Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 1795

Search results for: transmission pricing

1795 Investigation on Cost Reflective Network Pricing and Modified Cost Reflective Network Pricing Methods for Transmission Service Charges

Authors: K. Iskandar, N. H. Radzi, R. Aziz, M. S. Kamaruddin, M. N. Abdullah, S. A. Jumaat

Abstract:

Nowadays many developing countries have been undergoing a restructuring process in the power electricity industry. This process has involved disaggregating former state-owned monopoly utilities both vertically and horizontally and introduced competition. The restructuring process has been implemented by the Australian National Electricity Market (NEM) started from 13 December 1998, began operating as a wholesale market for supply of electricity to retailers and end-users in Queensland, New South Wales, the Australian Capital Territory, Victoria and South Australia. In this deregulated market, one of the important issues is the transmission pricing. Transmission pricing is a service that recovers existing and new cost of the transmission system. The regulation of the transmission pricing is important in determining whether the transmission service system is economically beneficial to both side of the users and utilities. Therefore, an efficient transmission pricing methodology plays an important role in the Australian NEM. In this paper, the transmission pricing methodologies that have been implemented by the Australian NEM which are the Cost Reflective Network Pricing (CRNP) and Modified Cost Reflective Network Pricing (MCRNP) methods are investigated for allocating the transmission service charges to the transmission users. A case study using 6-bus system is used in order to identify the best method that reflects a fair and equitable transmission service charge.

Keywords: cost-reflective network pricing method, modified cost-reflective network pricing method, restructuring process, transmission pricing

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1794 Influence of Power Flow Controller on Energy Transaction Charges in Restructured Power System

Authors: Manisha Dubey, Gaurav Gupta, Anoop Arya

Abstract:

The demand for power supply increases day by day in developing countries like India henceforth demand of reactive power support in the form of ancillary services provider also has been increased. The multi-line and multi-type Flexible alternating current transmission system (FACTS) controllers are playing a vital role to regulate power flow through the transmission line. Unified power flow controller and interline power flow controller can be utilized to control reactive power flow through the transmission line. In a restructured power system, the demand of such controller is being popular due to their inherent capability. The transmission pricing by using reactive power cost allocation through modified matrix methodology has been proposed. The FACTS technologies have quite costly assembly, so it is very useful to apportion the expenses throughout the restructured electricity industry. Therefore, in this work, after embedding the FACTS devices into load flow, the impact on the costs allocated to users in fraction to the transmission framework utilization has been analyzed. From the obtained results, it is clear that the total cost recovery is enhanced towards the Reactive Power flow through the different transmission line for 5 bus test system. The fair pricing policy towards reactive power can be achieved by the proposed method incorporating FACTS controller towards cost recovery of the transmission network.

Keywords: interline power flow controller, transmission pricing, unified power flow controller, cost allocation

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1793 Dynamic Pricing With Demand Response Managment in Smart Grid: Stackelberg Game Approach

Authors: Hasibe Berfu Demi̇r, Şakir Esnaf

Abstract:

In the past decade, extensive improvements have been done in electrical grid infrastructures. It is very important to make plans on supply, demand, transmission, distribution and pricing for the development of the electricity energy sector. Based on this perspective, in this study, Stackelberg game approach is proposed for demand participation management (DRM), which has become an important component in the smart grid to effectively reduce power generation costs and user bills. The purpose of this study is to examine electricity consumption from a dynamic pricing perspective. The results obtained were compared with the current situation and the results were interpreted.

Keywords: lectricity, stackelberg, smart grid, demand response managment, dynamic pricing

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1792 An Investigation for Information Asymmetry Nexus IPO Under-Pricing: A Case of Pakistan

Authors: Saqib Mehmood, Naveed Iqbal Chaudhry, Asif Mehmood

Abstract:

This study intends to investigate the information asymmetry theories of IPO and under-pricing in Pakistan. The purpose of the study is to validate the information asymmetry about firm value which leads to under-pricing. A total of 55 IPOs listed from 2000-2011 were included in this study. OLS multiple regression was applied to achieve the objectives of this study. The findings of the study confirm the significance of information asymmetry on under-pricing in Pakistan. The findings have implications for issuing firms and prospective investors.

