices have significant long-term positive effects on regional natural gas import prices. The volatility of international crude oil prices has a negative impact on regional natural gas import prices. The shock impact is weak in North America, lags in Europe and is most significant in Asia, which is mainly determined by different regional policies for price formation. In addition, the response of natural gas import prices to increases and decreases in international crude oil prices shows an asymmetrical mechanism, of which the decrease impact is relatively stronger. - Highlights: • Impacts of world economy and oil prices on regional natural gas prices are analysed • North American natural gas prices are mainly affected by world economy • Asian and European natural gas prices are mainly affected by oil prices • The volatility of oil prices has a negative impact on regional natural gas prices • The response of natural gas import prices to oil prices up and down shows asymmetry

  10. Optimizing pricing and ordering strategies in a three-level supply chain under return policy

    Science.gov (United States)

    Noori-daryan, Mahsa; Taleizadeh, Ata Allah

    2018-03-01

    This paper develops an economic production quantity model in a three-echelon supply chain composing of a supplier, a manufacturer and a wholesaler under two scenarios. As the first scenario, we consider a return contract between the outside supplier and the supplier and also between the manufacturer and the wholesaler, but in the second one, the return policy between the manufacturer and the wholesaler is not applied. Here, it is assumed that shortage is permitted and demand is price-sensitive. The principal goal of the research is to maximize the total profit of the chain by optimizing the order quantity of the supplier and the selling prices of the manufacturer and the wholesaler. Nash-equilibrium approach is considered between the chain members. In the end, a numerical example is presented to clarify the applicability of the introduced model and compare the profit of the chain under two scenarios.

  11. Implicit price of mussel characteristics in the auction market

    DEFF Research Database (Denmark)

    Nguyen, Thong Tien

    2012-01-01

    This study explores desired and undesired characteristics of mussels in wholesale market by applying hedonic price analysis. Transaction data in auction market in Yerseke, the Netherlands, was used to estimate linear and semi-log price models. Meat content and size count, which are measured...... of raw mussels are significant discounting factors on the price. The study also investigates the impact of farming locations and seasons on the price and the price trend during the period of 2002–2009....

  12. Level Shifts in Volatility and the Implied-Realized Volatility Relation

    DEFF Research Database (Denmark)

    Christensen, Bent Jesper; de Magistris, Paolo Santucci

    We propose a simple model in which realized stock market return volatility and implied volatility backed out of option prices are subject to common level shifts corresponding to movements between bull and bear markets. The model is estimated using the Kalman filter in a generalization to the mult......We propose a simple model in which realized stock market return volatility and implied volatility backed out of option prices are subject to common level shifts corresponding to movements between bull and bear markets. The model is estimated using the Kalman filter in a generalization...... to the multivariate case of the univariate level shift technique by Lu and Perron (2008). An application to the S&P500 index and a simulation experiment show that the recently documented empirical properties of strong persistence in volatility and forecastability of future realized volatility from current implied...... volatility, which have been interpreted as long memory (or fractional integration) in volatility and fractional cointegration between implied and realized volatility, are accounted for by occasional common level shifts....

  13. DEVELOPMENT OF TIGHT OIL RESOURCES IN USA: PROFITABILITY OF EXPLOITATION AND EFFECT OF MACROECONOMIC INDICATORS IN VOLATILE OIL PRICE ENVIRONMENT

    Directory of Open Access Journals (Sweden)

    Kristina Strpić

    2017-01-01

    Full Text Available Large scale development of tight oil resources in US started after 2010. with following five-year period of favorable steady increase in crude oil price. During this relatively short expansion cycle, operating and capital expenses changed drastically for main tight oil plays due to technological improvements in both well drilling and completion, expansion of service sector as well as loose government monetary policy which allowed favorable financing. This paper analyzed trends in costs during expansion period, as well as correlation of oil price to number of operating rigs and production quotas. After 2008/2009. world financial crisis economy recovery in US was somewhat sluggish and it caused extreme volatile environment in both equity and commodity markets. In such volatile environment intra-day crude oil prices, as well as other commodities and equities, show significant reaction to monthly published macroeconomic indicator reports, which give better overviews of trends in economic recovery. Prior to announcement, these reports always have forecasted value determined by consensus among market analysts. Therefore, any positive or negative surprise in real value tends to influence price of oil. This paper investigated influence of such macroeconomic reports to closing intraday oil price, as well as effect of other important daily market indices. Analysis showed that only Producer Price Index (PPI, among other indicators, has statistical significance of affecting intraday closing oil price.

  14. Intensity of Price and Volatility Spillover Effects in Asia-Pacific Basin Equity Markets

    Directory of Open Access Journals (Sweden)

    Sazali Abidin

    2014-12-01

    Full Text Available This paper investigates the intensity of price and volatility spillover effects in five major stock markets within the Asia Pacific basin region with a particular emphasis in the spillover effects between Australia and China. VAR(5 model is used for measuring the return spillover while AR/VAR model with exogenous variables is employed for measuring the effects of same day returns on return spillover. .In modelling the volatility spillover, we employ AR/GARCH model which also incorporates the same day effects. Results of both return and volatility spillover provide evidence that there are significant spillover effects across different markets in the Asia-Pacific region and as well as between Australia and China. This study also provides support to the view that a market is most affected by other markets that opens/closes just before it. The main contribution of this paper is the confirmation of spillover effects between markets in the region, in particular, the interdependence between Australia and China which may have evolved only recently and thus have received relatively little research attention to date.

  15. Models for S&P500 Dynamics: Evidence from Realized Volatility, Daily Returns, and Option Prices

    DEFF Research Database (Denmark)

    Christoffersen, Peter; Jacobs, Kris; Mimouni, Karim

    in the search for alternative specifications. We then estimate the models using maximum likelihood on S&P500 returns. Finally, we employ nonlinear least squares on a panel of option data. In comparison with earlier studies that explicitly solve the filtering problem, we analyze a more comprehensive option data......Most recent empirical option valuation studies build on the affine square root (SQR) stochastic volatility model. The SQR model is a convenient choice, because it yields closed-form solutions for option prices. However, relatively little is known about the resulting biases. We investigate...... alternatives to the SQR model, by comparing its empirical performance with that of five different but equally parsimonious stochastic volatility models. We provide empirical evidence from three different sources. We first use realized volatilities to assess the properties of the SQR model and to guide us...

  16. Market power monitoring and mitigation in the US wholesale power markets

    Energy Technology Data Exchange (ETDEWEB)

    Helman, Udi [Federal Energy Regulatory Commission, 888 First Street, N.E., Washington, DC 20426 (United States)

    2006-05-15

    Under current statutory requirements, the Federal Energy Regulatory Commission (FERC) must ensure that prices in US wholesale power markets are 'just and reasonable'. This has been interpreted by the agency and the courts as requiring the monitoring and mitigation of undue market power. This paper focuses on generation market power. Prior to electricity sector restructuring, wholesale bilateral power trading took place among vertically integrated monopoly utilities trading at the margin or between small independent producers and the utilities. Under those conditions, the authorization of trading at market prices, called 'market-based rates', required only that the generation supplier pass a simple market share screen for market power. As restructuring unfolded, and market conditions changed, there has been a steady evolution in FERC's market power mitigation rules, encompassing (a) changes in the market power assessment required for granting market-based rates and related methods for merger approval, and (b) development and refinement of new techniques for screening and mitigating offers into the organized day-ahead and real-time markets operated by Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs). This paper reviews these changes to date, as FERC continues to clarify its approved rules and procedures. It also examines recent methods for quantitative market power analysis that could augment current procedures or supplant them, as found appropriate. (author)

  17. Essays on pricing dynamics, price dispersion, and nested logit modelling

    Science.gov (United States)

    Verlinda, Jeremy Alan

    The body of this dissertation comprises three standalone essays, presented in three respective chapters. Chapter One explores the possibility that local market power contributes to the asymmetric relationship observed between wholesale costs and retail prices in gasoline markets. I exploit an original data set of weekly gas station prices in Southern California from September 2002 to May 2003, and take advantage of highly detailed station and local market-level characteristics to determine the extent to which spatial differentiation influences price-response asymmetry. I find that brand identity, proximity to rival stations, bundling and advertising, operation type, and local market features and demographics each influence a station's predicted asymmetric relationship between prices and wholesale costs. Chapter Two extends the existing literature on the effect of market structure on price dispersion in airline fares by modeling the effect at the disaggregate ticket level. Whereas past studies rely on aggregate measures of price dispersion such as the Gini coefficient or the standard deviation of fares, this paper estimates the entire empirical distribution of airline fares and documents how the shape of the distribution is determined by market structure. Specifically, I find that monopoly markets favor a wider distribution of fares with more mass in the tails while duopoly and competitive markets exhibit a tighter fare distribution. These findings indicate that the dispersion of airline fares may result from the efforts of airlines to practice second-degree price discrimination. Chapter Three adopts a Bayesian approach to the problem of tree structure specification in nested logit modelling, which requires a heavy computational burden in calculating marginal likelihoods. I compare two different techniques for estimating marginal likelihoods: (1) the Laplace approximation, and (2) reversible jump MCMC. I apply the techniques to both a simulated and a travel mode

  18. Maximum likelihood approach for several stochastic volatility models

    International Nuclear Information System (INIS)

    Camprodon, Jordi; Perelló, Josep

    2012-01-01

    Volatility measures the amplitude of price fluctuations. Despite it being one of the most important quantities in finance, volatility is not directly observable. Here we apply a maximum likelihood method which assumes that price and volatility follow a two-dimensional diffusion process where volatility is the stochastic diffusion coefficient of the log-price dynamics. We apply this method to the simplest versions of the expOU, the OU and the Heston stochastic volatility models and we study their performance in terms of the log-price probability, the volatility probability, and its Mean First-Passage Time. The approach has some predictive power on the future returns amplitude by only knowing the current volatility. The assumed models do not consider long-range volatility autocorrelation and the asymmetric return-volatility cross-correlation but the method still yields very naturally these two important stylized facts. We apply the method to different market indices and with a good performance in all cases. (paper)

  19. 29 CFR 779.327 - Wholesale sales.

    Science.gov (United States)

    2010-07-01

    ... 29 Labor 3 2010-07-01 2010-07-01 false Wholesale sales. 779.327 Section 779.327 Labor Regulations... Particular Industryâ § 779.327 Wholesale sales. A wholesale sale, of course, is not recognized as a retail sale. If an establishment derives more than 25 percent of its annual dollar volume from sales made at...

  20. Power plants investment decision-making in consideration of investment risk

    International Nuclear Information System (INIS)

    Oda, Junichiro; Matsuhashi, Ryuji; Yoshida, Yoshikuni; Takashima, Ryuta

    2005-01-01

    In this paper, we consider the investment risk of nuclear power plants using the real options approach. It is essential that the Japanese society evaluate the investment risk, because nuclear power plants are facing definite uncertainty and Japanese governments intend to promote and assist nuclear power plants through subsidies and policy actions. We assumed that the wholesale market prices of electricity constitute the definite uncertainty and that the wholesale market prices follow the geometric Brownian motion with drift. Using the Bellman equation and a lattice framework, we evaluated the value of investment opportunity, the value of equipment, and the critical prices that are optimal prices to invest in a nuclear power plant in the finite time horizon. This analysis shows that higher volatility of the wholesale market prices would give power companies lower incentive to construct electric power plants, particularly capital-intensive power plants. In order to deliberate and hold the Japanese governments accountable for the economics of nuclear power plants, multifaceted evaluation is needed. (author)

  1. Proceedings of the Canadian Institute's winter 2004/2005 conference on energy marketing strategies : proactively defend your energy portfolios from winter price spikes

    International Nuclear Information System (INIS)

    2004-01-01

    This conference addressed the challenges facing energy markets with particular emphasis on the outlook of winter fuels and prices. It was attended by more than 50 energy marketing professionals representing petroleum producers, pipelines, wholesale marketers, storage companies, end users, banks and government. In order to plan portfolios and reduce risks to their bottom lines, buyers and sellers of energy must always be prepared for unexpected ice storms, major pipeline outages or geopolitical events. Merchants in the fuel supply chain depend on basic analysis, correlations and forecasts of supply/demand, transportation and inventory levels. The conference presented strategies and analysis on how commodity prices will move during the winter; North American supply/demand dynamics for natural gas, electricity, heating oils and natural gas liquids; the interplay of fuel storage and price; fuel switching and its impact on the market; portfolio planning; managing the link between weather and fuel prices; seasonal volatility; and, how liquefied natural gas (LNG) is affecting winter supply. The conference featured 16 presentations, of which 6 have been catalogued separately for inclusion in this database. tabs., figs

  2. Capacity withholding in wholesale electricity markets: The experience in England and Wales

    Science.gov (United States)

    Quinn, James Arnold

    This thesis examines the incentives wholesale electricity generators face to withhold generating capacity from centralized electricity spot markets. The first chapter includes a brief history of electricity industry regulation in England and Wales and in the United States, including a description of key institutional features of England and Wales' restructured electricity market. The first chapter also includes a review of the literature on both bid price manipulation and capacity bid manipulation in centralized electricity markets. The second chapter details a theoretical model of wholesale generator behavior in a single price electricity market. A duopoly model is specified under the assumption that demand is non-stochastic. This model assumes that duopoly generators offer to sell electricity at their marginal cost, but can withhold a continuous segment of their capacity from the market. The Nash equilibrium withholding strategy of this model involves each duopoly generator withholding so that it produces the Cournot equilibrium output. A monopoly model along the lines of the duopoly model is specified and simulated under the assumption that demand is stochastic. The optimal strategy depends on the degree of demand uncertainty. When there is a moderate degree of demand uncertainty, the optimal withholding strategy involves production inefficiencies. When there is a high degree of demand uncertainty, the optimal monopoly quantity is greater than the optimal output level when demand is non-stochastic. The third chapter contains an empirical examination of the behavior of generators in the wholesale electricity market in England and Wales in the early 1990's. The wholesale market in England and Wales is analyzed because the industry structure in the early 1990's created a natural experiment, which is described in this chapter, whereby one of the two dominant generators had no incentive to behave non-competitively. This chapter develops a classification methodology

  3. A multiscale extension of the Margrabe formula under stochastic volatility

    International Nuclear Information System (INIS)

    Kim, Jeong-Hoon; Park, Chang-Rae

    2017-01-01

    Highlights: • Fast-mean-reverting stochastic volatility model is chosen to extend the classical Margrabe formula. • The resultant formula is explicitly given by the greeks of Margrabe price itself. • We show how the stochastic volatility corrects the Margrabe price behavior. - Abstract: The pricing of financial derivatives based on stochastic volatility models has been a popular subject in computational finance. Although exact or approximate closed form formulas of the prices of many options under stochastic volatility have been obtained so that the option prices can be easily computed, such formulas for exchange options leave much to be desired. In this paper, we consider two different risky assets with two different scales of mean-reversion rate of volatility and use asymptotic analysis to extend the classical Margrabe formula, which corresponds to a geometric Brownian motion model, and obtain a pricing formula under a stochastic volatility. The resultant formula can be computed easily, simply by taking derivatives of the Margrabe price itself. Based on the formula, we show how the stochastic volatility corrects the Margrabe price behavior depending on the moneyness and the correlation coefficient between the two asset prices.

  4. A robust multivariate long run analysis of European electricity prices

    OpenAIRE

    Bruno Bosco; Lucia Parisio; Matteo Pelagatti; Fabio Baldi

    2007-01-01

    This paper analyses the interdependencies existing in wholesale electricity prices in six major European countries. The results of our robust multivariate long run dynamic analysis reveal the presence of four highly integrated central European markets (France, Germany, the Netherlands and Austria). The trend shared by these four electricity markets appears to be common also to gas prices, but not to oil prices. The existence of long term dynamics among electricity prices and between electrici...

  5. How does petroleum price and corn yield volatility affect ethanol markets with and without an ethanol use mandate?

    International Nuclear Information System (INIS)

    Thompson, Wyatt; Meyer, Seth; Westhoff, Pat

    2009-01-01

    The recent increase in ethanol use in the US strengthens and changes the nature of links between agricultural and energy markets. Here, we explore the interaction of market volatility and the scope for policy to affect this interaction, with a focus on how corn yields and petroleum prices affect ethanol prices. Mandates associated with new US energy legislation may intervene in these links in the medium-term future. We simulate stochastically a structural model that represents these markets, and that includes mandates, in order to assess how shocks to corn or oil markets can affect ethanol price and use. We estimate that the mandate makes ethanol producer prices more sensitive to corn yields and less sensitive to changes in petroleum prices overall. We note a discontinuity in these links that is caused by the mandate. Ethanol use can exceed the mandate if petroleum prices and corn yields are high enough, but the mandate limits downside adjustments in ethanol use to low petroleum prices or corn yields

  6. Contracting Fashion Products Supply Chains When Demand Is Dependent on Price and Sales Effort

    Directory of Open Access Journals (Sweden)

    Ying Wei

    2015-01-01

    Full Text Available This paper investigates optimal decisions in a two-stage fashion product supply chain under two specified contracts: revenue-sharing contract and wholesale price contract, where demand is dependent on retailing price and sales effort level. Optimal decisions and related profits are analyzed and further compared among the cases where the effort investment fee is determined and undertaken either by the retailer or the manufacturer. Results reveal that if the retailer determines the effort investment level, she would be better off under the wholesale price contract and would invest more effort. However, if the manufacturer determines the effort level, he prefers to the revenue-sharing contract most likely if both parties agree on consignment.

  7. Evaluation of dynamic pass-through of carbon prices into electricity prices – a cointegrated VECM analysis

    OpenAIRE

    Freitas, Carlos J. Pereira; Silva, Patrícia Pereira da

    2013-01-01

    This paper addresses the impact of the CO2 opportunity cost on the wholesale electricity price in the context of the Iberian electricity market (MIBEL), namely on the Portuguese system, for the period corresponding to the Phase II of the European Union Emission Trading Scheme (EU ETS). In the econometric analysis a vector error correction model (VECM) is specified to estimate both long–run equilibrium relations and short–run interactions between the electricity price and the fuel (natural gas...

  8. An online learning approach to dynamic pricing for demand response

    OpenAIRE

    Jia, Liyan; Tong, Lang; Zhao, Qing

    2014-01-01

    In this paper, the problem of optimal dynamic pricing for retail electricity with an unknown demand model is considered. Under the day-ahead dynamic pricing (a.k.a. real time pricing) mechanism, a retailer obtains electricity in a twosettlement wholesale market and serves its customers in real time. Without knowledge on the aggregated demand function of its customers, the retailer aims to maximize its retail surplus by sequentially adjusting its price based on the behavior of its customers in...

  9. A Buffer Stock Model to Ensure Price Stabilization and Availability of Seasonal Staple Food under Free Trade Considerations

    Directory of Open Access Journals (Sweden)

    Wahyudi Sutopo

    2012-07-01

    Full Text Available The price volatility and scarcity have been became a great problem in the distribution system of seasonal staple food produced by agro industry. It has salient supply disparity during the harvest and planting season. This condition could cause disadvantages to the stakeholders such as producer, wholesaler, consumer, and government. This paper proposes a buffer stock model under free trade considerations to substitute quantitative restrictions and tariffs by indirect market intervention instrument. The instrument was developed through buffer stock scheme in accordance with warehouse receipt system (WRS and collateral management system. The public service institution for staple food buffer stock (BLUPP is proposed as wholesaler’s competitor with main responsibility to ensure price stabilization and availability of staple food. Multi criteria decision making is formulated as single objective a mixed integer non linear programming (MINLP. The result shows that the proposed model can be applied to solve the distribution problem and can give more promising outcome than its counterpart, the direct market intervention instrument.

