123 research outputs found
Pricing an European gas storage facility using a continuous-time spot price model with GARCH diffusion
In this article we present both a theoretical framework and a solved example for pricing an European gas storage facility and computing the optimal strategy for its operation. As a representative price index we choose the Dutch TTF day-ahead gas price. We present statistical evidence that the volatility of this index is time-varying, so we introduce a new continuous-time model by incorporating GARCH diffusion into an Ornstein-Uhlenbeck process. Based on this price process we use dynamic programming methods to derive partial differential equations for pricing a storage facility. As an example we apply our methodology to a storage site located in Epe at the German-Dutch border. In this context we investigate the effects of multiple contract types, and perform a sensitivity analysis for all model parameters. We obtain a value surface displaying the properties of a financial straddle. Both volatility and mean reversion influence the facility value - but only around the long-run mean of the gas price. The terminal condition, which includes information about the contract provisions, is of importance if it contains e.g. penalty terms for low inventory levels. Otherwise its influence is diminishing for increasing lease periods. --TTF gas price,GARCH diffusion,natural gas storage,dynamic computing
Equilibrium and Real Options in the Ethanol Industry: Modelling and Empirical Evidence
In the last twenty years a large number of competitive ethanol rms have estab-
lished operations in the US. Ethanol, produced from corn, is blended with pure
gasoline to produce fuel. Producers hold an option to turn o unpro table plants.
Blenders choose to substitute ethanol for gasoline at or beyond the minimum ratio
set by the government. We propose and test an equilibrium model for blenders and
producers that accounts for the real optionality embedded in the industry. The
model, driven by corn and gasoline prices, leads to analytical expressions for the
price and physical output of ethanol, and for the value of an ethanol producer. We
confront the model with data between 2000 and 2017. In line with the model, we
con rm that ethanol was largely priced as the maximum of rescaled gasoline and
corn prices. Historical output levels between the mandate and installed capacity
were explained by the model. Finally, the share price dynamics for the largest
public ethanol producer in the US was consistent in some aspects with the value
of a real option.Journal of Commodity Markets (JCM
An Analytic Solution for a Vasicek Interest Rate Convertible Bond Model
This paper provides the analytic solution to the partial differential equation for the value of a convertible bond. The equation assumes a Vasicek model for the interest rate and a geometric Brownian motion model for the stock price. The solution is obtained using integral transforms
Program Evaluation in Medical Education: An Overview of the Utilization-focused Approach
Medical school administrators, educators, and other key personnel must often make difficult choices regarding the creation, retention, modification, or termination of the various programs that take place at their institutions. Program evaluation is a data-driven strategy to aide decision-makers in determining the most appropriate outcome for programs within their purview. The purpose of this brief article is to describe one program evaluation model, the utilization-focused approach. In particular, we address the focus of this model, the personal factor, the role of the evaluator, and the evaluation process. Based on the flexibility of this model as well as its focus on stakeholder involvement, we encourage readers to consider the utilization-focused approach when evaluating programs
Blockin: Multi-Chain Sign-In Standard with Micro-Authorizations
The tech industry is currently making the transition from Web 2.0 to Web 3.0,
and with this transition, authentication and authorization have been reimag-
ined. Users can now sign in to websites with their unique public/private key
pair rather than generating a username and password for every site. How-
ever, many useful features, like role-based access control, dynamic resource
owner privileges, and expiration tokens, currently don’t have efficient Web
3.0 solutions. Our solution aims to provide a flexible foundation for resource
providers to implement the aforementioned features on any blockchain
through a two-step process. The first step, authorization, creates an on-chain
asset which is to be presented as an access token when interacting with a
resource. The second step, authentication, verifies ownership of an asset
through querying the blockchain and cryptographic digital signatures. Our
solution also aims to be a multi-chain standard, whereas current Web 3.0
sign-in standards are limited to a single blockchain
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