the economic determinants of interest rate option smiles we address three questions relating to the interest rate options market what is the shape of the smile what are the economic determinants of the shape of the smile do these determinants have predictive power for the future shape of the smile and vice versa we investigate these issues using daily bid and ask prices of euro interest rate caps floors we find a clear smile pattern in interest rate options the shape of the smile varies over time and is affected in a dynamic manner by yield curve variables and the future uncertainty in the interest rate markets it also has information about future aggregate default risk our findings are useful for the pricing hedging and risk management of these derivatives

does the bond market predict bankruptcy settlements this study shows the extent to which deviations from the absolute priority rule increase or decrease the bankruptcy emergence payoff to traded i e usually junior claimants bondholders the data indicate that on average bondholders benefit albeit slightly from absolute priority rule apr violations this paper also examines the degree to which the bond market in the bankruptcy filing month anticipates departures from the apr and other influences on the payoff to bondholders in other words we investigate the informational efficiency of the market for bankrupt bonds overall despite the complex and lengthy nature of bankruptcy proceedings the results support efficiency the finance literature has traditionally assumed that when a firm enters bankruptcy the creditors become the owners and the value of the firm is distributed according to the absolute priority rule apr the apr states that senior creditors should be fully compensated before junior creditors receive any portion of the bankrupt firm s value and junior creditors should receive full payment before shareholders receive any compensation in practice formal bankruptcy proceedings are complex processes that often violate the apr brown 1989 captures some of the intricacies of this process in a game theoretic model showing that the solution to the bargaining process in bankruptcy can involve deviations from the apr although the solution

competition policy and property rights one of the most controversial general questions in current competition policy is when if ever should competition law require a firm with market power to share its property with its rivals the answer would seem to be very rarely in the view of the supreme court of the united states as expressed in the 2004 trinko case which concerned whether a telecommunications network provider is required by us antitrust law to provide network access to its competitors

patent policy imitation incentives and the rate of cumulative innovation abstract we study an infinite horizon cumulative innovation model in which patents are characterized by their length and the likelihood of being ruled valid in a patent infringement litigation strengthening patent protection via a greater validity or length has two opposing effects on innovation 1 a negative litigation effect due to increasing the litigation threat for future innovators and 2 a positive competition effect due to reducing profit eroding imitation by competitive firms without innovation capacity the optimal innovation maximizing patent policy balances these two opposing effects for moderate patent validity longer remaining lifetime increases innovation due to the competition effect the opposite is true for higher validity for which the litigation effect dominates moderate validity and infinite patent length maximizes innovation when future profits are subject to greater discounting and r d costs are low while strong validity and finite length stimulates more innovation under lower discounting and higher r d costs

the aim end use model and its application to forecast japanese carbon dioxide emissions abstract the asian pacific integrated model aim has been developed for predicting greenhouse gas emissions and evaluating policy measures to reduce them two socioeconomic scenarios were assumed and co 2 emissions were predicted based on these scenarios and policy intervention assumptions it is found that mitigating co 2 emissions by 6 to the 1990 level is possible without scaling back productive activities or living standards in japan however this cannot be achieved by relying on the market mechanism alone our analysis shows that it is indispensable to introduce new policies and measures such as a carbon tax and subsidies

oil vulnerability index of oil importing countries abstract this paper assesses the relative oil vulnerability of 26 net oil importing countries for the year 2004 on the basis of various indicators the ratio of value of oil imports to gross domestic product gdp oil consumption per unit of gdp gdp per capita and oil share in total energy supply ratio of domestic reserves to oil consumption exposure to geopolitical oil market concentration risks as measured by net oil import dependence diversification of supply sources political risk in oil supplying countries and market liquidity the approach using the principal component technique has been adopted to combine these individual indicators into a composite index of oil vulnerability such an index captures the relative sensitivity of various economies towards developments of the international oil market with a higher index indicating higher vulnerability the results show that there are considerable differences in the values of individual indicators of oil vulnerability and overall oil vulnerability index among the countries both inter and intraregional

from the copenhagen accord to efficient technology protocols abstract as the copenhagen conference of parties cop failed to negotiate a binding post kyoto agreement an alternative is proposed based on the copenhagen accord ca the ca as endorsed by cop16 in cancun aims to combat global warming with differentiated reduction targets of greenhouse gas emissions and by mobilizing resources supporting adaptation and carbon free technology in developing countries dcs using a special version of merge we study the global implications of the ca postulating extensions of the accord in the direction of technology transfer protocols ttps we assess scenarios needed to reach sustainable climate targets under such protocols it is shown that without binding commitments for dcs the warming target of 2 c will be exceeded with a probability above 50 even if annex b countries eliminate their emissions however moderate commitments of dcs when they reach sufficient economic development make the 2 c scenario feasible ttps combined with binding emission reduction targets thus provide a mechanism to reduce climate change damages and may generate significant secondary benefits for example the reduced tax subsidy scenario rts20 has 77 to 40 chances to remain below 2 c of warming and an undiscounted cumulative gross domestic product gdp cost of 0 75 relative to baseline not accounting for the benefits of avoided damages

