Price Equation Research Articles

Reconstructing Marxian Theory of Ground Rent: Based on Japanese Development of Marxian Political Economy

ABSTRACT The aim of this paper is to reconstruct Marxian theory of ground rent in order to refurbish it as a fundamental theoretical framework of ecological Marxism. We make this attempt by the close examination of longstanding Japanese discussions on the rent theory among the Koza school, Rono school, and the Uno school, which have never been made available in English so far. By critically integrating Japanese preceding studies, Marxian theory of rent would be reinforced more effectively in analysing the class relation between the capitalist and the landowner, which is reflected in the formation of absolute rent. In addition, we use the price equations to formulate the rent formation and theoretically examine how the landowner performs as the third class. It is noteworthy that there is a case in which the conflict between the capitalist and the landowner takes the form of a confrontation about rent-seeking activities. In our two-sector model analysis, an intellectual property right in one sector can undermine the economic position of the landowners in the other sector, thereby fostering further destructive development of nature. Capitalist IP rent-seeking harms the environment not only directly but also through indirect causalities in the globally interrelated economy.

A Generalized Model for Pricing Financial Derivatives Consistent with Efficient Markets Hypothesis—A Refinement of the Black-Scholes Model

This research article provides criticism and arguments why the canonical framework for derivatives pricing is incomplete and why the delta-hedging approach is not appropriate. An argument is put forward, based on the efficient market hypothesis, why a proper risk-adjusted discount rate should enter into the Black-Scholes model instead of the risk-free rate. The resulting pricing equation for derivatives and, in particular, the formula for European call options is then shown to depend explicitly on the drift of the underlying asset, which is following a geometric Brownian motion. It is conjectured that with the generalized model, the predicted results by the model could be closer to real data. The adjusted pricing model could partly also explain the mystery of volatility smile. The present model also provides answers to many finance professionals and academics who have been intrigued by the risk-neutral features of the original Black-Scholes pricing framework. The model provides generally different fair values for financial derivatives compared to the Black-Scholes model. In particular, the present model predicts that the original Black-Scholes model tends to undervalue for example European call options.

Statistics Behavior of Individual-Weighting-Factors SSAF Algorithm Under Errors-in-Variables Model

The individual-weighting-factors sign subband adaptive filtering (IWF-SSAF) algorithm has acquired attention due to its quick convergence and brilliant robustness against impulsive interference. However, its statistics behavior has not been investigated under errors-in-variables (EIV) model, which system input and output are all corrupted by noise. Therefore, in this letter, the statistics analysis including transient and steady-state behaviors of IWF-SSAF is derived in mean and mean-square senses by virtue of some frequently-utilized assumptions and Price's theorem. Finally, numerical simulations under system identification scenario manifest that the simulated and theoretical results are in good agreement in different environments, which corroborate the accurateness of the derived theoretical models.

Pricing perpetual timer options under Heston Model by finite difference method: Theory and implementation

<abstract><p>In this paper a finite difference method (FDM) is provided for pricing perpetual timer options under the Heston volatility model. Considering the degeneracy of the pricing equation, we first prove the existence and uniqueness of the solution of the pricing problem with a new notion of boundary conditions at degenerate boundary and the infinity. Then we discuss the choice of artificial boundary value conditions and obtain a prior estimate of the internal error caused by the boundary value error. This estimate helps to choose appropriate artificial boundary values and solution domain to reduce internal error of the numerical solution. Furthermore, We build a FDM with second-order convergence for the pricing problem. Finally, we implement our method and show the visualization results.</p></abstract>

The Yoccoz–Birkeland livestock population model coupled with random price dynamics

We study a random version of the population-market model proposed by Arlot, Marmi, and Papini in Arlot et al. (2019). The latter model is based on the Yoccoz–Birkeland integral equation and describes a time evolution of livestock commodities prices which exhibits endogenous deterministic, stochastic behavior. We introduce a stochastic component inspired by the Black–Scholes market model into the price equation, and we prove the existence of a random attractor and a random invariant measure. We compute numerically the fractal dimension and the entropy of the random attractor, and show its convergence to the deterministic one as the volatility in the market equation tends to zero. We also investigate in detail the dependence of the attractor on the choice of the time-discretization parameter. We implement several statistical distances to quantify the similarity between the discretized systems’ attractors and the original ones. In particular, following a work by Cuturi (2013), we use the Sinkhorn distance. This distance is a discrete and penalized version of the Optimal Transport Distance between two measures, given a transport cost matrix.

