Distribution Of Market Prices Research Articles

Role of Renewables in Energy Storage Economic Viability in the Western Balkans

Given the growing shares of renewable energy sources in the grids, the interest in energy storage systems has increased. The role of pumped hydro energy storage systems as flexible solutions for managing peak and off-peak prices from nuclear and fossil power plants in previous systems is now revitalized in the liberalized systems, with a volatile generation of wind and solar energy. Thus, understanding of the patterns behind the economics of energy storage is crucial for the further integration of energy storage in the grids. In this paper, the factors that impact the economic viability of energy storage in electricity markets are analyzed. The method of approach used in this study considers the electricity market price distribution, full load hours, the total costs of energy storage, and linear regression analysis. Using revenues from arbitraging a 10-megawatt (MW) pumped hydro storage system in the Western Balkans, resulting from the electricity market price distribution and the analysis of the total costs of storage, an econometric model is created. This model shows the impacting factors of energy storage development in the context of the rising renewables sector. Research shows that the previous hypothesis about the integration of energy storage systems in proportion to the increase in shares of renewables in the grids is incorrect. There is a significant correlation between energy storage revenues, the dependent variable, and the independent variables of hydro, wind, and solar generation. The conducted analysis indicates the future arbitraging opportunities of pumped hydro energy storage systems and provides useful insights for energy storage investors and policymakers. During the transitional period, until the deployment of renewables changes the effects of fossil power plants, energy storage price arbitrage is profitable and desirable for 500, 1000, and 2000 full load hours in the Western Balkan region. Despite the need for flexibility, with more renewables in the grids, large-scale energy storage systems will not be economically viable in the long run because of “revenue cannibalization”.

A multimodal approach for improving market price estimation in online advertising

Learning the distribution of market prices is an important and challenging issue for demand-side platforms (DSPs) that serve as advertisers’ agents to compete for online advertising placements in real-time bidding (RTB) systems. Many existing approaches make an assumption that the market prices follow an unimodal distribution. However, based on analytical insights from real-world datasets, we found the distinct multimodal characteristics underlying the distribution of market prices. Moreover, the impression-level features for each ad are also ignored by these approaches in prediction, reducing the accuracy further. To address these problems, a Gaussian Mixture Model (GMM) is proposed in this paper to describe and discriminate the multimodal distribution of market price by utilizing the impression-level features. To further improve its robustness, GMM is extended into a censored version (CGMM) to handle the right-censored challenge in RTB systems (i.e., the market price is only visible to the winner of the ad auction. Thus, the dataset is always biased). Extensive experiments on two real-world public datasets demonstrate that GMM and CGMM significantly outperform 10 state-of-the-art baselines in terms of Wasserstein distance, KL-divergence, ANLP and MSE. To the best of our knowledge, this paper is the first work to simultaneously deal with the multimodal nature of market price distribution and the right-censored challenge in existing RTB systems. It will enable future RTB systems to develop more realistic bidding strategies to enhance the efficiency of online advertising placement auctioning.

Time-consistent lifetime portfolio selection under smooth ambiguity

<p style='text-indent:20px;'>This paper studies the optimal consumption, life insurance and investment problem for an income earner with uncertain lifetime under smooth ambiguity model. We assume that risky assets have unknown market prices that result in ambiguity. The individual forms his belief, that is, the distribution of market prices, according to available information. His ambiguity attitude, which is similar to the risk attitude described by utility function <inline-formula><tex-math id="M1">\begin{document}$ U $\end{document}</tex-math></inline-formula>, is represented by an ambiguity preference function <inline-formula><tex-math id="M2">\begin{document}$ \phi $\end{document}</tex-math></inline-formula>. Under the smooth ambiguity model, the problem becomes time-inconsistent. We derive the extended Hamilton-Jacobi-Bellman (HJB) equation for the equilibrium value function and equilibrium strategy. Then, we obtain the explicit solution for the equilibrium strategy when both <inline-formula><tex-math id="M3">\begin{document}$ U $\end{document}</tex-math></inline-formula> and <inline-formula><tex-math id="M4">\begin{document}$ \phi $\end{document}</tex-math></inline-formula> are power functions. We find that a more risk- or ambiguity-averse individual will consume less, buy more life insurance and invest less. Moreover, we find that the Tobin-Markowitz separation theorem is no longer applicable when ambiguity attitude is taken into consideration. The investment strategy will change with the characteristics of the decision maker, such as risk attitude, ambiguity attitude and age.</p>

The Endowment Effect and Beliefs About the Market.

