an analysis of feed in tariff remuneration models implications for renewable energy investment recent experience from around the world suggests that feed in tariffs fits are the most effective policy to encourage the rapid and sustained deployment of renewable energy there are several different ways to structure a fit policy each with its own strengths and weaknesses this paper presents an overview of seven different ways to structure the remuneration of a fit policy divided into two broad categories those in which remuneration is dependent on the electricity price and those that remain independent from it this paper examines the advantages and disadvantages of these different fit models and concludes with an analysis of these design options with a focus on their implications both for investors and for society

microstructure noise realized variance and optimal sampling a recent and extensive literature has pioneered the summing of squared observed intra daily returns realized variance to estimate the daily integrated variance of financial asset prices a traditional object of economic interest we show that in the presence of market microstructure noise realized variance does not identify the daily integrated variance of the frictionless equilibrium price however we demonstrate that the noise induced bias at very high sampling frequencies can be appropriately traded off with the variance reduction obtained by high frequency sampling and derive a mean squared error mse optimal sampling theory for the purpose of integrated variance estimation we show how our theory naturally leads to an identification procedure which allows us to recover the moments of the unobserved noise this procedure may be useful in other applications finally using the profits obtained by option traders on the basis of alternative variance forecasts as our economic metric we find that explicit optimization of realized variance s finite sample mse properties results in accurate forecasts and considerable economic gains copyright 2008 wiley blackwell

analytical evaluation of volatility forecasts estimation and forecasting for realistic continuous time stochastic volatility models is hampered by the lack of closed form expressions for the likelihood in response andersen bollerslev diebold and labys econometrica 71 2003 579 625 advocate forecasting integrated volatility via reduced form models for the realized volatility constructed by summing high frequency squared returns building on the eigenfunction stochastic volatility models we present analytical expressions for the forecast efficiency associated with this reduced form approach as a function of sampling frequency for popular models like garch multifactor affine and lognormal diffusions the reduced form procedures perform remarkably well relative to the optimal infeasible forecasts

feed in tariff contract schemes and regulatory uncertainty abstract this paper presents a novel analysis of two feed in tariffs fit under market and regulatory uncertainty namely a sliding premium with cap and floor and a minimum price guarantee regulatory uncertainty is modeled with a poisson process whereby a jump event may reduce the tariff before the signature of the contract using a semi analytical real options framework we derive the project value the optimal investment threshold and the value of the investment opportunity for these schemes taking into consideration the optimal investment threshold we also compare the two aforementioned fits with the fixed price fit and the fixed premium fit which are policy schemes that have been extensively studied in the literature our results show that increasing the likelihood of a jump event lowers the investment threshold for all the schemes moreover the investment threshold also decreases when the tariff reduction increases we also compare the four schemes in terms of the corresponding optimal investment thresholds for example we find that the investment threshold of the sliding premium is lower than the minimum price guarantee this result suggests that the first regime is a better policy than the latter because it accelerates the investment while avoiding excessive earnings for producers or excessive payments for consumers

how do learning externalities influence the evaluation of ontario s renewables support policies abstract support programs for renewable electricity generation in ontario have been in place since 2005 including feed in tariffs and a competitive procurement process these programs have been criticized on a number of fronts in particular critics claim the level of support was excessive and creating surplus supply however prior studies have ignored one potential benefit of renewable energy support that it can help to promote cost reductions in new technologies through learning by doing this paper uses a recursive dynamic computable general equilibrium cge model featuring learning by doing effects to assess the renewable support programs provided in ontario our results in line with previous studies do not justify the high support rates paid in ontario given our core range of assumptions but our modeling approach allows us to identify the combination of key parameter values relating to learning effects and environmental damages that justify the observed rates these parameters are hard to measure empirically and our modeling approach introduces a new tool for examining the impact of variations in these parameters on policy analysis

answering the skeptics yes standard volatility models do provide accurate forecasts a voluminous literature has emerged for modeling the temporal dependencies in financial market volatility using arch and stochastic volatility models while most of these studies have documented highly significant in sample parameter estimates and pronounced intertemporal volatility persistence traditional ex post forecast evaluation criteria suggest that the models provide seemingly poor volatility forecasts contrary to this contention we show that volatility models produce strikingly accurate interdaily forecasts for the latent volatility factor that would be of interest in most financial applications new methods for improved ex post interdaily volatility measurements based on high frequency intradaily data are also discussed

