Wholesale electricity market designs in practice do not provide the market participants with adequate mechanisms to hedge their financial risks. Demanders and suppliers will likely face even greater risks with the deepening penetration of variable renewable resources like wind and solar. This paper explores the design of a centralized cash-settled call option market to mitigate such risks. A ca...

We estimate the first econometric model of national civilian firearms market in United States (1946–2016), where per capita firearms-related harm is exceptionally high. Solving simultaneous equation models instrumented by natural disasters and steel prices, employing unique prices quantities data, we find this operates normally, except that stocks may generate some new demand a positive feedbac...

We address the empirical implementation of the static asset allocation problem by developing a forward-looking approach that uses information from market option prices. To this end, constant maturity S&P 500 implied distributions are extracted and subsequently transformed to the corresponding risk-adjusted ones. Then, we form optimal portfolios consisting of a risky and a risk-free asset and ev...

This paper develops and tests a heterogeneous agents model for the option market. Our agents have differing beliefs about the level of volatility of the underlying stock index and trade accordingly. We consider two types of agents: fundamentalists, who are assumed to expect the conditional volatility to return to the unconditional volatility, and chartists who respond solely to noise from the l...

The Sato process model for option prices is expanded to accomodate credit considerations by incorporating a single jump to default occuring at an independent random time with a Weibull distribution. Explicit formulas, in this context, for the bid and ask prices of two price economies that price residual risks to levels of risk acceptability are then derived. Liquidity considerations are thereby...

Economic agents have the possibility to fund the protection of environmental public goods, such as natural ecosystems and biodiversity, facing unknown risks of collapse, which could help to back them up. On the base of the prediction markets, which meet with a degree of success since their introduction, we propose an evolutionary model of an option fund market for the threshold environmental pu...

We call markets in which intermediaries sell networks of suppliers to consumers who are uncertain about their needs "option demand markets." In these markets, suppliers may grant the intermediaries discounts in order to be admitted to their networks. We derive a measure of each supplier's market power within the network; the measure is based on the additional ex ante expected utility consumers ...

We propose using a real options framework to quantify the financial value of cross training. We model the investment decision in cross training as a series of European call options with the same exercise price but with different maturity dates. We use the Black-Scholes formula and the binomial tree approach to find the value of having the option to cross train. A case study shows the applicatio...

pro-market economists usually present “competition” as the only solution of government’s inefficiencies. therefore, having given too much credence to the private sector in economy, they choose market strategy rather than state strategy in economic policies, prizing market choice above state choice, thereby advising strongly privatization policies in the economic system in order to inject ration...