The endowment effect occurs when people assign a higher value to an item they own than to the same item when they do not own it, and this effect is often taken to reflect an ownership-induced change in the intrinsic value people assign to the object. However recent evidence shows that valuations made by buyers and sellers are influenced by market prices provided for the individual products, suggesting a role for beliefs about the markets. Here we elicit individuals’ beliefs about whole distributions of market prices, enabling us to quantify whether or not a given transaction constitutes a “good deal” and to demonstrate how an endowment effect may reflect such considerations. In a meta-analysis and three laboratory experiments, we show for the first time that ownership has no effect on beliefs about either: (a) the quality of the item or (b) the appropriate market price for the item. Instead, we show that sellers demand a price for the item that matches their beliefs about the item’s relative quality and the distribution of market prices in the market. Buyers, in contrast, offer less than what they believe the appropriate market price is. Thus, we argue that the endowment effect may largely reflect “adaptively rational” behavior on the part of both buyers and sellers (given their beliefs about relevant markets) rather than any ownership-induced bias or change in intrinsic preferences.

The cadastral value as a tool for monitoring the real estate market value

In the theory and practice of real estate valuation, in analytical studies of the dynamics of real estate markets there is a problem of tracking changes in market prices. The apparent simplicity of this task leads to the fact that in everyday practice both market participants and professional analysts are satisfied with observations of average prices. The advantage of this traditional approach is computational simplicity. However, in the conditions of presence of a large number of special software and extensive statistical material can be used more complex research methods. The purpose of this article is to research big current market data of real estate objects and compare these data with the cadastral value determined in accordance with Russian legislation as the market value at the specified date. In this regard, there are problems associated with the multidimensional distribution of market prices and cadastral values. The article presents the method of calculation of changes of the real estate market prices on the basis of comparison of two-dimensional prices distributions of offers and cadastral prices for two periods. The main problem in studying the dynamics of real estate market prices is the inability to track the change in market prices for each property, as objects are constantly put up for sale and removed from it. The work carried out in the Russian Federation in 2014 to establish the cadastral value of real estate opens opportunity to analyze two-dimensional distributions of current market and cadastral prices and to assess the dynamic characteristics of the market for any real estate objects. The main result of article is the method which allows to apprise the market value of real estate in real time when new market data come by their comparison with the previously established cadastral value. Cadastral value is assumed to be defined as market value at the valuation date.

A Comparison Between Two Shape Parameters Estimators for (Burr-XII) Distribution

This paper deals with defining Burr-XII, and how to obtain its p.d.f., and CDF, since this distribution is one of failure distribution which is compound distribution from two failure models which are Gamma model and weibull model. Some equipment may have many important parts and the probability distributions representing which may be of different types, so found that Burr by its different compound formulas is the best model to be studied, and estimated its parameter to compute the mean time to failure rate. Here Burr-XII rather than other models is consider because it is used to model a wide variety of phenomena including crop prices, household income, option market price distributions, risk and travel time. It has two shape-parameters (α, r) and one scale parameter (λ) which is considered known. So, this paper defines the p.d.f. and CDF and derives its Moments formula about origin, and also derive the Moments estimators of two shapes parameters (α, r) in addition to maximum likelihood estimators as well as percentile estimators, the scale parameter (λ) is not estimated (as it is considered known). The comparison between three methods is done through simulation procedure taking different sample size (n=30, 60, 90) and different sets of initial values for (α, r, λ).It is observed that the moment estimators are the best estimator with percentage (46%) ,(42%) respectively compared with other estimators.

Random Walk Model From the Point of View of Algorithmic Trading

Despite the fact that an intraday market price distribution is not normal, the random walk model of price behaviour is as important for the understanding of basic principles of the market as the pendulum model is a starting point of many fundamental theories in physics. This model is a good zero order approximation for liquid fast moving markets where the queue position is less important than the price action. In this paper we present an exact solution for the cost of the static passive slice execution. It is shown, that if a price has a random walk behaviour, there is no optimal limit level for an order execution: all levels have the same execution cost as an immediate aggressive execution at the beginning of the slice. Additionally the estimations for the risk of a limit order as well as the probability of a limit order execution as functions of the slice time and standard deviation of the price are derived.

Dynamic price dispersion in Bertrand–Edgeworth competition

This paper studies a dynamic oligopoly model of price competition under demand uncertainty. Sellers are endowed with one unit of the good and compete by posting prices in every period. Buyers each demand one unit of the good and have a common reservation price. They have full information regarding the prices posted by each firm in the market; hence, search is costless. The number of buyers coming to the market in each period is random. Demand uncertainty is said to be high if there are at least two non-zero demand states that give a seller different option values of waiting to sell. Our model features a unique symmetric Markov perfect equilibrium in which price dispersion prevails if and only if the degree of demand uncertainty is high. Several testable theoretical implications on the distribution of market prices are derived.

