The time to shut down

At each time, a firm facing uncertainty over future market conditions have to make a decision whether they should continue to produce or stop the process? As the traditional principle, the firm will go out of production when the price of the typical unit does not cover the average variable cost that it must incur to produce the typical unit. In reality the firm can suffer losses today however it can get more gains tomorrow that is enough to make up the losses. It means that this rule seems not be suitable absolutely in an uncertainty environment. And it leads to a rule that the firm only stop producing if average variable costs of unit exceed the price of unit by a positive amount. This paper expects to find this exceeding amount and when a firm will stop producing. Under uncertainty, the price of unit and the average variables cost are assumed to follow a continuous time stochastic process. We wish to apply the optimal stopping time approach in order to solve it.

Relative efficiency and price discovery in the two-tier Brussels stock exchange.

Until the mid-90s, the more active among the Brussels-listed stocks were traded in parallel segments: "spot" (that is, with t + 3 settlement) and "forward" (with periodic settlement at the end of a two- or three-week period). The forward market was cheaper, deeper, unhampered by price limits, convenient also for shortsales, and played by the pros; so it looks likely to be the more efficient tier. Yet a simple variance comparison, after correcting for settlement effects,finds no such effect; in fact, the forward market may actually have been the more noisy one. Going on to the issue of price discovery, which is a more formal way of testing whether the forward market is less noisy, we extend the Margrabe-Silber price-discovery model to take into account the asynchronism in the opening forward and spot prices. Although the presence of the latent true morning return in our extended model precludes us from estimating explicitly the price adjustment coefficients, we can still identify the sign of the estimated difference of these coefficients and the lower and upper bounds of its t-statistic. This information enables us to conclude on the significance of the test. Also, our results reject the potential price discoverer status of the forward market: spot prices seem more informative than forward prices. This result raises the issue of how far the financial markets perform their central function of price discovery and how far the conventional wisdom can be trusted (e.g. the more trading volume the less noise the observed price contains).

The dynamics of price discovery in the two-tier Brussels stock exchange.

In this paper, we investigate the dynamics of price discovery in the Brussels Stock Exchange for the spot and forward stock markets. Specifically, we quantitatively analyze each market's process in impounding new fundamental information about a stock's value into its market price. Similar to the permanent-transitory decomposition procedure put forward by Gonzalo and Ng (2001), we use a vecm (Vector Error Correction Model) and decompose the vecm residuals into the permanent and transitory innovations. However, we adjust their procedure to accommodate for the asynchronism problem in the Brussels forward and spot stock exchange. From the impulse response functions of the derived structural cointegration model after the decomposition, we apply the price discovery measure proposed by Yan and Zivot (2007), which is the absolute magnitude of cumulative price errors in the process of reflecting a one-unit change in the permanent innovation. In particular, we investigate which market makes less errors while incorporating the full one-unit increase in the permanent innovation into its price. Our finding is that the spot market outperforms the forwards one in the price discovery process. This result contradicts the price discovery role conventionally ascribed to the forward market.price discovery; brussels stock exchange;

A note on time value in spot and forward prices on the Brussels stock exchange.

Until the mid-90s, the more active among the Brussels-listed stocks were traded in parallel segments: "spot" (that is, with t + 3 settlement) and "forward" (periodic settlement at the end of a two- or three-week period). The forward market was cheaper, deeper, unhampered by price limits, convenient also for shortsales, and played by the pros; so it looks likely to be the more efficient tier. In the forward markets, where the signal is stronger, we do find that time value affects prices. In spot markets there is very little evidence in favor or against a settlement effect, perhaps because the time value item has a very small variability. As expected, the time value signals are somewhat stronger in forward prices and noticeably so in forward premiums,but the estimates remain below our theoretical priors. We also find that price discrepancies are autocorrelated, probably indicating market inefficiency. A closer look reveals that positive forward premiums are persistent whereas negative ones vanish overnight. This is consistent with a market-imperfection explanation, where problems with raising cash (shorting money)are more important than problems with shorting stocks, thus creating preferred habitats for purchases (forward) and for sales (spot).dual markets; price discovery; settlement effect; microstructure;

Determinants of foreign direct investment in Vietnam 1988-2009

This thesis analyses the determinants of Foreign Direct Investment in Vietnam from 1988-2009. It examines the nature, motivation and impact of FDI upon the Vietnam economy and its contribution to the subsequent leap forward in economic growth. The focus is on developing Dunning’s eclectic theory through case study analysis of Honda-Vietnam Motorbike Company and ANZ-Vietnam Bank. The prominent theories on FDI generally used in the thesis focus on Vernon’s Product Life Cycle (PLC) model, the Market Imperfection Theory (MIT), the Transaction Cost (TC) or internalisation approach and Dunning’s Eclectic Theory. Dunning is the clearest methodology for understanding the Vietnamese case as its method is to take account of a countries particular FDI characteristics and their impact on economic growth. The addition of an emphasis on the impact of culture upon the development of FDI in Vietnam provides this thesis with evidence of its originality and legitimacy to the claim of filling a gap in the literature on FDI in developing countries and the advancement of economic theory. The main focus in the case studies is demonstrating how foreign invested enterprises altered production, management, service and marketing processes to adapt their traditional, organisational and locational advantages to suit the local environment, and give them both foreign and domestic comparative advantages, ensuring the maximum possible capital return on their investments

Hydrological Modelling and Climate Change Impact Assessment on Future Floods in the Norwegian Arctic Catchments

Climate change is expected to alter the hydrological cycle in the Arctic, which would result in the increase in intensity and frequency of hydrological extreme events such as flooding. Noticeably, the changes in flooding due to climate change would severely affect human life, infrastructures, the environment, ecosystem, and socio-economic development in the impacted areas. Hydrological models are state-of-the-art tools for assessing the impact of climate change on hydrological processes. However, performing hydrological simulation/projection in the Arctic is challenging because of the complex hydrological processes and data-sparse features in the region. In consideration of those issues, this PhD research aims: (1) to assess the performances of hydrological models in the Arctic, (2) to investigate the alternative weather inputs for running the hydrological models in the Arctic region with scattered monitoring data, (3) to evaluate the effects of the models’ structure and parameterization and the spatial resolution of weather inputs on the results of hydrological simulations, and (4) to project future hydrological events under climate change impacts using the current hydrological model, and analyse the reliability/uncertainty of the projection. To fulfil the research’s objectives, several methodologies were applied. Firstly, a comprehensive review was conducted to address the current capacities and challenges of twelve well-known hydrological models, including surface hydrological models and subsurface hydrological models/groundwater models/cryo-hydrogeological models. These models have previously been applied or have the potential for application in the Arctic. Next, the physically based, semi-distributed model, SWAT (soil and water assessment tool), was selected as a suitable model, among other potential models, to assess its performance for hydrological simulations and to verify the potential application of reanalysis weather data. Moreover, the SWAT was coupled with multiple ensemble global and regional climate models’ simulations to project the future hydrological impacts under climate change (in 2041-2070). The study areas were mainly focused in the Norwegian Arctic catchments