Portfolio Of Options Research Articles

Techno-economic and environmental assessment to mitigating climate change and building energy security: a study on willingdon island

ABSTRACT This paper aims to solve the state's hydropower dependence, build energy security and reduce greenhouse gas emissions through a hybrid renewable energy system and its implementation in Willingdon Island. Hybrid Optimisation of Multiple Energy Resources (HOMER) is used to find the optimal solution for two grid-connected and off-grid scenarios. Of the 19 solutions, an optimal off-grid, an optimal grid-connected, a 100% variable renewable energy, and a diversified energy portfolio option are selected, analyzed, and ranked based on their techno-economic and emissions characteristics. The results suggest the combination of PV/Wind/Grid with a cost of energy of $0.044 as an optimal solution for the Island. The diversified energy solution takes the second position, having 51.4% and 38.8% solar and wind, respectively.

Hedging Option Books Using Neural-SDE Market Models

We study the capability of arbitrage-free neural-SDE market models to yield effective strategies for hedging options. In particular, we derive sensitivity-based and minimum-variance-based hedging strategies using these models and examine their performance when applied to various option portfolios using real-world data. Through backtesting analysis over typical and stressed market periods, we show that neural-SDE market models achieve lower hedging errors than Black–Scholes delta and delta-vega hedging consistently over time, and are less sensitive to the tenor choice of hedging instruments. In addition, hedging using market models leads to similar performance to hedging using Heston models, while the former tends to be more robust during stressed market periods.

Environmental performance analysis of railway infrastructure using life cycle assessment: Selecting pavement projects based on global warming potential impacts

In response to the growing demand for credit to finance railway projects, portfolios of credit options which use criteria aligned with environmental factors have proved to be an attractive solution. The parameters involve, for example, the commitment to reduce the impact on global warming. Although transportation financing already includes environmental covenants, which are focused mainly on operational aspects, such as rolling stocks, this mechanism is still not applied comprehensively in railway infrastructure projects, particularly regarding the track and its foundation. Therefore, this study aims to present a comprehensive life cycle assessment method to analyze railway infrastructure projects' global warming potential impact, through environmental performance analysis. It was accomplished through the use of various materials for the composition of the sub-ballast, considering the subgrade's mechanical behavior under distinct moisture content conditions (optimal and optimal+2%). Compared with references values from the literature review (13.40–22.37 tCO2e/km/year), the results indicate that the sub-ballast without the use of alternative materials, specifically 19.88 tCO2eq/km/year, is the best choice. This considering a minor potential global warming impact when the moisture content is optimal, even considering differences in maintenance frequency during the assessed period, which is 200 years. Regarding the subgrade with moisture content above the optimal level, the use of a soil–cement mixture to increase the sub-ballast's support capacity, representing 4,481 tCO2eq, is the best choice when life cycle assessment aspects are considered. Finally, materials originating from bitumen demonstrate the highest potential global warming effects, been hot mix asphalt the option that shows the higher contribution– 48.69 tCO2eq/km/year. However, it is worth mentioning this last engineering solution is used to make the subgrade impermeable, which could be an interesting choice in situations in which the moisture content level is higher than that used in this study. • Comparative LCA for various sub-ballast is performed (construction & maintenance). • Sensibility assessed varying materials and subgrade moisture content, based on GWP. • For optimal moisture content, gravel soil without improvements performed better. • Under non-optimal moisture content, soil-cement seems to be the best choice. • For floods, HMA could be a feasible solution since it impermeabilizes the subgrade.

ESCP President's report.

ESCP President's report.

Anchoring Options on Variance and Volatility to Terminal Risk Neutral Distribution

In this paper the ratio of realized variance to the terminal squared return is modeled as independently distributed. Variance and volatility options are then first priced conditional on the terminal stock price. The variance and volatility options and their risk exposures are associated with option portfolios hedging the conditional price function. In particular the volatility swap vega is observed to be near a point above the variance swap vega. The residual uncertainty given the terminal stock price is modeled both using a log normal model and the empirical distribution.

