Option Model Research Articles

Pricing blue carbon to promote the protection and restoration of the marine environment: A real option model

Pricing blue carbon will allow the monetization of the implicit carbon sequestration value of socioeconomic activities in marine ecosystems. This will empower those engaged in marine environment protection and restoration to reap economic benefits while imposing costs on those who harm the marine environment or carbon-emitting enterprises. This can significantly increase the enthusiasm of local governments, enterprises, and others for protecting and restoring the marine environment. However, owing to the characteristics of public goods and the externalities of blue carbon, it is difficult to price them through the supply and demand relationship of the traditional market. This paper focuses on how to price blue carbon under government policies and market uncertainties to encourage investors to engage in blue carbon projects involving the ecological protection and restoration of coastal wetlands. First, a universal blue carbon pricing model is established via the real option approach. The mangrove blue carbon project in Zhanjiang, Guangdong, was used as a case study to evaluate the price of mangrove blue carbon. This research provides technical support for the formation of blue carbon prices, and this method can be used not only to promote the protection and restoration of the marine environment but also to optimize the supply of blue carbon, fully leveraging its role in addressing climate change.

Insurer green financing for a supply chain under cap-and-trade regulation: a capped call contingent claim analysis

This paper introduces a contingent claim analysis to examine sustainable insurance practices. It investigates how life insurers participate in sustainable lending by financing borrowing firms committed to environmentally friendly practices for cleaner production. We establish a capped call option model, where the capped function explicitly considers credit risks associated with borrowing firms in a supply chain engaged in the cap-and-trade mechanism regulated by environmental policies. Our findings reveal that tightening the cap within the cap-and-trade system and reducing green loans can enhance insurer’s interest margins. Conversely, an escalation in the green input ratio across the supply chain may reduce these margins for the insurer. However, reducing low-margin insurance offerings could jeopardize the stability of insurance. The insurer faces financial challenges while supporting borrowing firms in their efforts toward carbon reduction and sustainable production. Notably, the substantial impact of climate change fueled by carbon emissions significantly influences the underwriting of life insurance policies related to human health. Policymakers need to navigate these intricacies to establish a careful balance between environmental objectives and the financial stability of sustainable insurance.

Identifying immunohistochemical biomarkers panel for non-small cell lung cancer in optimizing treatment and forecasting efficacy

BackgroundChemotherapy and immunotherapy for non-small-cell lung cancer (NSCLC) are gaining momentum. However, its long-term efficacy remains limited to only a small fraction of patients. Hence, it is crucial to identify reliable immunohistochemical biomarkers to facilitate the formulation of optimal treatment strategies and to predict therapeutic outcomes.MethodsWe retrospectively analyzed a cohort of 140 patients diagnosed with NSCLC who received chemotherapy or immunotherapy. Using bioinformatics analysis and machine learning techniques, we assessed the role of immunohistochemical biomarkers and clinical characteristics in developing a predictive model for treatment options and outcomes in this population.ResultsOur research has found that immunohistochemical biomarkers can accurately predict treatment regimens and progression-free survival in NSCLC patients with an accuracy rate of 82.1%. We identified an exclusive detection panel for the six vital biomarkers. Of particular note is the role of programmed cell death protein 1 ligand 1 (PD-L1) expression in guiding treatment selection, with high expression predicting better outcomes in the immunotherapy group at a cut-off value of 50%. Non-squamous patients who tested positive for thyroid transcription factor 1 had a longer median progression-free survival, while squamous patients who tested positive for p63 protein or cytokeratin 5/6 expression had a longer median progression-free survival.ConclusionsThe results of our study are highly encouraging, as they revealed a significant correlation between immunohistochemical biomarkers, therapeutic regimens, and prognosis. These findings indicate that our immunohistochemical detection panel has great potential for facilitating customization of therapeutic regimens to improve patient care. The insights gained from this study could help clinicians optimize treatment protocols and ultimately enhance clinical outcomes.