  10. Electricity prices in the Finnish retail market

    International Nuclear Information System (INIS)

    Lehto, Eero

    2011-01-01

    This study focuses, firstly, on the pricing of electricity in the Finnish retail market. In particular, the impact of the ownership structure on prices is tested empirically. Secondly, the influence of low-cost electricity sources on retail prices is considered. The question about whether the average fuel costs rather than the wholesale price determine the retail prices is thus addressed. The supply side behaviour characterised may explain the passivity of client activity in the seemingly competitive Finnish market. - Research highlights: → Ownership has a strong impact on retail prices in the Finnish electricity market. → Locally owned companies' rates are 5-15 per cent lower than investor owned companies' rates. → Own low cost acquisition of electricity helps local firms to keep prices at low levels.

  11. Housing Price Volatility and Econometrics

    Czech Academy of Sciences Publication Activity Database

    Sunega, Petr; Lux, Martin; Zemčík, Petr

    2014-01-01

    Roč. 1, č. 2 (2014), s. 70-78 ISSN 2336-2839 R&D Projects: GA ČR(CZ) GAP404/12/1446 Institutional support: RVO:68378025 ; RVO:67985998 Keywords : econometrics * housing prices * price bubbles Subject RIV: AO - Sociology, Demography

  12. Pricing and collecting decisions in a closed-loop supply chain with symmetric and asymmetric information

    DEFF Research Database (Denmark)

    Wei, Jie; Govindan, Kannan; Li, Yongjian

    2015-01-01

    . The optimal strategies in closed form are given under the decision scenarios with symmetric information; moreover, the first order conditions that the optimal retail price, optimal wholesale price, and optimal collection rate satisfy are given under the decision scenarios with asymmetric information......The optimal decision problem of a closed-loop supply chain with symmetric and asymmetric information structures is considered using game theory in this paper. The paper aims to explore how the manufacturer and the retailer make their own decisions about wholesale price, retail price, and collection...... rate under symmetric and asymmetric information conditions. Four game models are established, which allow one to examine the strategies of each firm and explore the role of the manufacturer and the retailer in four different game scenarios under symmetric and asymmetric information structures...

  13. Estimation of volatility of selected oil production projects

    International Nuclear Information System (INIS)

    Costa Lima, Gabriel A.; Suslick, Saul B.

    2006-01-01

    In oil project valuation and investment decision-making, volatility is a key parameter, but it is difficult to estimate. From a traditional investment viewpoint, volatility reduces project value because it increases its discount rate via a higher risk premium. Contrarily, according to the real-option pricing theory, volatility may aggregate value to the project, since the downside potential is limited whereas the upside is theoretically unbounded. However, the estimation of project volatility is very complicated since there is not a historical series of project values. In such cases, many analysts assume that oil price volatility is equal to that of project. In order to overcome such problems, in this paper an alternative numerical method based on present value of future cash flows and Monte Carlo simulation is proposed to estimate the volatility of projects. This method is applied to estimate the volatility of 12 deep-water offshore oil projects considering that oil price will evolve according to one of two stochastic processes: Geometric Brownian Motion and Mean-Reverting Motion. Results indicate that the volatility of commodity usually undervalue that of project. For the set of offshore projects analyzed in this paper, project volatility is at least 79% higher than that of oil prices and increases dramatically in those cases of high capital expenditures and low price. (author)

  14. Forecasting volatility of crude oil markets

    International Nuclear Information System (INIS)

    Kang, Sang Hoon; Kang, Sang-Mok; Yoon, Seong-Min

    2009-01-01

    This article investigates the efficacy of a volatility model for three crude oil markets - Brent, Dubai, and West Texas Intermediate (WTI) - with regard to its ability to forecast and identify volatility stylized facts, in particular volatility persistence or long memory. In this context, we assess persistence in the volatility of the three crude oil prices using conditional volatility models. The CGARCH and FIGARCH models are better equipped to capture persistence than are the GARCH and IGARCH models. The CGARCH and FIGARCH models also provide superior performance in out-of-sample volatility forecasts. We conclude that the CGARCH and FIGARCH models are useful for modeling and forecasting persistence in the volatility of crude oil prices. (author)

  15. Forecasting volatility of crude oil markets

    Energy Technology Data Exchange (ETDEWEB)

    Kang, Sang Hoon [Department of Business Administration, Gyeongsang National University, Jinju, 660-701 (Korea); Kang, Sang-Mok; Yoon, Seong-Min [Department of Economics, Pusan National University, Busan, 609-735 (Korea)

    2009-01-15

    This article investigates the efficacy of a volatility model for three crude oil markets - Brent, Dubai, and West Texas Intermediate (WTI) - with regard to its ability to forecast and identify volatility stylized facts, in particular volatility persistence or long memory. In this context, we assess persistence in the volatility of the three crude oil prices using conditional volatility models. The CGARCH and FIGARCH models are better equipped to capture persistence than are the GARCH and IGARCH models. The CGARCH and FIGARCH models also provide superior performance in out-of-sample volatility forecasts. We conclude that the CGARCH and FIGARCH models are useful for modeling and forecasting persistence in the volatility of crude oil prices. (author)

  16. The electricity prices in the European Union. The role of renewable energies and regulatory electric market reforms

    International Nuclear Information System (INIS)

    Moreno, Blanca; López, Ana J.; García-Álvarez, María Teresa

    2012-01-01

    The European Union electricity market has been gradually liberalized since 1990s. Theoretically, competitive markets should lead to efficiency gains in the economy thus reducing electricity prices. However, there is a controversial debate about the real effects of the electricity liberalization on electricity prices. Moreover, the increased generation of electricity from renewable energies RES-E (Electricity from Renewable Energy Sources) is also integrated in wholesale market reducing wholesale prices, but the final effect over household prices is not clear. In order to contribute to this debate, this paper provides an empirical investigation into the electricity prices determinants. In fact we develop econometric panel models to explore the relationship between the household electricity prices and variables related to the renewable energy sources and the competition in generation electricity market. More specifically we use a panel data set provided by Eurostat and covering 27 European Union countries during the period 1998–2009. Our results suggest that electricity prices increase with the deployment of RES-E and with the expansion of greenhouse gas emissions produced by energy industries- as a European Union CO 2 emission trading scheme exists. Results also reveal that country's characteristics can affect household electricity prices. -- Highlights: ► Electricity liberalized markets should lead to reduce electricity prices. ► The use of renewable energies (RES) reduce wholesale electricity prices. ► However, household electricity prices are increasing in European Union. ► Panel data models are developed to investigate the effect of RES and electricity competition on household electricity prices. ► We find that the deployment of RES increases prices paid by consumers in a liberalized market.

  17. Least Squares Inference on Integrated Volatility and the Relationship between Efficient Prices and Noise

    OpenAIRE

    Nolte, Ingmar; Voev, Valeri

    2009-01-01

    The expected value of sums of squared intraday returns (realized variance)gives rise to a least squares regression which adapts itself to the assumptions ofthe noise process and allows for a joint inference on integrated volatility (IV),noise moments and price-noise relations. In the iid noise case we derive theasymptotic variance of the regression parameter estimating the IV, show thatit is consistent and compare its asymptotic efficiency against alternative consistentIV measures. In case of...

  18. Inflation impact of food prices: Case of Serbia

    Directory of Open Access Journals (Sweden)

    Šoškić Dejan

    2015-01-01

    Full Text Available Food prices traditionally have an impact on inflation around the world. Movements in these prices are coming more from the supply side, then from the demand side. If treated as a supply shock, monetary policy should not react. However, food prices are part of headline inflation that is an official target for most central banks. Serbia conducts Inflation targeting and faces serious challenges with food price volatility. Food price volatility in Serbia hampers inflation forecasting, and may have a negative influence on inflationary expectations and public confidence in (i.e. credibility of the Central bank, all of crucial importance for success of Inflation targeting. There are several important possible improvements that may decrease volatility of food prices but also limit negative impact of food price volatility on Consumer Price Index (CPI as a measure of inflation. These improvements are very important for success of Inflation targeting in Serbia.

  19. Impact of carbon cost on wholesale electricity price: A note on price pass-through issues

    Energy Technology Data Exchange (ETDEWEB)

    Kim, Wook [Korea Southern Power Co., 167, Samsung-dong, Gangnam-gu, Seoul 135-791 (Korea); Chattopadhyay, Deb [Saha International, Level 26, 385 Bourke Street, Melbourne, VIC 3000 (Australia); Park, Jong-bae [Electrical Engineering Department, Konkuk University, 1 Hwayang-dong, Kwanggin-gu, Seoul 143-701 (Korea)

    2010-08-15

    Carbon costs - either in the form of a carbon tax or through permit prices in an emissions trading scheme - would ultimately be reflected in higher electricity prices. Carbon cost ''pass-through'' is critical to the survival of existing coal generation assets and has been discussed widely as a measure of business impact in the electricity industry. This paper sets out in a structured way the factors that determine price pass-through and why this may differ greatly across different systems. Although the basic concept of price pass-through is simple, a clear understanding of the underlying factors is critical to developing insights on how carbon cost would impact on existing coal generation businesses. It is shown that pass-through can vary drastically if the underlying dispatch potential of generators varies significantly across alternative emissions reduction scenarios. It can also vary depending on the availability of competing cleaner forms of generation. Pass-through as a measure of business performance is, therefore, hard to generalize across different circumstances and should be interpreted carefully. (author)

  20. Scaling and long-range dependence in option pricing V: Multiscaling hedging and implied volatility smiles under the fractional Black-Scholes model with transaction costs

    Science.gov (United States)

    Wang, Xiao-Tian

    2011-05-01

    This paper deals with the problem of discrete time option pricing using the fractional Black-Scholes model with transaction costs. Through the ‘anchoring and adjustment’ argument in a discrete time setting, a European call option pricing formula is obtained. The minimal price of an option under transaction costs is obtained. In addition, the relation between scaling and implied volatility smiles is discussed.

  1. 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.

  2. Moment generating functions and Normalized implied volatilities: unification and extension via Fukasawa's pricing formula

    OpenAIRE

    De Marco, Stefano; Martini, Claude

    2017-01-01

    We extend the model-free formula of [Fukasawa 2012] for $\\mathbb E[\\Psi(X_T)]$, where $X_T=\\log S_T/F$ is the log-price of an asset, to functions $\\Psi$ of exponential growth. The resulting integral representation is written in terms of normalized implied volatilities. Just as Fukasawa's work provides rigourous ground for Chriss and Morokoff's (1999) model-free formula for the log-contract (related to the Variance swap implied variance), we prove an expression for the moment generating functi...

  3. Gasoline taxes and revenue volatility: An application to California

    International Nuclear Information System (INIS)

    Madowitz, M.; Novan, K.

    2013-01-01

    This paper examines how applying different combinations of excise and sales taxes on motor fuels impact the volatility of retail fuel prices and tax revenues. Two features of gasoline and diesel markets make the choice of tax mechanism a unique problem. First, prices are very volatile. Second, demand for motor fuels is extremely inelastic. As a result, fuel expenditures vary substantially over time. Tying state revenues to these expenditures, as is the case with a sales tax, results in a volatile stream of revenue which imposes real costs on agents in an economy. On July 1, 2010, California enacted Assembly Bill x8-6, the “Gas Tax Swap”, increasing the excise tax and decreasing the sales tax on gasoline purchases. While the initial motivation behind the revenue neutral swap was to provide the state with greater flexibility within its budget, we highlight that this change has two potentially overlooked benefits; it reduces retail fuel price volatility and tax revenue volatility. Simulating the monthly fuel prices and tax revenues under alternative tax policies, we quantify the potential reductions in revenue volatility. The results reveal that greater benefits can be achieved by going beyond the tax swap and eliminating the gasoline sales tax entirely. - Highlights: • We examine how gasoline taxes affect government revenue volatility. • We simulate the impact of California's Gasoline Tax Swap policy. • Sales taxes are shown to magnify price volatility and government revenue volatility. • A pure excise tax policy results in less volatile fuel prices and state revenues. • We argue that reductions in both forms of volatility are welfare enhancing

  4. The impact of alternative pricing methods for drugs in California Workers' Compensation System: Fee-schedule pricing.

    Science.gov (United States)

    Wilson, Leslie; Turkistani, Fatema A; Huang, Wei; Tran, Dang M; Lin, Tracy Kuo

    2018-01-01

    California's Workers' Compensation System (CAWCS) Department of Industrial Relations questioned the adequacy of the current Medi-Cal fee-schedule pricing and requested analysis of alternatives that maximize price availability and maintain budget neutrality. To compare CAWCS pharmacy-dispensed (PD) drug prices under alternative fee schedules, and identify combinations of alternative benchmarks that have prices available for the largest percentage of PD drugs and that best reach budget neutrality. Claims transaction-level data (2011-2013) from CAWCS were used to estimate total annual PD pharmaceutical payments. Medi-Cal pricing data was from the Workman's Compensation Insurance System (WCIS). Average Wholesale Prices (AWP), Wholesale Acquisition Costs (WAC), Direct Prices (DP), Federal Upper Limit (FUL) prices, and National Average Drug Acquisition Costs (NADAC) were from Medi-Span. We matched National Drug Codes (NDCs), pricing dates, and drug quantity for comparisons. We report pharmacy-dispensed (PD) claims frequency, reimbursement matching rate, and paid costs by CAWCS as the reference price against all alternative price benchmarks. Of 12,529,977 CAWCS claims for pharmaceutical products 11.6% (1,462,814) were for PD drugs. Prescription drug cost for CAWCS was over $152M; $63.9M, $47.9M, and $40.6M in 2011-2013. Ninety seven percent of these CAWCS PD claims had a Medi-Cal price. Alternative mechanisms provided a price for fewer claims; NADAC 94.23%, AWP 90.94%, FUL 73.11%, WAC 66.98%, and DP 14.33%. Among CAWCS drugs with no Medi-Cal price in PD claims, AWP, WAC, NADAC, DP, and FUL provided prices for 96.7%, 63.14%, 24.82%, 20.83%, and 15.08% of claims. Overall CAWCS paid 100.52% of Medi-Cal, 60% of AWP, 97% of WAC, 309.53% of FUL, 103.83% of DP, and 136.27% of NADAC. CAWCS current Medi-Cal fee-schedule price list for PD drugs is more complete than all alternative fee-schedules. However, all reimbursement approaches would require combinations of pricing benchmarks

  5. Effects of regulatory reforms in the electricity supply industry on electricity prices in developing countries

    International Nuclear Information System (INIS)

    Nagayama, Hiroaki

    2007-01-01

    Electric power sector reforms in the electricity supply industry have had an impact on industrial and household prices in developing countries in Latin America, the former Soviet Union, and Eastern Europe. Using original panel data for 83 countries during the period from 1985 to 2002, we examine how each policy instrument of the reform measures influenced electricity prices for countries in the above regions. We found that variables such as entry of independent power producers (IPP), unbundling of generation and transmission, establishment of a regulatory agency, and the introduction of a wholesale spot market have had a variety of impacts on electricity prices, some of which were not always consistent with expected results. The research findings suggest that neither unbundling nor introduction of a wholesale pool market on their own necessarily reduces the electric power price. In fact, contrary to expectations, there was a tendency for the price to rise. However, coexistent with an independent regulator, unbundling may work to reduce electricity prices. Privatization and the introduction of foreign IPP and retail competition lower electricity prices in some regions, but not all

  6. Understanding the Benefits of Dispersed Grid-Connected Photovoltaics: From Avoiding the Next Major Outage to Taming Wholesale Power Markets

    International Nuclear Information System (INIS)

    Letendre, Steven E.; Perez, Richard

    2006-01-01

    Thanks to new solar resource assessment techniques using cloud cover data available from geostationary satellites, it is apparent that grid-connected PV installations can serve to enhance electric grid reliability, preventing or hastening recovery from major power outages and serving to mitigate extreme price spikes in wholesale energy markets. (author)

  7. Option Pricing using Realized Volatility

    DEFF Research Database (Denmark)

    Stentoft, Lars Peter

    dynamics to be used for option pricing purposes in this framework, and we show that our model explains some of the mispricings found when using traditional option pricing models based on interdaily data. We then show explicitly that a Generalized Autoregressive Conditional Heteroskedastic model with Normal...... Inverse Gaussian distributed innovations is the corresponding benchmark model when only daily data is used. Finally, we perform an empirical analysis using stock options for three large American companies, and we show that in all cases our model performs significantly better than the corresponding...... benchmark model estimated on return data alone. Hence the paper provides evidence on the value of using high frequency data for option pricing purposes....

  8. Integration of capacity, pricing, and lead-time decisions in a decentralized supply chain

    NARCIS (Netherlands)

    Zhu, Stuart X.

    We consider a decentralized supply chain consisting of a supplier and a retailer facing price- and lead-time-sensitive demand. The decision process is modelled by a Stackelberg game where the supplier, as a leader, determines the capacity and the wholesale price, and the retailer, as a follower,

  9. Short run pricing in competitive electricity markets

    International Nuclear Information System (INIS)

    Ring, B. J.; Read, E. G.

    1996-01-01

    In response to the need for more responsive, competitive and decentralized pricing strategies forced upon the industry by deregulation, this study reviewed the type of electricity pricing required to coordinate a competitive wholesale electricity market over time periods typically of the order of one hour. It was found that nodal spot pricing can provide a straight-forward mechanism for providing the correct signals to market participants, while reflecting the costs and complexities of transmission network operation. Provided that all binding constraints are represented in the pricing model, and assuming that they are used in conjunction with long term contracts and capacity rights, such pricing can potentially deliver most of the benefits promised by perfect coordination, while allowing competition to flourish. 4 refs

  10. Wood fuel price survey for 2008 and 2009. Synthesis

    International Nuclear Information System (INIS)

    2010-01-01

    Based on interviews on telephone with wood fuel vendors and wholesalers, pellet producers, local community boiler managers, and individuals, this study, while giving several data figures and tables, proposes a price analysis for the housing sector (price evolution for individuals for different kinds and sizes of fuel woods), a comparison with other fuels and energies (electricity, gas) whether wood is used as the primary or secondary heating mean. It also comments the price scattering. It proposes the same kind of analysis for local communities

  11. Normalization for Implied Volatility

    OpenAIRE

    Fukasawa, Masaaki

    2010-01-01

    We study specific nonlinear transformations of the Black-Scholes implied volatility to show remarkable properties of the volatility surface. Model-free bounds on the implied volatility skew are given. Pricing formulas for the European options which are written in terms of the implied volatility are given. In particular, we prove elegant formulas for the fair strikes of the variance swap and the gamma swap.

  12. Flexible LNG supply, storage and price formation in a global natural gas market

    Science.gov (United States)

    Hayes, Mark Hanley

    The body of work included in this dissertation explores the interaction of the growing, flexible liquefied natural gas (LNG) trade with the fundamentals of pipeline gas supply, gas storage, and gas consumption. By nature of its uses---largely for residential heating and electric power generation---the consumption of natural gas is highly variable both seasonally and on less predictable daily and weekly timescales. Flexible LNG trade will interconnect previously isolated regional gas markets, each with non-correlated variability in gas demand, differing gas storage costs, and heterogeneous institutional structures. The dissertation employs a series of analytical models to address key issues that will affect the expansion of the LNG trade and the implications for gas prices, investment and energy policy. First, I employ an optimization model to evaluate the fundamentals of seasonal LNG swing between markets with non-correlated gas demand (the U.S. and Europe). The model provides insights about the interaction of LNG trade with gas storage and price formation in interconnected regional markets. I then explore how random (stochastic) variability in gas demand will drive spot cargo movements and covariation in regional gas prices. Finally, I analyze the different institutional structures of the gas markets in the U.S. and Europe and consider how managed gas markets in Europe---without a competitive wholesale gas market---may effectively "export" supply and price volatility to countries with more competitive gas markets, such as the U.S.

  13. A propane price spike nails users

    International Nuclear Information System (INIS)

    Milke, M.

