Rational plunging and the option value of sequential investment : the case of petroleum exploration

Any investor in assets that can be exploited sequentially faces a tradeoff between diversification and concentration. Loading a portfolio with correlated assets has the potential to inflate variance, but also creates information spillovers and real options that may augment total return and mitigate variance. The task of optimal portfolio design is therefore to strike an appropriate balance between diversification and concentration. We examine this tradeoff in the context of petroleum exploration. Using a simple model of geological dependence, we show that the value of learning options creates incentives for explorationists to plunge into dependence; i.e., to assemble portfolios of highly correlated exploration prospects. Risk-neutral and risk-averse investors are distinguished not by the plunging phenomenon, but by the threshold level of dependence that triggers such behavior. Aversion to risk does not imply aversion to dependence. Indeed the potential to plunge may be larger for risk-averse investors than for risk-neutral investors. To test the empirical validity of our theory, we examine the concentration of bids tendered in petroleum lease sales. We find that higher levels of risk aversion are associated with a revealed preference for more highly concentrated (i.e., less diversified) portfolios

Diversification and the value of exploration portfolios

Conventional wisdom holds that dependence among geological prospects increases exploration risk. However, dependence also creates the option to truncate exploration if early results are discouraging. We show that the value of this option creates incentives for explorationists to plunge into dependence; i.e., to assemble portfolios of highly correlated exploration prospects. Risk-neutral and risk-averse investors are distinguished not by the plunging phenomenon, but by the threshold level of dependence that triggers such behavior. Aversion to risk does not imply aversion to dependence. Indeed the potential to plunge may be larger for risk-averse investors than for risk-neutral investors

Managing a portfolio of real options : sequential exploration of dependent prospects

We consider the impact of sequential investment and active management on the value of a portfolio of real options. The options are assumed to be interdependent, in that exercise of any one is assumed to produce, in addition to some intrinsic value based on an underlying asset, further information regarding the values of other options based on related assets. We couch the problem in terms of oil exploration, where a discrete number of related geological prospects are available for drilling, and management₂s objective is to maximize the expected value of the combined exploration campaign. Management₂s task is complex because the expected value of the investment sequence depends on the order in which options are exercised. A basic conclusions is that, although dependence increases the variance of potential outcomes, it also increases the expected value of the embedded portfolio of options and magnifies the value of optimal management. Stochastic dynamic programming techniques may be used to establish the optimal sequence. Given certain restrictions on the risk structure, however, we demonstrate that the optimal dynamic program can be implemented by policies that are relatively simple to execute. In other words, we provide sufficient conditions for the optimality of intuitive decision rules, like "biggest first," "most likely first," or "greatest intrinsic value first," and we develop exact analytic expressions for the implied value of the portfolio. This permits the value of active management to be assessed directly. Finally, the sufficient conditions we identify are shown to be consistent with plausible exploration risk structures

Large Binocular Telescope and Sptizer Spectroscopy of Star-forming Galaxies at 1 < z < 3: Extinction and Star Formation Rate Indicators

We present spectroscopic observations in the rest-frame optical and near- to mid-infrared wavelengths of four gravitationally lensed infrared (IR) luminous star-forming galaxies at redshift 1 < z < 3 from the LUCIFER instrument on the Large Binocular Telescope and the Infrared Spectrograph on Spitzer. The sample was selected to represent pure, actively star-forming systems, absent of active galactic nuclei. The large lensing magnifications result in high signal-to-noise spectra that can probe faint IR recombination lines, including Pa and Br at high redshifts. The sample was augmented by three lensed galaxies with similar suites of unpublished data and observations from the literature, resulting in the final sample of seven galaxies. We use the IR recombination lines in conjunction with H observations to probe the extinction, Av, of these systems, as well as testing star formation rate (SFR) indicators against the SFR measured by fitting spectral energy distributions to far-IR photometry. Our galaxies occupy a range of Av from 0 to 5.9 mag, larger than previously known for a similar range of IR luminosities at these redshifts. Thus, estimates of SFR even at z 2 must take careful count of extinction in the most IR luminous galaxies.We also measure extinction by comparing SFR estimates from optical emission lines with those from far- IR measurements. The comparison of results from these two independent methods indicates a large variety of dust distribution scenarios at 1 < z < 3. Without correcting for dust extinction, the H SFR indicator underestimates the SFR; the size of the necessary correction depends on the IR luminosity and dust distribution scenario. Individual SFR estimates based on the 6.2m polycyclic aromatic hydrocarbon emission line luminosity do not show a systematic discrepancy with extinction, although a considerable, 0.2 dex, scatter is observed

