Some numerical methods for solving stochastic impulse control in natural gas storage facilities

The valuation of gas storage facilities is characterized as a stochastic impulse control problem with finite horizon resulting in Hamilton-Jacobi-Bellman (HJB) equations for the value function. In this context the two catagories of solving schemes for optimal switching are discussed in a stochastic control framework. We reviewed some numerical methods which include approaches related to partial differential equations (PDEs), Markov chain approximation, nonparametric regression, quantization method and some practitioners’ methods. This paper considers optimal switching problem arising in valuation of gas storage contracts for leasing the storage facilities, and investigates the recent developments as well as their advantages and disadvantages of each scheme based on dynamic programming principle (DPP

Gold as an inflation hedge?

This paper attempts to reconcile an apparent contradiction between short-run and long-run movements in the price of gold. The theoretical model suggests a set of conditions under which the price of gold rises over time at the general rate of inflation and hence be an effective hedge against inflation. The model also demonstrates that short-run changes in the gold lease rate, the real interest rate, convenience yield, default risk, the covariance of gold returns with other assets and the dollar/world exchange rate can disturb this equilibrium relationship and generate short-run price volatility. Using monthly gold price data (1976-1999), and cointegration regression techniques, an empirical analysis confirms the central hypotheses of the theoretical model

Reforming state enterprises in socialist economies : guidelines for leasing them to entrepreneurs

Since the state has proven to be incompetent in its management of state owned enterprises a new structure must be found that takes into account the incompetence of the state but ensures that the state's economic interests are preserved the best way possible. Two of the most difficult tasks in this process are how to exercise ownership rights to assets and simultaneously delegate decision making to the management of the firm. This paper finds that the solution of these problems is to lease state owned enterprises to entrepreneurs through contracts derived from the principal-agent literature where the state is the principal and the agent is the lessee. Since the state needs to delegate responsibility to the management of state owned enterprises, the process of reform becomes in reality a principal-agent problem. To facilitate the reform process it is necessary to establish a credit market because the lessee may have investment plans that need to be financed. So far no country has yet tried to implement lease schemes based on principal-agent contracts. Future work needs to build a bridge between theory and reality to see whether they both can benefit from the interaction.Health Economics&Finance,International Terrorism&Counterterrorism,Economic Theory&Research,Banks&Banking Reform,Environmental Economics&Policies

A guide to finance for Social Enterprises in South Africa

The global economic crisis and its aftermath deepen the challenge of decent employment creation. The Global Jobs Pact developed in response to the crisis sets out a framework that ensures linkages between social progress and economic development. In this context, there is increasing interest in the social economy as a way to combine social and economic goals. The Ouagadougou Symposium on the Global Jobs Pact as it relates to Africa included a recommendation to increase support to the social economy. A regional conference in October 2009 on the social economy as a response to the economic crisis in Africa defined the social economy as "a concept designating enterprises and organizations, in particular cooperatives, mutual benefit societies, associations, foundations and social enterprises, which have the specific feature of producing goods, services and knowledge while pursuing both economic and social aims and fostering solidarity.

Alternative strategies for space station financing

The attributes of the proposed space station program are oriented toward research activities and technologies which generate long term benefits for mankind. Unless such technologies are deemed of national interest and thus are government funded, they must stand on their own in the market place. Therefore, the objectives of a United States space station should be based on commercial criteria; otherwise, such a project attracts no long term funding. There is encouraging evidence that some potential space station activities should generate revenues from shuttle related projects within the decade. Materials processing concepts as well as remote sensing indicate substantial potential. Futhermore, the economics and thus the commercial feasibility of such projects will be improved by the operating efficiencies available with an ongoing space station program

Firm behaviour under alternative bidding systems for US OCS hydrocarbon leases

One of the least settled issues in US offshore oil policy is the "best" scheme to capture resource rents arising from hydrocarbon production. This paper analyses the impact of alternative bidding systems on the intertemporal production path and on the firm's investment decision. It concludes that with the exception of the pure profit share system all other pure or mixed bidding systems are likely to have a distortive effect on production and, thus, eventually lead to a dissipation of economic rent. Further, no leasing system authorised by current public law is found to be neutral regarding investment decisions.

Performance-Based Specifications: Exploring When They Work and Why

There is extensive research and attention on innovation and sustainable public procurement (SPP) in the European Union at present, with the 2014 revision of the Procurement Directives, the Innovation Union strategy and other European Union policy initiatives. This report seeks to contribute to this discussion through the investigation of the use of performance based specifications (PBSs) in public procurement in the European Union and the United States. The report outlines the benefits and limitations of the use of PBSs, even in the most "progressive" public procurement environments, such as the Netherlands, particularly around their ability to support sustainable development goals and deliver environmental benefits for a procuring authority, such as energy and resource efficiency. Additionally, this report aims to identify the sectors in which the enabling conditions for the successful use of PBSs in public procurement are in place and to understand what policies and regulations are needed to promote the use of PBSs in public tenders and public procurement framework agreements

ADB–OECD Study on Enhancing Financial Accessibility for SMEs: Lessons from Recent Crises