The need for local governance of global commons: The example of blue carbon ecosystems

To limit global warming to 1.5 °C, vast amounts of CO2 will have to be removed from the atmosphere via Carbon Dioxide Removal (CDR). Enhancing the CO2 sequestration of ecosystems will require not just one approach but a portfolio of CDR options, including so-called nature-based approaches alongside CDR options that are perceived as more technical. Creating a CDR “supply curve” would however imply that all carbon removals are considered to be perfect substitutes. The various co-benefits of nature-based CDR approaches militate against this. We discuss this aspect of nature-based solutions in connection with the enhancement of blue carbon ecosystems (BCE) such as mangrove or seagrass habitats. Enhancing BCEs can indeed contribute to CO2 sequestration, but the value of their carbon storage is low compared to the overall contribution of their ecosystem services to wealth. Furthermore, their property rights are often unclear, i.e. not comprehensively defined or not enforced. Hence, payment schemes that only compensate BCE carbon sequestration could create tradeoffs at the expense of other important, often local, ecosystem services and might not result in socially optimal outcomes. Accordingly, one chance for preserving and restoring BCEs lies in the consideration of all services in potential compensation schemes for local communities. Also, local contexts, management structures, and benefit-sharing rules are crucial factors to be taken into account when setting up international payment schemes to support the use of BCEs and other nature- or ecosystem-based CDR. However, regarding these options as the only hope of achieving more CDR will very probably not bring about the desired outcome, either for climate mitigation or for ecosystem preservation. Unhalted degradation, in turn, will make matters worse due to the large amounts of stored carbon that would be released. Hence, countries committed to climate mitigation in line with the Paris targets should not hide behind vague pledges to enhance natural sinks for removing atmospheric CO2 but commit to scaling up engineered CDR.

Building Resilient and Innovative Business Models in the Era of Covid-19:

The role that the Business Model (BM) concept and BM-related tools may play during times of crisis have been insufficiently investigated. This paper presents a process aimed at supporting companies in building resilient and original BMs through continuous innovation based on the existing BM literature. The present study highlights the role that BM tools may play during crisis situations, providing managers and entrepreneurs with an alert system (i.e., BM measurements) capable of signaling when a change should be implemented; a “library” of potential changes (i.e., BM pivots) to be generated in the BM; and a portfolio of potential available options when considering how the BM should be changed (i.e., BM configurations). The paper additionally highlights how tools for BM mapping, control, and innovation can provide one another with information and can be connected in a way that allows companies to achieve a synergetic effect in the face of instability and uncertainty.

Evaluation of efficiency of hedging strategies with option portfolios for buyers of the currency US dollar/Colombian peso

This paper evaluates the efficiency to mitigate the exchange rate risk of nine hedging strategies with financial options. Strategies to hedging the purchase of US dollar Colombian peso (USDCOP) by importers in Colombia were raised. In this way, the traditional strategy with call options and eight strategies with investment portfolios were evaluated. These portfolios of options for hedge are offered by financial entities in Colombia. These nine hedged scenarios were compared with the unhedged scenario that corresponds to the foreign exchange risk exposure of importers. The USDCOP currencies were modeled with a mean reversion with jumps models, option premiums were valued with the black-scholes method and the best hedging strategy was determined through a Monte Carlo simulation. According to the results obtained, the nine hedging strategies manage to mitigate risk, but the most efficient was the option portfolio called collar.

Does women’s engagement in sunflower commercialization empower them? Experience from Singida region, Tanzania

Empowering women within sunflower value chains can create significant development opportunities for them and generate benefits for their families. This paper asks whether women’s engagement in sunflower commercialization influences their levels of empowerment. The paper uses data from a 2018 study conducted by Agricultural Policy Research in Africa. A cross-sectional research design was used, and data were collected using mixed methods involving primary, qualitative, and quantitative methods as well as secondary data from the literature. A total of 600 farm household heads and 205 focus group participants (7–15) from 15 villages were selected for the study. Qualitative and quantitative data were subjected to content and econometric analysis respectively, with the help of Microsoft Excel and Statistical Package for the Social Sciences programs. The findings revealed that female household heads tend to benefit less than men from sunflower commercialization. Sunflower commercialization had a positive but insignificant influence on women’s empowerment: the study found that low levels of access to and control over productive resources resulted in low agricultural productivity, which affects empowerment levels. However, household commercialization involving all crops did have a positive and significant impact on the empowerment of women because non-cash crops were more likely to be retained by women, even when commercialized. This calls for policies that support and promote a diversified portfolio of livelihood options for women farmers in Singida region.