Aligning common prosperity with sustainable development goals 3 and 7 through sustainable insurance

This paper develops a capped-call option model to evaluate sustainable insurance for achieving common prosperity. It integrates policyholder protection (Sustainable Development Goal 3 (SDG 3)) and the cap-and-trade mechanism (SDG 7) in modeling the Gini coefficient, thereby connecting SDGs 3 and 7 with common prosperity. The main findings are as follows. Life insurance policies that prioritize saving features enhance policyholder protection (SDG 3) but can detract from common prosperity. This impact is magnified when the regulatory cap within the cap-and-trade scheme for carbon-intensive manufacturers becomes stricter. High investment risks for carbon-intensive manufacturers reduce policyholder protection but support common prosperity. A stricter cap-and-trade scheme (SDG 7) also reduces policyholder protection and contradicts common prosperity. This paper avoids concluding any inherent inconsistency between the SDGs and common prosperity, as our analysis is based on the structure-conduct-performance paradigm rather than a macro perspective. Policymakers should carefully balance objectives between SDG 3 and common prosperity to ensure that policies promoting individual security do not compromise broader societal well-being and economic equality, as outlined by the SDGs.

Domestic and foreign cap-and-trade regulations, carbon tariffs, and product tariffs during international trade conflicts: A multiproduct cost-efficiency analysis

This paper develops a down-and-out call option model with structural breaks to examine the effects of domestic environmental policies on carbon-intensive firms amid international trade conflicts. The findings reveal that stricter cap-and-trade regulations, carbon tariffs, and product tariffs exacerbate pollutant-specific diseconomies of scale, limit economies of scope, and reduce firm equity. The positive impact on pollutant-specific diseconomies of scale leads to higher pollution, hindering progress toward Sustainable Development Goal 7 (SDG 7: Affordable and Clean Energy) from a multiproduct cost-efficiency perspective. Meanwhile, the negative impact on economies of scope results in fewer products and pollutants, aligning with SDG 7 but conflicting with Sustainable Development Goal 8 (SDG 8: Decent Work and Economic Growth), as the scope measure accounts for efficiency in both products and pollutants. Additionally, the negative impact on firm equity discourages progress toward both SDGs, especially during trade conflicts. In summary, environmental policies distinctly affect firm multiproduct cost efficiency and equity, particularly under varying trade conflict conditions.

Wealth maximisation and residential energy-efficiency retrofits: Insights from a real options model

The slow adoption of residential energy-efficiency retrofits continues to hamper the energy transition. We study incentives for adoption by proposing a model of optimal investment under uncertainty where the wealth-maximising agent has the option to delay. Stochastic portfolio returns and energy prices are taken into account. An extension of the model where the energy carrier is switched, e.g. from gas to electricity, is also considered. Exercise boundaries for the optimal stopping problem are estimated numerically for recent case studies of German buildings. Investment is generally not optimal at current energy prices and market conditions. Increasing correlation between gas and electricity prices erodes the value of technology switching. Comparative statics reveal that energy-efficiency investments become optimal at relatively lower energy prices as wealth, income, and savings behaviour increase, and portfolio drift and volatility decrease. Consequently, incentive to invest in retrofits is far more heterogeneous along wealth dimensions than standard discounted cash flow analyses suggest. An examination of retrofit subsidies demonstrates how free-riding by wealthier agents occurs when subsidies are not appropriately targeted. We show that the pursuit of economic efficiency in subsidy design might have regressive effects on the wealth distribution.

