Search results for "Icing"
showing 10 items of 491 documents
The Risk Premium and the Esscher Transform in Power Markets
2012
In power markets one frequently encounters a risk premium being positive in the short end of the forward curve, and negative in the long end. Economically it has been argued that the positive premium is reflecting retailers aversion for spike risk, wheras in the long end of the forward curve the hedging pressure kicks in as in other commodity markets. Mathematically, forward prices are expressed as risk-neutral expectations of the spot at delivery. We apply the Esscher transform on power spot models based on mean-reverting processes driven by independent increment (time-inhomogeneous Levy) processes. It is shown that the Esscher transform is yielding a change of mean-reversion level. Moreov…
On first exit times and their means for Brownian bridges
2017
For a Brownian bridge from $0$ to $y$ we prove that the mean of the first exit time from interval $(-h,h), \,\, h>0,$ behaves as $O(h^2)$ when $h \downarrow 0.$ Similar behavior is seen to hold also for the 3-dimensional Bessel bridge. For Brownian bridge and 3-dimensional Bessel bridge this mean of the first exit time has a puzzling representation in terms of the Kolmogorov distribution. The result regarding the Brownian bridge is applied to prove in detail an estimate needed by Walsh to determine the convergence of the binomial tree scheme for European options.
Entry with two correlated signals : the case of industrial espionage and its positive competitive effects
2021
Recent advances in information and communication technologies have increased the incentives for firms to acquire information about rivals. These advances may have major implications for market entry because they make it easier for potential entrants to gather valuable information about, for example, an incumbent’s cost structure. However, little theoretical research has actually analyzed this question. This paper advances the literature by extending a one-sided asymmetric information version of Milgrom and Roberts’ (1982) limit pricing model. Here, the entrant is allowed access to an intelligence system (IS) of a certain precision that generates a noisy signal on the incumbent’s cost struct…
Evaluation of Insurance Products with Guarantee in Incomplete Markets
2008
Abstract Life insurance products are usually equipped with minimum guarantee and bonus provision options. The pricing of such claims is of vital importance for the insurance industry. Risk management, strategic asset allocation, and product design depend on the correct evaluation of the written options. Also regulators are interested in such issues since they have to be aware of the possible scenarios that the overall industry will face. Pricing techniques based on the Black & Scholes paradigm are often used, however, the hypotheses underneath this model are rarely met. To overcome Black & Scholes limitations, we develop a stochastic programming model to determine the fair price of the mini…
European Option Pricing and Hedging with Both Fixed and Proportional Transaction Costs
2003
Abstract In this paper we provide a systematic treatment of the utility based option pricing and hedging approach in markets with both fixed and proportional transaction costs: we extend the framework developed by Davis et al. (SIAM J. Control Optim., 31 (1993) 470) and formulate the option pricing and hedging problem. We propose and implement a numerical procedure for computing option prices and corresponding optimal hedging strategies. We present a careful analysis of the optimal hedging strategy and elaborate on important differences between the exact hedging strategy and the asymptotic hedging strategy of Whalley and Wilmott (RISK 7 (1994) 82). We provide a simulation analysis in order …
American Option Pricing and Exercising with Transaction Costs
2005
In this paper we examine the problem of finding the reservation option prices and corresponding exercise policies of American options in a market with proportional transaction costs using the utility based approach proposed by Davis and Zariphopoulou (1995). We present a model where the option holder has a constant absolute risk aversion. We discuss the numerical algorithm and propose a new characterization of the option holder's value function. We suggest original discretization schemes for computing reservation prices and exercise policies of American options. The discretization schemes are implemented for the cases of American put and call options. We present the study of the optimal tra…
Firm Size and Volatility Analysis in the Spanish Stock Market
2011
In this article, three strongly related questions are studied. First, volatility spillovers between large and small firms in the Spanish stock market are analyzed by using a conditional CAPM with an asymmetric multivariate GARCH-M covariance structure. Results show that there exist bidirectional volatility spillovers between both types of firms, especially after bad news. Second, the volatility feedback hypothesis explaining the volatility asymmetry feature is investigated. Results show significant evidence for this hypothesis. Finally, the study uncovers that conditional beta coefficient estimates within the used model are insensitive to sign and size asymmetries in the unexpected shock re…
Firefly algorithm based upon slicing structure encoding for unequal facility layout problem
2019
Finding the locations of departments or machines in a workspace is classified as a Facility Layout Problem. Good placement of departments has a relevant influence on manufacturing costs, work in process, lead times and production efficiency. This paper analyses the problem of allocating departments with restrictions in terms of unequal area and rectangular shape within a facility, in order to minimize the sum of material handling costs taking into account the satisfaction of the aspect ratio requested. In particular, we propose for the first time a Firefly Algorithm based on the slicing structure encoding. The proposed method was tested comparing the results obtained from other authors on t…
A multi objective genetic algorithm for the facility layout problem based upon slicing structure encoding
2012
This paper proposes a new multi objective genetic algorithm (MOGA) for solving unequal area facility layout problems (UA-FLPs). The genetic algorithm suggested is based upon the slicing structure where the relative locations of the facilities on the floor are represented by a location matrix encoded in two chromosomes. A block layout is constructed by partitioning the floor into a set of rectangular blocks using guillotine cuts satisfying the areas requirements of the departments. The procedure takes into account four objective functions (material handling costs, aspect ratio, closeness and distance requests) by means of a Pareto based evolutionary approach. The main advantage of the propos…
Prolidase in the Marine Sponge Suberites domuncula: Enzyme Activity, Molecular Cloning, and Phylogenetic Relationship
1999
: The enzyme prolidase hydrolyzes the peptide bond that involves the imino nitrogen of proline or hydroxyproline; hence, it catalyzes the final step in collagen degradation. From mammals it is known that this enzyme plays a major role in the recycling of proline for collagen synthesis and can be considered to be essential for the control of cell growth. The dominant organic exoskeleton in sponges, especially in Demospongiae, is collagen and the collagen-related spongin. Here we demonstrate that crude extracts of the demosponge Suberites domuncula contain prolidase or prolidase-like activity. The complementary DNA encoding the putative prolidase was cloned from a library of the same animal. …