    1997-01-01

    The increase in price for propane was discussed. In 1993, propane cost about 5 cents per litre; by December 1996, the price has risen to 27 cents wholesale, while retail prices for auto propane reached 40 cents per litre. As a result, farmers and fleet operators are considering switching to an alternative energy supply. The five factors which may have played a role in the propane price spike were described. These included a cold winter which lowered inventories, a Pemex gas plant in Mexico which had been damaged by fire, forcing Mexico to import natural gas and natural gas liquids from the USA, the failure of propane distributors to restock during the summer months in the hope of lower prices, and increased cost of competing fuels in the face of increased demand. It was noted that these factors are transitory, which could mean better prices this summer

  14. Misunderstood markets: The case of California gasoline

    Science.gov (United States)

    Thompson, Jennifer Ruth

    In 1996, the California Air Resources Board (CARB) implemented a new benchmark for cleaner burning gasoline that is unique to California. Since then, government officials have often expressed concern that the uniqueness of petroleum products in California segregates the industry, allowing for gasoline prices in the State that are too high and too volatile. The growing concern about the segmentation of the California markets lends itself to analysis of spatial pricing. Spatial price spreads of wholesale gasoline within the state exhibit some characteristics that seem, on the surface, inconsistent with spatial price theory. Particularly, some spatial price spreads of wholesale gasoline appear larger than accepted transportation rates and other spreads are negative, giving a price signal for transportation against the physical flow of product. Both characteristics suggest some limitation in the arbitrage process. Proprietary data, consisting of daily product prices for the years 2000 through 2002, disaggregated by company, product, grade, and location is used to examine more closely spatial price patterns. My discussion of institutional and physical infrastructure outlines two features of the industry that limit, but do not prohibit, arbitrage. First, a look into branding and wholesale contracting shows that contract terms, specifically branding agreements, reduces the price-responsiveness of would-be arbitrageurs. Second, review of maps and documents illustrating the layout of physical infrastructure, namely petroleum pipelines, confirms the existence of some connections among markets. My analysis of the day-of-the-week effects on wholesale prices demonstrates how the logistics of the use of transportation infrastructure affect market prices. Further examination of spatial price relationships shows that diesel prices follow closely the Augmented Law of One Price (ALOP), and that branding agreements cause gasoline prices to deviate substantially ALOP. Without branding

  15. Vertical price leadership on local maize markets in Benin

    NARCIS (Netherlands)

    Kuiper, WE; Lutz, C; van Tilburg, A

    This paper considers vertical price relationships between wholesalers and retailers on five local maize markets in Benin. We show that the common stochastic trend and the long-run disequilibrium error must explicitly be considered to correctly interpret the restrictions on the error-correction

  16. French wholesale electricity and gas markets in 2007. Monitoring report; Le fonctionnement des marches de gros francais de l'electricite et du gaz naturel en 2007. Rapport de surveillance

    Energy Technology Data Exchange (ETDEWEB)

    NONE

    2008-12-15

    Settled on 24 March 2000, the French Energy Regulatory Commission (CRE) is an independent authority. CRE supports an efficient functioning of the electricity and natural gas markets, to the advantage of final consumers. CRE ensures the absence of any discrimination, cross subsidy or obstacle to competition. CRE has examined the functioning of the wholesale markets for electricity and gas for the year 2007. The report discloses the results of a first set of analyses, as well as the next actions to be conducted in order to explain some observed behaviour. On the basis of analyses led on the electricity market, CRE observes that nuclear generation was marginal during 15% of the hours in 2007. Hydraulic generation was marginal during 25% of the hours, coal generation during 25% to 30% of the hours and oil generation during less than 2% of the hours in 2007. Finally, prices on the border markets were of high importance on the French prices which they determined during 20% to 25% of the hours of the year. On an efficient market, the price is driven by the marginal power plant among all those which contribute to satisfy the demand. Therefore the wholesale price formation is conditioned by the frequency of marginality of each generation sector and by the associated valuation of production. On the day-ahead market, when nuclear or hydraulic generation was marginal, the day-ahead price reflected the associated valuation which was decided by EDF. The level of this valuation was generally higher than the marginal generation cost of these plants. As a matter of fact, a producer, even market dominant, may legitimately seek to optimise its income, provided that there is no abuse of a dominant position or any price manipulation. Consequently, at this stage, the relevance of the valuation method for nuclear and hydraulic generation on the wholesale market is still to be checked. CRE has also demonstrated that generation transparency, even if it gradually increased, still needs to

  17. The impact of alternative pricing methods for drugs in California Workers’ Compensation System: Fee-schedule pricing

    Science.gov (United States)

    Wilson, Leslie; Turkistani, Fatema A.; Huang, Wei; Tran, Dang M.; Lin, Tracy Kuo

    2018-01-01

    Introduction California’s Workers’ Compensation System (CAWCS) Department of Industrial Relations questioned the adequacy of the current Medi-Cal fee-schedule pricing and requested analysis of alternatives that maximize price availability and maintain budget neutrality. Objectives To compare CAWCS pharmacy-dispensed (PD) drug prices under alternative fee schedules, and identify combinations of alternative benchmarks that have prices available for the largest percentage of PD drugs and that best reach budget neutrality. Methods Claims transaction-level data (2011–2013) from CAWCS were used to estimate total annual PD pharmaceutical payments. Medi-Cal pricing data was from the Workman’s Compensation Insurance System (WCIS). Average Wholesale Prices (AWP), Wholesale Acquisition Costs (WAC), Direct Prices (DP), Federal Upper Limit (FUL) prices, and National Average Drug Acquisition Costs (NADAC) were from Medi-Span. We matched National Drug Codes (NDCs), pricing dates, and drug quantity for comparisons. We report pharmacy-dispensed (PD) claims frequency, reimbursement matching rate, and paid costs by CAWCS as the reference price against all alternative price benchmarks. Results Of 12,529,977 CAWCS claims for pharmaceutical products 11.6% (1,462,814) were for PD drugs. Prescription drug cost for CAWCS was over $152M; $63.9M, $47.9M, and $40.6M in 2011–2013. Ninety seven percent of these CAWCS PD claims had a Medi-Cal price. Alternative mechanisms provided a price for fewer claims; NADAC 94.23%, AWP 90.94%, FUL 73.11%, WAC 66.98%, and DP 14.33%. Among CAWCS drugs with no Medi-Cal price in PD claims, AWP, WAC, NADAC, DP, and FUL provided prices for 96.7%, 63.14%, 24.82%, 20.83%, and 15.08% of claims. Overall CAWCS paid 100.52% of Medi-Cal, 60% of AWP, 97% of WAC, 309.53% of FUL, 103.83% of DP, and 136.27% of NADAC. Conclusions CAWCS current Medi-Cal fee-schedule price list for PD drugs is more complete than all alternative fee-schedules. However, all

  18. Demographic Characteristics Related To Wholesale Marketing Of ...

    African Journals Online (AJOL)

    Demographic Characteristics Related To Wholesale Marketing Of Yam In Delta State, Nigeria. ... analysis reveals that wholesale yam marketing in the study area was male - dominated (78.8%), most of ... EMAIL FULL TEXT EMAIL FULL TEXT

  19. Near-term oil prices

    International Nuclear Information System (INIS)

    Lynch, M.C.

    2001-01-01

    This PowerPoint presentation included 36 slides that described the state of oil prices and how to predict them. Prices are random, stochastic, chaotic, mean-reverting and driven by speculators, oil companies and OPEC. The many factors that enable price forecasting are economic growth, weather, industry behaviour, speculators, OPEC policy choices, Mexico/Russia production policy, non-OPEC supply and the interpretation of the above factors by OPEC, speculators, traders and the petroleum industry. Several graphs were included depicting such things as WTI price forecasts, differentials, oil market change in 2001, inventory levels, and WTI backwardation. The presentation provided some explanations for price uncertainties, price surges and collapses. U.S. GDP growth and the volatility of Iraq's production was also depicted. The author predicted that economic growth will occur and that oil demand will go up. Oil prices will fluctuate as the Middle East will be politically unstable and weather will be a major factor that will influence oil prices. The prices are likely to be more volatile than in the 1986 to 1995 period. 2 tabs., 22 figs

  20. Investment timing under hybrid stochastic and local volatility

    International Nuclear Information System (INIS)

    Kim, Jeong-Hoon; Lee, Min-Ku; Sohn, So Young

    2014-01-01

    Highlights: • The effects of hybrid stochastic volatility on real option prices are studied. • The stochastic volatility consists of a fast mean-reverting component and a CEV type one. • A fast mean-reverting factor lowers real option prices and investment thresholds. • The increase of elasticity raises real option prices and investment thresholds. • The effects of the addition of a slowly varying factor depend upon the project value. - Abstract: We consider an investment timing problem under a real option model where the instantaneous volatility of the project value is given by a combination of a hidden stochastic process and the project value itself. The stochastic volatility part is given by a function of a fast mean-reverting process as well as a slowly varying process and the local volatility part is a power (the elasticity parameter) of the project value itself. The elasticity parameter controls directly the correlation between the project value and the volatility. Knowing that the project value represents the market price of a real asset in many applications and the value of the elasticity parameter depends on the asset, the elasticity parameter should be treated with caution for investment decision problems. Based on the hybrid structure of volatility, we investigate the simultaneous impact of the elasticity and the stochastic volatility on the real option value as well as the investment threshold

  1. On the effects of world stock market and oil price shocks on food prices: An empirical investigation based on TVP-VAR models with stochastic volatility

    International Nuclear Information System (INIS)

    Jebabli, Ikram; Arouri, Mohamed; Teulon, Frédéric

    2014-01-01

    Transmission of price shocks from one market to another one has long been investigated in the economic literature. However, studies have namely dealt with the relationship between financial and energy markets. With the recent changes in market conditions, investors, policy-makers and interest groups are giving special attention to food market. This paper aims at analyzing shock transmission between international food, energy and financial markets and to provide some insights into the volatility behavior during the past years and discuss its implications for portfolio management. To do this, we present a new time varying parameter VAR (TVP-VAR) model with stochastic volatility approach which provides extreme flexibility with a parsimonious specification. We resort also to a generalized vector autoregressive framework in which forecast-error variance decompositions are invariant to the variable ordering for the assessment of total and directional volatility spillovers. Our main findings suggest that volatility spillovers increase considerably during crisis and, namely after mid-2008, when stock markets become net transmitter of volatility shocks while crude oil becomes a net receiver. Shocks to crude oil or MSCI markets have immediate and short-term impacts on food markets which are emphasized during the financial crisis period. Moreover, we show that augmenting a diversified portfolio of food commodities with crude oil or stocks significantly increases its risk-adjusted performance. - Highlights: • We study shock transmission between food, energy and financial markets. • We use a new time-varying parameter VAR model with stochastic volatility. • There is volatility spillover from oil and stock markets to food. • Volatility spillovers increase considerably during crisis, namely after mid-2008. • Augmenting a portfolio of foods with oil or stocks increases its performance

  2. Power shopping - practical advice and cost-saving alternatives

    International Nuclear Information System (INIS)

    Anthofer, J.

    1999-01-01

    Encore Energy Solutions is a power consulting company which operates in California, Alberta and Ontario. The company manages electricity portfolios, sells risk management instruments and works with end users to lower power costs. It also helps utilities manage the evolution to a competitive energy market. In this presentation, a series of overhead viewgraphs were used to explain the roles of different players in Ontario's electric power industry, including generators, retailers, distributors, wholesale sellers, transmitters, wholesale consumers, independent market operators (IMOs), and consultants. The challenges facing municipal electric utilities regarding the wires business and retail services were also discussed. The trends in today's evolving power market were highlighted. These included price elasticity, load dispatch, granularity, long- and short-term volatility, gas prices, day/night spread, transmission tariffs, congestion and cost of capital. A graph depicting volatility term structures for electricity, natural gas and crude oil suggests that instantaneous volatility of power is almost infinite. Issues regarding risk management in terms of shareholder's portfolio values were also discussed. 17 figs

  3. Modeling and forecasting petroleum futures volatility

    International Nuclear Information System (INIS)

    Sadorsky, Perry

    2006-01-01

    Forecasts of oil price volatility are important inputs into macroeconometric models, financial market risk assessment calculations like value at risk, and option pricing formulas for futures contracts. This paper uses several different univariate and multivariate statistical models to estimate forecasts of daily volatility in petroleum futures price returns. The out-of-sample forecasts are evaluated using forecast accuracy tests and market timing tests. The TGARCH model fits well for heating oil and natural gas volatility and the GARCH model fits well for crude oil and unleaded gasoline volatility. Simple moving average models seem to fit well in some cases provided the correct order is chosen. Despite the increased complexity, models like state space, vector autoregression and bivariate GARCH do not perform as well as the single equation GARCH model. Most models out perform a random walk and there is evidence of market timing. Parametric and non-parametric value at risk measures are calculated and compared. Non-parametric models outperform the parametric models in terms of number of exceedences in backtests. These results are useful for anyone needing forecasts of petroleum futures volatility. (author)

  4. Energy prices and substitution in United States manufacturing plants

    Science.gov (United States)

    Grim, Cheryl

    Persistent regional disparities in electricity prices, growth in wholesale power markets, and recent deregulation attempts have intensified interest in the performance of the U.S. electric power industry, while skyrocketing fuel prices have brought renewed interest in the effect of changes in prices of all energy types on the U.S. economy. This dissertation examines energy prices and substitution between energy types in U.S. manufacturing. I use a newly constructed database that includes information on purchased electricity and electricity expenditures for more than 48,000 plants per year and additional data on the utilities that supply electricity to study the distribution of electricity prices paid by U.S. manufacturing plants from 1963 to 2000. I find a large compression in the dispersion of electricity prices from 1963 to 1978 due primarily to a decrease in quantity discounts for large electricity purchasers. I also find that spatial dispersion in retail electricity prices among states, counties and utility service territories is large, rises over time for smaller purchasers, and does not diminish as wholesale power markets expand in the 1990s. In addition, I examine energy type consumption patterns, prices, and substitution in U.S. manufacturing plants. I develop a plant-level dataset for 1998 with data on consumption and expenditures on energy and non-energy production inputs, output, and other plant characteristics. I find energy type consumption patterns vary widely across manufacturing plants. Further, I find a large amount of dispersion across plants in the prices paid for electricity, oil, natural gas, and coal. These high levels of dispersion are accounted for by the plant's location, industry, and purchase quantity. Finally, I present estimates of own- and cross-price elasticities of demand for both the energy and non-energy production inputs.

  5. The Dynamics of Food Price Convergence in Ethiopia

    African Journals Online (AJOL)

    Optiplex 7010 Pro

    wholesale and retail prices at supply and destination markers in multivariate forecasting ... analytical methods in Part 3, and presentation and discussion of empirical findings in Part 4. ... maximum eigenvalue and trace test statistics are based on a pure unit-root .... (2009) used a bivariate instrumental variables method to.

  6. Estimation and prediction under local volatility jump-diffusion model

    Science.gov (United States)

    Kim, Namhyoung; Lee, Younhee

    2018-02-01

    Volatility is an important factor in operating a company and managing risk. In the portfolio optimization and risk hedging using the option, the value of the option is evaluated using the volatility model. Various attempts have been made to predict option value. Recent studies have shown that stochastic volatility models and jump-diffusion models reflect stock price movements accurately. However, these models have practical limitations. Combining them with the local volatility model, which is widely used among practitioners, may lead to better performance. In this study, we propose a more effective and efficient method of estimating option prices by combining the local volatility model with the jump-diffusion model and apply it using both artificial and actual market data to evaluate its performance. The calibration process for estimating the jump parameters and local volatility surfaces is divided into three stages. We apply the local volatility model, stochastic volatility model, and local volatility jump-diffusion model estimated by the proposed method to KOSPI 200 index option pricing. The proposed method displays good estimation and prediction performance.

  7. Short-term differences in drug prices after implementation of the national essential medicines system: A case study in rural Jiangxi Province, China.

    Science.gov (United States)

    Wang, Junyong; Liu, Xia; Wang, Suzhen; Chen, Heli; Wang, Xun; Zhou, Wei; Wang, Li; Zhu, Yanchen; Zheng, Xianping; Hao, Mo

    2015-01-01

    China's 2009 national essential medicine system (NEMS) was designed to reduce prices through a zero-markup policy and a centralized bidding system. To analyze NEMS's short-term impact on drug prices, we estimated the retail and wholesale prices before and after the reform at health institutions in rural Jiangxi Province. We undertook two cross-sectional surveys of prices of 39 medicines in November 2008 and May 2010, calculated inflation adjusted prices, and used the Wilcoxon signed-rank and rank-sum tests to examine price changes at different health institutions. Retail prices at pilot (P health centers decreased significantly, whereas the declines at retail pharmacies (P = 0.57) and village clinics (P = 0.29) were insignificant. The decline at pilot township health centers was the largest, compared with other kinds of health institutions (P health institutions, the centralized bidding system was insufficient to lower wholesale prices. A drug price management system should be constructed to control medicine prices and a long-term price information system is needed to monitor price changes.

  8. Quantifying the value that energy efficiency and renewable energy provide as a hedge against volatile natural gas prices

    Energy Technology Data Exchange (ETDEWEB)

    Bolinger, Mark; Wiser, Ryan; Bachrach, Devra; Golove, William

    2002-05-15

    Advocates of energy efficiency and renewable energy have long argued that such technologies can mitigate fuel price risk within a resource portfolio. Such arguments--made with renewed vigor in the wake of unprecedented natural gas price volatility during the winter of 2000/2001--have mostly been qualitative in nature, however, with few attempts to actually quantify the price stability benefit that these sources provide. In evaluating this benefit, it is important to recognize that alternative price hedging instruments are available--in particular, gas-based financial derivatives (futures and swaps) and physical, fixed-price gas contracts. Whether energy efficiency and renewable energy can provide price stability at lower cost than these alternative means is therefore a key question for resource acquisition planners. In this paper we evaluate the cost of hedging gas price risk through financial hedging instruments. To do this, we compare the price of a 10-year natural gas swap (i.e., what it costs to lock in prices over the next 10 years) to a 10-year natural gas price forecast (i.e., what the market is expecting spot natural gas prices to be over the next 10 years). We find that over the past two years natural gas users have had to pay a premium as high as $0.76/mmBtu (0.53/242/kWh at an aggressive 7,000 Btu/kWh heat rate) over expected spot prices to lock in natural gas prices for the next 10 years. This incremental cost to hedge gas price risk exposure is potentially large enough - particularly if incorporated by policymakers and regulators into decision-making practices - to tip the scales away from new investments in variable-price, natural gas-fired generation and in favor of fixed-price investments in energy efficiency and renewable energy.

  9. Quantifying the value that energy efficiency and renewable energy provide as a hedge against volatile natural gas prices

    International Nuclear Information System (INIS)

    Bolinger, Mark; Wiser, Ryan; Bachrach, Devra; Golove, William

    2002-01-01

    Advocates of energy efficiency and renewable energy have long argued that such technologies can mitigate fuel price risk within a resource portfolio. Such arguments-made with renewed vigor in the wake of unprecedented natural gas price volatility during the winter of 2000/2001-have mostly been qualitative in nature, however, with few attempts to actually quantify the price stability benefit that these sources provide. In evaluating this benefit, it is important to recognize that alternative price hedging instruments are available-in particular, gas-based financial derivatives (futures and swaps) and physical, fixed-price gas contracts. Whether energy efficiency and renewable energy can provide price stability at lower cost than these alternative means is therefore a key question for resource acquisition planners. In this paper we evaluate the cost of hedging gas price risk through financial hedging instruments. To do this, we compare the price of a 10-year natural gas swap (i.e., what it costs to lock in prices over the next 10 years) to a 10-year natural gas price forecast (i.e., what the market is expecting spot natural gas prices to be over the next 10 years). We find that over the past two years natural gas users have had to pay a premium as high as$0.76/mmBtu (0.53/242/kWh at an aggressive 7,000 Btu/kWh heat rate) over expected spot prices to lock in natural gas prices for the next 10 years. This incremental cost to hedge gas price risk exposure is potentially large enough - particularly if incorporated by policymakers and regulators into decision-making practices - to tip the scales away from new investments in variable-price, natural gas-fired generation and in favor of fixed-price investments in energy efficiency and renewable energy

  10. Optimal Willingness to Supply Wholesale Electricity Under Asymmetric Linearized Marginal Costs

    Directory of Open Access Journals (Sweden)

    David Hudgins

    2012-01-01

    Full Text Available This analysis derives the profit-maximizing willingness to supply functions for single-plant and multi-plant wholesale electricity suppliers that all incur linear marginal costs. The optimal strategy must result in linear residual demand functions in the absence of capacity constraints. This necessarily leads to a linear pricing rule structure that can be used by firm managers to construct their offer curves and to serve as a benchmark to evaluate firm profit-maximizing behavior. The procedure derives the cost functions and the residual demand curves for merged or multi-plant generators, and uses these to construct the individual generator plant offer curves for a multi-plant firm.

