the reformed eu ets intertemporal emission trading with restricted banking abstract with the increase of the linear reduction factor the implementation of the market stability reserve and the introduction of the cancellation mechanism the eu ets changed fundamentally we develop a discrete time model of the intertemporal allowance market that accurately depicts these reforms assuming that prices develop with the hotelling rule as long as the aggregated bank is non empty a sensitivity analysis ensures the robustness of the model results regarding its input parameters the accurate modelling of the eu ets allows for a decomposition of the effects of the individual amendments and the evaluation of their cost effectiveness the market stability reserve shifts emissions to the future but is allowance preserving a one time cancellation reduces the overall emission cap increasing allowance prices in the long run but does not significantly impact the emission and price path in the short run the increased linear reduction factor leads with 9 billion cancelled allowances to a stronger reduction than the cancellation mechanism and is therefore the main price driver of the reform

new results on the relationship among risk aversion prudence and temperance abstract this note studies the relationships between different aspects of agent s preferences toward risk we show that under the assumptions of non satiation and bounded marginal utility prudence implies risk aversion imprudence implies risk loving and that temperance implies prudence intemperance implies imprudence the implications of these results for comparing risks in the cases of increase in risk increase in downside risk and increase in outer risk are discussed

risk sensitive dividend problems abstract we consider a discrete time version of the popular optimal dividend payout problem in risk theory the novel aspect of our approach is that we allow for a risk averse insurer i e instead of maximising the expected discounted dividends until ruin we maximise the expected utility of discounted dividends until ruin this task has been proposed as an open problem in gerber and shiu 2004 the model in a continuous time brownian motion setting with the exponential utility function has been analysed in grandits et al 2007 nevertheless a complete solution has not been provided in this work instead we solve the problem in discrete time setup for the exponential and the power utility functions and give the structure of optimal history dependent dividend policies we make use of certain ideas studied earlier in bauerle and rieder 2011 where markov decision processes with general utility functions were treated our analysis however includes new aspects since the reward functions in this case are not bounded

on investor preferences and mutual fund separation abstract we extend cass and stiglitz s analysis of preference based mutual fund separation we provide a complete characterization of the general k fund separation we show that some instances of separation with many funds can be constructed by adding inverse marginal utility functions having separation with one or a few funds we also show that there is money separation in which we can choose the riskless asset as one of the funds if and only if there is a fund which may or may not be the riskless asset with a constant allocation as wealth changes in general we do not know how to write the separating utility functions in closed form but we can do so in the special case of sahara utility defined by chen et al and for a new class of gobi preferences introduced here

international portfolio choice and political instability risk a multi objective approach abstract the benefits derived from international portfolio diversification into foreign nations including the less developed countries are well documented yet this practice is discouraged due to market imperfections such as political instability in practice nations may be differentiated further by many aspects such as border controls or political and social trends which constrain private transactions and financial decisions this paper attempts to examine 1 whether the home asset bias in a portfolio holding is associated with higher political instability risk and 2 to what extent international diversification among stocks in the presence of such risk outperforms domestic stock portfolios using alternative instability risk proxies in the context of a discrete time version of mean variance framework we corroborate the impact of this type of risk on international portfolio investment decisions

transmission of the financial and sovereign debt crises to the emu stock prices cds spreads and exchange rates abstract this paper tests for the transmission of the 2007 2010 financial and sovereign debt crises to fifteen emu countries we use daily data from 2003 to 2010 on country financial and non financial stock market indexes to analyze the stock market returns for three country groups within emu north south and small the following results hold for both the north and south european countries while the smallest countries seem to be relatively isolated from international events first we find strong evidence of crisis transmission to european non financials from us non financials but not for financials second in order to test how the sovereign debt crisis affects stock market developments we split the crisis in pre and post lehman sub periods results show that financials become significantly more dependent on changes in the difference between the greek and german cds spreads after lehman s collapse compared to the pre lehman sub period however this increase is much smaller for non financials third before the crisis euro appreciations coincide with european stock market decreases whereas this relationship reverses during the crisis finally this reversal seems to be triggered by lehman s collapse