Offshore carbon storage from power plants based on real option and multi‐period source‐sink matching: A case study in the eastern coastal China

Carbon capture utilization and storage (CCUS) emerges as a pivotal strategy for CO2 reduction in the power sector, particularly focusing on the overlooked domain of offshore storage along China's east coast. In spite of the potential high costs, irreversible investments, and lengthy development, offshore storage can still be prospective. Considering autonomous decision-making among emission sources, this study pioneers a CO2 offshore storage investment decision model tailored for coal-fired and gas-fired power plants. Innovating an offshore storage source-sink matching model with a real options model and introducing a pipeline network optimization model allows a realistic source-sink matching strategy to be explored under optimal investment timing. According to the results, among 154 large stationary emission sources in Zhejiang Province, offshore storage could reduce CO2 emissions by 4.59 Gt, utilizing the Qiantang, Minjiang, and Fuzhou depressions. It is economically feasible to implement offshore storage with a whole-process unit cost of 368.8 CNY/tCO2, mainly dominated by capture costs. A hybrid carbon tax-subsidy policy promotes carbon reduction and economic benefits, offering a more effective incentive for emission sources to invest in offshore storage than a single policy. At a hybrid policy price of 250 CNY/tCO2, all 27 selected emission sources are projected to invest in offshore storage by 2048, with a preference for the Qiantang depression as the storage site. Practically, this study provides important technical support and guidance for the large-scale deployment of offshore storage.

Price optimization in supply chain agreements: a comparative analysis of buyback and put option contracts for inventory risk management

AbstractThis paper aims to provide a model of a supply chain in the integrated system and obtain its optimal decision variables. The paper introduces buyback and put option contracts to reduce inventory risk. These contracts were compared in three different cases via a numerical analysis approach. In the first case, the holding cost (h) of a retailer for surplus orders in the buyback contract is equal to the option price (o) in the put option model. The relationship between exercise price (e) in the put option model and buyback price (b) in the buyback contract was obtained by comparing the optimal values in the models. This study found that the exercise price in the put option contract will be greater than the buyback price. Furthermore, it is more likely that the retailer gave more benefits under the buyback agreement than the time the retailer chooses the put option contract. Therefore, it can be concluded that if the retailer chooses the buyback agreement in this situation, can gain more benefits. The study provides essential managerial insights to compare agreements and presents recommendations to choose a suitable contract.

Opracowanie konstrukcji świdra wiertniczego do zwiercania skał o różnych właściwościach mechanicznych

This paper presents a description of a bit design with a combined cutter layout, aimed at increasing the efficiency of breaking rocks with different mechanical properties. The results from industrial testing of the manufactured bits are analyzed, revealing the need to improve their hydraulic flushing system. Computer modeling was conducted using the Flow Simulation CAD/CAM package of the Solid Works system, where various models of the design options for the bit, the borehole bottom, and a segment of the drill string were created. For each variant, numerical calculations of the fluid motion were carried out using the finite element method. Based on the simulation results, optimal angles of inclination for the jet nozzles relative to the bit axis and their distance from this axis were determined. Key factors influencing the stability of the bit cutters, which destroy the rock by cutting with axial vibrations, were identified, and analytical dependencies for their predictive stability were derived. The wear rate of the bit cutters was determined by instantaneous values of such physical parameters as: the degree of wear, rock cutting speed, temperature, axial loading force on the cutter, and the friction coefficient at the contact between the cutter and rock. Temperature is especially impactful, reaching levels exceeding 1000°C in the cutting zone; it is often regarded as the primary factor influencing bit cutter stability. To maximize the efficiency of rock-breaking in the process of drilling wells, it is necessary to set the following vibration parameters: frequency, amplitude, and vibration mode, which can be determined from the results of mathematical modeling.

Феномен релокации (Модели экономического поведения российских мигрантов после февраля 2022 г.)