Path probability selection in nature and path integral

Understanding of any biological evolutions, such as speciation, adaptation behavior and biodiversity pattern, is based on a fundamental concept of fitness, in which natural selection implies the improvement and progress of fitness in either direct/indirect benefit or genetic transmission to the next generation. However, this basic idea of biological evolution, which is mathematically described by Price equation or its related models, has not fully considered feedback effects from the environment or other generations. They lost the global dynamics of the evolutions consequently. Drawing on the idea of modern physics, we introduce the path integral by iterating the Price equation step by step to characterize the evolutionary path in which the stationary fitness is replaced by the path probability. The evolutionary selection therefore will depend on path probability instead of fitness advantage. In such a framework of the evolutionary path, the intermediate process of evolution is not always pointing to the fitness-maximizing equilibrium and multiple evolutionary paths could thus coexist without fitness advantage discrimination. This mechanism could potentially explain evolutionary strategies with the diversified fitness (e.g., coexistence of altruism and selfishness) and thus species diversity.

The impact of price on Potato consumption in the USA

In this research paper we conduct our research using an econometrical analysis. In this research paper we mainly use previous economic theory, where we can find that if price increase then the demand of the good will declined automatically. This theory is more or less true for all kind of price and demand equation, it’s not different in this paper as well, but in this paper using USA potato consumption data we show that when price increase consumers always tend to reduce their potato consumptions as well, even though potato is one of the main stable sources of carbohydrate for US population. To conduct this research paper, we use data starting from 1970 till 2019.

A family of variable step-size sparsity-aware SSAF algorithms with individual-weighting-factors under model-driven method

Recently, the sparsity-aware sign subband adaptive filter algorithm with individual-weighting-factors (S-IWF-SSAF) was devised. To accomplish performance enhancement, the variable parameter S-IWF-SSAF (VP-S-IWF-SSAF) algorithm was developed through optimizing the step-size and penalty factor, respectively. Different from the optimization scheme, we devise a family of variable step-size strategy S-IWF-SSAF (VSS-S-IWF-SSAF) algorithms based on the transient model of algorithms via minimizing the mean-square deviation (MSD) on each iteration with some reasonable and frequently adopted assumptions and Price's theorem. And in order to enhance the tracking capability, an effective reset mechanism is also incorporated into the proposed algorithms. It is worth mentioning that the presented algorithms could acquire lower computational requirements and exhibit higher steady-state estimation accuracy obviously and acceptable tracking characteristic in comparison to the VP-S-IWF-SSAF algorithm. In addition, the stable step-size range in the mean and mean square sense and steady-state performance are concluded. And the computational requirements are exhibited as well. Monte-Carlo simulations for system identification and adaptive echo cancellation applications certify the proposed algorithms acquire superior performance in contrast to other related algorithms within various system inputs under impulsive interference environments.

A generalised approach to the study and understanding of adaptive evolution.

Evolutionary theory has made large impacts on our understanding and management of the world, in part because it has been able to incorporate new data and new insights successfully. Nonetheless, there is currently a tension between certain biological phenomena and mainstream evolutionary theory. For example, how does the inheritance of molecular epigenetic changes fit into mainstream evolutionary theory? Is niche construction an evolutionary process? Is local adaptation via habitat choice also adaptive evolution? These examples suggest there is scope (and perhaps even a need) to broaden our views on evolution. We identify three aspects whose incorporation into a single framework would enable a more generalised approach to the understanding and study of adaptive evolution: (i) a broadened view of extended phenotypes; (ii) that traits can respond to each other; and (iii) that inheritance can be non-genetic. We use causal modelling to integrate these three aspects with established views on the variables and mechanisms that drive and allow for adaptive evolution. Our causal model identifies natural selection and non-genetic inheritance of adaptive parental responses as two complementary yet distinct and independent drivers of adaptive evolution. Both drivers are compatible with the Price equation; specifically, non-genetic inheritance of parental responses is captured by an often-neglected component of the Price equation. Our causal model is general and simplified, but can be adjusted flexibly in terms of variables and causal connections, depending on the research question and/or biological system. By revisiting the three examples given above, we show how to use it as a heuristic tool to clarify conceptual issues and to help design empirical research. In contrast to a gene-centric view defining evolution only in terms of genetic change, our generalised approach allows us to see evolution as a change in the whole causal structure, consisting not just of genetic but also of phenotypic and environmental variables.