Keywords: information asymmetry, initial public offerings, under-pricing, firm value

Procedia PDF Downloads 382
1791 Predatory Pricing at Services Markets: Incentives, Mechanisms, Standards of Proving, and Remedies

Authors: Mykola G. Boichuk

Abstract:

The paper concerns predatory pricing incentives and mechanisms in the markets of services, as well as its anti-competitive effects. As cost estimation at services markets is more complex in comparison to markets of goods, predatory pricing is more difficult to detect in the provision of services. For instance, this is often the case for professional services, which is analyzed in the paper. The special attention is given to employment markets as de-facto main supply markets for professional services markets. Also, the paper concerns such instances as travel agents' services, where predatory pricing may have implications not only on competition but on a wider range of public interest as well. Thus, the paper develops on effective ways to apply competition law rules on predatory pricing to the provision of services.

Keywords: employment markets, predatory pricing, services markets, unfair competition

Procedia PDF Downloads 240
1790 4G LTE Dynamic Pricing: The Drivers, Benefits, and Challenges

Authors: Ahmed Rashad Harb Riad Ismail

Abstract:

The purpose of this research is to study the potential of Dynamic Pricing if deployed by mobile operators and analyse its effects from both operators and consumers side. Furthermore, to conclude, throughout the research study, the recommended conditions for successful Dynamic Pricing deployment, recommended factors identifying the type of markets where Dynamic Pricing can be effective, and proposal for a Dynamic Pricing stakeholders’ framework were presented. Currently, the mobile telecommunications industry is witnessing a dramatic growth rate in the data consumption, being fostered mainly by higher data speed technology as the 4G LTE and by the smart devices penetration rates. However, operators’ revenue from data services lags behind and is decupled from this data consumption growth. Pricing strategy is a key factor affecting this ecosystem. Since the introduction of the 4G LTE technology will increase the pace of data growth in multiples, consequently, if pricing strategies remain constant, then the revenue and usage gap will grow wider, risking the sustainability of the ecosystem. Therefore, this research study is focused on Dynamic Pricing for 4G LTE data services, researching the drivers, benefits and challenges of 4G LTE Dynamic Pricing and the feasibility of its deployment in practice from different perspectives including operators, regulators, consumers, and telecommunications equipment manufacturers point of views.

Keywords: LTE, dynamic pricing, EPC, research

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1789 Price Setting and the Role of Accounting Information

Authors: Chris Durden, Peter Lane

Abstract:

Cost accounting information potentially plays an important role in price setting. According to prior research fixed and variable cost information often is a key influence on pricing decisions. The literature highlights the benefits of applying systematic costing systems for enhanced price setting processes. This paper explores how costing systems are used for pricing decisions in the tourism and hospitality industry relative to other sources of price setting information. Pricing based on full cost information was found to have relatively greater importance and short-term survival and customer oriented objectives were found to be the more important pricing objectives. This paper contributes to the literature by providing a recent analysis of accounting’s role in price setting within the tourism and hospitality industry.

Keywords: cost accounting systems, pricing decisions, cost-plus pricing, market pricing, tourism industry

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1788 Econophysics: The Use of Entropy Measures in Finance

Authors: Muhammad Sheraz, Vasile Preda, Silvia Dedu

Abstract:

Concepts of econophysics are usually used to solve problems related to uncertainty and nonlinear dynamics. In the theory of option pricing the risk neutral probabilities play very important role. The application of entropy in finance can be regarded as the extension of both information entropy and the probability entropy. It can be an important tool in various financial methods such as measure of risk, portfolio selection, option pricing and asset pricing. Gulko applied Entropy Pricing Theory (EPT) for pricing stock options and introduced an alternative framework of Black-Scholes model for pricing European stock option. In this article, we present solutions to maximum entropy problems based on Tsallis, Weighted-Tsallis, Kaniadakis, Weighted-Kaniadakies entropies, to obtain risk-neutral densities. We have also obtained the value of European call and put in this framework.