Focused Ion Beam Fabrication

Contains reports on five research projects.DARPA/Naval Electronic Systems Command (Contract MDA-903-85-C-0215)Charles Stark Draper Laboratory (Contract DL-H-261827)U.S. Navy - Office of Naval Research (Contract N00014-84-K-0073)Nippon Telephone and TelegraphHitachi Central Research Laborator

LBT and Spitzer Spectroscopy of Star-Forming Galaxies at 1 < z < 3: Extinction and Star Formation Rate Indicators

We present spectroscopic observations in the rest-frame optical and near- to mid-infrared wavelengths of four gravitationally lensed infrared (IR) luminous star-forming galaxies at redshift 1 < z < 3 from the LUCIFER instrument on the Large Binocular Telescope and the Infrared Spectrograph on Spitzer. The sample was selected to represent pure, actively star-forming systems, absent of active galactic nuclei. The large lensing magnifications result in high signal-to-noise spectra that can probe faint IR recombination lines, including Pa-alpha and Br-alpha at high redshifts. The sample was augmented by three lensed galaxies with similar suites of unpublished data and observations from the literature, resulting in the final sample of seven galaxies. We use the IR recombination lines in conjunction with H-alpha observations to probe the extinction, Av, of these systems, as well as testing star formation rate (SFR) indicators against the SFR measured by fitting spectral energy distributions to far-IR photometry. Our galaxies occupy a range of Av from ~0 to 5.9 mag, larger than previously known for a similar range of IR luminosities at these redshifts. Thus, estimates of SFR even at z ~ 2 must take careful count of extinction in the most IR luminous galaxies. We also measure extinction by comparing SFR estimates from optical emission lines with those from far-IR measurements. The comparison of results from these two independent methods indicates a large variety of dust distribution scenarios at 1 < z < 3. Without correcting for dust extinction, the H-alpha SFR indicator underestimates the SFR; the size of the necessary correction depends on the IR luminosity and dust distribution scenario. Individual SFR estimates based on the 6.2 micron PAH emission line luminosity do not show a systematic discrepancy with extinction, although a considerable, ~0.2 dex scatter is observed.Comment: Accepted for publication in The Astrophysical Journal; 14 pages, 8 figure

Weather and our food supply

The steep rate of increase in yield of grain crops in the United States since the mid-1950\u27s has resulted in the use of the term explosion in technology. Surplus grains piled up to such proportions after the 1960 · harvest that acreage control appeared. to be in order. But despite substantial reductions in acreages after 1960 the increased output per acre has just about compensated for acreage reductions. During this period of rapid increase in output per acre there has been a growing tendency to believe that technology has reduced the influence of weather on grain production so that we no longer need to fear shortages due to unfavorable weather. There is also a popular belief that acreage control$ fail to achieve the objective of production control, and that public funds are being wasted in storing surplus grains which we don\u27t need. There is increasing evidence, however, that a period of favorable weather interacted with technology to produce our recent high yields, and that perhaps half of the increase in yield per acre since 1950 has been due to a change to more favorable weather for grain crops. These findings have important implications in continued support for research in production technology and in the way in which we look at our surplus stocks of feed and food grains. If a period of favorable weather has been responsible for half of the increase in yields since 19501 then what can we expect if the weather trend reverses itself for a few years? Do we have periodicity in weather, and have we just passed through a run of favorable years that might be followed by a run of unfavorable years? Should we treat our surplus grains as reserves? How does our rate of growth in grain output compare with the needs of a growing world population? And of course I in the background of these questions is one big question -- how much of our recent high yields is really due to weather? To answer these important questions the Center for Agriculture and Economic Development invited outstanding authorities to present their ideas under three main headings: (1) Techniques for Evaluation of Weather Variables in Agricultural Production I (2) Periodicity in Weather Patterns: Implications in Agriculture I and (3) Weather Considerations in Agricultural Policy. The papers have been assembled in the order of their presentation under the general outline above.https://lib.dr.iastate.edu/card_reports/1021/thumbnail.jp

Adenosine A2A receptor modulation of hippocampal CA3-CA1 synapse plasticity during associative learning in behaving mice