Drivers of smoked marine fish prices and challenges along the value chain

PurposeThe objectives of this paper are to analyze the drivers of smoked marine fish prices and examine the challenges along the value chain to inform policy.Design/methodology/approachThe study relies on cross-sectional data from 158 fish smokers, 100 wholesalers, and 120 retailers in Ghana. The challenges faced by the actors along the chain are identified and ranked using Kendall's coefficient of concordance. The three-stage least square estimation approach is employed to control for endogeneity resulting from the simultaneous equations for prices of different fish types and their substitutes.FindingsThe results reveal that marketing experience, the extent of competition, price of substitutes, payment terms, and variable cost items, such as transportation cost and storage charges, are key determinants of smoked fish prices along the value chain. Lack of access to credit is the main constraint to the marketing of smoked marine fish, irrespective of the actor or the fish type.Originality/valueMany studies have established the linkages between fish consumption, prices, and food security in the literature. However, there is a dearth of information on the responsiveness of fish prices to changes in the market and seller-specific factors to drive policy to stabilize prices along the value chain.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-09-2021-0566

Schleiermacher and the transmission of sin

Understanding the pervasiveness of sin is central to Christian theology. The question of why humans are so sinful given an omniscient, omnipotent, and omnibenevolent God presents a challenge and a puzzle. Here, we investigate Friedrich Schleiermacher’s biocultural evolutionary account of sin. We look at empirical evidence to support it and use the cultural Price equation to provide a naturalistic model of the transmission of sin. This model can help us understand how sin can be ubiquitous and unavoidable, even though it is not biologically transmitted, and even if there is no historical Fall that precipitated the tendency to sin.

Valuation of ticket prices for first‐division football matches in the Spanish league

This paper measures the optimal prices of football tickets and investigates the pricing strategy of the first‐division teams in the Spanish league during the 2018/2019 season. The paper develops a dual hybrid model of supply and demand based on a hedonic price approach. Fans have multiple motivations to attend the stadium, such as the quality of the opposing teams, the pre‐match qualifying position, the schedule, the day of the match, the stadium facilities, and the atmosphere. Their final decision will be conditioned by the price set by the clubs. The data show a difference of almost 300% in ticket prices among clubs. The estimation results from a hedonic price equation reveal that an optimal pricing strategy is followed by only five out of 20 clubs in the league. We also quantify the percentage of overvaluation or undervaluation of ticket prices.

Price Determinants of Collectable U.S. Commemorative Stamps: An Examination of Philatelic Demand

Philately, the collecting of postage stamps, is a popular hobby throughout the world. Stamp collectors’ motivations vary from the simple pursuit of leisure and recreation to financial investment and speculation. This study explores the demand for vintage U.S. commemorative stamps by examining the determinates of retail prices across alternative categories of sellers. Using regression analysis and a cross-sectional sample of the first 250 commemorative stamps issued by U.S. postal authorities, we estimate price equations for representative national dealers, regional dealers, and for electronic auction sites. The results indicate that production quantities, age, and specific attributes of individual stamp issues are the primary determinants of retail price. However, the pricing structures across categories of sellers are significantly different in a hierarchical manner indicating that dealers may successfully segment the collectable stamp market across different types of collectors but alternative explanations for our conclusions cannot be excluded without additional research.

Pricing Options with Vanishing Stochastic Volatility

In the past years, there has been an extensive investigation of the class of stochastic volatility models for the evaluation of options and complex derivatives. These models have proven to be extremely useful in generalizing the classic Black–Scholes economy and accounting for discrepancies between observation and predictions in the simple log-normal, constant-volatility model. In this paper, we study the structure of an options market with a stochastic volatility that will eventually vanish (i.e., reaches zero) for very short periods of time with probability of one. We investigate the form of pricing measures in this situation, first in a simple binomial case, and then for a diffusion model, by constructing a weak approximation in discrete space and continuous time. The market described allows fleeting arbitrage opportunities, since a vanishing volatility prevents the construction of an equivalent measure, so that pricing contingent claims are, a priori, not obvious. Nevertheless, we can still produce a fair pricing equation. Let us note that this issue is not only of theoretical relevance, as the phenomenon of very low volatility has indeed been observed in the financial markets and the economy for quite a long time in the recent past.

Quantifying the Selective, Stochastic, and Complementary Drivers of Institutional Evolution in Online Communities.

