Valuation of Employee Stock Options (ESOs) by means of Mean-Variance Hedging

We consider the problem of ESO valuation in continuous time. In particular, we consider models that assume that an appropriate random time serves as a proxy for anything that causes the ESO's holder to exercise the option early, namely, reflects the ESO holder's job termination risk as well as early exercise behaviour. In this context, we study the problem of ESO valuation by means of mean-variance hedging. Our analysis is based on dynamic programming and uses PDE techniques. We also express the ESO's value that we derive as the expected discounted payoff that the ESO yields with respect to an equivalent martingale measure, which does not coincide with the minimal martingale measure or the variance-optimal measure. Furthermore, we present a numerical study that illustrates aspects or our theoretical results

Forecasting tillage and soil warming effects on earthworm populations

1. Healthy soils are crucial for sustainable food production, but tillage limits the biological regulation of essential ecosystem services. Better understanding of the mechanisms driving management effects on soil ecosystem engineers is needed to support sustainable management under environmental change. 2. This paper presents the EEEworm (Energy–Environment–Earthworm) model, a mechanistic individual-based model (IBM) of Lumbricus terrestris populations. L. terrestris is a dominant earthworm species in undisturbed habitats and is closely associated with numerous ecosystem services such as water flow regulation, soil structure and crop production. In reduced tillage agriculture a decline in mechanical disturbance allows for L. terrestris proliferation, whilst the activities of L. terrestris can replace many of the soil functions provided by tillage. 3. Extensive EEEworm validation with eight published studies (average R2 = 0.84) demonstrates a mechanistic approach which can extrapolate between diverse soil, management and weather conditions. EEEworm simulation experiments elucidate that a combination of direct and indirect tillage effects lead to population declines in tilled fields, with litter removal from the soil surface being the main driver. 4. We investigate the effects of different tillage intensities under historical and projected soil warming conditions, and find that future warmer and drier soils in our simulation exacerbate the effects of deep ploughing on L. terrestris population declines. These effects result from warmer and drier soil conditions increasing individual metabolic rates and tillage reducing food availability to meet energy demands. 5. Synthesis and applications. Pre-emptive strategies to mitigate climate change impacts on soil health in agroecosystems should focus on decreasing tillage intensity and retention of crop residues following tillage. EEEworm has the potential to benefit land managers, policy makers, risk assessors and regulators by providing a tool to forecast how soil systems respond to combinations of land management and environmental change. To allow better cost-benefit analysis of contrasting land management systems a future aim of mechanistic models like EEEworm is to incorporate the links between earthworm populations, soil functions and ecosystem services

Drainage Water Management for the Midwest

https://lib.dr.iastate.edu/abe_eng_extensionpubs/1000/thumbnail.jp

Agricultural Impacts of Climate Change in Indiana and Potential Adaptations

While all sectors of the economy can be impacted by climate variability and change, the agricultural sector is arguably the most tightly coupled to climate where changes in precipitation and temperature directly control plant growth and yield, as well as livestock production. This paper analyzes the direct and cascading effects of temperature, precipitation, and carbon dioxide (CO2) on agronomic and horticultural crops, and livestock production in Indiana through 2100. Due to increased frequency of drought and heat stress, models predict that the yield of contemporary corn and soybean varieties will decline by 8–21% relative to yield potential, without considering CO2 enhancement, which may offset soybean losses. These losses could be partially compensated by adaptation measures such as changes in cropping systems, planting date, crop genetics, soil health, and providing additional water through supplemental irrigation or drainage management. Changes in winter conditions will pose a threat to some perennial crops, including tree and fruit crops, while shifts in the USDA Hardiness Zone will expand the area suitable for some fruits. Heat stress poses a major challenge to livestock production, with decreased feed intake expected with temperatures exceeding 29 °C over 100 days per year by the end of the century. Overall, continued production of commodity crops, horticultural crops, and livestock in Indiana is expected to continue with adaptations in management practice, cultivar or species composition, or crop rotation

Indiana’s Agriculture in a Changing Climate: A Report from the Indiana Climate Change Impacts Assessment

Indiana has long been one of the nation’s leaders in agricultural productivity. Favorable temperatures and precipitation help Indiana farmers generate over $31 billion worth of sales per year, making the state 11th in total agricultural products sold. Changes to the state’s climate over the coming decades, including increasing temperatures, changes in precipitation amounts and patterns, and rising levels of carbon dioxide (CO2) in the air will result in several direct and indirect impacts to the state’s agricultural industry. This report from the Indiana Climate Change Impacts Assessment (IN CCIA) describes how projected changes in the state’s climate will affect the health of livestock and poultry, growing season conditions for crops, the types of crops that can be planted, soil health and water quality as well as weed, pest and disease pressure for agricultural production statewide