Keywords: option pricing, Black-Scholes model, Tsallis entropy, Kaniadakis entropy, weighted entropy, risk-neutral density

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1787 Potentials and Influencing Factors of Dynamic Pricing in Business: Empirical Insights of European Experts

Authors: Christopher Reichstein, Ralf-Christian Härting, Martina Häußler

Abstract:

With a continuously increasing speed of information exchange on the World Wide Web, retailers in the E-Commerce sector are faced with immense possibilities regarding different online purchase processes like dynamic price settings. By use of Dynamic Pricing, retailers are able to set short time price changes in order to optimize producer surplus. The empirical research illustrates the basics of Dynamic Pricing and identifies six influencing factors of Dynamic Pricing. The results of a structural equation modeling approach show five main drivers increasing the potential of dynamic price settings in the E-Commerce. Influencing factors are the knowledge of customers’ individual willingness to pay, rising sales, the possibility of customization, the data volume and the information about competitors’ pricing strategy.

Keywords: e-commerce, empirical research, experts, dynamic pricing (DP), influencing factors, potentials

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1786 Implied Adjusted Volatility by Leland Option Pricing Models: Evidence from Australian Index Options

Authors: Mimi Hafizah Abdullah, Hanani Farhah Harun, Nik Ruzni Nik Idris

Abstract:

With the implied volatility as an important factor in financial decision-making, in particular in option pricing valuation, and also the given fact that the pricing biases of Leland option pricing models and the implied volatility structure for the options are related, this study considers examining the implied adjusted volatility smile patterns and term structures in the S&P/ASX 200 index options using the different Leland option pricing models. The examination of the implied adjusted volatility smiles and term structures in the Australian index options market covers the global financial crisis in the mid-2007. The implied adjusted volatility was found to escalate approximately triple the rate prior the crisis.

Keywords: implied adjusted volatility, financial crisis, Leland option pricing models, Australian index options

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1785 Investigating the Effective Parameters in Determining the Type of Traffic Congestion Pricing Schemes in Urban Streets

Authors: Saeed Sayyad Hagh Shomar

Abstract:

Traffic congestion pricing – as a strategy in travel demand management in urban areas to reduce traffic congestion, air pollution and noise pollution – has drawn many attentions towards itself. Unlike the satisfying findings in this method, there are still problems in determining the best functional congestion pricing scheme with regard to the situation. The so-called problems in this process will result in further complications and even the scheme failure. That is why having proper knowledge of the significance of congestion pricing schemes and the effective factors in choosing them can lead to the success of this strategy. In this study, first, a variety of traffic congestion pricing schemes and their components are introduced; then, their functional usage is discussed. Next, by analyzing and comparing the barriers, limitations and advantages, the selection criteria of pricing schemes are described. The results, accordingly, show that the selection of the best scheme depends on various parameters. Finally, based on examining the effective parameters, it is concluded that the implementation of area-based schemes (cordon and zonal) has been more successful in non-diversion of traffic. That is considering the topology of the cities and the fact that traffic congestion is often created in the city centers, area-based schemes would be notably functional and appropriate.

Keywords: congestion pricing, demand management, flat toll, variable toll

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1784 A Theoretical Framework of Multifactor Systematic Risks in Equity Market: Behavioral Finance Paradigm

Authors: Jasman Tuyon, Zamri Ahmad

Abstract:

Behavioral asset pricing research has been gaining momentum since in 1990s. However, it is still incomplete and has been criticized for some philosophical, theoretical and model specification limitations. Due to these drawbacks, investors’ behaviors as a source of risk in behavioral asset pricing modeling still remains disputable. This paper aims to address these issues with an alternative perspective based on behavioral finance paradigm. Specifically, this paper proposes a theoretical linkages of both fundamental and behavioral risks on stock prices formation and an extension of the multifactor stock pricing model by combining multi-factor fundamentals and behavioral risks factors.

