Search results for "pricing"
showing 10 items of 167 documents
The Economic Impact of Water Taxes: A Computable General Equilibrium Analysis with an International Data Set
2006
Water is scarce in many countries. One instrument to improve the allocation of a scarce resource is (efficient) pricing or taxation. However, water is implicitly traded on international markets, particularly through food and textiles, so that impacts of water taxes cannot be studied in isolation, but require an analysis of international trade implications. We include water as a production factor in a multi-region, multi-sector computable general equilibrium model (GTAP), to assess a series of water tax policies. We find that water taxes reduce water use, and lead to shifts in production, consumption, and international trade patterns. Countries that do not levy water taxes are nonetheless af…
Contingent convertible bonds for sovereign debt risk management
2015
We consider convertible bonds that contractually stipulate payment standstill, contingent on a market indicator of a sovereign's creditworthiness breaching a distress threshold. This financial innovation limits ex-ante the likelihood of debt crises and imposes ex-post risk sharing between creditors and the debtor. Drawing from literature on contingent contracts, neglected risks, and bank CoCo, we extend prevailing arguments in favor of sovereign CoCo (S-CoCo). We discuss issues relating to their design: which market trigger, market discipline and sovereign incentives, and errors of false alarms or missed crises, and provide supporting evidence with eurozone data and a simple simulation on t…
A Simple Operating Strategy of Small-Scale Battery Energy Storages for Energy Arbitrage under Dynamic Pricing Tariffs
2015
Price arbitrage involves taking advantage of an electricity price difference, storing electricity during low-prices times, and selling it back to the grid during high-prices periods. This strategy can be exploited by customers in presence of dynamic pricing schemes, such as hourly electricity prices, where the customer electricity cost may vary at any hour of day, and power consumption can be managed in a more flexible and economical manner, taking advantage of the price differential. Instead of modifying their energy consumption, customers can install storage systems to reduce their electricity bill, shifting the energy consumption from on-peak to off-peak hours. This paper develops a deta…
Pricing sovereign contingent convertible debt
2018
We develop a pricing model for Sovereign Contingent Convertible bonds (S-CoCo) with payment standstills triggered by a sovereign's Credit Default Swap (CDS) spread. We model CDS spread regime switching, which is prevalent during crises, as a hidden Markov process, coupled with a mean-reverting stochastic process of spread levels under fixed regimes, in order to obtain S-CoCo prices through simulation. The paper uses the pricing model in a Longstaff-Schwartz American option pricing framework to compute future state contingent S-CoCo prices for risk management. Dual trigger pricing is also discussed using the idiosyncratic CDS spread for the sovereign debt together with a broad market index. …
The Market Price of Credit Risk and Economic States
2015
This paper proposes a market-wide credit risk factor for the US stock market and investigates its properties that are dependent on economic conditions. The market price of credit risk is found to be statistically significantly negative, supporting earlier studies. However, a sample-split analysis reveals that this negative pay-off is non-existent in a later subsample, indicating that the credit risk puzzle is based on temporary mispricing related to the earlier subsample. Further investigation shows that mispricing in the earlier period was mainly driven by positive pay-offs of low credit risk firms, while high credit risk firms did not generate significant returns in any of the sub-periods.
Herding in the cryptocurrency market: CSSD and CSAD approaches
2018
Abstract We analyse the existence of herding in the cryptocurrency market through the cross-sectional standard (absolute) deviation of returns. Our results show that extreme dispersion of returns is explained by rational asset pricing models although it is possible to observe herding during down markets, which highlights the inefficiency and risk of cryptocurrencies. We also observe that the smallest digital currencies are herding with the largest ones, thus traders base their decisions on the performance of the main cryptocurrencies. However, the herding phenomenon cannot be solely attributed to Bitcoin, since the rest of the market is not herding with the main cryptocurrency.
Valuation of Barrier Options in a Black-Scholes Setup with Jump Risk
1999
This paper discusses the pitfalls in the pricing of barrier options approximations of the underlying continuous processes via discrete lattice models. These problems are studied first in a Black-Scholes model. Improvements result from a trinomial model and a further modified model where price changes occur at the jump times of a Poisson process. After the numerical difficulties have been resolved in the Black-Scholes model, unpredictable discontinuous price movements are incorporated.
Weibull Model for Dynamic Pricing in e-Business
2011
As is the case with traditional markets, the sellers on the Internet do not usually know the demand functions of their customers. However, in such a digital environment, a seller can experiment different prices in order to maximize his profits. In this paper, we develop a dynamic pricing model to solve the pricing problem of a Web-store, where seller sets a fixed price and buyer either accepts or doesn’t buy. Frequent price changes occur due to current market conditions. The model is based on the two-parameter Weibull distribution (indexed by scale and shape parameters), which is used as the underlying distribution of a random variable X representing the amount of revenue received in the sp…
High Order Compact Finite Difference Schemes for A Nonlinear Black-Scholes Equation
2001
A nonlinear Black-Scholes equation which models transaction costs arising in the hedging of portfolios is discretized semi-implicitly using high order compact finite difference schemes. A new compact scheme, generalizing the compact schemes of Rigal [29], is derived and proved to be unconditionally stable and non-oscillatory. The numerical results are compared to standard finite difference schemes. It turns out that the compact schemes have very satisfying stability and non-oscillatory properties and are generally more efficient than the considered classical schemes.
Home energy management system : a home energy management system under different electricity pricing mechanisms
2014
Masteroppgave i fornybar energi ENE 500 Universitetet i Agder 2014 Peak demand is a severe problem in the electricity grid and it was solved by supply side management in the past. But nowadays the demand side management sources have drawn attention due to the economic and environmental constraints. Demand side management in the domestic sector can play an important role in reducing the peak demand on the power system network. It can help in reducing stress and overloading on the transmission and distribution lines. In many countries there are various demand response programs implemented for industrial and commercial loads. In these programs load control is primarily achieved by various type…