on the structure of lost sales inventory models we provide a new approach to the structural analysis of the standard lost sales inventory system this approach is we think easier to work with than the original one we also derive new bounds on the optimal policy then we show that more variable demand leads to higher cost finally we extend the analysis to several important variations of the basic model

demand seasonality in retail inventory management abstract we investigate the value of accounting for demand seasonality in inventory control our problem is motivated by discussions with retailers who admitted to not taking perceived seasonality patterns into account in their replenishment systems we consider a single location single item periodic review lost sales inventory problem with seasonal demand in a retail environment customer demand has seasonality with a known season length the lead time is shorter than the review period and orders are placed as multiples of a fixed batch size the cost structure comprises of a fixed cost per order a cost per batch and a unit variable cost to model retail handling costs we consider four different settings which differ in the degree of demand seasonality that is incorporated in the model with or without within review period variations and with or without across review periods variations in each case we calculate the policy which minimizes the long run average cost and compute the optimality gaps of the policies which ignore part or all demand seasonality we find that not accounting for demand seasonality can lead to substantial optimality gaps yet incorporating only some form of demand seasonality does not always lead to cost savings we apply the problem to a real life setting using point of sales data from a european retailer we show that a simple distinction between weekday and weekend sales can lead to major cost reductions without greatly increasing the complexity of the retailer s automatic store ordering system our analysis provides valuable insights on the tradeoff between the complexity of the automatic store ordering system and the benefits of incorporating demand seasonality

international order flows explaining equity and exchange rate returns macroeconomic models of equity and exchange rate returns perform poorly at high frequencies the proportion of daily returns that these models explain is essentially zero instead of relying on macroeconomic determinants we model equity price and exchange rate behavior based on a concept from microstructure order flow the international order flows are derived from belief changes of different investor groups in a two country setting we obtain a structural relationship between equity returns exchange rate returns and their relationship to home and foreign equity market order flow to test the model we construct daily aggregate order flow data from 800 million equity trades in the u s and france from 1999 to 2003 almost 60 of the daily returns in the s p100 index are explained jointly by exchange rate returns and aggregate order flows in both markets as predicted by the model daily exchange rate returns and order flow into the french market have significant incremental explanatory power for the daily s p returns the model implications are also validated for intraday returns

real financial market exchange rates and capital flows foreign exchange rates asset prices and capital movements are expected to be closely related to each other as international capital markets become more and more integrated this paper provides new empirical evidence from an index of exchange rate adjusted cross country asset price ratios which may be interpreted as a real effective financial exchange rate the integrated stock flow approach reveals that a country s real effective financial exchange rate is cointegrated with international investors net foreign holdings of its assets the associated error correction equations have useful interpretations against the backdrop of uncovered return parity and investor portfolio rebalancing behavior

asymmetric impact of monetary surprises on exchange rate abstractthis paper examines the asymmetric response of exchange rate to monetary surprises after controlling the type direction and origin of the news as well as business cycle phase a new asymmetry is found in the response of the exchange rate to news surprises in specific the us dollar depreciates against major currencies as the response to the negative monetary surprises in the 2001 recession while the dollar appreciates responding to similar negative monetary surprises during the 2008 recession the paper further explores possible causes and finds that time varying status of the currency with higher financial returns may contribute to the new asymmetry

cap and trade programs under delayed compliance consequences of interim injections of permits virtually every analysis of cap and trade programs assumes that rms must surrender permits as they pollute however no program existing or proposed requires such continual compliance some e g the acid rain program limiting so2 emissions require compliance once a year others e g the regional greenhouse gas initiative limiting co2 emissions require compliance every three years the paths of emissions and permit prices would be invariant to compliance timing holland moore 2013 if the government never injected additional permits between successive compliance dates however virtually all emissions trading programs require such injections through either 1 interim permit auctions or 2 sales from cost containment reserves intended to cap permit prices in such cases analyses which abstract from delayed compliance may mislead policy makers for example a cost containment reserve judged sucient to cap prices at a ceiling over a year may sell out in a single day