Pricing Strategy versus Heterogeneous Shopping Behavior under Market Price Dispersion

We consider the ubiquitous problem of a seller competing in a market of a product with dispersed prices and having limited information about both his competitors’ prices and the shopping behavior of his potential customers. Given the distribution of market prices, the distribution of consumers’ shopping behavior, and the seller’s cost as inputs, we find the computational solution for the pricing strategy that maximizes his expected profits. We analyze the seller’s solution with respect to different exogenous perturbations of parametric and functional inputs. For that purpose, we produce synthetic price data using the family of Generalized Error Distributions that includes normal and quasiuniform distributions as particular cases, and we also generate consumers’ shopping data from different behavioral assumptions. Our analysis shows that, beyond price mean and dispersion, the shape of the price distribution plays a significant role in the seller’s pricing solution. We focus on the seller’s response to an increasing diversity in consumers’ shopping behavior. We show that increasing heterogeneity in the shopping distribution typically lowers seller’s prices and expected profits.

The Riddle of Volatility Clusters

In this financial engineering research we evaluate if observed non ­normalities in the market price distributions are caused mainly by a volatility clustering or also by another non­clustering mechanism. Such findings allow us to assess accor d­ ing to which rules the market price is actually developing or even make conclusions about market price directional forecasting chances, based on the realistic financial processes which we assign to the clustering and non ­clustering mechanisms. In the research we suggest certain methodology how to recognize these processes behind the market price development. We apply the method to the European government bonds market and for the comparison also to 1 day periods of S&P 500 Index development, with respect to the different time periods. Based on the findings we confirm the combination of both the volatility clustering and the non ­clustering processes to be active inside 1 day periods and to be responsible for measured non­normalities. We also find significant non ­clustering mechanism in 30 and 60 minute periods in case of European government bonds.

Optimal procurement portfolios when using B2Bs: A model and analysis

B2Bs are online markets where buyers and sellers trade products either in the spot market or via derivate instruments such as option contracts. Our goal in this paper is to show how procurement managers, in addition to buying on the spot market in cash (physical transactions), can integrate risk management tools (paper transactions) to mitigate risk over multiple time periods. Specifically, our scenario includes a buyer who is making procurement decisions to satisfy demand. Demand can be satisfied either by buying and exercising options on the B2B (for a price) or by directly trading on the spot market with an uncertain spot market price distribution. Over a two-period time horizon, we provide a model to compute the optimal number of options and physical quantities of the product that are needed to satisfy demand while minimizing relevant procurement and inventory costs over the two periods.

Incorporating reliability evaluation into the uncertainty analysis of electricity market price

A novel model and algorithm for analyzing the uncertainties in electricity market is proposed in this paper. In this model, bidding decision is formulated as a probabilistic model that takes into account the decision-maker's willingness to bid, risk preferences, the fluctuation of fuel-price, etc. At the same time, generating unit's uncertain output model is considered by its forced outage rate (FOR). Based on the model, the uncertainty of market price is then analyzed. Taking the analytical results into consideration, not only the reliability of the power system can be conventionally analyzed, but also the possible distribution of market prices can be easily obtained. The probability distribution of market prices can be further used to calculate the expected output and the sales income of generating unit in the market. Based on these results, it is also possible to evaluate the risk involved by generating units. A simple system with four generating units is used to illustrate the proposed algorithm. The proposed algorithm and the modeling technique are expected to helpful to the market participants in making their economic decisions.

Long‐term changes in the trophic level of the Celtic Sea fish community and fish market price distribution

Summary The intensive exploitation of fish communities often leads to substantial reductions in the abundance of target species, with ramifications for the structure and stability of the ecosystem as a whole. We explored changes in the mean trophic level of the Celtic Sea (ICES divisions VII f–j) fish community using commercial landings, survey data and estimates of trophic level derived from the analysis of nitrogen stable isotopes. Our analyses showed that there has been a significant decline in the mean trophic level of survey catches from 1982 to 2000 and a decline in the trophic level of landings from 1946 to 1998. The decline in mean trophic level through time resulted from a reduction in the abundance of large piscivorous fishes and an increase in smaller pelagic species which feed at a lower trophic level. Similar patterns of decline in the trophic level of both catches and landings imply that there have been substantial changes in the underlying structure of the Celtic Sea fish community and not simply a change in fishery preferences. We suggest that the reported changes in trophic structure result from reductions in the spawning stock biomass of traditional target species associated with intensive fishing, together with long‐term climate variability. The relative distribution of fish market prices has changed significantly over the past 22 years, with high trophic level species experiencing greater price rises than lower trophic level species. Although decreased abundance of high trophic level species will ultimately have negative economic consequences, the reduction in mean trophic level of the fish community as a whole may allow the system to sustain higher fishery yields. Management objectives in this fishery will depend on the relative values that society attaches to economic profit and protein production.

