Complex Asset Research Articles

Project Evaluation: A Practical Asset Pricing Method

This paper presents a practical approach to project evaluation using techniques of modern financial economics, with a sample application to oil development under a complex tax system. The method overcomes shortcomings of conventional discounted cash flow (DCF) methods which are either imprecise about the relation between economic value and uncertainty, or are rigid and unrealistic in the required assumptions about how a project's risks (and therefore its value) are influenced by market conditions, the project physical structure, and tax and contract provisions. It is based on the formulation and estimation of an "information model" which represents the resolution over time of uncertainties underlying a project (oil prices in the examples shown). The project can then be valued using derivative asset valuation, which replicates the consequences of a complex asset by a traded portfolio of simpler assets (in our case, riskless bonds and future claims on oil).

Using optimisation for integrated water network management

Abstract The water industry has undergone radical change in the late 1980s and changes continue apace. We have been, and will continue to be, under increasing pressure to reduce costs and increase service within a framework where regulations are becoming tighter and demanding more information to achieve and substantiate performance. The major challenge will lie with the leaders of the industry. They have to achieve the right attitude, management technique and technical excellence to meet the requirements of change and to create adaptable organizations that can manage the challenges of change in a positive and proactive way. Cultural change has started but has a long way to go. We must overcome the traditional attitude of many water suppliers, which has typically been one of the ‘professional stewardship’ of a resource in which they supply water in the way they believe to be best. This must change and is changing to a more commercially minded management which is ‘customer centred’ rather than ‘product centred’. We must realize that our organizations manage a complex asset base which has to work towards strictly defined objectives of service quality, operational efficiency and regulatory requirements, all of which, as time goes on, are influenced more and more by substantial external forces.

Byssinosis: the acute effect on ventilatory capacity of dusts in cotton ginneries, cotton, sisal, and jute mills.

Conceding that a great deal has been written about which asset classes are best held in a taxable compared to a tax-deferred account, the author looks at investors who have taxable and tax-deferred accounts of varying size, varying investment horizons, income tax brackets that are less than 39.6% or will decline below 39.6% upon retirement, complex asset allocation strategies using five asset classes, and investors who can hold their asset until death, getting the step-up in cost benefit. Starting with the ultimate goal to recommend asset allocation strategies that maximize after-tax returns, the article proposes a rule of thumb for allocating a variety of asset classes between the tax deferred and taxable portfolios. It concludes with a number of tables that offer a quick means to calculate tax liability without the benefit of a computer model and illustrate the asset allocation strategies discussed within the article.