capacitated multi item inventory systems with random and seasonally fluctuating demands implications for postponement strategies we address multi item inventory systems with random and seasonally fluctuating and possibly correlated demands the items are produced in two stages each with its own lead time in the first stage a common intermediate product is manufactured the production volumes in the first stage are bounded by given capacity limits we develop an accurate lower bound and close to optimal heuristic strategies of simple structure the gap between them evaluated in an extensive numerical study is on average only 0 45 we use the model to investigate the benefits of various delayed product differentiation postponement strategies as well as other strategic questions including i the benefits of flexible versus dedicated production facilities ii the trade off between capacity and inventory investments and iii the trade off between capacity investments and service levels

a multi period fuzzy portfolio optimization model with minimum transaction lots abstract in this paper we consider a multi period fuzzy portfolio optimization problem with minimum transaction lots based on possibility theory we formulate a mean semivariance portfolio selection model with the objectives of maximizing the terminal wealth and minimizing the cumulative risk over the whole investment horizon in the proposed model we take the return risk transaction costs diversification degree cardinality constraint and minimum transaction lots into consideration to reflect investor s aspiration levels for the two objectives a fuzzy decision technique is employed to transform the proposed model into a single objective mixed integer nonlinear programming problem then we design a genetic algorithm for solution finally we give an empirical application in chinese stock markets to demonstrate the idea of our model and the effectiveness of the designed algorithm

a review of low carbon fuel policies principles program status and future directions a low carbon fuel standard lcfs is a market based policy that specifies declining standards for the average lifecycle fuel carbon intensity afci of transportation fuels sold in a region this paper i compares transportation fuel carbon policies in terms of their economic efficiency fuel price impacts greenhouse gas emission reductions and incentives for innovation ii discusses key regulatory design features of lcfs policies and iii provides an update on the implementation status of lcfs policies in california the european union british columbia and oregon the economics literature finds that an intensity standard implicitly taxes emissions and subsidizes output the output subsidy results in an intensity standard being inferior to a carbon tax in a first best world although the inefficiency can be corrected with a properly designed consumption tax or mitigated by a properly designed carbon tax or cap and trade program in california from 2011 to 2015 the share of alternative fuels in the regulated transportation fuels pool increased by 30 and the reported afci of all alternative fuels declined 21 lcfs credit prices have varied considerably rising to above 100 credit in the first half of 2016 lcfs programs in other jurisdictions share many features with california s but have distinct provisions as well c 2016 elsevier ltd all rights reserved

measuring the dollar euro permanent equilibrium exchange rate using the unobserved components model this paper employs an unobserved component model that incorporates a set of economic fundamentals to obtain the euro dollar permanent equilibrium exchange rates peer for the period 1975q1 to 2008q4 the results show that for most of the sample period the euro dollar exchange rate closely followed the values implied by the peer the only significant deviations from the peer occurred in the years immediately before and after the introduction of the single european currency the forecasting exercise shows that incorporating economic fundamentals provides a better long run exchange rate forecasting performance than a random walk process

chance constrained optimization for pension fund portfolios in the presence of default risk abstract in this paper we consider the portfolio optimization problem for a pension fund consisting of various government and corporate bonds the aim of the problem is to maximize the fund s cash position at the end of the time horizon while allowing for the possibility of bond defaults we model this problem as a stochastic discrete time optimal control problem with a chance constraint that ensures all future outgoing commitments can be met with sufficiently high probability we then introduce a corresponding deterministic formulation that is a conservative approximation of the original stochastic optimal control problem this approximate problem can be solved using gradient based optimization techniques we conclude the paper with a simulation study