evaluating energy security in the asia pacific towards a more comprehensive approach the energy security conundrum how to equitably provide available affordable reliable efficient and environmentally benign energy services is a technology and policy challenge perhaps unlike any other the recent article on an energy security in the asia pacific by vlado vivoda is an excellent starting point for how to best capture the unique energy security challenges facing the region this article builds on vivoda s work but also points out some shortcomings with his analysis

technological regimes and schumpeterian patterns of innovation this paper proposes that the specific pattern of innovative activities in an industry can be explained as the outcome of different technological learning regimes a technological regime is defined by the particular combination of technological opportunities appropriability of innovations cumulativeness of technical advances and properties of the knowledge base building upon the distinction between schumpeter mark i and schumpeter mark ii industries this paper provides empirical estimates of the relationships between indicators of the schumpeterian patterns of innovation concentration of innovative activities stability in the hierarchy of innovators and importance of new innovators and indicators of the variables defining technological regimes

patentability r d direction and cumulative innovation we present a model of cumulative innovation where firms can conduct r d in both a safe and a risky direction innovations in the risky direction produce quality improvements with higher expected sizes and variances as patentability standards rise an innovation in the risky direction is less likely to receive a patent that replaces the current technology which decreases the static incentive for new entrants to conduct risky r d but increases their dynamic incentive because of the longer duration and hence higher reward for incumbency these together with a strategic substitution and a market structure effect result in an inverted u shape in the risky direction but a u shape in the safe direction for the relationship between r d intensity and patentability standards there exists a patentability standard that induces the efficient innovation direction whereas r d is biased towards against the risky direction under lower higher standards the optimal patentability standard may distort the r d direction to increase the industry innovation rate that is socially deficient

when do stronger patents increase continual innovation under continual innovation greater patent strength expands innovating firms profit against imitation but also shifts profit from current to past innovators we show how the impact of patents on innovation as determined by these two opposing effects varies with industry characteristics when the discount factor is sufficiently high the negative profit division effect is negligible and innovation monotonically increases in patent strength otherwise innovation has an inverted u relationship with patent strength and stronger patents are more likely to increase innovation when the discount factor or the fixed innovation cost is higher we also show how the impact of patents on innovation may change with firms innovation capability and with the intensity of competition from imitators

projection of future transport energy demand of thailand the objective of this study is to project transport energy consumption in thailand for the next 20 years the study develops log linear regression models and feed forward neural network models using the as independent variables national gross domestic product population and the numbers of registered vehicles the models are based on 20 year historical data between years 1989 and 2008 and are used to project the trends in future transport energy consumption for years 2010 2030 the final log linear models include only gross domestic product since all independent variables are highly correlated it was found that the projection results of this study were in the range of 54 84 59 05 million tonnes of oil equivalent 2 5 times the 2008 consumption the projected demand is only 61 65 of that predicted in a previous study which used the leap model this major discrepancy in transport energy demand projections suggests that projects related to this key indicator should take into account alternative projections because these numbers greatly affect plans policies and budget allocation for national energy management

assessing the energy vulnerability case of industrialised countries the emergence of new big consumer countries on the energy markets and the perspective of oil and gas depletion at the end of the current century raise the concerns about fair distribution of the remaining resources for the common and sustainable wellbeing of the mankind high volatility of energy prices discourages the investment and delays the energy technology transition voluntary measures are needed mainly in industrialised countries in order to develop alternative and sustainable energy sources to enable technology transfer towards emerging and developing countries and to avoid struggle for energy procurement in this paper a composite index of energy demand supply weaknesses is defined as a proxy of energy vulnerability the proposed index is based on several indicators such as energy intensity oil and gas import dependency co2 content of primary energy supply electricity supply weaknesses and non diversity in transport fuels the assessment of this composite index for selected industrialised countries is discussed as well as the sensitivity to various factors

antitrust in innovative industries we study the effects of antitrust policy in industries with continual innovation antitrust policies that restrict incumbent behavior toward new entrants may have conflicting effects on innovation incentives raising the profits of new entrants but lowering those of continuing incumbents we show that the direction of the net effect can be determined by analyzing shifts in innovation benefit and supply holding the innovation rate fixed we apply this framework to analyze several specific antitrust policies we also show that in some cases the tension does not arise and policies that protect entrants necessarily raise the rate of innovation