the pricing of options on assets with stochastic volatilities one option pricing problem that has hitherto been unsolved is the pricing of a european call on an asset that has a stochastic volatility this paper examines this problem the option price is determined in series form for the case in which the stochastic volatility is independent of the stock price numerical solutions are also produced for the case in which the volatility is correlated with the stock price it is found that the black scholes price frequently overprices options and that the degree of overpricing increases with the time to maturity one option pricing problem that has hitherto remained unsolved is the pricing of a european call on a stock that has a stochastic volatility from the work of merton 12 garman 6 and cox ingersoll and ross 3 the differential equation that the option must satisfy is known the solution of this differential equation is independent of risk preferences if a the volatility is a traded asset or b the volatility is uncorrelated with aggregate consumption if either of these conditions holds the risk neutral valuation arguments of cox and ross 4 can be used in a straightfoward way this paper produces a solution in series form for the situation in which the stock price is instantaneously uncorrelated with the volatility we do not assume that the volatility is a traded asset also a constant correlation between the instantaneous rate of change of the volatility and the rate of change of aggregate consumption can be accommodated the option price is lower than the blackscholes b s 1 price when the option is close to being at the money and higher when it is deep in or deep out of the money the exercise prices for which overpricing by b s takes place are within about ten percent of the security price this is the range of exercise prices over which most option trading takes place so we may in general expect the b s price to overprice options this effect is exaggerated as the time to maturity increases one of the most surprising implications of this is that if the b s equation is used to determine the implied volatility of a near the money option the longer the time to maturity the lower the implied volatility numerical solutions for the case in which the volatility is correlated with the stock price are also examined the stochastic volatility problem has been examined by merton 13 geske 7 johnson 10 johnson and shanno 11 eisenberg 5 wiggins 16 and

evaluation and optimization of feed in tariffs abstract feed in tariff program is an incentive plan that provides investors with a set payment for electricity generated from renewable energy sources that is fed into the power grid as of today fit is being used by over 75 jurisdictions around the world and offers a number of design options to achieve policy goals the objective of this paper is to propose a quantitative model by which a specific fit program can be evaluated and hence optimized we focus on payoff structure which has a direct impact on the net present value of the investment and other parameters relevant to investor reaction and electricity prices we combine cost modeling option valuation and consumer choice so as to simulate the performance of a fit program of interest in various scenarios the model is used to define an optimization problem from a policy maker s perspective who wants to increase the contribution of renewable energy to the overall energy supply while keeping the total burden on ratepayers under control numerical studies shed light on the interactions among design options program parameters and the performance of a fit program

feed in tariffs with minimum price guarantees and regulatory uncertainty abstract the feed in tariff fit program is a popular policy for incentivizing new renewable energy projects because it establishes a long term contract with renewable energy investors this paper presents a novel model to analyze a fit contract with a minimum price guarantee i e a price floor regime from an investor s perspective the results show that a perpetual guarantee only induces investment for prices below the price floor when offering a risk free investment opportunity in contrast the finite guarantee may induce investment even when the revenue from the guarantee is lower than the investment cost when an investor faces a scenario with regulatory uncertainty a higher and more likely reduction in the price floor induces earlier investment for all cases investors postpone an investment decision when market conditions present a higher price volatility

a stochastic equilibrium model of internet pricing abstract perhaps the greatest technological innovation of the next several decades will be universal access and utilization of the internet already congestion is becoming a serious impediment to efficient utilization we introduce a stochastic equilibrium concept for a general mathematical model of the internet and demonstrate that the efficient social welfare maximizing stochastic allocation of internet traffic can be supported by optimal congestion prices we further demonstrate that approximately optimal prices can be readily computed and implemented in a decentralized system by constructing a large computer simulation model we also address the alternative of building excess capacity to avoid congestion