inventory control in a fluctuating demand environment we present an inventory model where the demand rate varies with an underlying state of the world variable this variable can represent economic fluctuations or stages in the product life cycle for example we derive some basic characteristics of optimal policies and develop algorithms for computing them in addition we show that certain monotonicity patterns in the problem data are reflected in the optimal policies

output and attribute based carbon regulation under uncertainty abstract output based carbon regulations such as fuel economy standards and the rate based standards in the clean power plan create well known incentives to inefficiently increase output similar distortions are created by attribute based regulations this paper demonstrates that despite these distortions output and attribute based standards can always yield strictly greater expected welfare than flat emission standards given uncertainty in demand for output or attributes assuming locally constant marginal damages for fuel economy standards the welfare maximizing amount of attribute or mileage basing is likely small relative to current policy for the electricity sector however an intensity standard may yield greater expected welfare than a flat standard

informational integration and fx trading abstract this paper addresses international financial integration in a new way we focus on informational integration specifically the importance of information conveyed by order flow in major currencies for pricing minor currencies we develop a multi currency model of portfolio allocation in the presence of dispersed information we then test the model s implications using four months of concurrent transaction data on nine currencies the model explains 45 to 78 of daily returns in all nine currencies moreover its prediction that order flow in individual markets should be relevant for determining prices in other markets is borne out

on the equivalence of quadratic optimization problems commonly used in portfolio theory abstract in the paper we consider three quadratic optimization problems which are frequently applied in portfolio theory i e the markowitz mean variance problem as well as the problems based on the mean variance utility function and the quadratic utility conditions are derived under which the solutions of these three optimization procedures coincide and are lying on the efficient frontier the set of mean variance optimal portfolios it is shown that the solutions of the markowitz optimization problem and the quadratic utility problem are not always mean variance efficient the conditions for the mean variance efficiency of the solutions depend on the unknown parameters of the asset returns we deal with the problem of parameter uncertainty in detail and derive the probabilities that the estimated solutions of the markowitz problem and the quadratic utility problem are mean variance efficient because these probabilities deviate from one the above mentioned quadratic optimization problems are not stochastically equivalent the obtained results are illustrated by an empirical study

a periodic review inventory model with demand influenced by promotion decisions in this paper we use a markov decision process mdp to model the joint inventorypromotion decision problem the state variable of the mdp represents the demand state brought about by changing environmental factors as well as promotion decisions the demand state in a period determines the distribution of the random demand in that period optimal inventory and promotion decision policies in the finite horizon problem are obtained via dynamic programming under certain conditions we show that there is a threshold inventory level p for each demand state such that if the threshold is exceeded then it is desirable to promote the product for the proportional ordering cost case the optimal inventory replenishment policy is a base stock type policy with the optimal base stock level dependent on the promotion decision

expecting the unexpected emissions uncertainty and environmental market design we study potential equilibria in california s cap and trade market for greenhouse gases ghgs based on information available before the market started we find large ex ante uncertainty in business as usual emissions and in the abatement that might result from non market policies much larger than the reduction that could plausibly occur in response to an allowance price within a politically acceptable range this implies that the market price is very likely to be determined by an administrative price floor or ceiling similar factors seem likely to be present in other cap and trade markets for ghgs

portfolio optimization in a regime switching market with derivatives abstract we consider the optimal asset allocation problem in a continuous time regime switching market the problem is to maximize the expected utility of the terminal wealth of a portfolio that contains an option an underlying stock and a risk free bond the difficulty that arises in our setting is finding a way to represent the return of the option by the returns of the stock and the risk free bond in an incomplete regime switching market to overcome this difficulty we introduce a functional operator to generate a sequence of value functions and then show that the optimal value function is the limit of this sequence the explicit form of each function in the sequence can be obtained by solving an auxiliary portfolio optimization problem in a single regime market and then the original optimal value function can be approximated by taking the limit additionally we can also show that the optimal value function is a solution to a dynamic programming equation which leads to the explicit forms for the optimal value function and the optimal portfolio process furthermore we demonstrate that as long as the current state of the markov chain is given it is still optimal for an investor in a multiple regime market to simply allocate his her wealth in the same way as in a single regime market