Theoretical and empirical analysis of options in open market share repurchases of Taiwan companies

This paper derives option pricing models to formulize the flexibility and conditions that managers have in open market share repurchase programs in Taiwan. We extend the exchange option model by including the regulatory price range restriction and the purpose of the share repurchase. We propose the exchange option model (with price range constraints) and the option portfolio model. The simulated and empirical results show that the market reaction is lower than that in the model of Ikenberry and Vermaelen (1996). The price range constraint may block the market reaction when stock prices are volatile. In addition, investors may pay less attention to the repurchase purpose of returning buyback shares to employees, since there will be a small impact on price. Furthermore, we find that the stock volatility has a significant negative impact on the market reaction to the announcements of the share repurchases.

Portfolio Real Option Based on Trigeminal Tree Model in Sustainable Utilization of Exploration Asset

Uncertainty of crude oil market causes the value of oil and gas exploration assets to fluctuate upward, remain unchanged, and fluctuate downward. So exploration project investment is usually chartered by multistages. This brings many challenges to investment decisions regarding the sustainable utilization of exploration assets. To avoid the investment risk of exploration projects, a portfolio option method based on the trigeminal tree model was proposed. By analysing the real options involved in oil and gas exploration assets, the investment process is divided into European options and American options. The pricing model of portfolio options is constructed by the trigeminal tree method, and sequential compound diagram and compound option diagram are built. Volatility is predicted based on the GARCH model, and then, the trinomial tree of the underlying asset value, evolution chart, sequential compound option chart, and portfolio option chart is established, respectively. Finally, the project option value is calculated. The application shows that the ROV of oil and gas exploration project of company A is 1.39 million US$ (USMM$), and the project value is 279.87 USMM$. Compared with the binary tree model, the model is superior to the traditional option pricing method in the application effect, which provides a scientific basis for investment decision-making.

Cost-benefit analysis of prioritized climate-smart agricultural practices among smallholder farmers: evidence from selected value chains across sub-Saharan Africa

Prioritization of adaptation options is complex. This study presents a multi-dimensional framework to evaluate how to allocate resources among competing alternatives. The main objectives of the study were to identify the prioritized climate-smart agricultural practices adopted among smallholder farmers in different value chains across sub-Saharan Africa (SSA) and to assess the economic feasibility of the practices using Cost-Benefit Analysis (CBA) to develop a portfolio of viable and cost-effective options. This study focused on selected five SSA countries and selected value chains. 153 smallholder farmers and stakeholders were interviewed. The Climate Smart Agriculture Prioritization Framework was applied for the assessment of economically viable adaptation options. The prioritization was based on standard ranks on the ability of the practice to improve productivity, increase resilience, and mitigation. Spearman's rank-order correlation was used to assess the independence of the ranks. A CBA was conducted as the final step. Smallholder farmers in the study areas prioritized the adoption of improved seed, good agricultural practices, and conservation agriculture practices. In the sweet potato value chain in Kenya, good agricultural practices was viable with an NPV of US$ 28,044, an IRR of 328%, and a one-year payback period. This is in comparison to the improved seed varieties (US$ 8,738, 111%, and two years payback period) respectively. In Nigeria, the most viable option was the improved seed in the potato value chain and good agricultural practices in the rice value chain. In Malawi, Ethiopia, and Zambia, the most viable practices were improved seed, and conservation agriculture in the soybean, faba beans, and peanut value chains respectively. The NPV was highly sensitive to changes in the discount rate, moderately to price, yield, and practice lifecycle, and least to changes in annual labour costs. The results elaborate on the most feasible adaptation practices that enable smallholder farmers to increase productivity and be economically efficient. The use of the CSA-PF consecutively with the CBA tool allows for the proper identification of best-bet CSA options.

Homeowner Preference for Household-level Flood Mitigation in US: Analysis of a Discrete Choice Experiment

AbstractThe Federal Emergency Management Agency (FEMA) offers a portfolio of flood risk mitigation options for high-risk homeowners, hoping to reduce flood damages. Buyout (home acquisition) and home retrofit (e.g., home elevation) are candidates available to homeowners. FEMA has recently amended and increased its buyout efforts. This study examines homeowners’ stated preference for buyout and home elevation contracts using survey data. Results indicate multiple factors influence the decision to participate in home acquisition and elevation programs. Importantly, we find that preferences vary with the timing (whether the contract is offered before or after a damage event) of the contract offered.

