Stochastic Dominance Portfolio Analysis of Forestry Assets

We consider the forestry decision-making and harvesting problem from the perspective of financial portfolio management, where harvestable forest stands constitute one of the liquid assets of the portfolio. Using real data from Finnish mixed borealis forests and from the Helsinki stock exchange, we investigate the effect of trading the timber stock together with the forest land, or without the land (i.e., harvesting), on the portfolio efficiency. As our research methodology, we utilize the general Stochastic Dominance (SD) criteria, focusing on the recent theoretical advances in analyzing portfolio diversification within the SD framework. Our findings shed some further light on the question of how to model the forestry planning problem, and provide some comparative evidence of the applicability of the alternative SD test approaches.Forest Management, Portfolio Optimization, Stochastic Dominance, Diversification

An efficient portfolio approach towards ecosystem-based fisheries governance in EU

In the framework of multispecies fisheries governance, the main objective of this paper is to apply modern portfolio theory (MPT) to the North-East Atlantic European fisheries, including all the key commercial fish species subject to total allowable catches (TAC) and quota regimes within the EU. This is done, first, quantifying the inherent return and risk of the potential fish portfolios and, secondly, estimating an individual constrained financial efficient frontier (FEF) for each of the nine fishing countries in the North-East Atlantic. Unlike previous studies in the field of financial fisheries economics, and due to its major robustness under non-normality and the presence of fat tails, we are using Conditional Value-at-Risk (CVaR) instead of the conventional mean-variance optimization (MVO) as the method to solve the optimization problem of minimizing risk under a set of alter-native constraints so as to obtain the respective FEFs. Our results show that changing the species portfolio distribution, it would be possible to improve efficiency, that is to say, to simultaneously get increasing returns and decreasing risk levels. Moreover, this efficiency gain would be compatible with specific quota transfers among fishing countries.Itsaso Lopetegui is grateful for the financial support from the Predoctoral Research Training Program from the Basque Government, Spain (Programa Predoctoral de Formación de Personal Investigador No Doctor del Departamento de Educación, Política Lingüística y Cultura del Gobierno Vasco) and research grant EGONLABUR from the same department. This study has received financial support from the Spanish Ministry of Economics and Competitiveness, Spain (Project Ref: RTI2018–099225-B-I00)

A Multiple-Objective Framework for Sustainable Forest Management under Uncertainty in the U.S. Central Hardwood Region

Despite the economic and ecological significance of oak-hickory forests in the Central Hardwood Region (CHR), major challenges are faced by both private and public landowners and policymakers due to the lack of reliable growth and yield models as well as the absence of useful tools for multi-criteria management. Moreover, the effects of climate change and fire disturbance on these forests and their management are largely unknown.;The second chapter of the dissertation is directed towards the study of the community and population structure of CHR forests under climate change and associated changes of fire regimes. The Central Hardwood Region of the United States constitutes one of the most diverse ecoregions in North America and the most extensive temperate deciduous forest in the world. Despite the economic and ecological significance of the CHR, the long term effects of changes in climate and fire regime on forest structures remain largely unknown. In this study, we developed an integrated climate sensitive matrix framework to synchronously couple (1) forest dynamics, (2) mean fire interval, (3) population density, and (4) future climate scenarios to study the community and population structure of CHR forests under climate change and associated changes of fire regimes. Using Monte Carlo simulations and coupled forest dynamics-disturbance models, we projected that the CHR would undergo a major shift in population structure from the present to year 2100. The fundamental changes would consist of a transition of dominant species from oak and hickory to maple species, reduced species diversity, and substantial declines in stand basal area and stand volume compared to year 2010. These projected changes may have profound ecological and economic implications. Ecologically, changes in tree species diversity favoring maples would alter ecosystem processing of nutrients and subsequent nutrient flows to drainage waters within the region. Habitat change would alter the broad spectrum of organisms relying on the forest, leading to a redistribution of wildlife species, further heightening the risks for endangered species. On the brink of these fundamental shifts, our study calls for ecologically and economically informed conservation and mitigation strategies to better prepare society for the associated changes in ecosystem services and economic benefits derivable from the CHR forests.;The third chapter further addresses assessments of management impacts on central hardwood forests under climate and fire uncertainty. Central hardwood forests, in the absence of management, are predicted to undergo a species shift and decline in stocks due to climate change and increased fire frequencies. Here I quantified how various management intensities would influence these forests in terms of the net present value (NPV) of harvests, tree species and size diversity, and carbon stocks in four pools: above-ground biomass, fine roots, dead organic matters, and soil. An uncertainty analysis with fuzzy sets shows that when considering uncertain climate and fire, the NPV, size diversity, and total carbon stock would be distinctively different in climate scenarios RCP2.6 and RCP8.5 with high certainty. However, for species diversity, similar climatic effects on species diversity may exist across most management regimes.;The fourth chapter focused on modeling multi-stage scenario-based optimization under uncertainty in climate-induced fire disturbance. I developed multi-stage scenario-based optimization models for managing central hardwood forests under uncertainty in climate change and associated fire regimes. Based on a climate-sensitive matrix growth model and a mean fire interval model, four future climate scenarios and attendant fire intervals combined with two fire severity regimes were transformed into 36 and 20 tree growth scenarios for harvesting cycles of 10 and 20 years, respectively. Three alternatives of optimization formulations were proposed: 1) optimize for the maximum objective value under each individual scenario independently; 2) based on results from (1), find the compromise management plan that\u27s feasible for all scenarios while minimizing the weighted sum of deviations between the realized and maximum objective values; and 3) derive the optimal management plan over the entire scenario tree. Four objectives were considered: the net present value (NPV) of harvests, total carbon stock, tree species diversity, and tree size diversity. Finally I determined the trade-off between economic and ecological benefits by quantifying the opportunity cost of increasing ecological benefits in terms of NPV. (Abstract shortened by ProQuest.)

