ON KNOWLEDGE-BASED ECONOMIC GROWTH

International Development,

A Hedged Monte Carlo Approach to Real Option Pricing

In this work we are concerned with valuing optionalities associated to invest or to delay investment in a project when the available information provided to the manager comes from simulated data of cash flows under historical (or subjective) measure in a possibly incomplete market. Our approach is suitable also to incorporating subjective views from management or market experts and to stochastic investment costs. It is based on the Hedged Monte Carlo strategy proposed by Potters et al (2001) where options are priced simultaneously with the determination of the corresponding hedging. The approach is particularly well-suited to the evaluation of commodity related projects whereby the availability of pricing formulae is very rare, the scenario simulations are usually available only in the historical measure, and the cash flows can be highly nonlinear functions of the prices.Comment: 25 pages, 14 figure

A Government/Industry Summary of the Design Analysis Methods for Vibrations (DAMVIBS) Program

The NASA Langley Research Center in 1984 initiated a rotorcraft structural dynamics program, designated DAMVIBS (Design Analysis Methods for VIBrationS), with the objective of establishing the technology base needed by the rotorcraft industry for developing an advanced finite-element-based dynamics design analysis capability for vibrations. An assessment of the program showed that the DAMVIBS Program has resulted in notable technical achievements and major changes in industrial design practice, all of which have significantly advanced the industry's capability to use and rely on finite-element-based dynamics analyses during the design process

Macroeconomic Aspects of Substance Abuse: Diffusion, Productivity and Optimal Control

This paper deals dynamically with macroeconomic aspects of widespread substance abuse with a reference to illicit drugs as an example. Substance-abuse impedes the productivity of the labour force and subsequently economic growth. The labour force is divided into non-using and therefore fully productive workers, a number of whom are employed by the government in drug-control activities, and drug users who are only partially productive. An efficient management of the nation's portfolio of workers is taken to be the trajectory of drug-control that maximises the present value of the stream of disposable national incomes.Substance abuse, labour productivity, national income, optimal control

Software tools for stochastic programming: A Stochastic Programming Integrated Environment (SPInE)

SP models combine the paradigm of dynamic linear programming with modelling of random parameters, providing optimal decisions which hedge against future uncertainties. Advances in hardware as well as software techniques and solution methods have made SP a viable optimisation tool. We identify a growing need for modelling systems which support the creation and investigation of SP problems. Our SPInE system integrates a number of components which include a flexible modelling tool (based on stochastic extensions of the algebraic modelling languages AMPL and MPL), stochastic solvers, as well as special purpose scenario generators and database tools. We introduce an asset/liability management model and illustrate how SPInE can be used to create and process this model as a multistage SP application

Health benefits and control costs of tightening particulate matter emissions standards for coal power plants - The case of Northeast Brazil.

Exposure to ambient particulate matter (PM) caused an estimated 4.2 million deaths worldwide in 2015. However, PM emission standards for power plants vary widely. To explore if the current levels of these standards are sufficiently stringent in a simple cost-benefit framework, we compared the health benefits (avoided monetized health costs) with the control costs of tightening PM emission standards for coal-fired power plants in Northeast (NE) Brazil, where ambient PM concentrations are below World Health Organization (WHO) guidelines. We considered three Brazilian PM10 (PMx refers to PM with a diameter under x micrometers) emission standards and a stricter U.S. EPA standard for recent power plants. Our integrated methodology simulates hourly electricity grid dispatch from utility-scale power plants, disperses the resulting PM2.5, and estimates selected human health impacts from PM2.5 exposure using the latest integrated exposure-response model. Since the emissions inventories required to model secondary PM are not available in our study area, we modeled only primary PM so our benefit estimates are conservative. We found that tightening existing PM10 emission standards yields health benefits that are over 60 times greater than emissions control costs in all the scenarios we considered. The monetary value of avoided hospital admissions alone is at least four times as large as the corresponding control costs. These results provide strong arguments for considering tightening PM emission standards for coal-fired power plants worldwide, including in regions that meet WHO guidelines and in developing countries

Automatic Metro Map Layout Using Multicriteria Optimization

This paper describes an automatic mechanism for drawing metro maps. We apply multicriteria optimization to find effective placement of stations with a good line layout and to label the map unambiguously. A number of metrics are defined, which are used in a weighted sum to find a fitness value for a layout of the map. A hill climbing optimizer is used to reduce the fitness value, and find improved map layouts. To avoid local minima, we apply clustering techniques to the map the hill climber moves both stations and clusters when finding improved layouts. We show the method applied to a number of metro maps, and describe an empirical study that provides some quantitative evidence that automatically-drawn metro maps can help users to find routes more efficiently than either published maps or undistorted maps. Moreover, we found that, in these cases, study subjects indicate a preference for automatically-drawn maps over the alternatives