  11. Analysis of the transmission characteristics of China's carbon market transaction price volatility from the perspective of a complex network.

    Science.gov (United States)

    Jia, Jingjing; Li, Huajiao; Zhou, Jinsheng; Jiang, Meihui; Dong, Di

    2018-03-01

    Research on the price fluctuation transmission of the carbon trading pilot market is of great significance for the establishment of China's unified carbon market and its development in the future. In this paper, the carbon market transaction prices of Beijing, Shanghai, Tianjin, Shenzhen, and Guangdong were selected from December 29, 2013 to March 26, 2016, as sample data. Based on the view of the complex network theory, we construct a price fluctuation transmission network model of five pilot carbon markets in China, with the purposes of analyzing the topological features of this network, including point intensity, weighted clustering coefficient, betweenness centrality, and community structure, and elucidating the characteristics and transmission mechanism of price fluctuation in China's five pilot cities. The results of point intensity and weighted clustering coefficient show that the carbon prices in the five markets remained unchanged and transmitted smoothly in general, and price fragmentation is serious; however, at some point, the price fluctuates with mass phenomena. The result of betweenness centrality reflects that a small number of price fluctuations can control the whole market carbon price transmission and price fluctuation evolves in an alternate manner. The study provides direction for the scientific management of the carbon price. Policy makers should take a positive role in promoting market activity, preventing the risks that may arise from mass trade and scientifically forecasting the volatility of trading prices, which will provide experience for the establishment of a unified carbon market in China.

  12. Analysis of competition and market power in the wholesale electricity market in India

    International Nuclear Information System (INIS)

    Shukla, Umesh Kumar; Thampy, Ashok

    2011-01-01

    The electricity reforms were initiated in India with the objective of promoting competition in the electricity market. In order to promote competition, the Electricity Act 2003 was enacted and various policy initiatives were taken by the Government of India. Central Electricity Regulatory Commission (CERC) also facilitated competition through the regulatory framework of availability based tariff, Indian Electricity Grid Code, open access in inter-state transmission, inter-state trading and power exchanges. Despite these initiatives, electricity prices increased in the Wholesale Electricity Market in India (WEMI). This paper analyses the market structure and competitiveness in the WEMI. There are, of course, various potential reasons for the rise in the electricity price. This paper seeks to investigate, if market power was one of the reasons for increase in market prices. Concentration ratio, Herfindahl-Hirschman index, Supply Margin Assessment, and Residual Supply Index have been used to measure market power. This paper also uses the price-cost mark-up to examine, if exercise of market power led to higher margins. The analysis suggests that market power of firms may be part of the reason for the increase in electricity prices in WEMI. The study suggests various measures to increase competition in the WEMI.

  13. The impact of energy price shocks on the UK economy

    International Nuclear Information System (INIS)

    2007-01-01

    This report describes the results of six scenarios considering the impact of energy price shocks on the UK economy. The six scenarios considered are: UK aggregate energy price scenario; pan-Europe aggregate energy price; global aggregate energy price; UK temporary gas price; UK permanent gas price; crude (Brent) oil price. As expected, shocks to aggregate energy prices cause the largest macroeconomic and energy demand effects (in terms of growth rate volatility). Shocks to gas prices produce a greater growth volatility for macroeconomic and energy demand than shocks to oil prices. In general terms, shocks specific to the UK market tend to produce more growth rate volatility than wider ranging price shocks (global or pan-European). All of the price shocks considered have a recursive effect on the main indicators, which tend to stabilise around the baseline level in the long run. The report summarises the results obtained in the different scenarios

  14. Natural gas prices in the Maritimes : an energy market assessment

    International Nuclear Information System (INIS)

    2004-03-01

    The National Energy Board monitors the supply and price of natural gas in the Maritimes. This report contains the results and analysis of a survey of the wholesale natural gas prices paid by Canadian buyers in the Maritimes from November 2002 to October 2003. The objective of the report is to improve the understanding of the market factors that influence wholesale natural gas prices in the Maritimes. A comparative evaluation of domestic and export prices shows that Canadian buyers have had access to gas at prices similar to the export market at St. Stephen, New Brunswick. Since the number of participants in the domestic market is low, only four large buyers have a major impact on average prices in the region. The challenge for small buyers will be to buy gas from others who can divert some of their own sales of use. However, these sellers may not want to over-commit to new firm sales in case they have to re-purchase the gas during shortages that may occur due to fluctuations in production or shipping. It was noted that a new gas supply into the region would support many buyers and sellers, and could lead to a more transparent Maritime natural gas market. The National Energy Board is satisfied that the Maritime natural gas market is currently performing as well as can be expected, given its young stage of development. 1 tab., 8 figs., 1 appendix

  15. 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

  16. Response of corn markets to climate volatility under alternative energy futures.

    Science.gov (United States)

    Diffenbaugh, Noah S; Hertel, Thomas W; Scherer, Martin; Verma, Monika

    2012-07-01

    Recent price spikes(1,2) have raised concern that climate change could increase food insecurity by reducing grain yields in the coming decades(3,4). However, commodity price volatility is also influenced by other factors(5,6), which may either exacerbate or buffer the effects of climate change. Here we show that US corn price volatility exhibits higher sensitivity to near-term climate change than to energy policy influences or agriculture-energy market integration, and that the presence of a biofuels mandate enhances the sensitivity to climate change by more than 50%. The climate change impact is driven primarily by intensification of severe hot conditions in the primary corn-growing region of the US, which causes US corn price volatility to increase sharply in response to global warming projected over the next three decades. Closer integration of agriculture and energy markets moderates the effects of climate change, unless the biofuels mandate becomes binding, in which case corn price volatility is instead exacerbated. However, in spite of the substantial impact on US corn price volatility, we find relatively small impact on food prices. Our findings highlight the critical importance of interactions between energy policies, energy-agriculture linkages, and climate change.

  17. WHOLESALER TO RETAILER GOODS FORWARDING CONTROLLING

    Directory of Open Access Journals (Sweden)

    Oleg NIKIFOROV

    2016-06-01

    Full Text Available The modern trends in the development of logistics controlling through the prism of collaboration between wholesale companies and retail chains have been considered. The nature and structure of cargo transportation by the wholesale company to the retail chain have been analysed. The key transportation processes have been identified and the reliance on transportation drivers-forwarders for their effectiveness has been determined. The study has resulted in the program-mathematical approach to the transportation controlling automation used by the wholesale company to deliver goods to the retail chain as well as the mathematical model of the system information flow. The practical recommendations for the mathematical software implementation using the AWS Forwarder software product as an example have been illustrated.

  18. European Food and Drink Wholesalers and Sustainability

    Directory of Open Access Journals (Sweden)

    Peter Jones

    2017-01-01

    Full Text Available Purpose- The aim of this paper is to review and reflect on the sustainability agendas and achievements reported by Europe's leading food and drinks wholesalers. Design/Methodology/Approach- The paper begins with a short introduction to corporate sustainability, sustainability reporting and food and drinks wholesaling within Europe and the empirical material for the paper is drawn from reports and information posted on the leading food and drinks wholesalers' corporate websites. Findings- There are marked variations in the extent to which Europe's leading food and drinks wholesalers reported and provided information on their sustainability agendas and achievements. These agendas and achievements embraced a wide range of environmental, social and economic issues but the reporting process had a number of weaknesses that undermine its transparency and credibility. The authors also argue that the leading food and drinks wholesalers' definitions of, and commitments to, sustainability are principally driven by business imperatives as by any fundamental concern to maintain the viability and integrity of natural and social capital. More critically the authors argue that this approach is couched within existing business models centred on continuing growth and consumption Limitations- The paper is a preliminary review of the sustainability agendas and achievements publicly reported by Europe's leading food and drinks wholesalers. Originality- The role of Europe's wholesale sector in addressing sustainability has received scant attention in the academic literature and this paper will interest academics and students in business management and marketing and employees and executives working in the distribution sector of the economy.

  19. Do OPEC announcements influence oil prices?

    International Nuclear Information System (INIS)

    Loutia, Amine; Mellios, Constantin; Andriosopoulos, Kostas

    2016-01-01

    This paper investigates the effect of OPEC production decisions (increase, cut, maintain) on both WTI and Brent crude oil prices between Q1 1991 and Q1 2015 by employing the event study methodology and by using two indices as benchmarks (BCI and S&P GSCI). We employ an EGARCH model to take into account the high volatility of oil prices and some stylized facts characterizing this volatility. We find that the impact of OPEC’s announcements on oil prices (i)evolves over time and among decisions, (ii) is more significant for production cut and maintain, (iii) is different for WTI and Brent prices, and (iv) is sensitive to the benchmark index. Moreover, OPEC’s decisions depend on the exploration and extraction cost of more expensive/unconventional oil resources. - Highlights: • The impact of OPEC's production decisions on both BRENT and WTI is examined. • We adopt the event study methodology. • An EGARCH model is used to capture some features characterizing oil prices volatility. • OPEC decisions effect changes over time and depends on production decisions and oil prices. • OPEC is less influential when prices are high and unconventional resources are viable.

  20. Price drop and increasing competition; Sinkende Preise und mehr Wettbewerb

    Energy Technology Data Exchange (ETDEWEB)

    Berner, Joachim

    2012-01-06

    Competition in the German PV sector is getting harder. German wholesale providers are dropping their prices, strengthening their marketing activities and expanding their range of services. This is the result of an enquiry made by SONNE WIND and WAeRME in November 2011.

  1. Marketing wholesale electricity in British Columbia

    Energy Technology Data Exchange (ETDEWEB)

    Moghadam, B. [Powerex, Vancouver, BC (Canada)

    2002-03-14

    An open access wholesale transmission tariff (WTS) has been in place in British Columbia since 1997, and wholesale electricity can be sold to wholesale purchasers by independent producers located within the province. Customers range from municipalities to British Columbia Hydro (BC Hydro), to Powerex, to UtiliCorp Networks Corporation (UNC). Provided that the necessary approvals and transmission services have been acquired, the energy may be transmitted anywhere in Canada or the United States. The generation and sale of electricity within British Columbia and the United States is subject to government and regulatory approvals. Several buyers and sellers that come together to trade a product are part of a hub. The largest such hub in the Pacific Northwest is called the Mid-Columbia (Mid-C) hub in Washington. The commodity is traded in 25 MW standard blocks. The credit requirements of the purchaser must be satisfied by the generating party. BC Hydro wholesale transmission service can be purchased by any wholesale power marketer or generator to transmit the power to market. It is imperative that scheduling personnel be available at all times. The Western System Coordinating Council (WSCC) insists that an operating reserve of 5 per cent hydro generation and 7 per cent thermal generation to support the electrical system in the face of an emergency be available for the electricity marketed through the hub. Powerex has been successful since 1988 in the marketing of electricity throughout the WSCC. An example was provided to help make the rules a bit easier to comprehend. refs.

  2. Marketing wholesale electricity in British Columbia

    International Nuclear Information System (INIS)

    Moghadam, B.

    2002-01-01

    An open access wholesale transmission tariff (WTS) has been in place in British Columbia since 1997, and wholesale electricity can be sold to wholesale purchasers by independent producers located within the province. Customers range from municipalities to British Columbia Hydro (BC Hydro), to Powerex, to UtiliCorp Networks Corporation (UNC). Provided that the necessary approvals and transmission services have been acquired, the energy may be transmitted anywhere in Canada or the United States. The generation and sale of electricity within British Columbia and the United States is subject to government and regulatory approvals. Several buyers and sellers that come together to trade a product are part of a hub. The largest such hub in the Pacific Northwest is called the Mid-Columbia (Mid-C) hub in Washington. The commodity is traded in 25 MW standard blocks. The credit requirements of the purchaser must be satisfied by the generating party. BC Hydro wholesale transmission service can be purchased by any wholesale power marketer or generator to transmit the power to market. It is imperative that scheduling personnel be available at all times. The Western System Coordinating Council (WSCC) insists that an operating reserve of 5 per cent hydro generation and 7 per cent thermal generation to support the electrical system in the face of an emergency be available for the electricity marketed through the hub. Powerex has been successful since 1988 in the marketing of electricity throughout the WSCC. An example was provided to help make the rules a bit easier to comprehend. refs

  3. Panel data models with spatial correlation: Estimation theory and an empirical investigation of the United States wholesale gasoline industry

    Science.gov (United States)

    Kapoor, Mudit

    The first part of my dissertation considers the estimation of a panel data model with error components that are both spatially and time-wise correlated. The dissertation combines widely used model for spatial correlation (Cliff and Ord (1973, 1981)) with the classical error component panel data model. I introduce generalizations of the generalized moments (GM) procedure suggested in Kelejian and Prucha (1999) for estimating the spatial autoregressive parameter in case of a single cross section. I then use those estimators to define feasible generalized least squares (GLS) procedures for the regression parameters. I give formal large sample results concerning the consistency of the proposed GM procedures, as well as the consistency and asymptotic normality of the proposed feasible GLS procedures. The new estimators remain computationally feasible even in large samples. The second part of my dissertation employs a Cliff-Ord-type model to empirically estimate the nature and extent of price competition in the US wholesale gasoline industry. I use data on average weekly wholesale gasoline price for 289 terminals (distribution facilities) in the US. Data on demand factors, cost factors and market structure that affect price are also used. I consider two time periods, a high demand period (August 1999) and a low demand period (January 2000). I find a high level of competition in prices between neighboring terminals. In particular, price in one terminal is significantly and positively correlated to the price of its neighboring terminal. Moreover, I find this to be much higher during the low demand period, as compared to the high demand period. In contrast to previous work, I include for each terminal the characteristics of the marginal customer by controlling for demand factors in the neighboring location. I find these demand factors to be important during period of high demand and insignificant during the low demand period. Furthermore, I have also considered spatial

  4. Fluctuation behaviors of financial return volatility duration

    Science.gov (United States)

    Niu, Hongli; Wang, Jun; Lu, Yunfan

    2016-04-01

    It is of significantly crucial to understand the return volatility of financial markets because it helps to quantify the investment risk, optimize the portfolio, and provide a key input of option pricing models. The characteristics of isolated high volatility events above certain threshold in price fluctuations and the distributions of return intervals between these events arouse great interest in financial research. In the present work, we introduce a new concept of daily return volatility duration, which is defined as the shortest passage time when the future volatility intensity is above or below the current volatility intensity (without predefining a threshold). The statistical properties of the daily return volatility durations for seven representative stock indices from the world financial markets are investigated. Some useful and interesting empirical results of these volatility duration series about the probability distributions, memory effects and multifractal properties are obtained. These results also show that the proposed stock volatility series analysis is a meaningful and beneficial trial.

  5. Do daily retail gasoline prices adjust asymmetrically?

    NARCIS (Netherlands)

    Bettendorf, L.; van der Geest, S. A.; Kuper, G. H.

    2009-01-01

    This paper analyses adjustments in the Dutch retail gasoline prices. We estimate an error correction model on changes in the daily retail price for gasoline (taxes excluded) for the period 1996-2004, taking care of volatility clustering by estimating an EGARCH model. It turns out that the volatility

  6. A discrete-time two-factor model for pricing bonds and interest rate derivatives under random volatility

    OpenAIRE

    Heston, Steven L.; Nandi, Saikat

    1999-01-01

    This paper develops a discrete-time two-factor model of interest rates with analytical solutions for bonds and many interest rate derivatives when the volatility of the short rate follows a GARCH process that can be correlated with the level of the short rate itself. Besides bond and bond futures, the model yields analytical solutions for prices of European options on discount bonds (and futures) as well as other interest rate derivatives such as caps, floors, average rate options, yield curv...

  7. Stochastic volatility and multi-dimensional modeling in the European energy market

    Energy Technology Data Exchange (ETDEWEB)

    Vos, Linda

    2012-07-01

    In energy prices there is evidence for stochastic volatility. Stochastic volatility has effect on the price of path-dependent options and therefore has to be modeled properly. We introduced a multi-dimensional non-Gaussian stochastic volatility model with leverage which can be used in energy pricing. It captures special features of energy prices like price spikes, mean-reversion, stochastic volatility and inverse leverage. Moreover it allows modeling dependencies between different commodities.The derived forward price dynamics based on this multi-variate spot price model, provides a very flexible structure. It includes cotango, backwardation and hump shape forward curves.Alternatively energy prices could be modeled by a 2-factor model consisting of a non-Gaussian stable CARMA process and a non-stationary trend models by a Levy process. Also this model is able to capture special features like price spikes, mean reversion and the low frequency dynamics in the market. An robust L1-filter is introduced to filter out the states of the CARMA process. When applying to German electricity EEX exchange data an overall negative risk-premium is found. However close to delivery a positive risk-premium is observed.(Author)

  8. Energy prices and the post oil/energy crisis Brazilian inflation: an input-output study

    Energy Technology Data Exchange (ETDEWEB)

    Lara-Resende, M.deM.

    1982-01-01

    This study is an attempt to understand the implications of the OPEC-induced severalfold increase in the international price of oil for average and sectoral domestic prices in Brazil, a large oil-importing open developing economy. Rather than using a Keynesian model (focusing on the universal characteristics of an economy), the study makes use of an open-price input-output model (capturing the structural characteristics of the Brazilian economy). The first three chapters, descriptive in nature, place in perspective the following three, which detail the model and the empirical results. The main conclusion is that, despite the significant increase observed in the post-crisis period, the relative percentage contribution of primary energy to wholesale inflation in Brazil is still relatively minor. A conservative estimate suggests that, in the years of substantial acceleration (1974 and 1979), approximately 15% of the wholesale inflation was due to energy (basically crude oil and oil derivatives). Though such low estimates are partly due to the limitations and assumptions underlying input-output analysis, it seems that the acceleration of inflation is related to more than cost increases originating in energy prices. It also seems to be related to agricultural and labor prices, as well as to the government's decision to abruptly and inopportunely raise several important product prices.

  9. Does the U.S. biofuels mandate increase the price at the pump?

    Science.gov (United States)

    Bolotin, Stephen R.

    The Renewable Fuel Standard (RFS) as amended by the Energy Independence and Security Act of 2007 created a federal mandate for blending conventional biofuels like corn-based ethanol and advanced biofuels like biodiesel and renewable gasoline into the United States transportation fuel supply. The RFS established yearly blending standards for the obligated parties--refiners and importers of petroleum products--that increase progressively until reaching a high of 36 billion gallons by 2022. Each ethanol-equivalent gallon of biofuel blended is assigned a unique Renewable Identification Number (RIN) through the Environmental Protection Agency's (EPA) Moderated Transaction System (EMTS). At year's close, obligated parties must submit their allotted RIN obligations to the EPA to demonstrate compliance. In the case of under-compliance or over-compliance, RINs can be traded between obligated parties freely through the EMTS or carried over for use in the next year. It follows, then, that a RIN carries a market value reflective of the cost of complying with RFS regulations. Indeed, most biofuels cost more than their fossil-based equivalents. When the price of a corn ethanol RIN went from 2-3 cents each in 2012 to nearly $1.50 in July of 2013 due to a perceived shortage in corn ethanol RINs, obligated parties faced the prospect of multimillion-dollar compliance cost increases. Arguing that RFS makes fuel significantly more expensive for consumers, petroleum companies have begun to advocate for the full repeal of the RFS, winning over some allies in Congress. The future of this program is uncertain. In an attempt to quantify the concerns of RFS critics, this thesis estimated the effect that RIN prices have on the wholesale cost of diesel fuel. Using daily price data from January 2011 through August of 2013 on RINs and crude oil, I specified twelve OLS regression models that predict the passthrough of the diesel RIN price to wholesale diesel price. My statistical analysis

  10. Market power in the Nordic electricity wholesale market: A survey of the empirical evidence

    International Nuclear Information System (INIS)

    Fridolfsson, Sven-Olof; Tangeras, Thomas P.