The futility of utility: how market dynamics marginalize Adam Smith

Economic theorizing is based on the postulated, nonempiric notion of utility. Economists assume that prices, dynamics, and market equilibria are supposed to be derived from utility. The results are supposed to represent mathematically the stabilizing action of Adam Smith's invisible hand. In deterministic excess demand dynamics I show the following. A utility function generally does not exist mathematically due to nonintegrable dynamics when production/investment are accounted for, resolving Mirowski's thesis. Price as a function of demand does not exist mathematically either. All equilibria are unstable. I then explain how deterministic chaos can be distinguished from random noise at short times. In the generalization to liquid markets and finance theory described by stochastic excess demand dynamics, I also show the following. Market price distributions cannot be rescaled to describe price movements as ‘equilibrium’ fluctuations about a systematic drift in price. Utility maximization does not describe equilibrium. Maximization of the Gibbs entropy of the observed price distribution of an asset would describe equilibrium, if equilibrium could be achieved, but equilibrium does not describe real, liquid markets (stocks, bonds, foreign exchange). There are three inconsistent definitions of equilibrium used in economics and finance, only one of which is correct. Prices in unregulated free markets are unstable against both noise and rising or falling expectations: Adam Smith's stabilizing invisible hand does not exist, either in mathematical models of liquid market data, or in real market data.

A dynamical model describing stock market price distributions

High-frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well established by empirical evidence. Specifically, probability distributions have the following properties: (i) They are not Gaussian and their center is well adjusted by Lévy distributions. (ii) They are long-tailed but have finite moments of any order. (iii) They are self-similar on many time scales. Finally, (iv) at small time scales, price volatility follows a non-diffusive behavior. We extend Merton's ideas on speculative price formation and present a dynamical model resulting in a characteristic function that explains in a natural way all of the above features. The knowledge of such a distribution opens a new and useful way of quantifying financial risk. The results of the model agree – with high degree of accuracy – with empirical data taken from historical records of the Standard & Poor's 500 cash index.

Search at different price levels: the impact of knowledge and search cost

Studies the impact of search cost and prior knowledge on consumer search at different price points in a market price distribution for telecommunications products. In an experiment it is found that buyers search differently on premium price products than they do on moderate and low price products, and that this behavior depends on the search costs of the purchase situation and the knowledge of the buyer involved. The results suggest a number of implications for marketers on the role of premium priced brands, ranging from product line pricing strategy to information communication strategy.

On the Contribution of Research and Development Activities to the Output of an Industrial Corporation, Part 5 : Supplement on the Market Price distribution of Products of a Chemical Company

On the Contribution of Research and Development Activities to the Output of an Industrial Corporation, Part 5 : Supplement on the Market Price distribution of Products of a Chemical Company

Bullish or bearish: A Bayesian dichotomous model to forecast turning points in the foreign exchange market

While most practitioners in the foreign exchange market always try to detect whether the market is “bullish” or “bearish,” there is no application of statistic method to predict the dichotomous sentiment. This paper presents a Bayesian trading system to forecast market trends and reversals. By estimating the market price distributions, we can apply the optimal stopping rules to answer the question and control the trading system according to the a priori probability and risk preference of the investor.

Discrete Equilibrium Price Dispersion

An explicit solution of an equilibrium model with price-setting firms and searching customers makes possible a number of comparativestatics predictions about how cost differences among firms, search costs of customers, and taxes will affect the mean and variance of the distribution of market prices. Another implication of the model is that a firm's demand depends on the difference between its price and the average price in the market.

Capacity and Market Structure

The principal objective of this essay is to bring together the theory of a firm's capacity decisions and certain facts of market structure which contribute to the uncertainty about the prices or revenues realized by the firm. The connecting link between the two is furnished by the fact that, under conditions of "competition among a few," the output decisions of an individual firm have a random effect on its own revenues. It is shown that considerations of uncertainty influence the capacity or utilization decisions in a manner which is fundamentally different from that under "pure" competition. In the latter case, a production decision of an individual firm does not change the probability distribution of market prices. This and some related considerations make it practically useful to interpret "capacity" in terms of profitable output--allowing the standards of profitability to be quite arbitrary. Defined in terms of profitable output, capacity emerges as a random variable--random because of the uncertain fulfillment of the standards of profitability. It is also seen that the usual interpretation of the present-value integral is to be abandoned in favor of another which, on a formal level, has close ties with the theory of integration over the space of random functions.