Revenue Risk Research Articles

PENDAPATAN DAN RISIKO PENDAPATAN USAHA TANI PADI DAERAH IRIGASI DAN NON IRIGASI DI KABUPATEN BANJAR KALIMANTAN SELATAN

This study aims to determine the income and revenue risk from rice farming inirrigated and non irrigated land are also factors that influence it. The hypothesisadvanced is that (1) factors that affect revenue and revenue risk rice farming inpaddy fields are irrigated and non irrigated land area, the price of seed, fertilizerprices, wage labor, the price of seeds, irrigation areas and varieties, (2 ) rice farmincome risk in irrigated land is lower than non-irrigated land. Data obtainedthrough interviews with 80 randomly simple rice farmers. The method used ismultiple linear regression analysis model with Ordinary Least Square (OLS) andthe analytical coefficient of variation (CV). The results showed that the area ofland, the price of urea, ponska price, the price of pesticides, and irrigation areadummy effect on income. While the risk is influenced by the land revenue, theprice of seed, the price of urea fertilizer, fertilizer prices ponska, pesticide pricingand superior varieties of variables. Income risk in the area of irrigated ricefarming was smaller than non-irrigated areas with kofisien variation of 0.83 and0.89.Key words: revenue, risk, rice, irrigated and non irrigated area.

Income volatility of Indonesian banks after the Asian Financial Crisis

This paper considers the factors that determine Indonesian bank risk both before and after the Asian Financial Crisis (AFC). In the pre-AFC period, bank capital holdings are positively associated with bank revenue risk, which is attributed to a combination of regulatory laxity as well as laxity of enforcement. In the post-AFC period, capital is found to reduce bank risk in a non-linear manner. Franchise value is associated with lower bank risk, but in a non-linear manner; low levels of franchise value are associated with increased bank risk, while higher levels of franchise value result in lower bank risk. It is also concluded the low-to-medium levels of bank loan growth are associated with lower bank risk; however, high levels of loan growth are risk increasing. These results point to the importance of enforcement of regulatory oversight in reducing bank risk.

Stochastic Revenue and Cost Model for Determining a BOT Concession Period under Multiple Project Constraints

AbstractThe concession period is an important issue in the contractual arrangement of build-operate-transfer (BOT) projects, such as highways, bridges, and tunnels. In determining the concession period, it is predominantly the toll revenue and construction costs that affect how long the concessionaire needs to be in operation after the completion of the project. This paper presents a stochastic revenue and cost model to determine a concession period under multiple constraints in planning a BOT infrastructure project. In the study, the stochastic process is converted into an equivalent discrete form, and its parameters are estimated using historical data. Based on the process, a principle-agent problem is addressed as a solution to the conflict between the owner and the concessionaire. This methodology incorporates these stakeholders’ interests in terms of (1) incentive constraints, and (2) participation constraints. In a case study, a numerical simulation is carried out to assess the risk of toll revenue ...

Alternative to Government Revenue Guarantees: Dynamic Revenue Insurance Contracts

AbstractPublic private partnerships (PPPs) are arrangements under which the private sector supplies infrastructure assets and services that traditionally have been provided by the public sector. Public authorities may enhance the marketability of PPP projects by offering revenue guarantees. However, government revenue guarantees can pose significant fiscal risks for the issuing government, particularly during economic crises. This paper presents a new type of revenue risk hedging contract, the dynamic (flexible) revenue insurance contract, which can be offered as an alternative to the conventional government guarantees. This new contract gives PPP stakeholders other than the government the opportunity to participate in the revenue risk coverage. Potential revenue risk insurers include international financial institutions, export credit agencies, and private insurance companies. The key feature of these new contracts is that they facilitate the pooling of project revenue insurers by accommodating insurer f...

The Risk Analysis in Public Passenger Transport

The paper deals with the risks related to providing public passenger transport. The risks are divided into two groups: cost and revenue risks. The paper describes possibilities of risk allocation among contracting parties when providing transport services.