high frequency volatility connectedness between the us crude oil market and china s agricultural commodity markets abstract this paper investigates the realised volatility connectedness of us crude oil futures and five china s agricultural commodity futures using connectedness measures and high frequency data time varying volatility connectedness characteristics are identified by combining a multivariate heteroscedastic autoregressive har model with the dcc garch model the results verify the existence of volatility spillover from the us crude oil market to china s agricultural commodity markets although the magnitude of this spillover is weak furthermore the realised volatility is decomposed into positive and negative components to identify the asymmetric effect of volatility connectedness the results show that market interdependence has obviously increased for negative volatility relative to positive volatility implying that volatility transmission has a leverage effect across markets

forecasting reit volatility with high frequency data a comparison of alternative methods abstractvolatility is a crucial input for many financial applications including asset allocation risk management and option pricing over the last two decades the use of high frequency data has greatly advanced the research on volatility modelling this article makes the first attempt in the real estate literature to employ intraday data for volatility forecasting we examine a wide range of commonly used methods and apply them to several major global reit markets our findings suggest that the group of reduced form methods deliver the most accurate one step ahead forecast for daily reit volatility they outperform their garch model based counterparts and two methods using low frequency data we also show that exploiting intraday information through garch does not necessarily yield incremental precision for forecasting reit volatility our results are relatively robust to the choice of realized measure of volatility and the length of evaluation period

sequential investment in renewable energy technologies under policy uncertainty although innovation and support schemes are among the main forces that drive investment in renewable energy re technologies both involve considerable uncertainty we develop a real options framework to analyse the impact of technological policy and electricity price uncertainty on the decision to invest sequentially in successively improved versions of a re technology technological uncertainty is reflected in the random arrival of innovations and policy uncertainty in the likely provision or retraction of a subsidy that takes the form of a fixed premium on top of the electricity price we show that greater likelihood of subsidy retraction provision lowers raises the incentive to invest and by comparing a stepwise to a lumpy investment strategy we show how an embedded option to adopt an improved technology version mitigates the impact of subsidy retraction on investment timing specifically we show how stepwise investment facilitates earlier technology adoption compared to lumpy investment and that under stepwise investment technological uncertainty accelerates technology adoption thus further offsetting the incentive to delay investment in the light of subsidy retraction

feed in tariff and tradable green certificate in oligopoly abstract feed in tariff fit and tradable green certificate tgc schemes are studied in a formal model and numerical example using the uk data we find that if the markets were perfectly competitive then feed in tariff and the certificate price would be the same however when the markets are imperfect they are generally different while both the tariff and certificate price fluctuate around the difference between the costs of green and black energy the tariff deviates more from the cost difference than the certificate price the supplies of both black and green energy under fit are higher than tgc obviously as a result of subsidies a troubling outcome is that the total energy supply increases under fit as the renewables quota increases which can negate other measures to mitigate climate changes such as demand management finally using the data from the uk market we find that social welfare under tgc is consistently higher than fit for a wide range of values of the parameters

converting technology to mitigate environmental damage there are many situations where policy makers would like to induce firms to make a major discrete conversion in production technology to help the environment this paper examines how heterogeneity in the operating condition of firms plant and equipment which cannot be observed by policy makers can affect the choice between incentives to encourage conversion to a cleaner technology by relating different conditions of firms plant and equipment to production costs extent of environmental damage and cost of conversion to a cleaner technology we show when a perfectly discriminating incentive to encourage conversion is not feasible in addition we show that firms with plant and equipment in better condition will convert their technology to mitigate their environmental damage and firms with plant and equipment in poorer condition will not this and a series of additional results lead to conditions under which an administratively simple uniform lump sum incentive to switch to cleaner technology is preferable to one based on output these results and conditions extend to cases where there are network externalities in conversion and where there is strategic timing in firms choice of when to convert

roughing it up including jump components in the measurement modeling and forecasting of return volatility a rapidly growing literature has documented important improvements in financial return volatility measurement and forecasting via use of realized variation measures constructed from high frequency returns coupled with simple modeling procedures building on recent theoretical results in barndorff nielsen and shephard 2004a 2005 for related bi power variation measures the present paper provides a practical and robust framework for non parametrically measuring the jump component in asset return volatility in an application to the dm exchange rate the s p500 market index and the 30 year u s treasury bond yield we find that jumps are both highly prevalent and distinctly less persistent than the continuous sample path variation process moreover many jumps appear directly associated with specific macroeconomic news announcements separating jump from non jump movements in a simple but sophisticated volatility forecasting model we find that almost all of the predictability in daily weekly and monthly return volatilities comes from the non jump component our results thus set the stage for a number of interesting future econometric developments and important financial applications by separately modeling forecasting and pricing the continuous and jump components of the total return variation process