    2009-01-01

    We review the recent empirical research assessing market power on the Nordic wholesale market for electricity, Nord Pool. The studies find no evidence of systematic exploitation of system level market power on Nord Pool. Local market power arising from transmission constraints seems to be more problematic in some price areas across the Nordic countries. Market power can manifest itself in a number of ways that have so far escaped empirical scrutiny. We discuss investment incentives, vertical integration and buyer power, as well as withholding of base-load (nuclear) capacity.

  11. Liquidity in the Dutch wholesale electricity market

    International Nuclear Information System (INIS)

    Newbery, D.; Von der Fehr, N.H.; Van Damme, E.

    2003-05-01

    Industry concerns over perceived reductions in the liquidity of the Dutch wholesale electricity market led the DTe to ask the Market Surveillance Committee (MSC) to examine recent developments. This report starts with a generic examination of wholesale power markets and liquidity and its measurement. An overview of the Dutch wholesale electricity market and its constituent segments follows together with a summary of events and opinions connected to liquidity that have been reported in the trade press. Sources of information on market liquidity are then reviewed. Participation in the market is analysed before examining each market segment and this analysis and the earlier sections are then drawn together in conclusions and recommendations

  12. The Impact of Oil Price Volatility on Statoil

    OpenAIRE

    Johannessen, Frida; Skjelvik, Karina

    2017-01-01

    Master's thesis in Finance PROBLEM STATEMENT How do oil price movements impact Statoil ASA? RESEARCH QUESTIONS Do oil price fluctuations have an explainable effect on Statoil’s capital expenditures and operating expenditures? Do oil price fluctuations have an explainable effect on Statoil’s share price? ANALYSIS To analyse the impact of oil price shocks, Ordinary Least Squares regression has been employed for two separate time periods. First, the period from Q4...

  13. Do Daily Retail Gasoline Prices adjust Asymmetrically?

    Energy Technology Data Exchange (ETDEWEB)

    Bettendorf, L. [Tinbergen Instituut, Amsterdam/Rotterdam (Netherlands); Van der Geest, S. [Erasmus Universiteit, Rotterdam (Netherlands); Kuper, G. [University of Groningen, Groningen (Netherlands)

    2005-04-15

    This paper analyzes adjustments in the Dutch retail gasoline prices. We estimate an error correction model on changes in the daily retail price for gasoline (taxes excluded) for the period 1996-2004 taking care of volatility clustering by estimating an EGARCH model. It turns out the volatility process is asymmetrical: an unexpected increase in the producer price has a larger effect on the variance of the producer price than an unexpected decrease. We do not find strong evidence for amount asymmetry. However, there is a faster reaction to upward changes in spot prices than to downward changes in spot prices. This implies timing or pattern asymmetry. This asymmetry starts three days after the change in the spot price and lasts for four days.

  14. CORN PRODUCERS´ RESPONSE TO THE 2001 NITROGEN FERTILIZER PRICE INCREASE

    OpenAIRE

    Daberkow, Stan G.; McBride, William D.

    2004-01-01

    During the past few years, nitrogen fertilizer prices and price volatility have increased. Producers of nitrogen-intensive crops, such as corn, who are faced with increased nitrogen prices or price volatility, can adopt either cost-reducing or price variability-reducing strategies. Using a behavioral model in the logit specification and data from a 2001 national survey of U.S. corn producers, we found that the probability of forward pricing nitrogen fertilizer and the probability of using nit...

  15. 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.

  16. Commodity derivatives pricing with inventory effects

    DEFF Research Database (Denmark)

    Bach, Christian; Dziubinski, Matt P.

    We introduce tractable models for commodity derivatives pricing with inventory and volatility eects, and illustrate with applications to the oil market. We contribute to the existing literature in several respects. First, whereas the previous literature uses futures data for investigating...... the relationship between inventory and volatility, we use the information available in options traded on futures. Second, performance assessment in the previous literature has primarily evolved around explaining moments of data or forecasting prices of futures. Instead, we asses the performance of our model...... by considering both the ability of explaining prices in-sample and out-of-sample - assessing both the pricing-performance and the hedging-performance of the models. Third, we model the futures surface rather than the spot price process, and from the no-arbitrage relationship between spot and futures prices we...

  17. Implied and Local Volatility Surfaces for South African Index and Foreign Exchange Options

    Directory of Open Access Journals (Sweden)

    Antonie Kotzé

    2015-01-01

    Full Text Available Certain exotic options cannot be valued using closed-form solutions or even by numerical methods assuming constant volatility. Many exotics are priced in a local volatility framework. Pricing under local volatility has become a field of extensive research in finance, and various models are proposed in order to overcome the shortcomings of the Black-Scholes model that assumes a constant volatility. The Johannesburg Stock Exchange (JSE lists exotic options on its Can-Do platform. Most exotic options listed on the JSE’s derivative exchanges are valued by local volatility models. These models needs a local volatility surface. Dupire derived a mapping from implied volatilities to local volatilities. The JSE uses this mapping in generating the relevant local volatility surfaces and further uses Monte Carlo and Finite Difference methods when pricing exotic options. In this document we discuss various practical issues that influence the successful construction of implied and local volatility surfaces such that pricing engines can be implemented successfully. We focus on arbitrage-free conditions and the choice of calibrating functionals. We illustrate our methodologies by studying the implied and local volatility surfaces of South African equity index and foreign exchange options.

  18. A Hull and White Formula for a General Stochastic Volatility Jump-Diffusion Model with Applications to the Study of the Short-Time Behavior of the Implied Volatility

    Directory of Open Access Journals (Sweden)

    Elisa Alòs

    2008-01-01

    Full Text Available We obtain a Hull and White type formula for a general jump-diffusion stochastic volatility model, where the involved stochastic volatility process is correlated not only with the Brownian motion driving the asset price but also with the asset price jumps. Towards this end, we establish an anticipative Itô's formula, using Malliavin calculus techniques for Lévy processes on the canonical space. As an application, we show that the dependence of the volatility process on the asset price jumps has no effect on the short-time behavior of the at-the-money implied volatility skew.

  19. Evaluation of the price volatility of short-term in Brazil and its relation with the thermal generation; Avaliacao da volatilidade do preco de curto prazo no Brasil e sua relacao com a geracao termica

    Energy Technology Data Exchange (ETDEWEB)

    Heideier, R.B.; Prado, F.A.A.; Saidel, M.A.; Ueocka, M.Z. [Universidade de Sao Paulo (EPUSP), SP (Brazil). Escola Politecnica. Dept. de Energia e Automacao Eletricas], E-mails: fernando@sinerconsult.com.br, saidel@pea.usp.br, marcos.ueocka@poli.usp.br

    2009-07-01

    This article evaluate the intensity of volatility of the electric power prices in the short term market in selected countries. It were analyzed historical series of monthly prices of major energy markets worldwide, with assessment of the energy matrix of each region. The study, by analysis of data entry program for optimizing the operation of the SIN (NEWAVE and DECOM), concludes that the price volatility in short-term in Brazil is marked by the large variation of thermal power available, especially the lack of natural gas.

  20. Forecasting volatility for options valuation

    International Nuclear Information System (INIS)

    Belaifa, M.; Morimune, K.

    2006-01-01

    The petroleum sector plays a neuralgic role in the basement of world economies, and market actors (producers, intermediates, as well as consumers) are continuously subjected to the dynamics of unstable oil market. Huge amounts are being invested along the production chain to make one barrel of crude oil available to the end user. Adding to that are the effect of geopolitical dynamics as well as geological risks as expressed in terms of low chances of successful discoveries. In addition, fiscal regimes and regulations, technology and environmental concerns are also among some of the major factors that contribute to the substantial risk in the oil industry and render the market structure vulnerable to crises. The management of these vulnerabilities require modern tools to reduce risk to a certain level, which unfortunately is a non-zero value. The aim of this paper is, therefore, to provide a modern technique to capture the oil price stochastic volatility that can be implemented to value the exposure of an investor, a company, a corporate or a Government. The paper first analyses the regional dependence on oil prices, through a historical perspective and then looks at the evolution of pricing environment since the large price jumps of the 1970s. The main causes of oil prices volatility are treated in the third part of the paper. The rest of the article deals with volatility models and forecasts used in risk management, with an implication for pricing derivatives. (author)

  1. A dispatch based pricing model for the New Zealand electricity market

    International Nuclear Information System (INIS)

    Ring, B.J.; Read, E.G.

    1996-01-01

    Work undertaken for the New Zealand transmission grid is described. Prices derived from an observed system dispatch can be used in the short-run coordination of a competitive wholesale electricity market. These prices vary across space and time, reflecting differences in marginal costs and changing demand. Markets for emergency reserve generating capacity can be integrated with a market for power. Used in conjunction with longer term contracts, such short-run prices have the potential to allow competitive power system operation without significant loss of coordination efficiencies. 2 figs., 26 refs

  2. Food security in an era of economic volatility.

    Science.gov (United States)

    Naylor, Rosamond L; Falcon, Walter P

    2010-01-01

    This article analyzes international commodity price movements, assesses food policies in response to price fluctuations, and explores the food security implications of price volatility on low-income groups. It focuses specifically on measurements, causes, and consequences of recent food price trends, variability around those trends, and price spikes. Combining these three components of price dynamics shows that the variation in real prices post-2000 was substantially greater than that in the 1980s and 1990s, and was approximately equal to the extreme volatility in commodity prices that was experienced in the 1970s. Macro policy, exchange rates, and petroleum prices were important determinants of price variability over 2005–2010, highlighting the new linkages between the agriculture-energy and agriculture-finance markets that affect the world food economy today. These linkages contributed in large part to misguided expectations and uncertainty that drove prices to their peak in 2008. The article also argues that there is a long-lasting effect of price spikes on food policy around the world, often resulting in self-sufficiency policies that create even more volatility in international markets. The efforts by governments to stabilize prices frequently contribute to even greater food insecurity among poor households, most of which are in rural areas and survive on the margin of net consumption and net production. Events of 2008—and more recently in 2010—underscore the impact of price variability for food security and the need for refocused policy approaches to prevent and mitigate price spikes.

  3. Option price and market instability

    Science.gov (United States)

    Baaquie, Belal E.; Yu, Miao

    2017-04-01

    An option pricing formula, for which the price of an option depends on both the value of the underlying security as well as the velocity of the security, has been proposed in Baaquie and Yang (2014). The FX (foreign exchange) options price was empirically studied in Baaquie et al., (2014), and it was found that the model in general provides an excellent fit for all strike prices with a fixed model parameters-unlike the Black-Scholes option price Hull and White (1987) that requires the empirically determined implied volatility surface to fit the option data. The option price proposed in Baaquie and Cao Yang (2014) did not fit the data during the crisis of 2007-2008. We make a hypothesis that the failure of the option price to fit data is an indication of the market's large deviation from its near equilibrium behavior due to the market's instability. Furthermore, our indicator of market's instability is shown to be more accurate than the option's observed volatility. The market prices of the FX option for various currencies are studied in the light of our hypothesis.

  4. Hospital pharmacists' evaluation of drug wholesaler services.

    Science.gov (United States)

    Allen, W O; Ryan, M R; Roberts, K B

    1983-10-01

    Services provided by drug wholesalers were evaluated by hospital pharmacists. A survey was mailed to 1500 randomly selected pharmacy directors. Respondents indicated availability and use of 26 customer services. Pharmacists rated the services that they used on the basis of importance of the service and satisfaction with the service. The 644 returned questionnaires indicated that most services were available to a large majority of respondents. Most services used were rated as important or essential. Most respondents were satisfied with wholesaler services; the service with which the most respondents were dissatisfied was stocking of pharmaceuticals in single-unit packaging. Of other services that were widely used and rated important, prompt crediting for delivery errors, few out-of-stock items, frequent pickup of return merchandise, and stocking of injectable pharmaceuticals received low satisfaction ratings. Same-day delivery service and emergency delivery of prescription items were unavailable to more than 40% of respondents. Hospital pharmacists were generally satisfied with services provided by drug wholesalers. Wholesalers should be aware of the particular service needs of hospital pharmacists, and further studies of these needs should be conducted.

  5. Price Formation and Competition in the Swedish Electricity Market. Main findings of ER 2006:13

    International Nuclear Information System (INIS)

    2006-11-01

    The Nordic electricity market can be divided into a Nordic wholesale market - the producer market - and the, national, retail markets. Nord Pool organises a 24-hour market for the physical trade of electricity, the spot market. Nord Pool also has a market place for so-called financial trade where players can (among other things) hedge themselves against price risks. Thus, the trade at Nord Pool represents the basis for trading with electricity throughout the entire Nordic market. In addition to the trade at Nord Pool, there is also bilateral trading between buyers and sellers. The report has been arranged as follows. Initially the functioning of the wholesale market is analysed, the issues addressed include the price formation in the spot market, the functioning of the financial market, as well as the price development in the spot market. The section ends with an analysis of the competitive situation in the Nordic wholesale market with a focus on Sweden. The next section focuses on how a potential introduction of Elspot areas in Sweden might affect the conditions for competition. The third section looks at certain conditions in the Swedish retail market and on certain consequences for households and electricity-intensive industry due to the price increases in recent years. The report concludes with the Energy Markets Inspectorate's deliberations on the need for measures to be undertaken in the Swedish and Nordic electricity market. The concentration on the Nordic electricity market is at a level where the authorities monitoring competition need to counteract changes that lead to further concentration. The present structure of the market, with an increasingly high concentration and co-ownership of power stations, also places demands on the authorities responsible for monitoring competition to implement measures designed to detect and to prevent the possible abuse of market power. There is a substantial need for research on competition and efficiency on the

  6. Pricing mechanism for real-time balancing in regional electricity markets

    NARCIS (Netherlands)

    De Weerdt, M.M.; Ketter, W.; Collins, J.

    2011-01-01

    We consider the problem of designing a pricing mechanism for precisely controlling the real-time balance in electricity markets, where retail brokers aggregate the supply and demand of a number of individual customers, and must purchase or sell power at the wholesale level such that the total supply

  7. Food Price Volatility and Decadal Climate Variability

    Science.gov (United States)

    Brown, M. E.

    2013-12-01

    The agriculture system is under pressure to increase production every year as global population expands and more people move from a diet mostly made up of grains, to one with more meat, dairy and processed foods. Weather shocks and large changes in international commodity prices in the last decade have increased pressure on local food prices. This paper will review several studies that link climate variability as measured with satellite remote sensing to food price dynamics in 36 developing countries where local monthly food price data is available. The focus of the research is to understand how weather and climate, as measured by variations in the growing season using satellite remote sensing, has affected agricultural production, food prices and access to food in agricultural societies. Economies are vulnerable to extreme weather at multiple levels. Subsistence small holders who hold livestock and consume much of the food they produce are vulnerable to food production variability. The broader society, however, is also vulnerable to extreme weather because of the secondary effects on market functioning, resource availability, and large-scale impacts on employment in trading, trucking and wage labor that are caused by weather-related shocks. Food price variability captures many of these broad impacts and can be used to diagnose weather-related vulnerability across multiple sectors. The paper will trace these connections using market-level data and analysis. The context of the analysis is the humanitarian aid community, using the guidance of the USAID Famine Early Warning Systems Network and the United Nation's World Food Program in their response to food security crises. These organizations have worked over the past three decades to provide baseline information on food production through satellite remote sensing data and agricultural yield models, as well as assessments of food access through a food price database. Econometric models and spatial analysis are used

  8. Speculation and volatility spillover in the crude oil and agricultural commodity markets: A Bayesian analysis

    International Nuclear Information System (INIS)

    Du Xiaodong; Yu, Cindy L.; Hayes, Dermot J.

    2011-01-01

    This paper assesses factors that potentially influence the volatility of crude oil prices and the possible linkage between this volatility and agricultural commodity markets. Stochastic volatility models are applied to weekly crude oil, corn, and wheat futures prices from November 1998 to January 2009. Model parameters are estimated using Bayesian Markov Chain Monte Carlo methods. Speculation, scalping, and petroleum inventories are found to be important in explaining the volatility of crude oil prices. Several properties of crude oil price dynamics are established, including mean-reversion, an asymmetry between returns and volatility, volatility clustering, and infrequent compound jumps. We find evidence of volatility spillover among crude oil, corn, and wheat markets after the fall of 2006. This can be largely explained by tightened interdependence between crude oil and these commodity markets induced by ethanol production.

  9. Measuring medicine prices in Peru: validation of key aspects of WHO/HAI survey methodology.

    Science.gov (United States)

    Madden, Jeanne M; Meza, Edson; Ewen, Margaret; Laing, Richard O; Stephens, Peter; Ross-Degnan, Dennis

    2010-04-01

    To assess the possibility of bias due to the limited target list and geographic sampling of the World Health Organization (WHO)/Health Action International (HAI) Medicine Prices and Availability survey used in more than 70 rapid sample surveys since 2001. A survey was conducted in Peru in 2005 using an expanded sample of medicine outlets, including remote areas. Comprehensive data were gathered on medicines in three therapeutic classes to assess the adequacy of WHO/HAI's target medicines list and the focus on only two product versions. WHO/HAI median retail prices were compared with average wholesale prices from global pharmaceutical sales data supplier IMS Health. No significant differences were found in overall availability or prices of target list medicines by retail location. The comprehensive survey of angiotensin-converting enzyme inhibitor, anti-diabetic, and anti-ulcer products revealed that some treatments not on the target list were costlier for patients and more likely to be unavailable, particularly in remote areas. WHO/HAI retail prices and IMS wholesale prices were strongly correlated for higher priced products, and weakly correlated for lower priced products (which had higher estimated retailer markups). The WHO/HAI survey approach strikes an appropriate balance between modest research costs and optimal information for policy. Focusing on commonly used medicines yields sufficient and valid results. Surveyors elsewhere should consider the limits of the survey data as well as any local circumstances, such as scarcity, that may call for extra field efforts.

  10. Comparative analysis of features of Polish and Lithuanian Day-ahead electricity market prices

    International Nuclear Information System (INIS)

    Bobinaite, Viktorija; Juozapaviciene, Aldona; Staniewski, Marcin; Szczepankowski, Piotr

    2013-01-01

    The goal of this article is to better understand the processes of electricity market price formation in Poland and Lithuania through an analysis of the features (volatility and spikes) of Lithuanian and Polish day-ahead electricity market prices and to assess how acquired electricity price features could affect the achievement of the main goals of the national energy policy. The following indicators have been calculated to determine electricity market price volatility: the oscillation coefficient, the coefficient of variation, an adjusted coefficient of variation, the standard deviation indicator, the daily velocity indicator (based on the overall average price) and the daily velocity indicator (based on the daily average price). Critical values for electricity market price have been calculated to evaluate price spikes. This analysis reveals that electricity market-price volatility is moderate in Poland and high in Lithuania. Electricity price spikes have been an observable phenomenon both in Lithuanian and in Polish day-ahead electricity markets, but they are more common in Lithuania, encompassing 3.15% of the time period analysed in Poland and 4.68% of the time period analysed in Lithuania. Volatile, spiking and increasing electricity prices in day-ahead electricity markets in Lithuania and Poland create preconditions and substantiate the relevance of implementation of the national energy policies and measures. - Highlights: • Moderate and seasonal volatility. • spiking market price and. • stable average price

  11. Dynamic Factor Models for the Volatility Surface

    DEFF Research Database (Denmark)

    van der Wel, Michel; Ozturk, Sait R.; Dijk, Dick van

    The implied volatility surface is the collection of volatilities implied by option contracts for different strike prices and time-to-maturity. We study factor models to capture the dynamics of this three-dimensional implied volatility surface. Three model types are considered to examine desirable...