Keywords: behavioral finance, multifactor asset pricing, behavioral risks, fundamental risks

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1783 Derivation of Fractional Black-Scholes Equations Driven by Fractional G-Brownian Motion and Their Application in European Option Pricing

Authors: Changhong Guo, Shaomei Fang, Yong He

Abstract:

In this paper, fractional Black-Scholes models for the European option pricing were established based on the fractional G-Brownian motion (fGBm), which generalizes the concepts of the classical Brownian motion, fractional Brownian motion and the G-Brownian motion, and that can be used to be a tool for considering the long range dependence and uncertain volatility for the financial markets simultaneously. A generalized fractional Black-Scholes equation (FBSE) was derived by using the Taylor’s series of fractional order and the theory of absence of arbitrage. Finally, some explicit option pricing formulas for the European call option and put option under the FBSE were also solved, which extended the classical option pricing formulas given by F. Black and M. Scholes.

Keywords: European option pricing, fractional Black-Scholes equations, fractional g-Brownian motion, Taylor's series of fractional order, uncertain volatility

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1782 Optimized Scheduling of Domestic Load Based on User Defined Constraints in a Real-Time Tariff Scenario

Authors: Madia Safdar, G. Amjad Hussain, Mashhood Ahmad

Abstract:

One of the major challenges of today’s era is peak demand which causes stress on the transmission lines and also raises the cost of energy generation and ultimately higher electricity bills to the end users, and it was used to be managed by the supply side management. However, nowadays this has been withdrawn because of existence of potential in the demand side management (DSM) having its economic and- environmental advantages. DSM in domestic load can play a vital role in reducing the peak load demand on the network provides a significant cost saving. In this paper the potential of demand response (DR) in reducing the peak load demands and electricity bills to the electric users is elaborated. For this purpose the domestic appliances are modeled in MATLAB Simulink and controlled by a module called energy management controller. The devices are categorized into controllable and uncontrollable loads and are operated according to real-time tariff pricing pattern instead of fixed time pricing or variable pricing. Energy management controller decides the switching instants of the controllable appliances based on the results from optimization algorithms. In GAMS software, the MILP (mixed integer linear programming) algorithm is used for optimization. In different cases, different constraints are used for optimization, considering the comforts, needs and priorities of the end users. Results are compared and the savings in electricity bills are discussed in this paper considering real time pricing and fixed tariff pricing, which exhibits the existence of potential to reduce electricity bills and peak loads in demand side management. It is seen that using real time pricing tariff instead of fixed tariff pricing helps to save in the electricity bills. Moreover the simulation results of the proposed energy management system show that the gained power savings lie in high range. It is anticipated that the result of this research will prove to be highly effective to the utility companies as well as in the improvement of domestic DR.

Keywords: controllable and uncontrollable domestic loads, demand response, demand side management, optimization, MILP (mixed integer linear programming)

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1781 Hybrid Multipath Congestion Control

Authors: Akshit Singhal, Xuan Wang, Zhijun Wang, Hao Che, Hong Jiang

Abstract:

Multiple Path Transmission Control Protocols (MPTCPs) allow flows to explore path diversity to improve the throughput, reliability and network resource utilization. However, the existing solutions may discourage users to adopt the solutions in the face of multipath scenario where different paths are charged based on different pricing structures, e.g., WiFi vs cellular connections, widely available for mobile phones. In this paper, we propose a Hybrid MPTCP (H-MPTCP) with a built-in mechanism to incentivize users to use multiple paths with different pricing structures. In the meantime, H-MPTCP preserves the nice properties enjoyed by the state-of-the-art MPTCP solutions. Extensive real Linux implementation results verify that H-MPTCP can indeed achieve the design objectives.

Keywords: network, TCP, WiFi, cellular, congestion control

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1780 Option Pricing Theory Applied to the Service Sector

Authors: Luke Miller

Abstract:

This paper develops an options pricing methodology to value strategic pricing strategies in the services sector. More specifically, this study provides a unifying taxonomy of current service sector pricing practices, frames these pricing decisions as strategic real options, demonstrates accepted option valuation techniques to assess service sector pricing decisions, and suggests future research areas where pricing decisions and real options overlap. Enhancing revenue in the service sector requires proactive decision making in a world of uncertainty. In an effort to strategically price service products, revenue enhancement necessitates a careful study of the service costs, customer base, competition, legalities, and shared economies with the market. Pricing decisions involve the quality of inputs, manpower, and best practices to maintain superior service. These decisions further hinge on identifying relevant pricing strategies and understanding how these strategies impact a firm’s value. A relatively new area of research applies option pricing theory to investments in real assets and is commonly known as real options. The real options approach is based on the premise that many corporate decisions to invest or divest in assets are simply an option wherein the firm has the right to make an investment without any obligation to act. The decision maker, therefore, has more flexibility and the value of this operating flexibility should be taken into consideration. The real options framework has already been applied to numerous areas including manufacturing, inventory, natural resources, research and development, strategic decisions, technology, and stock valuation. Additionally, numerous surveys have identified a growing need for the real options decision framework within all areas of corporate decision-making. Despite the wide applicability of real options, no study has been carried out linking service sector pricing decisions and real options. This is surprising given the service sector comprises 80% of the US employment and Gross Domestic Product (GDP). Identifying real options as a practical tool to value different service sector pricing strategies is believed to have a significant impact on firm decisions. This paper identifies and discusses four distinct pricing strategies available to the service sector from an options’ perspective: (1) Cost-based profit margin, (2) Increased customer base, (3) Platform pricing, and (4) Buffet pricing. Within each strategy lie several pricing tactics available to the service firm. These tactics can be viewed as options the decision maker has to best manage a strategic position in the market. To demonstrate the effectiveness of including flexibility in the pricing decision, a series of pricing strategies were developed and valued using a real options binomial lattice structure. The options pricing approach discussed in this study allows service firms to directly incorporate market-driven perspectives into the decision process and thus synchronizing service operations with organizational economic goals.

Keywords: option pricing theory, real options, service sector, valuation

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1779 Optimal Pricing Mechanism for Non-Storable Goods: The Power of Opaque Products

Authors: Juana M. Alonso, M. Pilar Socorro

Abstract:

In this paper, we develop a theoretical model to analyze firms’ optimal pricing mechanism for non-storable goods. With non-storable goods, firms may be interested in introducing opaque products in order to have two different markets: the transparent market and the opaque market. This may allow firms to sell all their non-storable goods, discriminate prices between markets, and maximize revenues. We prove that in a situation of low demand in the transparent market, if all consumers are risk neutral or risk loving, introducing opaque products is always the most profitable strategy for the firm. However, if consumers are risk averse, the firm needs to offer opaque products with an additional discount. We analyze under which circumstances selling opaque products with such a discount is the optimal pricing strategy. Throughout the paper, we use airlines’ pricing strategy as an application for non-storable goods (flights), opaque products (blind tickets), and continuously changing demand (as it is nowadays the case in the air transport industry due to the Covid-19 pandemic).

Keywords: opaque products, risk attitude, expected utility, pricing strategy

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1778 Hybrid Equity Warrants Pricing Formulation under Stochastic Dynamics

Authors: Teh Raihana Nazirah Roslan, Siti Zulaiha Ibrahim, Sharmila Karim

Abstract:

A warrant is a financial contract that confers the right but not the obligation, to buy or sell a security at a certain price before expiration. The standard procedure to value equity warrants using call option pricing models such as the Black–Scholes model had been proven to contain many flaws, such as the assumption of constant interest rate and constant volatility. In fact, existing alternative models were found focusing more on demonstrating techniques for pricing, rather than empirical testing. Therefore, a mathematical model for pricing and analyzing equity warrants which comprises stochastic interest rate and stochastic volatility is essential to incorporate the dynamic relationships between the identified variables and illustrate the real market. Here, the aim is to develop dynamic pricing formulations for hybrid equity warrants by incorporating stochastic interest rates from the Cox-Ingersoll-Ross (CIR) model, along with stochastic volatility from the Heston model. The development of the model involves the derivations of stochastic differential equations that govern the model dynamics. The resulting equations which involve Cauchy problem and heat equations are then solved using partial differential equation approaches. The analytical pricing formulas obtained in this study comply with the form of analytical expressions embedded in the Black-Scholes model and other existing pricing models for equity warrants. This facilitates the practicality of this proposed formula for comparison purposes and further empirical study.

