Piecewise continuous cumulative prospect theory and behavioral financial engineering

We extend the continuous Cumulative Prospect Theory (CPT) by considering piecewise con-tinuous distributions with a finite number of jump discontinuities. Such distributions are rele-vant in practice, for example, within the framework of financial engineering since cash flow distributions of most types of derivatives are only piecewise continuous. In addition, we ex-pand the model with a (piecewise) continuous version of hedonic framing which is, until now, only available in a discrete model setting. We show how to apply the model to a broad class of structured products. Finally, we apply Prospect Theory (PT), CPT, and expected utility theory to a set of different real-life certificates with piecewise continuous and discrete distributions in order to analyze whether there are any significant differences between the theories, and which theory is able to explain the demand behavior of a market participant best. As a result, we recommend the use of the piecewise continuous version of CPT to design products within the framework of behavioral financial engineering. --Continuous Cumulative Prospect Theory,Continuous Hedonic Framing,Behavioral Finance,Financial Engineering

Venture mania in Europe: Its causes and consequences

Over the course of the past twenty years, venture capital has fuelled an entrepreneurial revolution - first in the United States and now in Europe's common market -, which has opened new opportunities for technological innovation, capital investment and employment growth. Some of the most promising opportunities are in science-based industries, like software and biotechnology, which are often seen as driving the transformation to an increasingly knowledge- based economy. Indeed, this transformation would hardly be conceivable without the innovative contributions of business start-ups that rely on venture capital to finance their early stages of growth. So what, if anything, should governments do to support venture capital and help this transformation along? This paper will argue that governments must understand that venture capital is necessarily linked to specialization and therefore cannot be expected to play the same role in any two economies whose place, and contribution, within the international division of labour differ. --

Klimatpåverkan av vätgas som bränsle för tunga fordon i vägtrafiken : En tidsberoende livscykelmetod baserad analys

Currently, the transportation sector stands for one third of all greenhouse gas emissions in Sweden. Hydrogen (H2) could contribute to a decarbonized transportation sector since water is the only direct emission from a fuel cell electric vehicle. The higher energy density of H2 compared to batteries makes H2 better in a zero-emission system for heavy truck vehicles and long-distance transportations. Depending on the different production processes, the climate impact of H2 varies, which encourages a life cycle assessment (LCA) based methodology. The production processes of H2 are commonly referred to as colours, in which H2 from steam methane reforming (SMR) with natural gas as feedstock is known as ‘grey H2’. Further, if carbon capture and storage (CCS) is added, it is referred to as ‘blue H2’. There is a possibility to replace natural gas with biomethane as feedstock, which in this study is referred to as ‘beige H2’, and with CCS it can be called ‘orange H2’. Another production technology is through water-electrolysis from renewable electricity, which is referred to as ‘green H2’. The chosen climate metrics for the LCA study are the global warming potential (GWP) and the absolute global temperature potential (AGTP). The GWP of a heavy fuel cell truck is between 2% to 110% lower than for a conventional diesel truck. Grey H2 contributes with the highest CO2-equivalent emissions and orange H2 contributes with the lowest. To assess the AGTP, different future scenarios were elaborated with H2 implementation as diesel displacement for heavy truck transportation. The future scenarios have different mixes of H2 colours based on future market trends. Depending on the mix of H2 colours, the temperature increase varies from 1.6·10-15 to 1.8·10-15 K/tonne-km, which corresponds to a temperature reduction between 9% to 21% compared to heavy truck transport with only diesel. To reach the Swedish national target of net-zero emissions by 2045, a higher share of renewable fuels together with H2 is most likely necessary