Determine targets with revenue maximisation and downside risk hedging considerations under the stochastic setting

This paper studies how to set revenue targets by finding the best trade-off between the expected return for achieving a target and the expected cost for missing a target when the revenue performance is stochastic. The corresponding formulas of calculating the target under the consideration of revenue maximisation, risk control, and revenue maximisation under controlled risk are developed and different scenarios under certain return and failure cost functions are discussed. This paper further discusses how to set sub-period targets under the consideration of expected revenue thereby, achieving the target at the period-end and thus controlling the downside risk. Numerical analysis about how the parameters impacting the downside risk and sub period target is also provided.

Competitive Procurement Design: Evidence from Regional Passenger Railway Services in Germany

We study competitive awarding procedures of short haul railway passenger services in Germany from 1995 to 2011 by means of a newly collected data set. In particular, we use regression techniques to investigate the determinants of the number of bidders, the identity of the winning bidder and the subsidy level. We find that there are more bidders when the contract duration is high and the revenue risk low. The dominant operator is more likely to win contracts if it is the incumbent, the network is large, the contract duration is high, when used rolling stock is admitted and when there are few other bidders.

Gross revenue risk in Swiss dairy farming

This study investigated how agricultural policy reforms, including market liberalization and market deregulation, have influenced gross revenue risk of Swiss dairy producers using farm-level panel data between 1990 and 2009. Based on detrended data, variance decomposition was applied to assess how output prices and yields contributed to revenue risk over 3 different periods: the whole period (1990–2009), the first decade (1990–1999), and the second decade (1999–2009). In addition, the effect of expected changes in animal-based support for roughage-consuming cattle and price volatility on revenue risk was evaluated using a simulation model. Prices were the main contributor to revenue risk, even if the importance of yield risk increased over time. Swiss dairy producers can profit from natural hedge but market deregulation and market liberalization have reduced the natural hedge at the farm level. An increase in price volatility would substantially increase revenue risk and would, together with the abandonment of direct payments, reduce the comparative advantage of dairy production for risk-averse decision makers. Depending on other available risk management strategies, price risk management instruments might be a valuable solution for Swiss dairy producers in the future.

Crop biodiversity repercussions of subsidized organic farming

This paper analyses the impact that the CAP financial support on selected organic crops has on agrobiodiversity under production uncertainty. A stochastic production function is employed and estimated to assess whether risk-averse farmers hedge risk by diversifying their portfolio of crops. The model is applied to farm-level data of organic crop farms in Greece. Organic farming financial support, in the form of agricultural subsidies for the cultivation of organic crops, poses a double-edged sword: on one side, organic farming is considered an agrobiodiversity enhancing cultivation method; on the other side, financial support may reduce agrobiodiversity if farmers decide it is optimal to cultivate only the few, supported crops. The study shows that risk aversion leads to agrobiodiversity conservation. However, the existence of CAP financial support on selected crops decreases the relationship between revenue risk management and agrobiodiversity, indirectly leading to agrobiodiversity loss.

Modelling the Economic Impact of Electricity Tariff Increases on Eskom’s Top Customer Segment

With the rapid and sharp rise in energy prices in South Africa, the cost of energy is becoming a factor that cannot be ignored in either energy-intensive or -dependent industries. In the energy-intensive industries, for examp le, this immed iate and direct perspective can result in the incurring of costs that are greatly magnified by the large amount of power consumed. Few would therefore deny the importance of electricity as an essential input to production and to economic activity in general. Based on the fact that changes in electricity prices impact on basically each and every individual in South Africa, and mo re specifically on an energy utility provider's core business, it is important to determine its effect on each of these entities. The develop ment of an analytical Cost of Production Tipping Po int (CoPTP) model, combined with the economy-wide modelling capabilit ies of an Applied General Equilib riu m (A GE) model for South Africa, will help to determine what the potential impact would be, given the market forces at play at any particular instance. The aim of this paper is therefore to help develop an understanding of the impact of increasing electricity prices on an energy utility provider's main assets - its customers, by determining the broader potential economic impact on the South African economy. The value of this framewo rk is therefore that it will provide strategic context, will allow for a better understanding of the influence of electricity price increases on both energy-intensive and -dependent industries, while also informing key stakeholders regard ing imp lications of potential changes in customer operational environ ments to an energy utility provider in terms of potential revenue risk implications, as well as to the rest of industry and the broader market in South Africa due to potential second round feedback effects.