asset allocation with correlation a composite trade off abstract we assess the ability of minimum variance portfolio allocation strategies accounting for time varying correlation between assets to provide performance benefits relative to an equally weighted portfolio prior to transaction costs correlation based strategies emphatically outperform the equally weighted benchmark this finding is strongest for short horizon correlation forecasts and attributed to dynamic correlation as opposed to variance forecasts thus estimation error is not found to be the primary obstacle to successful portfolio optimization rather frequent rebalancing and associated transaction costs pose a significant challenge limiting portfolio turnover through short selling restrictions and greater rebalancing error tolerance results in regular outperformance of the correlation based strategies even for large transaction costs taken together these findings provide evidence of a trade off between optimal portfolio performance forecasting horizon rebalancing frequency and transaction costs

multiperiod portfolio optimization models in stochastic markets using the mean variance approach we consider several multiperiod portfolio optimization models where the market consists of a riskless asset and several risky assets the returns in any period are random with a mean vector and a covariance matrix that depend on the prevailing economic conditions in the market during that period an important feature of our model is that the stochastic evolution of the market is described by a markov chain with perfectly observable states various models involving the safety first approach coefficient of variation and quadratic utility functions are considered where the objective functions depend only on the mean and the variance of the final wealth an auxiliary problem that generates the same efficient frontier as our formulations is solved using dynamic programming to identify optimal portfolio management policies for each problem illustrative cases are presented to demonstrate the solution procedure with an interpretation of the optimal policies

international equity flows and returns a quantitative equilibrium approach this paper models trading by foreign and domestic investors in developed country equity markets the key assumptions are that i both the foreign and domestic investor populations contain investors of different sophistication and ii investor sophistication matters for performance in both public equity and private off market investments a quantitative model with these assumptions delivers a unified explanation for three stylized facts about us investors international equity trades that have been documented in the literature i trading by us investors occurs in bursts of simultaneous buying and selling ii americans build and unwind foreign equity positions gradually and iii us investors increase their market share in a country when stock prices there have recently been rising

the costs and determinants of order aggressiveness abstract this paper examines the costs and determinants of order aggressiveness aggressive orders have larger price impacts but smaller opportunity costs than passive orders price impacts are amplified by large orders small firms and volatile stock prices to minimize the implementation shortfall the optimal strategy is to enter buy sell orders at the bid ask aggressive buy sell orders tend to follow other aggressive buy sell orders and occur when bid ask spreads are narrow and depth on the same opposite side of the limit book is large small aggressive buys are more likely than sells to be motivated by information

consignment auctions of free emissions allowances abstract while the initial distribution of emissions allowances is usually thought to be independent of the emissions outcome free allocation can affect the efficiency and fairness of allowance trading inefficiency may result from thin allowance markets poor price discovery and regulatory or organizational complexities that hinder the recognition of opportunity costs concerns about fairness may result from intransparency in the process of transferring substantial allowance value we explore the role of consignment auctions in mitigating these concerns these revenue neutral auctions return the financial value of allowances to their original holders while revealing prices and directing allowances to their highest valued use they also can be used to support a minimum price when allowances are freely distributed which may facilitate program linkage consignment auctions have minimal administrative costs and do not necessarily involve government experience indicates that they can play an important role especially in new markets

hara frontiers of optimal portfolios in stochastic markets abstract in this paper we consider the optimal portfolio selection problem in continuous time settings where the investor maximizes the expected utility of the terminal wealth in a stochastic market the utility function has the structure of the hara family and the market states change according to a markov process the states of the market describe the prevailing economic financial social and other conditions that affect the deterministic and probabilistic parameters of the model this includes the distributions of the random asset returns as well as the utility function we analyzed black scholes type continuous time models where the market parameters are driven by markov processes the markov process that affects the state of the market is independent of the underlying brownian motion that drives the stock prices the problem of maximizing the expected utility of the terminal wealth is investigated and solved by stochastic optimal control methods for exponential logarithmic and power utility functions we found explicit solutions for optimal policy and the associated value functions we also constructed the optimal wealth process explicitly and discussed some of its properties in particular it is shown that the optimal policy provides linear frontiers