  12. Price Determinants of the Tendering Process for Pharmaceuticals in the Cyprus Market.

    Science.gov (United States)

    Petrou, Panagiotis; Talias, Michael A

    2015-09-01

    Tendering has been a promising approach for procuring pharmaceuticals. Significant price reductions have been well documented by several authors. To our knowledge, there are limited data detailing the impact of variables in the tendering process. In this article, our objective was to evaluate the impact of potentially exploratory variables, which included innovation status, total value and volume of sales of each product, health care setting administration (hospital/outpatient), patent status (branded/generic), tendering type, and wholesale price, on price reduction in the tendering process. Financial data of public sector sales during 2011 were analyzed. On the basis of these data, we selected 178 medicines with corresponding sales of €49 million, out of a total market value of €104 million. Medicines were selected according to volume, value, and therapeutic value across all therapeutic areas. We performed a beta regression for the assessment of impact of variables and applied the same methodology to different subgroups. The generic status of medicines is statistically significantly associated with a higher price reduction. Tendering type by alternative, high wholesale prices, and high volume are robust estimators for price reduction. Innovation status does not have any effect on price reduction. Outpatient medicines reach lower prices as compared with hospital medicines. A rather unexpected finding is the negative correlation of high sales value with price reduction. These findings will lead to better understanding of the tendering framework, enabling us to further evolve its operational capacity, aiming to generate more savings. Moreover, our study indicates areas in which a more optimized approach is needed. Copyright © 2015 International Society for Pharmacoeconomics and Outcomes Research (ISPOR). Published by Elsevier Inc. All rights reserved.

  13. Exchange rate volatility and oil prices shocks and its impact on economic sustainability

    Directory of Open Access Journals (Sweden)

    Khuram Shaf

    2015-01-01

    Full Text Available Impact of exchange rate volatility has received a great attention from the last century, its importance is certain in all sectors of the economy and it affects welfare as well as social life of the economy. Exchange rate between two currencies tells the value of one currency in terms of others one. Depreciation/Appreciation of exchange rate affects economic growth in terms of trade and shifts income to/from exporting countries from/to importing countries. The factors affecting exchange rate are inflation, interest rate, foreign direct investment, government consumption expenditure and balance of trade. This research study examines the impact of oil prices and exchange rate volatility on economic growth in Germany based on 40-year annual data. Cointegration technique is applied to check the impact of macroeconomic variables on exchange rate in the long run and short run. It is estimated that imports, exports, inflation, interest rate, government consumption expenditure and foreign direct investment had significant impacts on real effective exchange rate in the long run and short run. Sin addition, Engle Granger results indicate that relationship was significant for the long run and its error correction adjustment mechanism (ECM in short a run is significant and correctly signed for Germany.

  14. Minerals Price Increases and Volatility: Causes and Consequences

    National Research Council Canada - National Science Library

    Cooney, Stephen; Nanto, Dick K

    2008-01-01

    .... Prices have at least nearly doubled between 2001 and 2008. In the case of steel, the most widely used industrial metal, the rise in price appears largely driven by the high prices of iron ore and steel scrap...

  15. Price formation of the salmon aquaculture futures market

    DEFF Research Database (Denmark)

    Ankamah-Yeboah, Isaac; Nielsen, Max; Nielsen, Rasmus

    2017-01-01

    This study examines price formation of the internationally traded salmon futures exchange. Analyzing data from 2006 to 2015, the study identifies the co-integration relationship between the spot market price and 1–6-, 9- and 12-month futures contract prices. With exception of the 12-month maturity....... Analysis of the term structure of futures volatilities reveal that the shorter the length of the futures contract, the more volatility there is. This is because salmon prices exhibit short-term cyclical and seasonal patterns like other agricultural commodities. As such, salmon producers will be better off...

  16. The world price of jump and volatility risk

    NARCIS (Netherlands)

    Driessen, J.J.A.G.; Maenhout, P.

    2013-01-01

    We study international integration of markets for jump and volatility risk, using index option data for the main global markets. To explain the cross-section of expected option returns we focus on return-based multi-factor models. For each market separately, we provide evidence that volatility and

  17. China's coal price disturbances: Observations, explanations, and implications for global energy economies

    International Nuclear Information System (INIS)

    Yang, Chi-Jen; Xuan, Xiaowei; Jackson, Robert B.

    2012-01-01

    Since China decontrolled coal prices, its coal price has risen steadily and been unusually volatile. In 2011 in particular, high coal prices and capped electricity prices in China discouraged coal-fired power generation, triggering widespread power shortages. We suggest that these coal-price disturbances could be symptomatic of a major change in pricing dynamics of global fossil-fuel markets, with increasing correspondence between coal and oil prices globally. Historically, global coal prices have been more stable and lower than oil and natural gas prices on a per-heat basis. In recent years, however, coal prices have been increasingly volatile worldwide and have tracked other fossil fuel prices more closely. Meanwhile, the recent development of unconventional gas has substantially decoupled US natural gas and oil prices. Technically, low US natural gas prices, with potential fuel switching, could drive US domestic coal prices lower. However, this effect is unlikely to counteract the overall trend in increasing coal consumption globally. China's market size and unique, partially-controlled energy system make its reform agenda a key force in the global economy. Policymakers in the US, E.U. and elsewhere should monitor China's economic reform agenda to anticipate and respond to changes accompanying China's increasing importance in the global energy economy. - Highlights: ► Since China decontrolled its coal prices, the price of coal has risen steadily in China, accompanied by unusual volatility. ► Relatively high and volatile coal prices have triggered widespread power shortages in China. ► Coal and oil prices have already become, and continue to become, more closely linked globally. ► China's demand will likely drive up global coal prices and make them as volatile as that of other fossil fuels. ► Policymakers should monitor China's economic reform agenda to anticipate and respond to changes in the global energy economy.

  18. The energy in Colombia: A wholesale market

    International Nuclear Information System (INIS)

    1996-01-01

    One year ago, the national government's energy politics, gave beginning to a novel strategy for the restructuring of the sector: The setting in march of the wholesale energy market -WEM - and the opening of the energy bag under the administration of interconnection electric S.A. E. P. S., ISA. After a year of works, the positive balance of the market and their permanent growth, are the best letter in presentation of this sector of the national economy. The wholesale energy market is conformed by generating companies. The generating ones are the companies with capacity of superior generation to the 20 MW that they are connected to the national interconnected system; it doesn't care if the origin of this energy is hydraulic, gas, coal or liquid fuel. The generators participate in the WEM with energy offers for price and with their long-term contracts. In the bag they can also offer or to buy energy the generators with capacity between 1 and 20 MW, registered in the National Center of Office CO of ISA, as WEM participants. These can be associated to a generator, to a distributor, to be conformed by one or several groups of big consumers or for organized companies for this purpose, as Mamonal in Cartagena. These users with more demand to 2 MW assisted in oneself place, receive the name of Not Regulated Clients -NRC - and they can hire their energy in free form. The commission of energy regulation and gas ERG modified the tops for these clients starting from January of 1997, the not regulated clients will be this way those that have a same demand or superior to 1 MW; and in January of 1998, bigger than 0.5 MW

  19. Pricing of power in the new market: the impact on industrial/commercial customers

    Energy Technology Data Exchange (ETDEWEB)

    Johannson, K. [TransCanada Power, Calgary, AB (Canada)

    2001-07-01

    A series of viewgraphs were part of this presentation where the author discussed the operations of TransCanada Power. The company operates a power plant that generate 1500 MW, and has 1000 MW in the advanced development stage. TransCanada Power is also a wholesale marketer that actively participates in regulatory and market design forums. It handles 20 per cent of large industrial loads. A brief overview of power price risk was provided, where the concept of value at risk (VAR), a measurement technique, was explained. An example further illustrated the concept. The author reviewed power markets in Alberta from an historical perspective, noting the differences between regulated wholesale markets and the markets found today. A discussion of the drivers of regulated markets ensued, followed by the drivers of the deregulated market, where generation assets are privately owned, operating outside of the adjudication of the regulator, and the merit order is established by ranking of offers, not costs. Return is made from energy commodity sales, the market price is affected by outside influences, and the average market price does not reflect the average system costs. The author explained the changes that took place and discussed some pricing issues. A section on pricing options reviewed pricing decision objectives, term, short term purchases, long term fixed price energy, gas tolling agreements. The author concluded that each organization must define its tolerance to risk, its comfort level with treating electricity differently than gas. The fundamentals behind pricing must be understood, as well as the competitive position of company. tabs., figs.

  20. Pricing of power in the new market: the impact on industrial/commercial customers

    International Nuclear Information System (INIS)

    Johannson, K.

    2001-01-01

    A series of viewgraphs were part of this presentation where the author discussed the operations of TransCanada Power. The company operates a power plant that generate 1500 MW, and has 1000 MW in the advanced development stage. TransCanada Power is also a wholesale marketer that actively participates in regulatory and market design forums. It handles 20 per cent of large industrial loads. A brief overview of power price risk was provided, where the concept of value at risk (VAR), a measurement technique, was explained. An example further illustrated the concept. The author reviewed power markets in Alberta from an historical perspective, noting the differences between regulated wholesale markets and the markets found today. A discussion of the drivers of regulated markets ensued, followed by the drivers of the deregulated market, where generation assets are privately owned, operating outside of the adjudication of the regulator, and the merit order is established by ranking of offers, not costs. Return is made from energy commodity sales, the market price is affected by outside influences, and the average market price does not reflect the average system costs. The author explained the changes that took place and discussed some pricing issues. A section on pricing options reviewed pricing decision objectives, term, short term purchases, long term fixed price energy, gas tolling agreements. The author concluded that each organization must define its tolerance to risk, its comfort level with treating electricity differently than gas. The fundamentals behind pricing must be understood, as well as the competitive position of company. tabs., figs

  1. Dividend policy and share price volatility: UK evidence

    OpenAIRE

    Hussainey, Khaled; Mgbame, Chijoke Oscar; Chijoke Mgbame, Aruoriwo M.

    2011-01-01

    Purpose – The purpose of this paper is to examine the relation between dividend policy and share price changes in the UK stock market. Design/methodology/approach – Multiple regression analyses are used to explore the association between share price changes and both dividend yield and dividend payout ratio. Findings – A positive relation is found between dividend yield and stock price changes, and a negative relation between dividend payout ratio and stock price changes. In a...

  2. 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.

  3. Time-varying convergence in European electricity spot markets and their association with carbon and fuel prices

    International Nuclear Information System (INIS)

    Menezes, Lilian M. de; Houllier, Melanie A.; Tamvakis, Michael

    2016-01-01

    Long-run dynamics of electricity prices are expected to reflect fuel price developments, since fuels generally account for a large share in the cost of generation. As an integrated European market for electricity develops, wholesale electricity prices should be converging as a result of market coupling and increased interconnectivity. Electricity mixes are also changing, spurred by a drive to significantly increase the share of renewables. Consequently, the electricity wholesale price dynamics are evolving, and the fuel–electricity price nexus that has been described in the literature is likely to reflect this evolution. This study investigates associations between spot prices from the British, French and Nordpool markets with those in connected electricity markets and fuel input prices, from December 2005 to October 2013. In order to assess the time-varying dynamics of electricity spot price series, localized autocorrelation functions are used. Electricity spot prices in the three markets are found to have stationary and non-stationary periods. When a trend in spot prices is observed, it is likely to reflect the trend in fuel prices. Cointegration analysis is then used to assess co-movement between electricity spot prices and fuel inputs to generation. The results show that British electricity spot prices are associated with fuel prices and not with price developments in connected markets, while the opposite is observed in the French and Nordpool day-ahead markets. - Highlights: • Electricity market integration policies may have altered EU spot electricity prices. • LACF is used to assess the changing nature of electricity spot prices. • EU electricity spot prices show both stationary and non-stationary periods. • Carbon and fuel prices have greater impact on British spot prices. • In continental Europe, electricity prices have decoupled from fuel prices.

  4. The impact of global oil price shocks on China’s bulk commodity markets and fundamental industries

    International Nuclear Information System (INIS)

    Zhang, Chuanguo; Chen, Xiaoqing

    2014-01-01

    This paper investigated the reaction of aggregate commodity market to oil price shocks and also explored the effects of oil price shocks on China's fundamental industries: metals, petrochemicals, grains and oilfats. We separated the volatilities of oil price into expected, unexpected and negatively expected categories to identify how oil prices influence bulk commodity markets. We contrasted the results between different periods and among classified indices, in order to discover the significant changes in recent years and the differences at an industry level. Our results indicate that the aggregate commodity market was affected by both expected and unexpected oil price volatilities in China. The impact of unexpected oil price volatilities became more complex after 2007. The metals and grains indices did not significantly respond to the expected volatility in oil prices, in contrast to the petrochemicals and oilfats indices. These results not only contribute to advancing the existing literature, but also merit particular attention from policy makers and market investors in China. - Highlights: • We investigated the impact of global oil price shocks on China’s bulk commodity markets and fundamental industries. • The aggregate commodity market was affected by both expected and unexpected oil price volatilities. • The impact of unexpected oil price volatilities became more complex after 2007. • The metals and grains indices did not significantly respond to the expected volatility in oil prices

  5. 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

  6. Comparative analysis of wholesale and retail frozen fish marketing ...

    African Journals Online (AJOL)

    Comparative analysis of wholesale and retail frozen fish marketing in Port Harcourt Metropolis, Rivers State, Nigeria. ... from each market giving 30 retail marketers and 30 wholesale marketers. ... EMAIL FULL TEXT EMAIL FULL TEXT

  7. Electricity prices, large-scale renewable integration, and policy implications

    International Nuclear Information System (INIS)

    Kyritsis, Evangelos; Andersson, Jonas; Serletis, Apostolos

    2017-01-01

    This paper investigates the effects of intermittent solar and wind power generation on electricity price formation in Germany. We use daily data from 2010 to 2015, a period with profound modifications in the German electricity market, the most notable being the rapid integration of photovoltaic and wind power sources, as well as the phasing out of nuclear energy. In the context of a GARCH-in-Mean model, we show that both solar and wind power Granger cause electricity prices, that solar power generation reduces the volatility of electricity prices by scaling down the use of peak-load power plants, and that wind power generation increases the volatility of electricity prices by challenging electricity market flexibility. - Highlights: • We model the impact of solar and wind power generation on day-ahead electricity prices. • We discuss the different nature of renewables in relation to market design. • We explore the impact of renewables on the distributional properties of electricity prices. • Solar and wind reduce electricity prices but affect price volatility in the opposite way. • Solar decreases the probability of electricity price spikes, while wind increases it.

  8. Boom or bust : developing countries' rough ride on the commodity price rollercoaster

    International Nuclear Information System (INIS)

    Brown, O.; Gibson, J.

    2006-10-01

    Current high commodity prices are driven by strong demand from the emerging economies of China and India in addition to high consumption in the United States. Many developing countries are experiencing massive windfall revenues from high commodity prices. However, commodity prices are highly volatile in the short term, and can vary as much as 50 per cent in a single year. While developed country producers are supported by subsidies and social safety nets, developing countries and smallholder producers feel the extent of commodity price volatility more directly. Many developing countries are becoming locked into the production and export of primary commodities whose volatile prices are declining over the long term, and over which they have very little control. Price volatility makes sound fiscal planning difficult for both countries and producers. Price booms and busts also drive social inequalities, livelihood inequalities, and corruption. Price swings can cause conflict over valuable land and resources, and does not create incentives for sound environmental stewardship. This paper described the impacts of commodity price volatility in developing countries with the aim of promoting discussion about what can be done to help stabilize revenues for countries as well as producers. Price trends and their importance were reviewed, and the theoretical benefits of liberalized commodity markets were examined. Previous attempts to stabilize commodity prices were reviewed. It was concluded that the best long-term solution to the commodity price problem is economic diversification. Recommendations for promoting economic diversification were provided. 43 refs., 1 tab., 2 figs

  9. 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.

  10. Electricity price modeling with stochastic time change

    International Nuclear Information System (INIS)

    Borovkova, Svetlana; Schmeck, Maren Diane

    2017-01-01

    In this paper, we develop a novel approach to electricity price modeling, based on the powerful technique of stochastic time change. This technique allows us to incorporate the characteristic features of electricity prices (such as seasonal volatility, time varying mean reversion and seasonally occurring price spikes) into the model in an elegant and economically justifiable way. The stochastic time change introduces stochastic as well as deterministic (e.g., seasonal) features in the price process' volatility and in the jump component. We specify the base process as a mean reverting jump diffusion and the time change as an absolutely continuous stochastic process with seasonal component. The activity rate of the stochastic time change can be related to the factors that influence supply and demand. Here we use the temperature as a proxy for the demand and hence, as the driving factor of the stochastic time change, and show that this choice leads to realistic price paths. We derive properties of the resulting price process and develop the model calibration procedure. We calibrate the model to the historical EEX power prices and apply it to generating realistic price paths by Monte Carlo simulations. We show that the simulated price process matches the distributional characteristics of the observed electricity prices in periods of both high and low demand. - Highlights: • We develop a novel approach to electricity price modeling, based on the powerful technique of stochastic time change. • We incorporate the characteristic features of electricity prices, such as seasonal volatility and spikes into the model. • We use the temperature as a proxy for the demand and hence, as the driving factor of the stochastic time change • We derive properties of the resulting price process and develop the model calibration procedure. • We calibrate the model to the historical EEX power prices and apply it to generating realistic price paths.

  11. 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.

  12. 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.

  13. Essays on Economic Volatility and Financial Frictions

    OpenAIRE

    Zhao, Hongyan

    2012-01-01

    This dissertation consists of three essays in macroeconomics. The first one essay discusses the reasons of Chinese huge foreign reserves holdings. It contributes to the literature of sudden stops, precautionary saving and foreign assets holdings. In the second essay, I study the price volatility of commodities and manufactured goods. I measure the price volatility of each individual goods but not on the aggregated level and therefore the results complete the related study. The third essay exp...

  14. The price of electricity from private power producers

    Energy Technology Data Exchange (ETDEWEB)

    Kahn, E.; Milne, A.; Kito, S.

    1993-10-01

    The long-term wholesale electricity market is becoming increasingly competitive. Bidding for power contracts has become a dominant form of competition in this sector. The prices which emerge from this process have not been documented and compared in a systematic framework. This paper introduces a method to make such comparisons and illustrates it on a small sample of projects. This results show a wide range of prices for what is essentially the same technology, gas-fired combined cycle generation. The price range seems greater than what could be explained by transmission cost differences between high and low cost regions. For the smaller sample of coal-fired projects, price variation is substantially less. Further data collection and analysis should be able to help isolate more clearly what market or cost factors are responsible for the observed variation.

  15. 27 CFR 31.34 - Wholesale dealer in beer.

    Science.gov (United States)

    2010-04-01

    ... 27 Alcohol, Tobacco Products and Firearms 1 2010-04-01 2010-04-01 false Wholesale dealer in beer... Classified § 31.34 Wholesale dealer in beer. (a) General. Except as otherwise provided in paragraph (b) of this section, every person who sells or offers for sale beer, but not distilled spirits or wines, to...