Institutions and cultures usually evolve in response to environmental incentives. However, sometimes institutional change occurs due to stochastic drivers beyond current fitness, including drift, path dependency, blind imitation, and complementary cooperation in fluctuating environments. Disentangling the selective and stochastic components of social system change enables us to identify the key features of long-term organizational development. Evolutionary approaches provide organizational science with abundant theories to demonstrate organizational evolution by tracking beneficial or harmful features. In this study, focusing on 20,000 Minecraft communities, we measure these drivers empirically using two of the most widely applied evolutionary models: the Price equation and the bet-hedging model. As a result, we find strong selection pressure on administrative and information rules, suggesting that their positive correlation with community fitness is the main reason for their frequency change. We also find that stochastic drivers decrease the average frequency of administrative rules. The result makes sense when viewed in the context of evolutionary bet-hedging. We show through the bet-hedging result that institutional diversity contributes to the growth and stability of rules related to information, communication, and economic behaviors.

Decomposing Long Bond Returns: A Decentralized Theory

Classic bond pricing centralizes bond valuation across all maturities by specifying the dynamics of the short-term interest rate. This article develops a decentralized theory that prices each bond based purely on the near-term behavior of the bond’s own yield. The theory levers the domain expertise of an investor on a particular bond and allows the investor to make pricing and investment analysis on the bond without the shackles of an ambitious centralizing mandate. The theory decomposes the short-term return on a bond with respect to the variation of its own yield. Imposing no dynamic arbitrage on the return decomposition leads to a simple pricing equation relating the bond yield to the market pricing and conditional mean and variance forecasts of the yield’s near-term change. The article illustrates the theory’s applications in decentralized investment of a single bond and in the construction and investment of decentralized butterfly bond portfolios.

Product differentiation and the relative importance of wine attributes: U.S. retail prices

AbstractThis paper investigates the relative importance of various attributes, including varietal, brands, and geographic origin, in explaining retail wine prices for the United States market. We use a metric based on the Shapely value, from cooperative game theory, in the context of an empirical hedonic price equation estimated using a large sample of retail wine sales for home consumption over the period 2007–2019. We find that brands alone explain more than 70% of the variation in wine prices, but geographic origin and varietals retain additional explanatory power. Furthermore, information about the geographic origin appears to be a considerably more important attribute than varietals.

Host-parasite coevolution: Partitioning the effects of natural selection and environmental change using coupled Price equations.

George Price showed how the effects of natural selection and environmental change could be mathematically partitioned. This partitioning may be especially useful for understanding host–parasite coevolution, where each species represents the environment for the other species. Here, we use coupled Price equations to study this kind of antagonistic coevolution. We made the common assumption that parasites must genetically match their host's genotype to avoid detection by the host's self/nonself recognition system, but we allowed for the possibility that non‐matching parasites have some fitness. Our results show how natural selection on one species results in environmental change for the other species. Numerical iterations of the model show that these environmental changes can periodically exceed the changes in mean fitness due to natural selection, as suggested by R.A. Fisher. Taken together, the results give an algebraic dissection of the eco‐evolutionary feedbacks created during host–parasite coevolution.

Forecasting the behaviour of fractional Black-Scholes option pricing equation by laplace perturbation iteration algorithm

Financial derivatives plays a major role in all financial deals these days. Black–Scholes option pricing model gives a risk free analysis for investing in options. In the current work, a method called the Laplace Perturbation Iteration Algorithm is being applied on Fractional Black–Scholes Equation to obtain its fractional analytical solutions in series form to analyze its results for the European and American option pricing problem, quickly and accurately. Laplace Perturbation Iteration Algorithm incorporates Laplace transform and Perturbation Iteration Algorithm and forms an iterative scheme that derives the analytical solutions without any inconvenience. The Fractional Black–Scholes Equation analytical solution is obtained as a convergent power series of conveniently computed components. Four examples have been solved and their results have been discussed in this paper, in order to check the efficacy of Laplace Perturbation Iteration Algorithm.

Currency returns and systematic risk

We investigate the relationship between currency excess returns and Gross Domestic Product (GDP) in a Consumption Capital Asset Pricing Model. GDPs are observable systematic risk factors in our asset pricing equations. The correlation between the unobservable systematic factors is explored by Seemingly Unrelated Regressions estimations. The sample comprises the period from 1999:M01 to 2019:M12 and 48 countries. Results show that GDP growth risk is significant for most currency pairs and portfolios. We also find that they are priced in the cross-section of excess returns. Furthermore, currency returns are directly affected by regional business cycles (Europe, America, and Asia).