A flexible and scalable model to improve decision quality in shale plays

Shale asset investment decisions are difficult to model because they are portfolios of options under complex and time-evolving uncertainties. Sequential development decisions must balance short-term cash flow with long-term value creation. Typical assets consist of thousands of locations, making exact analysis impossible. Consequently, decision support tools are very simple, usually consisting of decision trees, fixed price decks, and no midstream constraints.We develop a heuristic that maps the current information of an asset, such as inventory, prices, and estimated production, to a well schedule. We combine the heuristic with Monte Carlo simulation and decision trees to form a shale field development model that includes all relevant features while being scalable to realistic problem sizes. To demonstrate our method's performance, we create a sample shale asset with 370 wells, price and production uncertainty, midstream constraints, and 30 decision periods. On the sample problem, our method exhibits first-order stochastic dominance over the decision tree approach and improves expected value by 407%. Using our modeling approach will improve overall decision quality in shale asset management.

Constructed Wetlands as Nature-Based Solutions in the Post-COVID Agri-Food Supply Chain: Challenges and Opportunities

The COVID-19 crisis has highlighted the interchangeable link between human and nature. The health and socioeconomic impacts of COVID-19 are directly or indirectly linked to the natural environment and to the way that agri-food systems interact with nature. Although the pandemic continues to evolve and there are still many uncertainties, important issues about the future of the agri-food sector and the need for a sustainable and environmentally friendly reformation are beginning to arise in society. Nature-based Solutions (NbSs) encompass a broad range of practices that can be introduced in the agri-food supply chain and address multiple environmental challenges of the COVID-19 and post-COVID-19 era while providing economic and societal benefits. In this perspective, the design and establishment of multifunctional constructed wetlands as NbSs opens a portfolio of eco-innovative options throughout the agri-food supply chain, offering a realistic and promising way towards the green regeneration of the post-COVID-19 economy and the welfare of society. The aim of this work is to explore the potential role of constructed wetlands as Nature-based Solutions in the agri-food supply chain of the forthcoming post-COVID-19 era. More specifically, this work aims to reveal application opportunities of constructed wetlands in the different segments of the agri-food supply chain, identify linkages with societal challenges and EU policies, and discuss their potential limitations, future challenges, and perspectives.

Crop and income diversification for rural adaptation: Insights from Ugandan panel data

Ugandan territory is a challenging environment for agriculture due to extreme climate events. These are likely to harm the development of rural communities. Crop diversification and off-farm activities are considered potential adaptation strategies to reduce the impacts of climate risk. This paper explores three main issues. The first one is the frequency and the intensity of climate shocks that push households to diversify their portfolio of livelihood options. The second one is about the market and the institutional factors that enhance the context where farmers can effectively diversify against adverse climate events. The last issue concerns the mix of crop and income diversification that minimises the welfare variability and the downside risk. To address these points, the study exploits four rounds of the Ugandan National Panel Survey and the SPEI climatic index to estimate a panel multinomial endogenous switching model. Results demonstrate that farmers' diversification response to the climate shocks is not linear. Moreover, the empirical analysis shows that a medium crop diversification maximises mean welfare, while a mix of high crop and income diversification generates the largest impact on the downside risk reduction. Social and human capital are crucial to improve the chance of an effective diversification-based adaptation.

Fully integrated CO2 mitigation strategy for an existing refinery: A case study in Colombia