The events of February 2022 became the starting point of a new wave of Russian emigration. On the one hand, this phenomenon can be considered within a series of previous migration waves, on the other hand, the modern context leaves its imprint on the current migration process, making it very special from the economic and sociocultural perspectives. The article presents an attempt to analyze this specificity with an emphasis on the characteristics of the economic behavior of emigrants. Empirically, the study is based on a series of in-depth interviews with people who left Russia after February 2022. On the basis of these interviews, the authors built idealized cognitive models of possible options for the economic behavior of migrants. The authors considered a total of four models: relocation, which involves searching for a job in the host country; relocation, which involves remote work for a Russian company; relocation, which involves creating or moving one’s own business; relocation to a branch of a Russian company. Since the economic strategies of migrants are influenced by signals broadcast by the Russian government structures, the article analyzed the statements of representatives of these structures using the method of network cognitive mapping, which made it possible to reveal two types of official discourse in relation to those who left Russia, which differed in the extent of their criticism towards them. In general, the study showed that migrants of the latest wave are internally heterogeneous and fall into several groups that differ markedly in their motivation and patterns of economic behavior. At the same time, a significant part of them continues to cooperate with Russia in one way or another and, in principle, is ready to return to Russia. For them, migration is driven largely by security and/or economic reasons. Only a minority of emigrants left the country due to their disagreement with the current political course and consider the possibility of coming back only if the political course changes radically.

The oral intake of specific Bioactive Collagen Peptides (BCP) improves gait and quality of life in canine osteoarthritis patients—A translational large animal model for a nutritional therapy option

Objective Osteoarthritis (OA) is the most common joint disorder in humans and dogs. Due to its chronic progressive nature, the predominant clinical signs after a certain point are pain and immobility. The similar pathogenesis allows conclusions to be drawn from canine to human OA. Current treatments are limited and often attempt to treat OA symptoms rather than improve joint structure and function. Collagen hydrolysates as oral supplements are a promising therapeutic option to achieve this advanced therapeutic aim in both species. The effects of oral supplementation were therefore investigated in canine OA patients. Method In a systematic, placebo-controlled, double-blind interventional study in 31 dogs with naturally occurring OA, the efficacy of oral supplementation of specific bioactive collagen peptides (BCP) was tested in comparison to the approved combination of the active substances omega-3 fatty acids and vitamin E. The dogs were examined on a horizontal treadmill with 4 integrated piezoelectric force plates at the beginning and end of a twelve-week test period. At both points, the owners completed a specific questionnaire containing the validated Canine Brief Pain Inventory (CBPI) and the dogs were fitted with accelerometers to record total daily activity data. Results Only the oral supplementation of BCP resulted in a significant improvement of several kinetic parameters measured using a force-plate fitted treadmill, and the quality of life assessed by CBPI, while accelerometry was unaffected by the intervention. Conclusion The results of this three-month BCP supplementation study using objective measurement parameters in dogs with naturally occurring OA demonstrate an efficacy, suggesting the therapeutic use of BCP in canine OA patients and demonstrating the relevance of this collagen hydrolysate formulation for the treatment of OA in human patients as well.

Implementing Real Options Valuation under Macroeconomic Risk and Normally Distributed Cash Flows

The paper highlights the encountered problems in implementing real options under more realistic assumptions such as business cycle risk and normally distributed cash flows. The problems considered include (i) estimating empirical distribution of cash flows from real option investments; (ii) investment decisions across business cycles, and (iii) calculating the probability of investing with the above stated rich features. To this end, we estimate operating cash flows of US corporate firms using a Markov chain model under both geometric and arithmetic Brownian motions assumptions for cash flows and develop a valuation model of real option with normally distributed cash flows. Associated investment valuation models incorporating these estimates reveal that critical cash flow levels significantly differ across models and regimes.

Investment in CCUS under technical uncertainty considering investor's risk aversion: An exotic compound real-options approach

Carbon capture, utilization, and storage (CCUS) technology is effective and value-adding solution for reducing emissions. However, the development and commercialization of these technologies are challenging due to high investment costs and several uncertainties. This study develops a novel comprehensive real-options-based model to evaluate investment in CCUS projects considering the technical risk and the investor's risk aversion. This study proposed an exotic compound real options model that combines American and barrier options. First, applying the Poison process, the technical risk is explicitly modeled. Secondly, the investor's risk aversion is defined as a barrier level for the barrier option part of the proposed model. Thirdly, the value of the project is evaluated through the exotic compound real option. Finally, we assess the economic viability of the project under multiple scenarios. The results of implementing the model for a real case show that the integrated technical risk assessment and the barrier option appropriately address investors' risk aversion. Furthermore, the comparison indicates that the proposed compound real options model is more effective than the traditional NPV (Net Present Value). Regarding policymaking, the results reveal that setting an appropriate carbon tax that considers the costs of carbon capture would be more beneficial. Further, the model provides investors helpful guidance to make proper investment decisions for CCUS technology projects under uncertainties.