During the era of global financial uncertainty, stable access to appropriate funding sources has been much harder for small and medium-sized enterprises (SMEs). The global financial crisis impacted SMEs and entrepreneurs disproportionately, exacerbating their traditional financing constraints. The financial conditions of many SMEs were weakened by the drop in demand for goods and services and the credit tightening. The sovereign debt crisis that hit several European countries contributed to further deterioration in bank lending activities, which negatively affected private sector development. The global regulatory response to financial crises, such as the Basel Capital Accord, while designed to reduce systemic risks may also constrain bank lending to SMEs. In particular, Basel III requires banks to have tighter risk management as well as greater capital and liquidity. Resulting asset preference and deleveraging of banks, particularly European banks with significant presence in Asia, could limit the availability of funding for SMEs in Asia and the Pacific. Lessons from the recent financial crises have motivated many countries to consider SME access to finance beyond conventional bank credit and to diversify their national financial system. Improving SME access to finance is a policy priority at the country and global level. Poor access to finance is a critical inhibiting factor to the survival and growth potential of SMEs. Financial inclusion is thus key to the development of the SME sector, which is a driver of job creation and social cohesion and takes a pivotal role in scaling up national economies. The Asian Development Bank (ADB) and the Organisation for Economic Co-operation and Development (OECD) have recognized that it is crucial to develop a comprehensive range of policy options on SME finance, including innovative financing models. With this in mind, sharing Asian and OECD experiences on SME financing would result in insightful discussions on improving SME access to finance at a time of global financial uncertainty. Based on intensive discussions in two workshops organized by ADB in Manila on 6–7 March 2013 and by OECD in Paris on 21 October 2013, the two organizations together compiled this study report on enhancing financial accessibility for SMEs, especially focusing on lessons from the past and recent crises in Asia and OECD countries. The report takes a comparative look at ADB and OECD experiences, and aims to identify promising policy solutions for creating an SME base that is resilient to crisis, from a viewpoint of access to finance, and which can help drive growth and development

Land acquisition and compensation in Singur : what really happened?

This paper reports results of a household survey in Singur, West Bengal concerning compensation offered by the state government to owners of land acquired to make way for a car factory. While on average compensations offered were close to the reported market valuations of land, owners of high grade multi-cropped (Sona) lands were undercompensated, which balanced over-compensation of low grade mono-cropped (Sali) lands. This occurred owing to misclassification of most Sona land as Sali land in the official land records. Under-compensation relative to market values significantly raised the chance of compensation offers being rejected by owners. There is considerable evidence of the role of financial considerations in rejection decisions. Land acquisition significantly reduced incomes of owner cultivator and tenant households, despite their efforts to increase incomes from other sources. Agricultural workers were more adversely affected relative to non-agricultural workers, while the average impact on workers as a whole was insignificant. Adverse wealth effects associated with under-compensation significantly lowered household accumulation of consumer durables, while effects on other assets were not perceptible. Most households expressed preferences for non-cash forms of compensation, with diverse preferences across different forms of non-cash compensation depending on occupation and time preferences

Innovations in rural and agriculture finance

Most rural households lack access to reliable and affordable finance for agriculture and other livelihood activities. Many small farmers live in remote areas where retail banking is limited and production risks are high. The recent financial crisis has made the provision of credit even tighter and the need to explore innovative approaches to rural and agricultural finance even more urgent. This set of 14 briefs clearly points out the importance of business realities faced by small farmers, including low education levels, the dominance of subsistence farming, and the lack of access to modern financial instruments. These conditions mean that new and innovative institutions are required to reach small farmers. Emerging communication technologies provide new opportunities for rural banking by reducing business costs and alleviating information asymmetries. New financing instruments, such as weather index-based insurance and microinsurance, also have great potential for managing the risks faced by small farmers. In addition, bundling financial services with nonfinancial services like marketing and extension services offers new opportunities for small farmers to increase their productivity and incomes. Finally, an enabling policy environment and legal framework, enforcement of rules and regulations, and a supportive rural infrastructure all contribute immensely to making sustainable access to finance a reality. Table of Contents: •Innovations in rural and agriculture finance: Overview by Renate Kloeppinger-Todd and Manohar Sharma •Financial literacy by Monique Cohen •Community-based financial organizations: Access to Finance for the Poorest by Anne Ritchie •Rural banking in Africa: The Rabobank approach by Gerard van Empel •Rural banking: The case of rural and community banks in Ghana by Ajai Nair and Azeb Fissha •Rural leasing: An alternative to loans in financing income-producing assets by Ajai Nair •Determinants of microcredit repayment in federations of Indian self-help groups by Yanyan Liu and Klaus Deininger •M-PESA: Finding new ways to serve the unbanked in Kenya by Susie Lonie •Biometric technology in rural credit markets: The case of Malawi by Xavier Giné •Credit risk management in financing agriculture by Mark D. Wenner •New approaches for index insurance: ENSO insurance in Peru by Jerry R. Skees and Benjamin Collier •Microinsurance innovations in rural finance by Martina Wiedmaier-Pfister and Brigitte Klein •Combining extension services with agricultural credit: The experience of BASIX India by Vijay Mahajan and K. Vasumathi •Bundling development services with agricultural finance: The experience of DrumNet by Jonathan Campaigne and Tom RauschAgricultural innovations -- Developing countries, agriculture finance, Financial crisis, microinsurance, Poverty reduction, rural banking, Rural finance, Rural households, Small farmers,