nonlinear pricing of information goods this paper analyzes optimal pricing for information goods under incomplete information when both unlimited usage fixed fee pricing and usage based pricing are feasible and administering usage based pricing may involve transaction costs it is shown that offering fixed fee pricing in addition to a nonlinear usage based pricing scheme is always profit improving in the presence of nonzero transaction costs and there may be markets in which a pure fixed fee is optimal this implies that the optimal pricing strategy for information goods is almost never fully revealing moreover it is proved that the optimal usage based pricing schedule is independent of the value of the fixed fee a result that simplifies the simultaneous design of pricing schedules considerably and provides a simple procedure for determining the optimal combination of fixed fee and nonlinear usage based pricing the introduction of fixed fee pricing is shown to increase both consumer surplus and total surplus the differential effects of setup costs fixed transaction costs and variable transaction costs on pricing policy are described these results suggest a number of managerial guidelines for designing pricing schedules for instance in nascent information markets firms may profit from low fixed fee penetration pricing but as these markets mature the optimal pricing mix should expand to include a wider range of usage based pricing options minimum fees quantity discounts and adoption levels across the different pricing schemes are characterized strategic pricing responses to changes in market characteristics are described and the implications of the paper s results for bundling and vertical differentiation of information goods are discussed

semi parametric comparison of stochastic volatility models using realized measures this paper proposes a procedure to test for the correct specification of the functional form of the volatility process within the class of eigenfunction stochastic volatility models the procedure is based on the comparison of the moments of realized volatility measures with the corresponding ones of integrated volatility implied by the model under the null hypothesis we first provide primitive conditions on the measu rement error associated with the realized measure which allow to construct asymptotically valid specification tests then we establish regularity conditions under which the considered realized measures namely realized volatility bipower variation and modified subsampled realized volatility satisfy the given primitive assumptions finally we provide an empirical illustration based on thr ee stocks from the dow jones industrial average 2006 the review of economic studies limited

pricing access services many established industries such as the online service industry the telecommunication industry or the fitness club industry are access service industries when using services in these industries consumers pay for the privilege of accessing the firm s facilities but do not acquire any right to the facility itself a firm s pricing decisions in access industries frequently come down to a simple choice among flat fee pricing usage pricing or two part tariff pricing however it is not so simple for firms in those industries to make this choice access service firms typically face a mix of consumers who have intrinsically different usage rates a key characteristic of access service firms however is that the cost of providing an additional minute of usage is typically negligible as long as the firm has the necessary capacity to serve its customers service capacity which corresponds to the total available time on a firm s system is often limited in this paper we show that service capacity and consumer usage heterogeneity are two important factors that determine a firm s optimal choice we develop a model that incorporates these two salient characteristics shared by access industries and study what determines a firm s choice among the three alternative pricing structures flat fee pricing usage pricing or two part tariff pricing our analysis shows that in the presence of consumer usage heterogeneity service capacity mediates a firm s optimal choice in a complex yet predictable way a firm s choice also hinges on whether heavy or light users are more valuable in terms of their willingness to pay on a per unit capacity basis the presence of both consumer usage heterogeneity and capacity constraints prompts a firm to choose its pricing structure to attract a desired customer mix and to price discriminate as a result two part tariff pricing is not always optimal in access industries and a firm s pricing structure can vary in a complex way with the interaction of those two factors specifically we show that when light users are more valuable a firm may use a two part tariff or a flat fee depending on whether the firm is constrained by its service capacity but never charge a usage price alone or offer any signing bonus a negative flat fee or a flat payment to customers when heavy users are more valuable a firm may choose to set a usage price a signing bonus plus a usage price or flat fee interestingly regardless of whether heavy or light users are more valuable in an access service industry only flat rate pricing is a sustainable pricing structure once the industry has developed sufficient excess capacity we also show that the optimal pricing strategy in access industries can have some intriguing nonintuitive implications that have not been explored elsewhere for instance when the industry capacity is unevenly distributed between competing firms the large capacity firm may well be advised to increase rather than to decrease its price to accommodate the small firm it would be too costly and too tactless for the large firm to do otherwise in fact the strategy of accommodation calls on the larger firm to retreat in both light and heavy user markets and leave more of its capacity idle and more of the market demand unmet when the small firm s capacity hence the industry capacity increases this implies that incremental policy measures that encourage the growth of smaller companies in the presence of a large company can be welfare decreasing because the growth of smaller firm can force the retreat of a large company at the expense of market coverage today services account for two thirds to three quarters of the gnp not only in the united states but also in many industrial countries access industries are growing rapidly to exert profound impact on today s economy however service pricing in general and pricing access services in particular have not received adequate attention in the literature in this paper we take the first step in understanding how capacity constraints and consumer usage heterogeneity mediate the choice of pricing structures in both monopolistic and competitive contexts