can portfolio rebalancing explain the dynamics of equity returns equity flows and exchange rates we explore whether the pattern of international equity returns equity portfolio flows and exchange rate returns are consistent with the hypothesis that unhedged global investors rebalance their portfolio in order to limit their exchange rate exposure when there are 1 relative equity return and 2 exchange rate shocks we also explore whether 3 equity flow shocks influence the exchange rates and relative equity prices in the estimation of the var system we do not impose any causal ordering upon the primitive shocks but instead identify the system based on theoretical priors about the contemporaneous conditional correlations between the three variables international data for the five largest equity markets are consistent with a theory in which equity returns and portfolio rebalancing are an important source of exchange rate dynamics

numerical approximations of optimal portfolios in mispriced asymmetric levy markets abstract we present numerical approximations of optimal portfolios in mispriced levy markets under asymmetric information for informed and uninformed investors having logarithmic preference we apply our numerical scheme to kou 2002 jump diffusion markets by deriving analytic formulas for the first two derivatives of the underlying portfolio objective function which depend only on the levy measure of the jump generating process optimal portfolios are then simulated using the box muller algorithm newton s method and incomplete beta functions convergence dynamics and trajectories of sample paths of optimal portfolios for both investors are presented at different levels of information asymmetry mispricing horizon asymmetry in the kou density jump intensity volatility mean reversion speed and sharpe ratios we also apply the proposed newton s algorithm to compute optimal portfolios for investors in variance gamma markets via instantaneous centralized moments of returns

time varying liquidity in foreign exchange abstract this paper addresses whether currency trades have greater price impact when public information is flowing rapidly we develop an optimizing model to account for why public news should increase the price impact of trades using transaction data made available by electronic trading we test whether trades following macroeconomic news have higher price impact they do price impact per dollar traded is about 10 percent higher per news announcement in the previous hour after controlling for public information flow we do not find evidence that liquidity depends on trading volume and return volatility the findings provide policy makers with guidance for the timing and magnitude intervention

a possibilistic mean semivariance entropy model for multi period portfolio selection with transaction costs abstract this paper deals with a multi period portfolio selection problem with fuzzy returns a possibilistic mean semivariance entropy model for multi period portfolio selection is presented by taking into account four criteria viz return risk transaction cost and diversification degree of portfolio in the proposed model the return level is quantified by the possibilistic mean value of return the risk level is characterized by the lower possibilistic semivariance of return and the diversification degree of portfolio is measured by the originally presented possibilistic entropy furthermore a hybrid intelligent algorithm is designed to obtain the optimal portfolio strategy finally the comparison analysis between the possibilistic entropy model and the proportion entropy model is provided by two numerical examples to illustrate the efficiency of the proposed approaches and the designed algorithm

order imbalance liquidity and market returns traditionally volume has provided the link between trading activity and returns we focus on a hitherto unexplored but intuitive measure of trading activity the aggregate daily order imbalance on the new york stock exchange signed order imbalances increase decrease following market declines rises which reveals that investors are contrarians on aggregate order imbalances in either direction either excess buy or sell orders reduce liquidity market wide returns are strongly affected by contemporaneous and lagged order imbalances market wide returns reverse themselves after high negative imbalance large negative return days the magnitude of this reversal is partially predictable from the level of the imbalance and return even after controlling for aggregate market volume and liquidity market returns are affected by order imbalance