Characterization of Ucp1-iCre knockin mice reveals the recombination activity in male germ cells.

Ucp1 promoter-driven Cre transgenic mice are useful in the manipulation of gene expression specifically in thermogenic adipose tissues. However, the wildly used Ucp1-Cre line was generated by random insertion into the genome and showed ectopic activity in some tissues beyond adipose tissues. Here, we characterized a knockin mouse line Ucp1-iCre generated by targeting IRES-Cre cassette immediately downstream the stop codon of the Ucp1 gene. The Cre insertion had little to no effect on uncoupling protein 1 (UCP1) levels in brown adipose tissue. Ucp1-iCre mice of both genders exhibited normal thermogenesis and cold tolerance. When crossed with Rosa-tdTomato reporter mice, Ucp1-iCre mice showed robust Cre activity in thermogenic adipose tissues. In addition, limited Cre activity was sparsely present in the ventromedial hypothalamus (VMH), choroid plexus, kidney, adrenal glands, ovary, and testis in Ucp1-iCre mice, albeit to a much lesser extent and with reduced intensity compared with the conventional Ucp1-Cre line. Single-cell transcriptome analysis revealed Ucp1 mRNA expression in male spermatocytes. Moreover, male Ucp1-iCre mice displayed a high frequency of Cre-mediated recombination in the germline, whereas no such effect was observed in female Ucp1-iCre mice. These findings suggest that Ucp1-iCre mice offer promising utility in the context of conditional gene manipulation in thermogenic adipose tissues, while also highlighting the need for caution in mouse mating and genotyping procedures.NEW & NOTEWORTHY Ucp1 promoter-driven Cre transgenic mice are useful in the manipulation of gene expression specifically in thermogenic adipose tissues. The widely used Ucp1-Cre mouse line (Ucp1-CreEvdr), which was generated using the bacterial artificial chromosome (BAC) strategy, exhibits major brown and white fat transcriptomic dysregulation and ectopic activity beyond adipose tissues. Here, we comprehensively validate Ucp1-iCre knockin mice, which serve as another optional model besides Ucp1-CreEvdr mice for specific genetic manipulation in thermogenic tissue.

Queer households and possibilities for shared housing: a policy case study analysis

ABSTRACT Kinship structures among Two-Spirit, lesbian, gay, bisexual, transgender, queer, and intersex (2SLGBTQI+) individuals differ from conventional nuclear families. Heteronormative models of family and cohabitation impact housing options, resulting in the marginalization of queer households in Canada. This paper examines systemic factors in federal, provincial, and municipal policies, focusing on two specific policies: Multigenerational Home Renovation Tax Credit and Expanding Housing Options in Neighbourhoods, which limit housing provision for 2SLGBTQI+ individuals. Using Toronto as a case study, it evaluates how these policies affect the household needs of 2SLGBTQI+ adults based on queer kinship and identifies opportunities for change.

How to implement the 2023 IMO GHG strategy? Insights on the importance of combining policy instruments and on the role of uncertainty

In its 2023 strategy for reducing GHG emissions from ships, the International Maritime Organization aims for the uptake of zero or near-zero GHG emissions technologies, fuels or energy to represent at least 5 %, striving for 10 %, of the energy used by 2030. Measures proposed to reach this target combine two kinds of policy instruments: an emission intensity standard and GHG emissions pricing. Proposals vary in terms of the design of the pricing scheme and the subsequent uncertainty that would affect the price signal. This paper assesses the extent to which emissions pricing effectively complements a more restrictive standard on the intensity of GHG emissions to boost transition to low-carbon vessels. Attention is paid to the role of the volatility of the price signal of GHG emissions and fuels prices. For this purpose, the paper applies a multiple real options model to the decision to renew a ship under various sources of uncertainty. Simulations carried out based on a case study show that the price signal effectively complements the more restrictive standard but that the decarbonization objectives are only achieved with a quite ambitious level of pricing. The role of the volatility of the price signal of GHG emissions appears negligible compared to other sources of volatility.

