This paper examines price level determination from the perspective of portfolio choice. Arbitrages among money balances, bonds, and investment goods determine their relative demands. Returns to real balance holdings and after-tax returns to investment goods determine the relative values of nominal and real assets. Because expectations of government policies ultimately determine the expected ret...

This paper presents a general intensity-based framework to value executive stock options (ESOs). It builds upon the recent advances in the credit risk modeling arena. The early exercise or forfeiture due to voluntary or involuntary employment termination and the early exercise due to the executive’s desire for liquidity or diversification are modeled as an exogenous point process with random in...

Pacific Economic Bulletin Volume 20 Number 3 2005 © Asia Pacific Press This article seeks to determine the short to mediumterm impact of EU Sugar Protocol reforms on Fiji’s sugar industry. The expected impact on the livelihoods of sugarcane producers, the area remaining under cane, sugar cane output and sugar production are derived under various price scenarios using industry census production ...

Optimal timing for airline ticket purchasing from the consumer’s perspective is challenging principally because buyers have insufficient information for reasoning about future price movements. This paper presents a model for computing expected future prices and reasoning about the risk of price changes. The proposed model is used to predict the future expected minimum price of all available fli...

Projects in the mining industry are undertaken with the objective of maximizing economic value, which is near-universally measured by the Net Present Value (NPV), considering all capital expenditure and operating cash flow. This industry is usually considered high risk because of historically volatile commodity prices (directly impacting revenues) and the fact that very large capital expenditur...

This paper investigates the relationship between aggregate stock market trading volume and the serial correlation of daily stock returns. For both stock indexes and individual large stocks, the first-order daily return autocorrelation tends to decline with volume. The paper explains this phenomenon using a model in which risk-averse "market makers" accommodate buying or selling pressure from "l...

A common characteristic of basic material manufacturers (which account for 85% of all industrial energy use) and of cleantech manufacturers is that they are price-takers in their input and output markets. Variability in those prices has implications for how much a manufacturer should invest in three fundamental types of process improvement. Input price variability reduces the value of improving...

We derive dynamic optimal trading strategies that minimize the expected cost of trading a large block of equity over a fixed time horizon. Specifically, given a fixed block SM of shares to be executed within a fixed finite number of periods 1, and given a price-impact function that yields the execution price of an individual trade as a function of the shares traded and market conditions, we obt...

Generalized Second Price Auction, also known as Ad Word auction, and its variants have been the main mechanism used by search companies to auction positions for sponsored search links. In this paper we study the social welfare of the Nash equilibria of this game under the Bayes-Nash solution concept (i.e., in a partial information setting). In this model, the value of each player for one click ...

A cointegrated vector autoregressive (CVAR) model is estimated to determine the dynamic relationship between Nordic wholesale electricity prices and EU emissions trading scheme (EU-ETS) CO2 allowance prices. An impulse response analysis reveals that electricity prices have large short-term responses to CO2 price shocks, but that this response dampens over time. Using hourly Nordic electricity s...