Keywords: Cox-Ingersoll-Ross model, equity warrants, Heston model, hybrid models, stochastic

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1777 Decomposition of Funds Transfer Pricing Components in Islamic Bank: The Exposure Effect of Shariah Non-Compliant Event Rectification Process

Authors: Azrul Azlan Iskandar Mirza

Abstract:

The purpose of Funds Transfer Pricing (FTP) for Islamic Bank is to promote prudent liquidity risk-taking behavior of business units. The acquirer of stable deposits will be rewarded whilst a business unit that generates long-term assets will be charged for added liquidity funding risks. In the end, it promotes risk-adjusted pricing by incorporating profit rate risk and liquidity risk component in the product pricing. However, in the event of Shariah non-compliant (SNCE), FTP components will be examined in the rectification plan especially when Islamic banks need to purify the non-compliance income. The finding shows that the determination between actual and provision cost will defer the decision among Shariah committee in Islamic banks. This paper will review each of FTP components to ensure the classification of actual and provision costs reflect the decision on rectification process on SNCE. This will benefit future decision and its consistency of Islamic banks.

Keywords: fund transfer pricing, Islamic banking, Islamic finance, shariah non-compliant event

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1776 Enhancing the Pricing Expertise of an Online Distribution Channel

Authors: Luis N. Pereira, Marco P. Carrasco

Abstract:

Dynamic pricing is a revenue management strategy in which hotel suppliers define, over time, flexible and different prices for their services for different potential customers, considering the profile of e-consumers and the demand and market supply. This means that the fundamentals of dynamic pricing are based on economic theory (price elasticity of demand) and market segmentation. This study aims to define a dynamic pricing strategy and a contextualized offer to the e-consumers profile in order to improve the number of reservations of an online distribution channel. Segmentation methods (hierarchical and non-hierarchical) were used to identify and validate an optimal number of market segments. A profile of the market segments was studied, considering the characteristics of the e-consumers and the probability of reservation a room. In addition, the price elasticity of demand was estimated for each segment using econometric models. Finally, predictive models were used to define rules for classifying new e-consumers into pre-defined segments. The empirical study illustrates how it is possible to improve the intelligence of an online distribution channel system through an optimal dynamic pricing strategy and a contextualized offer to the profile of each new e-consumer. A database of 11 million e-consumers of an online distribution channel was used in this study. The results suggest that an appropriate policy of market segmentation in using of online reservation systems is benefit for the service suppliers because it brings high probability of reservation and generates more profit than fixed pricing.

Keywords: dynamic pricing, e-consumers segmentation, online reservation systems, predictive analytics

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1775 Nonparametric Estimation of Risk-Neutral Densities via Empirical Esscher Transform

Authors: Manoel Pereira, Alvaro Veiga, Camila Epprecht, Renato Costa

Abstract:

This paper introduces an empirical version of the Esscher transform for risk-neutral option pricing. Traditional parametric methods require the formulation of an explicit risk-neutral model and are operational only for a few probability distributions for the returns of the underlying. In our proposal, we make only mild assumptions on the pricing kernel and there is no need for the formulation of the risk-neutral model for the returns. First, we simulate sample paths for the returns under the physical distribution. Then, based on the empirical Esscher transform, the sample is reweighted, giving rise to a risk-neutralized sample from which derivative prices can be obtained by a weighted sum of the options pay-offs in each path. We compare our proposal with some traditional parametric pricing methods in four experiments with artificial and real data.

Keywords: esscher transform, generalized autoregressive Conditional Heteroscedastic (GARCH), nonparametric option pricing

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1774 Evaluation of the Efficiency of Intelligent Systems in Traffic Congestion Pricing Schemes in Urban Streets

Authors: Saeed Sayyad Hagh Shomar

Abstract:

Traffic congestion pricing as one of the demand management strategies constrains expenditure to network users so that it helps reduction in traffic congestion and environment pollution like air pollution. Despite the development of congestion pricing schemes for traffic in our country, the matters of traditional toll collection, drivers’ waste of time and delay in traffic are still widespread. Electronic toll collection as a part of the intelligent transportation system provides the possibility of collecting tolls without car-stop and traffic disruption. Unlike the satisfying outcomes of using intelligent systems in congestion pricing schemes, implementation costs and technological problems are the barriers in these schemes. In this research first, a variety of electronic pay toll systems and their components are introduced then their functional usage is discussed. In the following, by analyzing and comparing the barriers, limitations and advantages, the selection criteria of intelligent systems are described and the results show that the choice of the best technology depends on the various parameters which, by examining them, it is concluded that in a long-term run and by providing the necessary conditions, DSRC technology as the main system in the schemes and ANPR as a major backup system of the main one can be employed.