Effects of agricultural policy reforms and farm characteristics on income risk in Swiss agriculture

PurposeThe purpose of this study is to examine the effects of agricultural policy reform – specifically the change from market to direct payment support – on income variability of Swiss farming households. In addition, the observed heterogeneity in income risks across farms and time is explained in terms of farm and regional characteristics.Design/methodology/approachUnbalanced farm‐level panel data of the Swiss farm accountancy network (FADN) are used to construct coefficients of variation of five‐year overlapping time intervals for total household income and gross farm revenues over the period 1992 to 2009. Linear fixed effect models are applied to measure the effect of specialization, off‐farm income, direct payments, farm size, and liquidity on the variability of gross farm revenues and household income in the valley, hill, and mountain regions.FindingsThe switch from market‐based support to direct payments has decreased the variability of farm revenues and household income. The strong reliance on direct payments serves as insurance for most farmers and reduces both household income and revenue risk. Off‐farm income can be used by farmers to reduce household income risk but it increases revenue risk in the valley regions. In all of the regions considered, farm size has a positive effect on household income risk and a negative effect on revenue risk. A high degree of specialization increases both gross revenue and household income risk. Potential revenue insurance contracts should specify farmers' off‐farm employment, the degree of specialization, farm size, and regional specific risk profiles.Originality/valueThis paper assesses the complementary effects of specific farm characteristics and risk management strategies with regard to both farm revenue and household income risk. Influences of agricultural policy changes on income risks are also empirically assessed at different spatial scales.

Relative Importance of Price vs. Yield variability in Crop Revenue Risk

Relative Importance of Price vs. Yield variability in Crop Revenue Risk

Analytical calculation of risk measures for variable annuity guaranteed benefits

With the increasing complexity of investment options in life insurance, more and more life insurers have adopted stochastic modeling methods for the assessment and management of insurance and financial risks. The most prevalent approach in market practice, Monte Carlo simulation, has been observed to be time consuming and sometimes extremely costly. In this paper we propose alternative analytical methods for the calculation of risk measures for variable annuity guaranteed benefits on a stand-alone basis. The techniques for analytical calculations are based on the study of geometric Brownian motion and its integral. Another novelty of the paper is to propose a quantitative model which assesses both market risk on the liability side and revenue risk on the asset side in the same framework from the viewpoint of risk management. As we demonstrate by numerous examples on quantile risk measure and conditional tail expectation, the methods and numerical algorithms developed in this paper appear to be both accurate and computationally efficient.

Evaluation of progress in contractual terms: Two case studies of recent DBFO PPP projects in North America

With continuous demand for transportation infrastructure and chronic funding shortfalls, public-private partnerships (PPPs) for infrastructure provision have garnered attention in recent years in the U.S. and abroad. High profile concession deals in Chicago and Indiana have raised concerns about the protection of public interests in PPPs. Such concerns have ignited heated debates, partly driven by ideology and vested interests, but also by questionable decisions made previously. While public agencies at all levels are interested in identifying successful PPP arrangements, the variety and complexity of PPP deals, combined with local factors unique to each project, make the development of a universal evaluation framework practically infeasible.In order to improve our knowledge of the best PPP approaches for transportation infrastructure, we examine two recently completed Design-Build-Finance-Operate (DBFO) PPP deals in North America on six critical factors identified in the literature review: 1) pre-construction and construction risks; 2) asset valuation, traffic demand, and revenue risks; 3) non-compete provisions; 4) facility performance standards; 5) early termination terms; and 6) public and political acceptance. The case studies exhibit evidence of improved balances of risks, responsibility, costs, and benefits between the public and private sectors, incorporating knowledge from past experiences, and suggest an increasing sophistication of governmental decision-making and a move toward what we call a “middle-ground approach” to successfully addressing key issues of PPP implementation. As technical experience and familiarity with PPPs grow among transportation officials in the public sector, it is likely that success with and acceptance of PPPs will increase in coming years.