© 2009 Nature Publishing Group All rights reservedPrevious in vitro studies have characterized the electrophysiological and molecular signaling pathways of adenosine tonic modulation on long-lasting synaptic plasticity events, particularly for hippocampal long-term potentiation(LTP). However, it remains to be elucidated whether the long-term changes produced by endogenous adenosine in the efficiency of synapses are related to those required for learning and memory formation. Our goal was to understand how endogenous activation of adenosine excitatory A2A receptors modulates the associative learning evolution in conscious behaving mice. We have studied here the effects of the application of a highly selective A2A receptor antagonist, SCH58261, upon a well-known associative learning paradigm - classical eyeblink conditioning. We used a trace paradigm, with a tone as the conditioned stimulus (CS) and an electric shock presented to the supraorbital nerve as the unconditioned stimulus(US). A single electrical pulse was presented to the Schaffer collateral–commissural pathway to evoke field EPSPs (fEPSPs) in the pyramidal CA1 area during the CS–US interval. In vehicle-injected animals, there was a progressive increase in the percentage of conditioning responses (CRs) and in the slope of fEPSPs through conditioning sessions, an effect that was completely prevented (and lost) in SCH58261 (0.5 mg/kg, i.p.)-injected animals. Moreover, experimentally evoked LTP was impaired in SCH58261- injected mice. In conclusion, the endogenous activation of adenosine A2A receptors plays a pivotal effect on the associative learning process and its relevant hippocampal circuits, including activity-dependent changes at the CA3-CA1 synapse.This study was supported by grants from the Spanish Ministry of Education and Research (BFU2005-01024 and BFU2005-02512), Spanish Junta de Andalucía (BIO-122 and CVI-02487), and the Fundación Conocimiento y Cultura of the Pablo de Olavide University (Seville, Spain).B. Fontinha was in receipt of a studentship from a project grant (POCI/SAU-NEU/56332/2004) supported by Fundação para a Ciência e Tecnologia (FCT, Portugal), and of an STSM from Cost B30 concerted action of the EU

Potential climatic transitions with profound impact on Europe

We discuss potential transitions of six climatic subsystems with large-scale impact on Europe, sometimes denoted as tipping elements. These are the ice sheets on Greenland and West Antarctica, the Atlantic thermohaline circulation, Arctic sea ice, Alpine glaciers and northern hemisphere stratospheric ozone. Each system is represented by co-authors actively publishing in the corresponding field. For each subsystem we summarize the mechanism of a potential transition in a warmer climate along with its impact on Europe and assess the likelihood for such a transition based on published scientific literature. As a summary, the ‘tipping’ potential for each system is provided as a function of global mean temperature increase which required some subjective interpretation of scientific facts by the authors and should be considered as a snapshot of our current understanding. <br/

Mid-Infrared Determination of Total Infrared Luminosity and Star Formation Rates of Local and High-Redshift Galaxies

We demonstrate estimating the total infrared luminosity, LIR, and star formation rates (SFRs) of star-forming galaxies at redshift 0 < z < 2.8 from single-band 24 micron observations, using local spectral energy distributions (SED) templates without introducing additional free parameters. Our method is based on characterizing the SEDs of galaxies as a function of their LIR surface density, which is motivated by the indications that the majority of IR luminous star-forming galaxies at 1 < z < 3 have extended star-forming regions, in contrast to the strongly nuclear concentrated, merger-induced starbursts in local luminous and ultraluminous IR galaxies. We validate our procedure for estimating LIR by comparing the resulting LIRs with those measured from far-IR observations at 0 < z < 2.8. AGNs were excluded using X-ray and 3.6-8.0 micron observations, which are generally available in deep cosmological survey fields. The Gaussian fits to the distribution of the discrepancies between the LIR measurements from single-band 24 micron and Herschel observations have sigma < 0.1 dex, with ~10% of objects disagreeing by more than 0.2 dex. Since the 24 micron estimates are based on SEDs for extended galaxies, this agreement suggests that ~90% of IR galaxies at high z are indeed much more physically extended than local counterparts of similar LIR, consistent with recent independent studies of the fractions of galaxies forming stars in the main-sequence and starburst modes, respectively. Because we have not introduced empirical corrections to enhance these estimates, in principle, our method should be applicable to lower luminosity galaxies. This will enable use of the 21 micron band of the Mid-Infrared Instrument (MIRI) on board the JWST to provide an extremely sensitive tracer of obscured SFR in individual star-forming galaxies across the peak of the cosmic star formation history.Comment: 17 pages, 7 figures, ApJ accepte