  16. Price regulation and relative price convergence: Evidence from the retail gasoline market in Canada

    International Nuclear Information System (INIS)

    Suvankulov, Farrukh; Lau, Marco Chi Keung; Ogucu, Fatma

    2012-01-01

    This paper explores price regulation and relative price convergence in the Canadian retail gasoline market. We use monthly data (2000–2010) on retail gasoline prices in 60 Canadian cities to investigate (i) whether the retail gasoline market in Canada has experienced a relative price convergence to the mean, which is expected, given the increased economic integration across Canadian provinces; and (ii) whether the introduction of price regulation mechanisms in New Brunswick and Nova Scotia in July 2006 had any impact on the price convergence in these provinces. We use a nonlinear panel unit root test and find solid evidence that Canadian retail gasoline markets are well integrated across locales; however, the share of converging cities reveals a significant decline since July of 2006. The impact of price regulation on price convergence is mixed; our results indicate that since the enactment of the regulation in all New Brunswick cities (9) included in the dataset, gasoline prices converge to the national mean. Volatility of price is also significantly reduced. In contrast, in the wake of price regulation in Nova Scotia, all 6 cities of the province are non-convergent to the mean with increased volatility and overall price level. - Highlights: ► The paper examines price regulation and convergence of gasoline prices in Canada. ► Overall in 2000–2010 the Canadian retail gasoline market was well integrated. ► Price convergence across cities has significantly declined since July 2006. ► The impact of price regulation at province level on a price convergence is mixed. ► The paper relies on the most advanced nonlinear panel unit root test.

  17. Ramsey prices in the Italian electricity market

    International Nuclear Information System (INIS)

    Bigerna, Simona; Bollino, Carlo Andrea

    2016-01-01

    In this paper, we derive optimal zonal prices in the Italian day-ahead electricity market using estimation of a complete system of hourly demand in 2010–2011. In Italy, the hourly equilibrium price for all buyers is computed as a uniform average of supply zonal prices, resulting from market splitting due to line congestion. We model ex-ante individual bids expressed by heterogeneous consumers, which are distinguished by geographical zones. Using empirical estimations, we compute demand elasticity values and new zonal prices, according to a Ramsey optimal scheme. This is a new approach in the wholesale electricity market literature, as previous studies have discussed the relative merit of zonal prices, considering only the issue of line congestion. Our results show that the optimal pricing scheme can improve welfare in the day-ahead Italian electricity market, with respect to both the existing uniform price scheme and the proposal to charge the existing supply zonal prices to the demand side. - Highlights: • We model and estimate the demand of heterogeneous buyers in the electricity market. • Transmission line congestion creates welfare distortions in the market. • We derive optimal Ramsey prices in the Italian day-ahead electricity market. • We compare optimal prices with historical ones showing how to improve welfare.

  18. Implications of Climate Volatility for Agricultural Commodity Markets in the Presence of Biofuel Mandates

    Science.gov (United States)

    Verma, M.; Diffenbaugh, N. S.; Hertel, T. W.; Beckman, J.

    2011-12-01

    In presence of bio-fuels, link between energy and agricultural commodity markets has become more complex. An increase in ethanol production to minimum 15bn gallons a year - Renewable Fuel Standard (RFS) and current technically permissible maximum 10% blending limit - Blend Wall (BW); make the link even stronger. If oil prices in future do not rise significantly from their current levels, this minimum production requirement would likely be binding. In such a scenario any fluctuation in crop production will have to be absorbed by the non-ethanol usage of the crop and would translate into crop prices adjusting to clear the markets and therefore the commodity prices will be more volatile. At high oil prices it is possible that the BW may become binding, severing the link between oil prices and commodity prices as well, potentially leading to higher price volatility. Hertel and Beckman (2010) find that, with both RFS and BW simultaneously binding, corn price volatility due to supply side shocks (which could arise from extreme climate events) could be more than 50% as large as in the absence of bio-fuel policies. So energy markets are important determinants of agricultural commodity price volatility. This proposal intends to introduce the increased supply side volatility on account of climate change and volatility, in the framework. Global warming on account of increased GHG concentrations is expected to increase the intensity and frequency of hot extremes in US (Diffenbaugh et al. 2008) and therefore affect corn yields. With supply shocks expected to increase, binding RFS and BW will exacerbate the volatility, while if they are non-binding then the price changes could be cushioned. We propose to model the impacts of climate changes and volatility on commodity prices by linking three main components - a. Projections for change in temperature and precipitation using climate model b. A statistical model to predict impacts of change in climate variable on corn yields in US

  19. Pricing and Remanufacturing Decisions of a Decentralized Fuzzy Supply Chain

    Directory of Open Access Journals (Sweden)

    Jing Zhao

    2013-01-01

    costs, and the collecting scaling parameters of the two retailers. The purpose of this paper is to explore how the manufacturer and the two retailers make their own decisions about wholesale price, retail prices, and the remanufacturing rates in the expected value model. Using game theory and fuzzy theory, we examine each firm’s strategy and explore the role of the manufacturer and the two retailers over three different game scenarios. We get some insights into the economic behavior of firms, which can serve as the basis for empirical study in the future.

  20. 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)

  1. 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

  2. Inefficient and opaque price formation in the Japan Electric Power Exchange

    International Nuclear Information System (INIS)

    Nakajima, Tadahiro

    2013-01-01

    This study examines whether the spot prices in the Japan Electric Power Exchange are efficiently formed from April 3, 2006, to March 31, 2012, using the conventional and rank-based variance-ratio tests. The results seem to reject the efficient market hypothesis in the market. Moreover, by applying Granger-causality tests, this paper investigates whether the power price is determined from the information of primary energy and exchange markets that directly affect the cost of power generation. The results indicate no Granger-causality from the prices of oil and gas and the exchange rate to the price of electricity. Finally, this paper discusses the factors that lead to inefficient and mysterious price formation. - Highlights: ► This study examines the wholesale electricity market in Japan. ► Efficient market hypothesis is rejected. ► Prices of imported fuel do not Granger-cause the prices of electricity. ► The WTI prices and the exchange rates do not Granger-cause the power prices

  3. The Effect of Long Memory in Volatility on Stock Market Fluctuations

    DEFF Research Database (Denmark)

    Christensen, Bent Jesper; Nielsen, Morten Ørregaard

    2007-01-01

    Recent empirical evidence demonstrates the presence of an important long memory component in realized asset return volatility. We specify and estimate multivariate models for the joint dynamics of stock returns and volatility that allow for long memory in volatility without imposing this property...... on returns. Asset pricing theory imposes testable cross-equation restrictions on the system that are not rejected in our preferred specifications, which include a strong financial leverage effect. We show that the impact of volatility shocks on stock prices is small and short-lived, in spite of a positive...

  4. Multifractal analysis of implied volatility in index options

    Science.gov (United States)

    Oh, GabJin

    2014-06-01

    In this paper, we analyze the statistical and the non-linear properties of the log-variations in implied volatility for the CAC40, DAX and S& P500 daily index options. The price of an index option is generally represented by its implied volatility surface, including its smile and skew properties. We utilize a Lévy process model as the underlying asset to deepen our understanding of the intrinsic property of the implied volatility in the index options and estimate the implied volatility surface. We find that the options pricing models with the exponential Lévy model can reproduce the smile or sneer features of the implied volatility that are observed in real options markets. We study the variation in the implied volatility for at-the-money index call and put options, and we find that the distribution function follows a power-law distribution with an exponent of 3.5 ≤ γ ≤ 4.5. Especially, the variation in the implied volatility exhibits multifractal spectral characteristics, and the global financial crisis has influenced the complexity of the option markets.

  5. Regulated and unregulated Nordic retail prices

    International Nuclear Information System (INIS)

    Johnsen, Tor Arnt; Olsen, Ole Jess

    2011-01-01

    Nordic residential electricity consumers can now choose among a number of contracts and suppliers. A large number of households have continued to purchase electricity from the incumbent supplier at default contract terms. In this paper, we compare the situation for such passive customers. Danish default prices are regulated whereas default prices in the other countries are unregulated. Systematic price differences exist among the Nordic countries. However, as wholesale prices sometimes differ the gross margin is a more relevant indicator. Regulated gross margins are lower in Denmark than in Sweden but higher than in Norway and Finland. Because of market design Norwegian default contracts are competitive whereas Swedish contracts provide the retailer with some market power. We interpret the low Finnish margins as a result of municipal retailers continuing traditional pricing from the monopoly period. Danish margins are higher than the competitive Norwegian margins but are earned from a much lower level of consumption. The annually margins earned per consumer are very close in the two countries, which indicates that the Danish regulation is achieving its objective of approaching competitive prices. - Highlights: → Prices of active and passive Nordic residential electricity consumers are compared. → Active consumers get lower prices in Sweden but not in Norway. → Prices of passive consumers differ considerably among the four Nordic countries. → Danish regulated prices compare well with unregulated prices in the other countries. → Passive consumers in Finland have low prices compared with the other countries.

  6. Regulated and unregulated Nordic retail prices

    Energy Technology Data Exchange (ETDEWEB)

    Johnsen, Tor Arnt, E-mail: tor.a.johnsen@bi.no [Norwegian School of Management BI, NO-0442 Oslo (Norway); Olsen, Ole Jess, E-mail: ojo@ruc.dk [Department of Environmental, Social and Spatial Change (ENSPAC), Roskilde University, Building 10.1, Universitetsvej 1, DK-4000, Roskilde (Denmark)

    2011-06-15

    Nordic residential electricity consumers can now choose among a number of contracts and suppliers. A large number of households have continued to purchase electricity from the incumbent supplier at default contract terms. In this paper, we compare the situation for such passive customers. Danish default prices are regulated whereas default prices in the other countries are unregulated. Systematic price differences exist among the Nordic countries. However, as wholesale prices sometimes differ the gross margin is a more relevant indicator. Regulated gross margins are lower in Denmark than in Sweden but higher than in Norway and Finland. Because of market design Norwegian default contracts are competitive whereas Swedish contracts provide the retailer with some market power. We interpret the low Finnish margins as a result of municipal retailers continuing traditional pricing from the monopoly period. Danish margins are higher than the competitive Norwegian margins but are earned from a much lower level of consumption. The annually margins earned per consumer are very close in the two countries, which indicates that the Danish regulation is achieving its objective of approaching competitive prices. - Highlights: > Prices of active and passive Nordic residential electricity consumers are compared. > Active consumers get lower prices in Sweden but not in Norway. > Prices of passive consumers differ considerably among the four Nordic countries. > Danish regulated prices compare well with unregulated prices in the other countries. > Passive consumers in Finland have low prices compared with the other countries.

  7. Coal prices rise

    International Nuclear Information System (INIS)

    McLean, A.

    2001-01-01

    Coking and semi hard coking coal price agreements had been reached, but, strangely enough, the reaching of common ground on semi soft coking coal, ultra low volatile coal and thermal coal seemed some way off. More of this phenomenon later, but suffice to say that, traditionally, the semi soft and thermal coal prices have fallen into place as soon as the hard, or prime, coking coal prices have been determined. The rise and rise of the popularity of the ultra low volatile coals has seen demand for this type of coal grow almost exponentially. Perhaps one of the most interesting facets of the coking coal settlements announced to date is that the deals appear almost to have been preordained. The extraordinary thing is that the preordination has been at the prescience of the sellers. Traditionally, coking coal price fixing has been the prerogative of the Japanese Steel Mills (JSM) cartel (Nippon, NKK, Kawasaki, Kobe and Sumitomo) who presented a united front to a somewhat disorganised force of predominantly Australian and Canadian sellers. However, by the time JFY 2001 had come round, the rules of the game had changed

  8. Humps in the volatility structure of the crude oil futures market: New evidence

    International Nuclear Information System (INIS)

    Chiarella, Carl; Kang, Boda; Nikitopoulos, Christina Sklibosios; Tô, Thuy-Duong

    2013-01-01

    This paper analyses the volatility structure of commodity derivatives markets. The model encompasses hump-shaped, unspanned stochastic volatility, which entails a finite-dimensional affine model for the commodity futures curve and quasi-analytical prices for options on commodity futures. Using an extensive database of crude oil futures and futures options spanning 21 years, we find the presence of hump-shaped, partially spanned stochastic volatility in the crude oil market. The hump shaped feature is more pronounced when the market is more volatile, and delivers better pricing as well as hedging performance under various dynamic factor hedging schemes. - Highlights: • This paper analyses the volatility structure of commodity derivatives markets. • 21-years of data on crude oil futures and futures options is used. • The crude oil futures market has hump-shaped, unspanned stochastic volatility. • The hump shaped feature is more pronounced when the market is more volatile. • Hump shape delivers better pricing and hedging compared to exponential decay

  9. Electricity deregulation, spot price patterns and demand-side management

    International Nuclear Information System (INIS)

    Li, Y.; Flynn, P.C.

    2006-01-01

    This paper examines extensive hourly or half-hourly power price data from 14 deregulated power markets. It analyzes average diurnal patterns, relationship to system load, volatility, and consistency over time. Diurnal patterns indicate the average price spread between off-peak and on-peak and weekend vs. weekday power consumption. Volatility is measured by price velocity: the average normalized hourly change in power price, calculated daily. The calculated price velocity is broken down into an expected component that arises from the diurnal pattern and an unexpected component that arises from unknown factors. The analysis reveals significant differences among markets, suggesting that demand-side management (DSM) of power consumption is far more difficult in some markets than in others. At one extreme, Spain, Britain and Scandinavia show consistent diurnal price patterns, a stable relationship between price and system load, and a low unexplained component of price volatility. A power consumer in these markets could form a reasonable expectation of a reward for DSM of elective power consumption. At the other extreme, two markets in Australia show erratic diurnal price patterns from year to year, low correlation between price and system load, and a high amount of unexpected price velocity. A power consumer in these markets would have far greater difficulty in realizing a benefit from DSM. Markets that experienced one period of very high prices without a clear external cause, such as California and Alberta, appear to have a significant longer-term erosion of public support for deregulation. (author)

  10. Marginal Cost Pricing in a World without Perfect Competition: Implications for Electricity Markets with High Shares of Low Marginal Cost Resources

    Energy Technology Data Exchange (ETDEWEB)

    Frew, Bethany A. [National Renewable Energy Lab. (NREL), Golden, CO (United States); Clark, Kara [National Renewable Energy Lab. (NREL), Golden, CO (United States); Bloom, Aaron P. [National Renewable Energy Lab. (NREL), Golden, CO (United States); Milligan, Michael [National Renewable Energy Lab. (NREL), Golden, CO (United States)

    2017-12-02

    A common approach to regulating electricity is through auction-based competitive wholesale markets. The goal of this approach is to provide a reliable supply of power at the lowest reasonable cost to the consumer. This necessitates market structures and operating rules that ensure revenue sufficiency for all generators needed for resource adequacy purposes. Wholesale electricity markets employ marginal-cost pricing to provide cost-effective dispatch such that resources are compensated for their operational costs. However, marginal-cost pricing alone cannot guarantee cost recovery outside of perfect competition, and electricity markets have at least six attributes that preclude them from functioning as perfectly competitive markets. These attributes include market power, externalities, public good attributes, lack of storage, wholesale price caps, and ineffective demand curve. Until (and unless) these failures are ameliorated, some form of corrective action(s) will be necessary to improve market efficiency so that prices can correctly reflect the needed level of system reliability. Many of these options necessarily involve some form of administrative or out-of-market actions, such as scarcity pricing, capacity payments, bilateral or other out-of-market contracts, or some hybrid combination. A key focus with these options is to create a connection between the electricity market and long-term reliability/loss-of-load expectation targets, which are inherently disconnected in the native markets because of the aforementioned market failures. The addition of variable generation resources can exacerbate revenue sufficiency and resource adequacy concerns caused by these underlying market failures. Because variable generation resources have near-zero marginal costs, they effectively suppress energy prices and reduce the capacity factors of conventional generators through the merit-order effect in the simplest case of a convex market; non-convexities can also suppress prices.

  11. An integrated ant colony optimization approach to compare strategies of clearing market in electricity markets. Agent-based simulation

    International Nuclear Information System (INIS)

    Azadeh, A.; Maleki-Shoja, B.; Skandari, M.R.

    2010-01-01

    In this paper, an innovative model of agent based simulation, based on Ant Colony Optimization (ACO) algorithm is proposed in order to compare three available strategies of clearing wholesale electricity markets, i.e. uniform, pay-as-bid, and generalized Vickrey rules. The supply side actors of the power market are modeled as adaptive agents who learn how to bid strategically to optimize their profit through indirect interaction with other actors of the market. The proposed model is proper for bidding functions with high number of dimensions and enables modelers to avoid curse of dimensionality as dimension grows. Test systems are then used to study the behavior of each pricing rule under different degrees of competition and heterogeneity. Finally, the pricing rules are comprehensively compared using different economic criteria such as average cleared price, efficiency of allocation, and price volatility. Also, principle component analysis (PCA) is used to rank and select the best price rule. To the knowledge of the authors, this is the first study that uses ACO for assessing strategies of wholesale electricity market. (author)

  12. Leveraging the benefits of storage as a risk management tool : strategies to offset price volatility

    International Nuclear Information System (INIS)

    Ledene, B.

    2002-01-01

    The Storage and Hub Services of the Alberta Energy Company provides the largest independent gas storage and operation in North America. It has grown from one facility in 1988 in Canada to 4 facilities and 2 leases with total storage capacity of 133 billion cubic feet in Canada and the United States. It established the AECO C Hub in Alberta, the major pricing point for gas in the western Canadian supply basin. It was also the first company to use, and continue to use, horizontal well technology in natural gas storage. AEC Storage has played a leading role in regulatory proceedings regarding the interconnect of its facilities and transmission systems. It also established the first independent gas storage facility in California, where it promoted true competition in the natural gas market. In October 2001, natural gas storage inventories in Canada and the United States were at a near record level of 3.56 Tcf. The only other time inventories were that full was at the end of October 1998. The paper illustrated how prices behaved during the winters of 98/99 and beyond. It was noted that low natural gas prices will have a strong impact on production levels since drilling is closely linked to the price of natural gas. Drilling activity is declining even in price sensitive areas such as in the Shallow Water Gulf of Mexico and the Permian Basin. These production declines will not affect the storage situation because storage levels are currently high. Natural gas prices may rebound with significant storage withdrawals by March 2003 if the US economy recovers and if the winter is normal. Field data suggests that supplies are not keeping up with demand. The average decline rate for all active wells in western Canada is about 23 per cent. This drilling activity will have to be maintained or we will see stronger gas prices. The paper described how industry participants use storage to take advantage of price volatility with information on how to focus on storage assets, develop a

  13. 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.

  14. How does market concern derived from the Internet affect oil prices?

    International Nuclear Information System (INIS)

    Guo, Jian-Feng; Ji, Qiang

    2013-01-01

    Highlights: • The impact of market concern derived from the Web on oil volatility is analysed. • It has an equilibrium relationship between oil prices and long-run market concern. • The short-run market concerns have an asymmetric influence on oil price volatility. • The Internet can exaggerate the impact of information shocks on oil price. - Abstract: With the acceleration of oil marketisation and the rapid development of electronic information carriers, external information shocks can be easily and quickly transmitted to the oil market through the Internet. This paper analyses the impact of short- and long-run market concerns, derived from search query volumes in Google for different domains around the oil market on oil volatility using co-integration and the modified EGARCH model. Empirical results suggest there is a long-term equilibrium relationship between oil prices and long-run market concern for oil prices and oil demand. The short-run market concerns for the 2008 financial crisis and the Libyan war convulsion have a significant and asymmetric influence on oil price volatility. This indicates that market concern transmitted through the Internet can strengthen the linkage between oil price changes and external events by influencing the expectation of market traders, and to some extent it can exaggerate the impact of nonfundamental information shocks

  15. Contracting Fashion Products Supply Chains When Demand Is Dependent on Price and Sales Effort

    OpenAIRE

    Wei, Ying; Xiong, Liyang

    2015-01-01

    This paper investigates optimal decisions in a two-stage fashion product supply chain under two specified contracts: revenue-sharing contract and wholesale price contract, where demand is dependent on retailing price and sales effort level. Optimal decisions and related profits are analyzed and further compared among the cases where the effort investment fee is determined and undertaken either by the retailer or the manufacturer. Results reveal that if the retailer determines the effort inves...