Keywords: congestion pricing, electronic toll collection, intelligent systems, technology, traffic

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1773 Co-Integrated Commodity Forward Pricing Model

Authors: F. Boudet, V. Galano, D. Gmira, L. Munoz, A. Reina

Abstract:

Commodities pricing needs a specific approach as they are often linked to each other and so are expectedly doing their prices. They are called co-integrated when at least one stationary linear combination exists between them. Though widespread in economic literature, and even if many equilibrium relations and co-movements exist in the economy, this principle of co-movement is not developed in derivatives field. The present study focuses on the following problem: How can the price of a forward agreement on a commodity be simulated, when it is co-integrated with other ones? Theoretical analysis is developed from Gibson-Schwartz model and an analytical solution is given for short maturities contracts and under risk-neutral conditions. The application has been made to crude oil and heating oil energy commodities and result confirms the applicability of proposed method.

Keywords: co-integration, commodities, forward pricing, Gibson-Schwartz

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1772 Improved Performance Scheme for Joint Transmission in Downlink Coordinated Multi-Point Transmission

Authors: Young-Su Ryu, Su-Hyun Jung, Myoung-Jin Kim, Hyoung-Kyu Song

Abstract:

In this paper, improved performance scheme for joint transmission is proposed in downlink (DL) coordinated multi-point(CoMP) in case of constraint transmission power. This scheme is that serving transmission point (TP) request a joint transmission to inter-TP and selects one pre-coding technique according to channel state information(CSI) from user equipment(UE). The simulation results show that the bit error rate(BER) and throughput performances of the proposed scheme provide high spectral efficiency and reliable data at the cell edge.

Keywords: CoMP, joint transmission, minimum mean square error, zero-forcing, zero-forcing dirty paper coding

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1771 Pricing European Options under Jump Diffusion Models with Fast L-stable Padé Scheme

Authors: Salah Alrabeei, Mohammad Yousuf

Abstract:

The goal of option pricing theory is to help the investors to manage their money, enhance returns and control their financial future by theoretically valuing their options. Modeling option pricing by Black-School models with jumps guarantees to consider the market movement. However, only numerical methods can solve this model. Furthermore, not all the numerical methods are efficient to solve these models because they have nonsmoothing payoffs or discontinuous derivatives at the exercise price. In this paper, the exponential time differencing (ETD) method is applied for solving partial integrodifferential equations arising in pricing European options under Merton’s and Kou’s jump-diffusion models. Fast Fourier Transform (FFT) algorithm is used as a matrix-vector multiplication solver, which reduces the complexity from O(M2) into O(M logM). A partial fraction form of Pad`e schemes is used to overcome the complexity of inverting polynomial of matrices. These two tools guarantee to get efficient and accurate numerical solutions. We construct a parallel and easy to implement a version of the numerical scheme. Numerical experiments are given to show how fast and accurate is our scheme.

Keywords: Integral differential equations, , L-stable methods, pricing European options, Jump–diffusion model

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1770 Research on Transmission Parameters Determination Method Based on Dynamic Characteristic Analysis

Authors: Baoshan Huang, Fanbiao Bao, Bing Li, Lianghua Zeng, Yi Zheng

Abstract:

Parameter control strategy based on statistical characteristics can analyze the choice of the transmission ratio of an automobile transmission. According to the difference of the transmission gear, the number and spacing of the gear can be determined. Transmission ratio distribution of transmission needs to satisfy certain distribution law. According to the statistic characteristics of driving parameters, the shift control strategy of the vehicle is analyzed. CVT shift schedule adjustment algorithm based on statistical characteristic parameters can be seen from the above analysis, if according to the certain algorithm to adjust the size of, can adjust the target point are in the best efficiency curve and dynamic curve between the location, to alter the vehicle characteristics. Based on the dynamic characteristics and the practical application of the vehicle, this paper presents the setting scheme of the transmission ratio.