Fate and transport of tylosin-resistant bacteria and macrolide resistance genes in artificially drained agricultural fields receiving swine manure

Application of manure from swine treated with antibiotics introduces antibiotics and antibiotic resistance genes to soil with the potential for further movement in drainage water, which may contribute to the increase in antibiotic resistance in non-agricultural settings. We compared losses of antibiotic-resistant Enterococcus and macrolide-resistance (erm and msrA) genes in water draining from plots with or without swine manure application under chisel plow and no till conditions. Concentrations of ermB,ermC and ermF were all \u3e 109 copies g− 1 in manure from tylosin-treated swine, and application of this manure resulted in short-term increases in the abundance of these genes in soil. Abundances of ermB, ermC and ermF in manured soil returned to levels identified in non-manured control plots by the spring following manure application. Tillage practices yielded no significant differences (p \u3e 0.10) in enterococci or erm gene concentrations in drainage water and were therefore combined for further analysis. While enterococci and tylosin-resistant enterococci concentrations in drainage water showed no effects of manure application, ermB and ermF concentrations in drainage water from manured plots were significantly higher (p \u3c 0.01) than concentrations coming from non-manured plots. ErmB and ermF were detected in 78% and 44%, respectively, of water samples draining from plots receiving manure. Although ermC had the highest concentrations of the three genes in drainage water, there was no effect of manure application on ermC abundance. MsrA was not detected in manure, soil or water. This study is the first to report significant increases in abundance of resistance genes in waters draining from agricultural land due to manure application

Temporal Dynamics of Preferential Flow to a Subsurface Drain

We conducted a sequential tracer leaching study on a 24.4 by 42.7 m field plot to investigate the temporal behavior of chemical movement to a 1.2-m deep field drain during irrigation and subsequent rainfall events over a 14-d period. The herbicides atrazine [6-chloroN-ethyl-N′-(1-methylethyl)-1,3,5-triazine-2,4-diamine], and alachlor [2-chloro-N-(2,6-diethylphenyl)-N-(methoxymethyl)acetamide] along with the conservative tracer Br were applied to a 1-m wide strip, offset 1.5 m laterally from a subsurface drain pipe, immediately before an 11.3-h long, 4.2-mm h−1 irrigation. Three additional conservative tracers, pentafluorobenzoate (PF), o-trifluoromethylbenzoate (TF), and difluorobenzoate (DF) were applied to the strip during the irrigation at 2-h intervals. Breakthrough of Br and the two herbicides occurred within the first 2-h of irrigation, indicating that a fraction of the solute transport was along preferential flow paths. Retardation and attenuation of the herbicides indicated that there was interaction between the chemicals and the soil lining the preferential pathways. The conservative tracers applied during the later stages of irrigation arrived at the subsurface drain much faster than tracers applied earlier. The final tracer, applied 6 h after the start of irrigation (DF), took only 15 min and 1 mm of irrigation water to travel to the subsurface drain. Model simulations using a two-dimensional, convective, and dispersive numerical model without an explicit preferential flow component failed to reproduce Br tracer concentrations in the drain effluent, confirming the importance of preferential flow. This study showed that preferential flow in this soil is not a uniform process during a leaching event

Measured and Predicted Solute Transport in a Tile Drained Field

Most solute transport measurement techniques are tedious and require extensive soil excavation. A field experiment was conducted to evaluate whether surface transport properties determined by a nondestructive time domain reflectometry (TDR) technique could be used to accurately predict tile flux concentrations. A 14 by 14 m field plot selected above a 1.1-m deep tile drain was studied. Low electrical conductivity (EC) water was sprinkled on the plot surface, and after reaching a steady-state condition, a pulse of calcium chloride solution (16.3 cm) with an EC of 23 dS m−1 was applied through the same sprinklers. Time domain reflectometry equipment was used to record the change in EC of surface (∼ top 2 cm) soil at 45 locations. The EC of the tile drainage flow was measured continuously with an EC probe. The surface convective lognormal transfer (CLT) function parameters, log mean irrigation depth, μI, and its standard deviation, σI, were found to be 3.44 and 0.94 [ln(cm)], respectively, for a reference depth of 110 cm. These surface parameters were used in a one-dimensional (1-D) CLT model and in a two-dimensional (2-D) model (CLT vertical function combined with exponential horizontal transfer function) to predict the tile flux concentrations. The 1-D CLT model predicted an earlier arrival time of chemicals to the tile drain than observed values. The root mean square error, RMSE, of the 1-D CLT predictions was 0.123, and the coefficient of efficiency, E, was −0.47. The 2-D model predictions of tile flux concentrations were similar to the observed values. The root mean squared errors (RMSE) and E were 0.023 and 0.94, respectively. The findings suggest that in this field soil, the surface solute transport properties determined by TDR could be combined with a 2-D transport model to make reasonable predictions of tile flux concentrations