The oil and gas industry is responsible for 6% of total global CO2 emissions, from exploration to downstream petrochemical production and account for another 50% when including the use of its products. Thus, this industry has a significant role in realising the target of net “zero” CO2 emissions by 2070, essential to limit global warming to 1.8 °C [2], as introduced under the Paris agreement. Currently, the interactions of an extensive set of individual and combined CO2 mitigation measures along the value chain and over time are poorly assessed. This paper aims to assess a bottom-up CO2 mitigation potential for a complex refinery, including portfolios of combined mitigation options, considering synergies, overlap, and interactions over time for more realistic insight into the costs and constraints of the mitigation portfolio. A total of 40 measures were identified, covering a wide range of technologies such as energy efficiency measures (EEM), carbon capture and storage (CCS), bio-oil co-processing, blue and green hydrogen (BH2, GH2), green electricity import, and electrification of refining processes linked to the transition of the Colombian energy systems. Five deployment pathways were assessed to achieve different specific targets: 1-base case scenario, 2-less effort, 3-maximum CO2 avoidance, 4-INDC, and 5-measures below 200 €/t CO2. Two scenarios (3 and 5) gave the highest GHG emission reduction potentials of 106% and 98% of refining process emissions, respectively. Although significant, it represent only around 13% of the life-cycle emissions when including upstream and final-use emissions of the produced fuels. Bio-oil co-processing options account for around 60% of the mitigation options portfolio, followed by CCS (23%), green electricity (7%) and green H2 (6%). The devised methodological approach in this study can also be applied to assess other energy-intensive industrial complexes and shed light on the bias for estimating CO2 mitigation potentials, especially when combining different mitigation options. This is turn is vital to define optimal transition pathways of industrial complexes.

The Role of Executive Risk-Taking Incentives in Voluntary Disclosure Accuracy

ABSTRACTWe investigate whether common compensation features encourage managers to reveal their private information. Assuming managers have private knowledge of future earnings, we use management forecast accuracy to proxy for the extent to which managers reveal private information and offer two main findings. First, both the amount of a manager's severance pay and the convexity of their stock option portfolio (i.e., vega) are positively associated with forecast accuracy. This suggests managers are more forthcoming if compensated in ways that reduce concerns over firm volatility. Second, these incentives are more strongly associated with forecast accuracy when short-term pressure to conceal private information is higher. Additional analyses suggest these results are unlikely explained by earnings management subsequent to the forecast, managers with these incentives issue less optimistically biased forecasts, and these contracts increase forecast accuracy of good and bad news. Overall, our results suggest compensation can encourage managers to provide more accurate disclosures.

Reducción de externalidades negativas por aprovechamiento de residuos en el desarrollo de productos: economía circular en la industria olivícola chilena

The circular economy, as a factor of sustainable development, is an innovative practice of resource allocation that considers the production of goods and the reuse of their waste. Society values the circular economy, since it contributes to the reduction of negative externalities arising from the operation of certain industries that generate waste that is harmful to the environment. In this work, the magnitude of the negative externality represented by the accumulation of the waste called "alperujo" in the olive sector in Chile is evaluated, identifying, and validating new businesses developed from its reuse. For this purpose, a portfolio of viable options for the valorization of alperujo was constituted, based on a contextual analysis, the application of Product-Market Fit and the participation of a focus group, which allowed estimating the reduction of the negative externality, because of the use of alperujo. This industry externality comes from the generation of 120,000 t/year of waste, with an estimated value of USD 10.48 million. The alperujo, in the form of paste or extract, can be incorporated in the production of snacks, antioxidant drinks and yogurt. The sum of the NPV of the three businesses reaches USD 11.63 million, which allows compensating the estimated negative externality with a favorable margin, using 1.8% of the alperujo generated annually in Chile. This study contributes to the validation of the circular business model in a relevant sector of the Chilean export economy.

Decision Science Can Help Address the Challenges of Long‐Term Planning in the Colorado River Basin

Abstract“Deep uncertainty” is a term that describes planning contexts in which it is impossible to determine the likelihood of any given set of future conditions, there are conflicting performance objectives and priorities, and decision outcomes are unpredictable. Evidence of the relevance of this term in the Colorado River Basin can be found in the unexpected severity and length of the ongoing drought, the existence of a wide range of future streamflow and demand projections and anticipated system requirements, as well as in the diverse range of stakeholders, viewpoints, and priorities that must be considered when developing and analyzing future operating policies. Decision Making under Deep Uncertainty (DMDU) is a branch of decision science devoted to developing planning approaches that can address these challenges. Reclamation began exploring DMDU techniques in 2012 in the Colorado River Basin Water Supply and Demand Study when it used the concepts of adaptation, vulnerability, and robustness in the design and evaluation of portfolios of options and strategies to address a potential supply‐demand imbalance in coming decades. This article presents the basis for continuing to explore DMDU techniques and briefly describes how Reclamation’s recent and ongoing DMDU studies could contribute to future planning efforts in the Colorado River Basin.