Keywords: vehicle dynamics, transmission ratio, transmission parameters, statistical characteristics

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1769 Fama French Four Factor Model: A Study of Nifty Fifty Companies

Authors: Deeksha Arora

Abstract:

The study aims to explore the applicability of the widely used asset pricing models, namely, Capital Asset Pricing Model (CAPM) and the Fama-French Four Factor Model in the Indian equity market. The study will be based on the companies that form part of the Nifty Fifty Index for a period of five years: 2011 to 2016. The asset pricing model is examined by forming portfolios on the basis of three variables – market capitalization (size effect), book-to-market equity ratio (value effect) and profitability. The study provides a basis to test the presence of the Fama-French Four factor model in Indian stock market. This study may provide a basis for future research in the generalized asset pricing model comprising of multiple risk factors.

Keywords: book to market equity, Fama French four factor model, market capitalization, profitability, size effect, value effect

Procedia PDF Downloads 174
1768 EU Regulation 868/04: Report of a Unilateral Approach on Unfair Subsidisation and Unfair Pricing Practices and Its Failure

Authors: Andrea Trimarchi

Abstract:

This paper is designed to provide a comprehensive overview on the EU Regulation No. 868/2004 concerning protection against subsidisation and unfair pricing practices regarding non-EU carriers and causing injury to Community air carriers. The analysis will focus, at first, on the exegetical scrutiny of the legal categories encompassed by the Regulation. In addition to that, while considering the peculiarities of such legal instrument, the attention will be addressed on the assessment on its effectiveness. The Regulation, indeed, having received lots of criticism, is in need of a profound revision. In this context, the present work will try to take into account the policy alternatives. In light of the failure of Regulation 868, which is to be seen as the expression of a unilateral and regional approach, there would seem to be the necessity for the aviation sector to reconsider the topic of subsidisation and unfair pricing practices in a more international oriented manner.

Keywords: non-EU airlines, aviation, subisidisation, unfair

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1767 Asset Pricing Model: A Quality Paradigm

Authors: Urmi Khatri

Abstract:

Capital asset pricing model (CAPM) draws a direct relationship between the risk and the expected rate of return. There was a criticism on the beta and the assumptions of CAPM, as they are not applicable in the real world. Fama French Three Factor Model and Fama French Five Factor Model have given different factors, which have an impact on the return of any asset like size, value, investment and profitability. This study proposes to see Capital Asset pricing Model through the lenses of the quality aspect. In the study, the six factors are studied. The Fama French Five Factor Model and addition of the quality dimension are studied. Here, Graham’s seven quality and quantity criteria are measured to determine the score of the sample firms. Thus, this study tries to check the model fit. The beta coefficient of the quality dimension and the R square value is seen to determine validity of the proposed model. The sample is drawn from the firms listed on Indian Stock Exchange (BSE). For the study, only nonfinancial firms are been selected. The time period of the study is from January 1999 to December 2019. Hence, the primary objective of the study is to check how robust the model becomes after giving the quality dimension to the capital asset pricing model in addition to the size, value, profitability and investment.

Keywords: asset pricing model, CAPM, Graham’s score, G-score, multifactor model, quality

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1766 Price Regulation in Domestic Market: Incentives to Collude in the Deregulated Market

Authors: S. Avdasheva, D. Tsytsulina

Abstract:

In many regulated industries over the world price cap as a method of price regulation replaces cost-plus pricing. It is a kind of incentive regulation introduced in order to enhance productive efficiency by strengthening sellers’ incentives for cost reduction as well as incentives for more efficient pricing. However pricing under cap is not neutral for competition in the market. We consider influence on competition on the markets where benchmark for cap is chosen from when sellers are multi-market. We argue that the impact of price cap regulation on market competition depends on the design of cap. More specifically if cap for one (regulated) market depends on the price of the supplier in other (non-regulated) market, there is sub-type of price cap regulation (known in Russian tariff regulation as ‘netback minus’) that enhance incentives to collude in non-regulated market.

Keywords: price regulation, competition, collusion

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