corporate credit risk dynamics the lack of widely available and comprehensive data of default activity on the corporate level has encouraged the advance of theories of corporate credit risk far beyond related empirical work this article addresses this deficit by examining a unique data set corporate bond defaults and credit ratings compiled by moody s investors service since 1920 the article investigates the time inhomogeneity of company default risk that is the pattern in which the risk of default for a company changes over time the empirical analysis addresses company default risk within a regression framework of competing risks or hazards the analysis identifies and quantifies variations in default risk with macroeconomic conditions with industries and through time an important characterization for many approaches to measuring and managing credit risk

relationship between level of economic development and motorcycle and car ownerships and their impacts on fuel consumption and greenhouse gas emission in thailand abstract an increase in road vehicles secondary to economic development has strongly pushed up energy demand and adversely impact the environment by the emission of greenhouse gases and pollutants this paper aims to analyse the relationship between motorcycle and car ownerships and level of economic development in thailand in addition an overall private vehicle ownership which is a sum of both types of private vehicle ownership is also studied an understanding of these relationships due to the economic development is a key knowledge for the sustainable transport policy in the future the results of this study revealed that at the early stage of economic development of developing countries like thailand the number of motorcycles predominates over private cars economic development strongly affects the ownership of private vehicles in two ways 1 overall private vehicle ownerships increase as the income levels grow and 2 after personal income grows up to a certain level people will shift from motorcycle to car ownerships for their prestige convenience comfort and safety because of continuing economic development and population growth the expected increase in overall private vehicle ownership is projected to push up the total private vehicle stock of thailand in the year 2050 to about twice of the present level this will drive fuel demands in 2050 to about 2 4 times and the greenhouse gases ghg emission to about 2 5 times of the current levels hence policy makers in developing countries should not overlook the impacts on the consequences of increasing overall private vehicle stock in the near future the best and most appropriate policies should be given to the development of public transport as the first priority rather than the traditional one which gives highest priority to traffic mobility of private vehicles by road transport neglecting the effectiveness of passengers mobility of the public transport in addition policies to promote high efficiency vehicle technologies particularly for motorcycles should also be taken into consideration particularly for a low income country due to a high share of the motorcycles in the overall private vehicle stock

low carbon society scenario analysis of transport sector of an emerging economy the aim enduse modelling approach abstract the transport sector of a country is the backbone driving the economy forward thailand s land transport sector is modelled using the aim enduse which is a recursive dynamic optimization model based on bottom up modelling principle the travel demand is divided into two major categories which are passenger travel and freight travel the objective of this paper is to analyse the mitigation possible through low carbon society lcs measures and emission tax et two scenario clusters are devised along with the bau case the lcs scenario cluster has three designed scenarios which are lcs l lcs m and lcs h the emission tax et cluster has four scenarios where the taxes of 50 100 200 and 500 usd t co2 are implemented along with this the marginal abatement costs mac of the counter measures cms and the co benefits in terms of energy security productivity and air pollutant mitigation are also assessed results show that lcs scenarios are possible of mitigating up to 1230 mt co2 cumulatively from 2010 to 2050 in terms of macs new vehicles play a pivotal role along with hybrid vehicles the average abatement cost aac assessment shows that the aac of lcs h scenario is in the order of 100 usd t co2 all the lcs and et scenarios show an enhancement in energy security and also a threefold increase in productivity there is distinct mitigation in terms of air pollutants from the transport sector as well

benefits of low carbon development in a developing country case of nepal this paper analyzes the direct and indirect benefits of reducing co2 emission during 2005 to 2100 in the case of nepal a low income developing country rich in hydropower resource it discusses the effects on energy supply mix local pollutant emissions energy security and energy system costs of co2 emission reduction targets in the country by using an energy system model based on the markal framework the study considers three cases of co2 emission reduction targets and analyzes their benefits during the study period as compared to the reference scenario the first two cases consist of a 20 cutback scenario ert20 and 40 cutback scenario ert40 of co2 emission in the reference scenario the third case considers a 40 cutback of co2 emission with the share of electric mass transport emt in the land transport service demand increased to 30 as compared to 20 in the reference scenario the study shows that an implementation of scenario ert40 would increase the cumulative electricity generation mainly from hydropower by 16 5 794 twh reduce the cumulative consumption of imported fuels by 42 24 400 pj and increase the total energy system cost by 1 6 during 2005 to 2100 as compared to the reference scenario besides there would be a reduction in the emission of local pollutants and generation of additional employment in the country with the share of emt increased to 30 there would be a further reduction in local pollutant emissions an improvement in energy security and a decrease in the energy system cost compared to that in scenario ert40