time consistent investment policies in markovian markets a case of mean variance analysis abstract the optimal investment policy for a standard multi period mean variance model is not time consistent because the variance operator is not separable in the sense of the dynamic programming principle with a nested conditional expectation mapping we develop an investment model with time consistency in markovian markets furthermore we examine the differences of the investment policies with a riskless asset from those without a riskless asset analytical solutions for time consistent optimal investment policies and the resulting mean variance efficient frontier are obtained finally using numerical examples we show that the optimal investment policy derived from our model is more efficient than that of the standard mean variance model in which the trade off is determined between the mean and variance of the terminal wealth

cash management in a randomly varying environment we study a cash management system in which the distribution of the cash flow xn in period n 1 2 depends on the state in of a randomly varying environment sufficient conditions are found for the optimality of a simple transfer rule generalizing and partially improving the well known results for the classical case with i i d cash flows these and further structural results obtained for the cash balance are shown to reduce the computational effort drastically in determining an optimal transfer rule in addition structural and computational results w r t the environment are derived finally some examples are given for economic and statistical environments and their interactions with the cash flow process

fixed versus flexible lessons from ems order flow abstract we extend the literature on regime dependent volatility in two ways first our microstructural model provides a qualitatively new explanation second we test implications of our model using europe s recent shift to rigidly fixed rates ems to emu in the model shocks to order flow induce more volatility under flexible rates because the elasticity of speculative demand is endogenously low leading to pronounced portfolio balance effects new data on ff dm transactions show that order flow had persistent effects on the exchange rate before emu parities were announced after announcement the ff dm rate was decoupled from order flow as the model predicts

downstream regulation of co2 emissions in california s electricity sector this paper examines the implications of alternative forms of cap and trade regulations on the california electricity market specific focus is given to the implementation of a downstream form of regulation known as the first deliverer policy under this policy importers i e first deliverers of electricity into california are responsible for the emissions associated with the power plants from which the power originated even if those plants are physically located outside of california we find that absent strict non economic barriers to changing import patterns such policies are extremely vulnerable to reshuffling of import resources the net impact implies that the first deliverer policies will be only marginally more effective than a conventional source based regulation

inventory control with information about supply conditions this paper presents an inventory control model which includes a markovian model of the supply system as that system evolves over time so do the replenishment leadtimes the optimal policy has the same structure as in standard models but its parameters change dynamically to reflect current supply conditions in this setting contrary to conventional wisdom a longer leadtime does not necessarily imply more inventory the leadtime is important but so is a concept we call order coverage

measuring global gasoline and diesel price and income elasticities abstract price and income elasticities of transport fuel demand have numerous applications they help forecast increases in fuel consumption as countries get richer they help develop appropriate tax policies to curtail consumption help determine how the transport fuel mix might evolve and show the price response to a fuel disruption given their usefulness it is understandable why hundreds of studies have focused on measuring such elasticities for gasoline and diesel fuel consumption in this paper i focus my attention on price and income elasticities in the existing studies to see what can be learned from them i summarize the elasticities from these historical studies i use statistical analysis to investigate whether income and price elasticities seem to be constant across countries with different incomes and prices although income and price elasticities for gasoline and diesel fuel are not found to be the same at high and low incomes and at high and low prices patterns emerge that allow me to develop suggested price and income elasticities for gasoline and diesel demand for over one hundred countries i adjust these elasticities for recent fuel mix policies and suggest an agenda of future research topics

batch quantities when forecasts are improving this paper considers the choice of initial batch quantities when demand forecasts are improving we assume that the standard deviation of the demand per period is decreasing exponentially and approaching a long run value a discrete time stochastic single level inventory model is considered there are traditional holding and backorder costs as well as an ordering cost the ordering periods must be determined in advance and we wish to determine a suitable schedule