Time-Varying Deterministic Volatility Model for Options on Wheat Futures

This study introduces a robust model that captures wheat futures’ volatility dynamics, influenced by seasonality, time to maturity, and storage dynamics, with minimal calibratable parameters. Our approach reduces error-proneness and enhances plausibility checks, offering a reliable alternative to models that are difficult to calibrate. Transferring estimated parameters from liquid to illiquid markets is feasible, which is challenging for models with numerous parameters. This is of practical importance as it improves the modeling of volatility in illiquid markets, where price discovery is less efficient. In liquid markets, on the other hand, where speculative activity is high, we find that implied volatility is usually the best measure. Additionally, the introduced volatility model is suitable for pricing options on wheat futures as a risk-neutral measure.

ESG-Driven Investment Decisions in Photovoltaic Projects

As global climate change intensifies and environmental awareness increases, investing in renewable energy has become a primary economic and social development priority. Photovoltaic (PV) projects, as a clean and sustainable energy technology, have garnered significant attention due to their notable environmental and economic benefits. However, traditional investment evaluation methods such as net present value (NPV) analysis fail to adequately capture the flexibility and future uncertainties inherent in PV project investments. This paper presents a case study analysis proposing a delay option model that incorporates environmental, social, and governance (ESG) factors, providing a more scientific and flexible investment decision framework for PV projects. The case study results indicate that considering ESG factors significantly enhances the investment value of PV projects. This model not only provides comprehensive support for PV project investment decisions but also underscores the importance of establishing stringent carbon trading markets and policy incentive mechanisms to promote the widespread adoption and sustainable development of renewable energy projects.

A Study of Asian Chooser Options in a General Two-Period Binomial Model

Asian options are also known as average price options, and their strike price is the average price of the stock in the market half a day before the strike. Binomial model is a good model to identify the value of options, The paper develops the theory of Asian chooser options in the two-period binomial model. There are Asian call options, and Asian put options. We first derive the binomial model of the Asian option and get the portfolio function. After that, we get the number of bond and stock, Nb and Ns. We study the problem via five different cases in the two-period Binomial model. In these five cases, we choose the maximum value between Asian put and call options. Then, we decide whether they are call options or put options. Then, we calculate the number of portfolios in these five cases in the two-period binomial model. Finally, we implemented the whole project with Python.

Experimental analysis of structural nonlinear damping ratio induced by bolt joint friction

Friction is an important source of energy dissipation in structural damping. The effect of friction on the damping ratio, however, has not been fully investigated. This paper presents an experimental study of the nonlinear damping ratio induced by friction at bolted joints of a bridge model in the laboratory. The decay responses of the bridge were tested under various bolt configurations and pre-torques. The nonlinear characteristics of the damping ratio were analyzed, and the experimental results were interpreted through numerical simulations. The relationship between damping ratio and amplitude of the Iwan model was derived. The results show that friction induces a nonlinear damping ratio. The damping ratio exhibits two opposite nonlinear characteristics under the influence of bolt joints. The damping ratio may either decrease with decreasing amplitude or may increase, and both of these nonlinear patterns can be elucidated by the Iwan model. Numerical simulations successfully replicate these two nonlinear damping ratios. A case study of an actual steel truss bridge is used to discuss the possible effects of bolt joints on the damping ratio. The results of this paper reveal the nonlinear damping patterns induced by bolt joints and provide an optional model for such structures.