Production and insurance under regret aversion

This paper examines the behavior of a regret-averse producer facing revenue risk. To insure against the revenue risk, the producer can purchase a coinsurance contract with an endogenously chosen coinsurance rate. Regret-averse preferences are characterized by a utility function that includes disutility from having chosen ex-post suboptimal alternatives. We show that the regret-averse producer never fully insures against the revenue risk even though the coinsurance contract is actuarially fair. When the producer is sufficiently regret averse and the loss probability is high, we further show that the regret-averse producer chooses not to purchase the actuarially fair coinsurance contract. Even when purchasing the actuarially fair coinsurance contract is optimal, we derive sufficient conditions under which the regret-averse producer reduces the optimal output level as compared to that without the coinsurance contract. These results are distinct from those under pure risk aversion, thereby making the consideration of regret aversion crucial.

Financial Statement Analysis: National Presto Case

This paper addresses specific questions pertaining to financial statement analysis. The paper focuses on National Presto, which was dealing with a good and bad problem at the time of this paper. Good in that they had significant cash on hand and bad that there was significant competition and the number of customer they served was being reduced that could significantly increase the revenue risk to this entity in the near future.

Quantitative risk measures applied to Alaskan commercial fisheries

Risk measures can summarize the complex variability inherent in fisheries management into simple metrics. We use quantitative risk measures from investment theory to analyze catch and revenue risks for 90 commercial fisheries in Alaska, USA, nearly a complete census. We estimate the relationship between fishery characteristics and catch risk using nonparametric random forest regression to identify attributes associated with high or low risks. Catch and revenue risks for individual Alaskan fisheries are substantial and are higher than risks for farmed food alternatives. Revenue risks are greater than catch risks for most fisheries, indicating that price variability is an additional source of risk to fishermen. Regression results indicate that higher productivity species tend to be higher risk, and there is an increasing gradient of risk moving north and west across Alaskan waters, with the remote western Bering Sea fisheries tending to have the highest risks. Low risk fisheries generally have large catches and support larger fleets. Finally, fisheries with greater catch history under some form of dedicated access privileges tend to have lower catch risks.

Latin American Company Strategies in the Financial Crisis

This article presents a conceptual basis for developing a corporate strategy to respond to a financial crisis, and an empirical examination of strategic moves undertaken by a number of large Latin American (Mexican) firms during the crisis and subsequent recession. A framework for thinking about this problem is the Cost–Revenue–Risk (CRR) view,1 which focuses on the firm’s costs, revenues, and risks. This framework is elaborated in the article, and then applied empirically to six companies in Mexico, looking at their responses to the crisis initially and after one year. In addition, the firms listed on the Mexican stock exchange are examined to see if the strategies used by the interview sample also contribute to performance of the larger group of firms—which they do. In the sample of listed Mexican firms, both sectoral diversification and cross-country diversification turned out to be significant contributors to explaining relative firm performance during the crisis.

Valuing Public-Sector Revenue Risk Exposure in Transportation Public–Private Partnerships

A methodological framework can be used to evaluate public revenue financial risk exposure when transportation infrastructure is delivered through public–private partnerships (PPPs) in the United States. Transportation agencies worldwide and across the United States are increasingly using PPPs as a mechanism to deliver infrastructure. An analysis of international experience conducted for this research shows that countries with more extensive experience in PPPs than the United States have devised sophisticated methodologies to value and manage risk exposure in the context of value for money and optimum allocation of project risks. However, a review of major U.S. transportation PPP transactions reveals that U.S. states currently lack a well-documented methodology to quantify and incorporate the cost of public-sector risk into the evaluation of PPP projects. This evidence suggests that U.S. transportation agencies might benefit significantly from implementing more systematic approaches to incorporate the cost of risk in the evaluation of PPP projects. The framework proposed in this research provides a step-by-step methodology to quantify revenue risk exposure and is aimed at facilitating the estimation of the risk-adjusted costs of delivering a project as a PPP. The methodology is based on the concept of contingent liabilities and uses option pricing techniques. The application of the methodology is demonstrated by two U.S. transportation PPP case studies.

February Settlement Period Critical in Determining Downside Revenue Risks

February Settlement Period Critical in Determining Downside Revenue Risks