portfolio optimization with disutility based risk measure abstract in this paper we propose a quantile based risk measure which is defined using the modified loss distribution according to the decision maker s risk and loss aversion the properties related to different classes of disutility functions are established a portfolio selection model in the mean risk framework is proposed and equivalent formulations of the model generating the same efficient frontier are given the advantages of this approach are investigated using real world data from nyse the differences between the efficient frontier of the proposed model and the classical mean variance and mean cvar are quantified and interpreted extensive experiments show that the efficient portfolios obtained by using the proposed model exhibit lower risk levels and an increased satisfaction compared to the other two mean risk models

myopic policies for some inventory models with uncertain demand distributions the majority of papers on stochastic inventory theory make the assumption that the distribution of consumer demand in each time period is known with certainty while this assumption is unsupported in many applied contexts it is conventionally held that more realistic models are more difficult to solve and will not yield simple operational policies this paper shows that a simple inventory policy based upon a critical fractile can be optimal or near optimal in some inventory models with parameter adaptive demand processes in these some parameter of the demand distribution is not known with certainty and estimates of the parameter are updated in a statistical fashion as demand is observed through time examples include exponentially smoothed forecasts and bayesian updating of parameter estimates bounds on the value loss relative to optimal cost when using the critical fractile policy can be calculated directly from the problem data some numerical examples illustrate the technique

bullwhip effect measurement and its implications the bullwhip effect or demand information distortion has been a subject of both theoretical and empirical studies in the operations management literature in this paper we develop a simple set of formulas that describe the traditional bullwhip measure as a combined outcome of several important drivers such as finite capacity batch ordering and seasonality our modeling framework is descriptive in nature as it features certain plausible approximations that are commonly employed in practical inventory systems the results are nonetheless compelling and can be used to explain various conflicting observations in previous empirical studies building on the theoretical framework we discuss the managerial implications of the bullwhip measurement we show that the measurement can be completely noninformative about the underlying supply chain cost performance if it is not linked to the operational details such as decision intervals and leadtimes specifically we show that an aggregated measurement over relatively long time periods can mask the operational level bullwhip in addition we show that masking also exists under product or location aggregation in some illustrative cases

a discontinuous mispricing model under asymmetric information we study a discontinuous mispricing model of a risky asset under asymmetric information where jumps in the asset price and mispricing are modelled by levy processes by contracting the filtration of the informed investor we obtain optimal portfolios and maximum expected utilities for the informed and uninformed investors we also discuss their asymptotic properties which can be estimated using the instantaneous centralized moments of return we find that optimal and asymptotic utilities are increased due to jumps in mispricing for the uninformed investor but the informed investor still has excess utility provided there is not too little or too much mispricing

portfolio selection in stochastic markets with hara utility functions in this paper we consider the optimal portfolio selection problem where the investor maximizes the expected utility of the terminal wealth the utility function belongs to the hara family which includes exponential logarithmic and power utility functions the main feature of the model is that returns of the risky assets and the utility function all depend on an external process that represents the stochastic market the states of the market describe the prevailing economic financial social political and other conditions that affect the deterministic and probabilistic parameters of the model we suppose that the random changes in the market states are depicted by a markov chain dynamic programming is used to obtain an explicit characterization of the optimal policy in particular it is shown that optimal portfolios satisfy the separation property and the composition of the risky portfolio does not depend on the wealth of the investor we also provide an explicit construction of the optimal wealth process and use it to determine various quantities of interest the return risk frontiers of the terminal wealth are shown to have linear forms special cases are discussed together with numerical illustrations

inventory management with random supply and imperfect information a hidden markov model in most of the papers on inventory models operating in a random environment the state of the environment in each period is assumed to be fully observed with perfect information however this assumption is not realistic in most real life situations and we provide a remedy in this paper by assuming that the environment is only partially observed with imperfect information we accomplish this by analyzing two formulations of single item models with periodic review and random supply in a random environment in the first one supply is random due to random capacity of production and random availability of transportation we show that state dependent base stock policy is optimal if the capacity and all costs are observed while demand and availability are unobserved in the second model we consider a model with random availability only with fixed ordering cost we show that state dependent s s policy is optimal if the availability process is observable