assessing co2 emissions in china s commercial sector determinants and reduction strategies abstract the commercial sector is one of the key sectors in china s economic transformation and carbon emissions control this paper applies var and stirpat models to investigate the major influencing factors of co 2 emissions in china s commercial sector over the period 1980 2014 according to the empirical results per capita gdp urbanization and energy structure have positive effects on co 2 emissions while energy intensity has negative effect on co 2 emissions in the long term besides per capita gdp ranks as the most important driving factors of co 2 in china s commercial sector followed by urbanization energy structure and energy intensity in that order this paper argues that reducing energy intensity and improving energy structure are the means to realize co 2 emission reductions in the commercial sector in the short and long term respectively besides this paper forecasts that co 2 emissions in china s commercial sector will be 1942 mt by 2030 which is huge and about half of the co 2 emissions of the european union in 2014 the findings have important implications for policy makers to enact co 2 emission reduction policies

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

the patent paradox revisited an empirical study of patenting in the u s semiconductor industry 1979 1995 we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms

how broad should the scope of patent protection be i explore the trade off between a patent s length that is its lifetime and its width that is its scope of coverage a wider patent generally reduces the distortion of consumers choices between the patented brand of the product and unpatented lower priced varieties sold by competitors but also permits higher prices which increase relative to profits the deadweight losses from consumers switching consumption out of the product class i show under what conditions infinitely lived but very narrowly focused patents are the socially efficient way to reward innovation and under what conditions very short lived but very broad patents are optimal

energy policies for low carbon sustainable transport in asia abstract transformation of asia s transport sector has vital implications for climate change sustainable development and energy indicators papers in this special issue show how transport transitions in asia may play out in different socio economic and policy scenarios including a low carbon scenario equivalent to 2 c stabilization accounting for heterogeneity of national transport systems these papers use diverse methods frameworks and models to assess the response of the transport system to environmental policy such as a carbon tax as well as to a cluster of policies aimed at diverse development indicators the analysis shows that co2 mitigation in a transport system is achieved more effectively by aligning mitigation policies with sustainable development policies and measures such as mandates for mode share and choices such as urban design information and communication systems and behavioral measures authors therefore advocate policies that target multiple dividends vis a vis carbon mitigation energy security and local air quality whereas four papers focus on emissions mitigation policies one paper examines challenges to adapt fast growing transport infrastructures to future climate change induced risks collectively the papers exemplify a set of policies and measures that can deliver co benefits and also demonstrate the use of methods frameworks and models to delineate the optimal mix of such policies and measures

the applicability of marginal abatement cost approach a comprehensive review abstract the marginal abatement cost mac methodology is widely used in climate change policies policy makers rely on mac to assess feasible strategies and related costs to achieve emission reduction goals this paper introduces a variety of mac methodologies aiming at solving diverse problems which utilizes various calculable logic thus producing different results and implications this study applies a mind mapping method to capture differentiation of mac methods and systematically classify mac methodologies the applicability path analysis was proposed based on principles such as stakeholder type decision making objectives cost concept strategy mode and information scope our goal is to assess the applicability of different methodologies to reduce misuse by policy makers and to serve as a guide for subsequent research which might prompt and lead to the derivation of more consequential results in future studies the results of this study suggest that the complex method is not always better than the simplified method because policy makers are required to select the appropriate method according to the type of information needed it may even be suggested that mac could be reliable by ranking relative value of options compared with baseline rather than focusing on the absolute value of individual measures

modeling the bid ask spread measuring the inventory holding premium the need to understand and measure the determinants of market maker bid ask spreads is crucial in evaluating the merits of competing market structures and the fairness of market maker rents this study develops a simple parsimonious model for the market maker s spread that accounts for the effects of price discreteness induced by minimum tick size order processing costs inventory holding costs adverse selection and competition the inventory holding and adverse selection cost components of spread are modeled as an option with a stochastic time to expiration this inventory holding premium embedded in the spread represents compensation for the price risk borne by the market maker while the security is held in inventory the premium is partitioned in such a way that the inventory holding and adverse selection cost components as well as the probability of an informed trade are identified the model is tested empirically using nasdaq stocks in three distinct minimum tick size regimes and is shown to perform well both in an absolute sense and relative to competing specifications

patent litigation as an information transmission mechanism patent litigation reveals important information about the validity of the contested patent to other potential entrants this paper explores the implications of such informational externalities for entry dynamics in the presence of multiple potential entrants the nature of the entry game can be one of either waiting or preemption depending on the degree of patent protection therefore the payoffs for the patentee and the initial imitator are discontinuous in the degree of patent protection furthermore strengthening intellectual property rights is not necessarily desirable for the patentee the analysis may also help explain the apparently puzzling practice of delaying patent suits copyright 1998 by american economic association