  16. Evaluation on Core Competitiveness of Wholesale Market of Agricultural Products Based on CWAA Operator

    Institute of Scientific and Technical Information of China (English)

    2011-01-01

    According to relevant data,we select five indices,namely management ability,organization and management capability,enterprise culture,development ability and technical equipment ability,to establish the index system of core competitiveness of wholesale market of agricultural products.Based on combination weight arithmetic average(CWAA) operator,we advance an evaluation model of core competitiveness of wholesale market of agricultural products which involves participation of many people.By inviting five exerts,we conduct evaluation in terms of management ability of wholesale market of agricultural products,organization and management capability of leadership,enterprise culture of wholesale market of agricultural products,future development ability of wholesale market of agricultural products,and exiting technical equipment ability of wholesale market of agricultural products.We adopt hundred-mark system to grade and evaluate core competitiveness of wholesale market of agricultural products.The results show that the experts’ evaluation score of core competitiveness of wholesale market of agricultural products is high.The evaluation result is reasonable and authentic and this model is feasible.

  17. Can we use volatility to diagnose financial bubbles? lessons from 40historical bubbles

    Directory of Open Access Journals (Sweden)

    Didier Sornette

    2018-03-01

    Full Text Available We inspect the price volatility before, during, and after financial asset bubbles in orderto uncover possible commonalities and check empirically whether volatility might be used as anindicator or an early warning signal of an unsustainable price increase and the associated crash. Someresearchers and finance practitioners believe that historical and/or implied volatility increase beforea crash, but we do not see this as a consistent behavior. We examine forty well-known bubbles and,using creative graphical representations to capture robustly the transient dynamics of the volatility, findthat the dynamics of the volatility would not have been a useful predictor of the subsequent crashes.In approximately two-third of the studied bubbles, the crash follows a period of lower volatility,reminiscent of the idiom of a “lull before the storm”. This paradoxical behavior, from the lensesof traditional asset pricing models, further questions the general relationship between risk and return.

  18. Extreme-Strike and Small-time Asymptotics for Gaussian Stochastic Volatility Models

    OpenAIRE

    Zhang, Xin

    2016-01-01

    Asymptotic behavior of implied volatility is of our interest in this dissertation. For extreme strike, we consider a stochastic volatility asset price model in which the volatility is the absolute value of a continuous Gaussian process with arbitrary prescribed mean and covariance. By exhibiting a Karhunen-Loève expansion for the integrated variance, and using sharp estimates of the density of a general second-chaos variable, we derive asymptotics for the asset price density for large or smal...

  19. Long-term memory and volatility clustering in high-frequency price changes

    Science.gov (United States)

    oh, Gabjin; Kim, Seunghwan; Eom, Cheoljun

    2008-02-01

    We studied the long-term memory in diverse stock market indices and foreign exchange rates using Detrended Fluctuation Analysis (DFA). For all high-frequency market data studied, no significant long-term memory property was detected in the return series, while a strong long-term memory property was found in the volatility time series. The possible causes of the long-term memory property were investigated using the return data filtered by the AR(1) model, reflecting the short-term memory property, the GARCH(1,1) model, reflecting the volatility clustering property, and the FIGARCH model, reflecting the long-term memory property of the volatility time series. The memory effect in the AR(1) filtered return and volatility time series remained unchanged, while the long-term memory property diminished significantly in the volatility series of the GARCH(1,1) filtered data. Notably, there is no long-term memory property, when we eliminate the long-term memory property of volatility by the FIGARCH model. For all data used, although the Hurst exponents of the volatility time series changed considerably over time, those of the time series with the volatility clustering effect removed diminish significantly. Our results imply that the long-term memory property of the volatility time series can be attributed to the volatility clustering observed in the financial time series.

  20. An Analysis of Price Determination and Markups in the Air-Conditioning and Heating Equipment Industry

    Energy Technology Data Exchange (ETDEWEB)

    Dale, Larry; Millstein, Dev; Coughlin, Katie; Van Buskirk, Robert; Rosenquist, Gregory; Lekov, Alex; Bhuyan, Sanjib

    2004-01-30

    In this report we calculate the change in final consumer prices due to minimum efficiency standards, focusing on a standard economic model of the air-conditioning and heating equipment (ACHE) wholesale industry. The model examines the relationship between the marginal cost to distribute and sell equipment and the final consumer price in this industry. The model predicts that the impact of a standard on the final consumer price is conditioned by its impact on marginal distribution costs. For example, if a standard raises the marginal cost to distribute and sell equipment a small amount, the model predicts that the standard will raise the final consumer price a small amount as well. Statistical analysis suggest that standards do not increase the amount of labor needed to distribute equipment the same employees needed to sell lower efficiency equipment can sell high efficiency equipment. Labor is a large component of the total marginal cost to distribute and sell air-conditioning and heating equipment. We infer from this that standards have a relatively small impact on ACHE marginal distribution and sale costs. Thus, our model predicts that a standard will have a relatively small impact on final ACHE consumer prices. Our statistical analysis of U.S. Census Bureau wholesale revenue tends to confirm this model prediction. Generalizing, we find that the ratio of manufacturer price to final consumer price prior to a standard tends to exceed the ratio of the change in manufacturer price to the change in final consumer price resulting from a standard. The appendix expands our analysis through a typical distribution chain for commercial and residential air-conditioning and heating equipment.

  1. Trends and volatility in sub Saharan Africa’s key primary commodity exports

    Directory of Open Access Journals (Sweden)

    Matthew Ocran

    2013-02-01

    Full Text Available Using a GARCH model the paper sought to test the hypothesis that price volatility of key Sub Saharan Africa primary commodity exports, have not changed over the past four decades. Whilst crude oil, aluminium, cocoa and six others have not experienced significant change in price volatility over the period, nine other major commodities recorded changes. Efforts need to be made to extensively diversify the portfolio of agricultural commodity exports by including new products of which price volatilities in the past decades have been reduced. This is crucial for countries that depend on up to three primary commodities for the bulk of their foreign exchange earnings. Other measures such as value addition can also help in reducing impacts of unfavourable price movements.

  2. Analysis of model implied volatility for jump diffusion models: Empirical evidence from the Nordpool market

    International Nuclear Information System (INIS)

    Nomikos, Nikos K.; Soldatos, Orestes A.

    2010-01-01

    In this paper we examine the importance of mean reversion and spikes in the stochastic behaviour of the underlying asset when pricing options on power. We propose a model that is flexible in its formulation and captures the stylized features of power prices in a parsimonious way. The main feature of the model is that it incorporates two different speeds of mean reversion to capture the differences in price behaviour between normal and spiky periods. We derive semi-closed form solutions for European option prices using transform analysis and then examine the properties of the implied volatilities that the model generates. We find that the presence of jumps generates prominent volatility skews which depend on the sign of the mean jump size. We also show that mean reversion reduces the volatility smile as time to maturity increases. In addition, mean reversion induces volatility skews particularly for ITM options, even in the absence of jumps. Finally, jump size volatility and jump intensity mainly affect the kurtosis and thus the curvature of the smile with the former having a more important role in making the volatility smile more pronounced and thus increasing the kurtosis of the underlying price distribution.

  3. 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.

  4. A Generalized Schwartz Model for Energy Spot Prices - Estimation using a Particle MCMC Method

    DEFF Research Database (Denmark)

    Lunde, Asger; Brix, Anne Floor; Wei, Wei

    structure. Instead of using various filtering techniques for splitting the two factors, as often found in the literature, we estimate the model in one step using an adaptive MCMC method with a Rao-Blackwellized particle filter. We fit the model to UK natural gas spot prices and investigate the importance......We propose an energy spot price model featuring a two-factor price process and a two-component stochastic volatility process. The first factor in the price process captures the normal variations; the second accounts for spikes. The two-component volatility allows for a flexible autocorrelation...... of spikes and stochastic volatility. We find that the inclusion of stochastic volatility is crucial and that it strongly impacts the jump intensity in the spike process. Furthermore, our estimation method enables us to consider both continuous and purely jump-driven volatility processes, and thereby assess...

  5. Impact of cigarette minimum price laws on the retail price of cigarettes in the USA.

    Science.gov (United States)

    Tynan, Michael A; Ribisl, Kurt M; Loomis, Brett R

    2013-05-01

    Cigarette price increases prevent youth initiation, reduce cigarette consumption and increase the number of smokers who quit. Cigarette minimum price laws (MPLs), which typically require cigarette wholesalers and retailers to charge a minimum percentage mark-up for cigarette sales, have been identified as an intervention that can potentially increase cigarette prices. 24 states and the District of Columbia have cigarette MPLs. Using data extracted from SCANTRACK retail scanner data from the Nielsen company, average cigarette prices were calculated for designated market areas in states with and without MPLs in three retail channels: grocery stores, drug stores and convenience stores. Regression models were estimated using the average cigarette pack price in each designated market area and calendar quarter in 2009 as the outcome variable. The average difference in cigarette pack prices are 46 cents in the grocery channel, 29 cents in the drug channel and 13 cents in the convenience channel, with prices being lower in states with MPLs for all three channels. The findings that MPLs do not raise cigarette prices could be the result of a lack of compliance and enforcement by the state or could be attributed to the minimum state mark-up being lower than the free-market mark-up for cigarettes. Rather than require a minimum mark-up, which can be nullified by promotional incentives and discounts, states and countries could strengthen MPLs by setting a simple 'floor price' that is the true minimum price for all cigarettes or could prohibit discounts to consumers and retailers.

  6. Oil and stock market volatility: A multivariate stochastic volatility perspective

    International Nuclear Information System (INIS)

    Vo, Minh

    2011-01-01

    This paper models the volatility of stock and oil futures markets using the multivariate stochastic volatility structure in an attempt to extract information intertwined in both markets for risk prediction. It offers four major findings. First, the stock and oil futures prices are inter-related. Their correlation follows a time-varying dynamic process and tends to increase when the markets are more volatile. Second, conditioned on the past information, the volatility in each market is very persistent, i.e., it varies in a predictable manner. Third, there is inter-market dependence in volatility. Innovations that hit either market can affect the volatility in the other market. In other words, conditioned on the persistence and the past volatility in their respective markets, the past volatility of the stock (oil futures) market also has predictive power over the future volatility of the oil futures (stock) market. Finally, the model produces more accurate Value-at-Risk estimates than other benchmarks commonly used in the financial industry. - Research Highlights: → This paper models the volatility of stock and oil futures markets using the multivariate stochastic volatility model. → The correlation between the two markets follows a time-varying dynamic process which tends to increase when the markets are more volatile. → The volatility in each market is very persistent. → Innovations that hit either market can affect the volatility in the other market. → The model produces more accurate Value-at-Risk estimates than other benchmarks commonly used in the financial industry.

  7. Market Makers' Supply and Pricing of Financial Market Liquidity

    OpenAIRE

    Shen, Pu; Starr, Ross M.

    2000-01-01

    This study models the bid-ask spread in financial markets as a function of asset price variability and order flow. The market-maker is characterized as passively accepting orders to buy and to sell a security at the market's prevailing price (plus or minus half the bid-ask spread). The bid-ask spread adjusts to cover market-makers' average costs. The bid-ask spread then varies positively with: the security's price volatility, the volatility of order flow, and the absolute value of the market-...

  8. Area price and demand response in a market with 25% wind power

    International Nuclear Information System (INIS)

    Grohnheit, Poul Erik; Andersen, Frits Møller; Larsen, Helge V.

    2011-01-01

    Denmark, east and west of the Great Belt are bidding areas with separate hourly area prices for the Nord Pool power exchange, covering four Nordic countries and parts of Germany. The share of wind power has now increased to 25% on an annual basis in western Denmark. This has a significant impact not only on the electricity wholesale prices, but also on the development of the market. Hourly market data are available from the website of Danish TSO from 1999. In this paper these data are analysed for the period 2004–2010. Electricity generators and customers may respond to hourly price variations, which can improve market efficiency, and a welfare gain is obtained. An important limitation for demand response is events of several consecutive hours with extreme values. The analysis in this paper is a summary and update of some of the issues covered by the EU RESPOND project. It shows that extreme events were few, and the current infrastructure and market organisation have been able to handle the amount of wind power installed so far. This recommends that geographical bidding area for the wholesale electricity market reflects external transmission constraints caused by wind power. - Highlights: ► More than 10 years of hourly electricity market data are available for western Denmark. ► Current infrastructure and market organisation could handle 25% wind power. ► Demand response to hourly electricity prices leads to limited welfare gain. ► Consecutive hours with high or low price, or high or low wind are relatively few.

  9. 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)

  10. Is the depressive effect of renewables on power prices contagious? A cross border econometric analysis

    International Nuclear Information System (INIS)

    Phan, Sebastien; Roques, Fabien

    2015-04-01

    European power markets have become more integrated and the implementation of market coupling has reinforced the efficiency of cross-border trading. This paper investigates empirically the impact of renewables growth in Germany on German and French power price volatility. We find that renewables depress power prices on average and increase volatility not only domestically but also across borders. We also leverage market resiliency data to investigate the impact of increases in interconnection capacity. We find that power price volatility would decrease in France despite some contagion effects of volatility from German renewables production. Our findings have important policy implications as they demonstrate the need to coordinate cross-border support policies for renewables in order to mitigate the impact of volatility on power prices in coupled power markets. (authors)

  11. The Role of Implied Volatility in Forecasting Future Realized Volatility and Jumps in Foreign Exchange, Stock and Bond Markets

    DEFF Research Database (Denmark)

    Christensen, Bent Jesper

    We study the forecasting of future realized volatility in the stock, bond, and foreign exchange markets, as well as the continuous sample path and jump components of this, from variables in the information set, including implied volatility backed out from option prices. Recent nonparametric...

  12. Pricing offshore wind power

    International Nuclear Information System (INIS)

    Levitt, Andrew C.; Kempton, Willett; Smith, Aaron P.; Musial, Walt; Firestone, Jeremy

    2011-01-01

    Offshore wind offers a very large clean power resource, but electricity from the first US offshore wind contracts is costlier than current regional wholesale electricity prices. To better understand the factors that drive these costs, we develop a pro-forma cash flow model to calculate two results: the levelized cost of energy, and the breakeven price required for financial viability. We then determine input values based on our analysis of capital markets and of 35 operating and planned projects in Europe, China, and the United States. The model is run for a range of inputs appropriate to US policies, electricity markets, and capital markets to assess how changes in policy incentives, project inputs, and financial structure affect the breakeven price of offshore wind power. The model and documentation are made publicly available. - Highlights: → We calculate the Breakeven Price (BP) required to deploy offshore wind plants. → We determine values for cost drivers and review incentives structures in the US. → We develop 3 scenarios using today's technology but varying in industry experience. → BP differs widely by Cost Scenario; relative policy effectiveness varies by stage. → The low-range BP is below regional market values in the Northeast United States.

  13. Reducing Fuel Volatility. An Additional Benefit From Blending Bio-fuels?

    Energy Technology Data Exchange (ETDEWEB)

    Bailis, R. [Yale School of Forestry and Environmental Studies, 195 Prospect Street, New Haven, CT 06511 (United States); Koebl, B.S. [Utrecht University, Science Technology and Society, Budapestlaan 6, 3584 CD Utrecht (Netherlands); Sanders, M. [Utrecht University, Utrecht School of Economics, Janskerkhof 12, 3512 BL Utrecht (Netherlands)

    2011-02-15

    Oil price volatility harms economic growth. Diversifying into different fuel types can mitigate this effect by reducing volatility in fuel prices. Producing bio-fuels may thus have additional benefits in terms of avoided damage to macro-economic growth. In this study we investigate trends and patterns in the determinants of a volatility gain in order to provide an estimate of the tendency and the size of the volatility gain in the future. The accumulated avoided loss from blending gasoline with 20 percent ethanol-fuel estimated for the US economy amounts to 795 bn. USD between 2010 and 2019 with growing tendency. An amount that should be considered in cost-benefit analysis of bio-fuels.

  14. Some recent developments in stochastic volatility modelling

    DEFF Research Database (Denmark)

    Barndorff-Nielsen, Ole Eiler; Nicolato, Elisa; Shephard, N.

    2002-01-01

    This paper reviews and puts in context some of our recent work on stochastic volatility (SV) modelling for financial economics. Here our main focus is on: (i) the relationship between subordination and SV, (ii) OU based volatility models, (iii) exact option pricing, (iv) realized power variation...

  15. Order flow and volatility: An empirical investigation

    NARCIS (Netherlands)

    Opschoor, A.; Taylor, N.; van der Wel, M.; van Dijk, D.

    2014-01-01

    We study the relationship between order flow and volatility. To this end we develop a comprehensive framework that simultaneously controls for the effects of macro announcements and order flow on prices and the effect of macro announcements on volatility. Using high-frequency 30-year U.S. Treasury

  16. 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

  17. On the Pricing of Options in Incomplete Markets

    NARCIS (Netherlands)

    Melenberg, B.; Werker, B.J.M.

    1996-01-01

    In this paper we reconsider the pricing of options in incomplete continuous time markets.We first discuss option pricing with idiosyncratic stochastic volatility.This leads, of course, to an averaged Black-Scholes price formula.Our proof of this result uses a new formalization of idiosyncraticy

  18. Identification of Distribution Channels to Create Sustainable Vegetable Prices

    Directory of Open Access Journals (Sweden)

    Aflit Nuryulia Praswati

    2017-12-01

    Full Text Available The price of vegetables has a role as a contributor to the rate of inflation. Currently the number of vegetable production in Boyolali region can no longer meet the needs of local communities. The limited amount of vegetable production and the inhibition of the vegetable distribution channel creates a scarcity of vegetables that result in price increases. This study aims to identify the distribution channel and the formation of vegetable prices derived from Boyolali area. The method used in this research is quantitative and qualitative. Respondents from this study consisted of farmers, wholesalers, small trader and end consumers. The type of distribution channel prevailing in Boyolali area are traditional and modern distribution channels. Intermediate distribution channels play a greater role in determining vegetable prices. If farmers want to improve their economic condition, it needs innovation and creativity in the process of planting, harvesting, packaging and marketing vegetable products.

  19. Electronic trading system and returns volatility in the oil futures market

    International Nuclear Information System (INIS)

    Liao, Huei-Chu; Lee, Yi-Huey; Suen, Yu-Bo

    2008-01-01

    This paper uses daily Brent crude prices to investigate the employment of electronic trading on the returns conditional volatility in the oil futures market. After a suitable GARCH model is established, the conditional volatility series are found. The Bai and Perron model is then used to find two significant structural breaks for these conditional volatility series around two implementation dates of electronic trading. This result indicates that the change in the trading system has significant impacts on the returns volatility since our estimated second break date is very close to the all-electronic trade implementation date. Moreover, the conditional volatility in the all-electronic trading period is found to be more dominated by the temporal persistence rather than the volatility clustering effect. All these evidence can shed some light for explaining the high relationship between more volatile world oil price and the more popular electronic trade. (author)

  20. The power to choose. Demand response in liberalized electricity markets

    International Nuclear Information System (INIS)

    2003-01-01

    Highly volatile electricity prices are becoming a more frequent and unwanted characteristic of modern electricity wholesale markets. But low demand elasticity, mainly the result of a lack of incentives and consumers' inability to control demand, means that consumer behaviour is not reflected in the cost of energy. This study analyses the impact of price-responsive demand and shows how pricing, policy and technology can be used to inform consumer behaviour and choice. Informed choice and market-based valuation of electricity supply will ensure liberalized markets are competitive, efficient, less volatile and able to provide long term security of supply. Significant benefits will occur even if only 5% of customers become responsive to price-incentives and information. And customers will respond to well designed programs, thereby developing a role in ensuring efficient price formulation for electricity. This study analyses the economic, efficiency and security benefits and identifies the changes in electricity tariffs and the network infrastructure needed to achieve greater demand response