On risk, diversity and financial efficient frontiers: the case study of european fish and fisheries

xi, 260 p.La pesca necesita herramientas de gestión ecosistémicas que garanticen simultáneamente los objetivos sociales, ecológicos y económicos que garanticen su sostenibilidad de largo plazo. Es por ello que el objetivo principal de esta tesis es explorar métodos innovadores para favorecer la comprensión y evaluación de la gobernanza de los recursos pesqueros. Aunque nos centramos en la pesca en la UE, nuestros procedimientos, estimaciones y resultados podrían extrapolarse a marcos y niveles de agregación adicionales. La tesis está estructurada en una introducción, tres capítulos independientes y las conclusiones finales y sección de discusión. En el primer capítulo, nuestro objetivo es contribuir con conocimientos sintéticos y descriptivos adicionales para guiar las posibles estrategias sobre el futuro del sector pesquero europeo. Para ello, en primer lugar se describen los desafíos la Política Pesquera Común (PPC), en segundo lugar se presentan las cifras y datos disponibles sobre el sector y finalmente se pretende identificar la taxonomía de los países pesqueros de la UE a partir de un análisis clúster en dos etapas. En el segundo capítulo nos centramos en especificaciones teóricas y empíricas alternativas de riesgo y diversidad en el dominio de la pesca y la correlación entre ambos. Teóricamente, cuanto menor es la diversidad, mayor es la concentración y la dependencia de la industria pesquera a la evolución de las especies dominantes. Por tanto, mayor riesgo de colapso en el sector pesquero. Sugerimos hacer uso de indicadores de riesgo financieros para medir cuantitativamente el riesgo biológico y riesgo productivo de las principales especies, como complemento a los indicadores de ecológicos de vulnerabilidad existentes. Posteriormente, partiendo de nuestras estimaciones de riesgo a nivel de especie, inferimos nuestros indicadores de riesgo para cada uno de los países pesqueros de la UE. Además, estudiamos la dinámica de la diversidad bio-económica a nivel país empleando índices de diversidad. Una vez obtenidas las medidas de riesgo y diversidad para cada país pesquero de la UE, y analizada la correlación entre ambos, se verifica si nuestros indicadores estimados de riesgo y diversidad inciden en el reagrupamiento de los países pesqueros de la UE obtenidos en el análisis clúster precedente. Finalmente, en el tercer capítulo, proporcionamos una nueva herramienta para la formulación de políticas pesqueras haciendo uso de la Modern Portfolio Theory (MPT). Estimamos la frontera financiera eficiente agregada para el conjunto de la UE, así como para cada uno de los nueve estados miembros en el Noreste Atlántico. De esta manera, haciendo uso de un indicador de riesgo robusto y novedoso en la literatura de las finanzas aplicadas a la gestión ecosistémica de pesquerías (i.e. Conditional Value-at-Risk (CVaR) cuantificamos el riesgo y retorno inherentes de las carteras de pesca y proponemos una resdistribución de las cuotas de cada país miembro con el fin de optimizar la gestión de la pesca, aumentar los retornos provenientes de los desembarcos y/o reducir su riesgo

Uncertainty, risk and forest management on the Tillamook State Forest : a case study

Forest management is typically associated with a high degree of uncertainty, since it relies on predictions of natural growth processes over long periods of time. A number of methods exist for mitigating the risk associated with this uncertainty, but few have the ability to explicitly minimize risk. This study will present a case study on dealing with uncertainty and risk in an applied setting. The selected study area was the Tillamook State Forest, located in northwest Oregon. The primary objectives were to quantify the uncertainty and assess its impact on forest management. An additional objective was to assess the application of non-linear probabilistic programming on a large forest management problem. Uncertainty was quantified through regression models that predicted actual outcomes from planned outcomes, as well as the error associated with predictions of actual outcomes. The effects of uncertainty on forest management were assessed through two chance-constrained programming formulations. One maximized the harvest volume under a given level of risk, and the other minimized the maximum level of risk associated with a given forest management plan. Both were subject to sustainable inventory and forest structure constraints. The results showed that these models could substantially increase the probability of achieving a given forest management outcome, at the cost of only a minimal deviation (4 to 6%) from the risk neutral position. These results were however in contrast to an analysis of risk preferences, which showed significant differences in the outcomes associated with various levels of risk. This indicated that uncertainty could not be considered without the decision maker's attitude towards risk. In addition, post-optimality analysis of the model results showed that correlated yield coefficients had an insignificant impact, and that the assumption of zero covariance was justified for this study. Finally, it was also demonstrated that chance- constrained programming can be applied to large scale forest management problems, but that the solvability of these problems were determined by the formulation type.Keywords: Risk, Chance-Constrained Programming, Uncertainty, Forest Management, Tillamook State Fores