the existence of equilibrium without free disposal in economies with transaction costs and incomplete markets this paper presents a general model of an economy with transaction costs and proves the existence of a competitive equilibrium using t c bergstrom s procedure to discard the free disposal assumption since economies with incomplete markets are shown to be special cases of economies with transaction costs this result is used to discuss the conditions for the existence of an equilibrium in economies with incomplete markets copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

the impact of attribute preferences on adoption timing the case of photo voltaic pv solar cells for household electricity generation we are concerned with micro generation individual households generating electricity using a renewable technology we focus on modeling the adoption probability of photo voltaic solar panels by households using data from ontario canada where a generous feed in tariff is available to households generating electricity from solar panels we measure household level preferences for panels and use these preferences along with household characteristics to predict adoption time intentions we use discrete choice experiments to measure household level preferences and establish a causal link between the attributes of the technology and adoption time intentions using discrete time survival mixture analysis significant preferences included lower cost greater energy savings and lower fossil fuel inflation the conditional hazard probability of adoption at a particular time given no previous adoption showed that the attribute preferences had intuitively reasonable effects the hazard probabilities allow us to compute the cumulative probability of adoption over a 10 year period per household technology awareness has a significant effect on the adoption probability reinforcing the need for effective education our approach indicates the level of heterogeneity in preferences particularly high for investment criteria and co2 emissions these findings suggest that education campaigns should explain more about investment criteria feed in tariffs and environmental effects

do favorable land price policy affect renewable energy industry evidence from photovoltaics abstract renewable energy is necessary for sustainable social and economic development this is particularly so with global energy shortages the continuous deterioration of ecosystems and the environment as well as the world population explosion this article qualitatively and quantitatively analyzes the effects and problems of chinese favorable land price policy on photovoltaics in examining the favorable land price policy in china this study develops a multiple linear regression model to study the effects of favorable land price policy on photovoltaic power and photovoltaic industry data used in this research was mainly collected from 20 provinces in china it is found that the development of pv in china has been greatly affected by the favorable land price policy in the end it is highly recommended that favorable land price policy should be continued for renewable energy systemic deficiencies can be overcome through continual reform and innovation of mechanisms

interest rate volatility the yield curve and the macroeconomy abstract this paper provides theory and evidence that a low dimensional term structure model can simultaneously price bonds and related options it shows that a component of volatility risk largely unrelated to the shape of the yield curve is a determinant of expected excess returns for holding long maturity bonds it also finds evidence for this return relationship both in the model and directly in the data through regression analysis the paper also identifies a link between corporate earnings performance and interest rate volatility providing a channel driving interest rate volatility the structure of risk in the model that gives rise to these features of volatility is distinct from that inherent in recent models with unspanned stochastic volatility

a theoretical comparison between integrated and realized volatility in this paper we provide both qualitative and quantitative measures of the precision of measuring integrated volatility by realized volatility for a fixed frequency of observation we start by characterizing for a general diffusion the difference between realized and integrated volatility for a given frequency of observation then we compute the mean and variance of this noise and the correlation between the noise and the integrated volatility in the eigenfunction stochastic volatility model of meddahi 2001a this model has as special cases log normal affine and garch diffusion models using previous empirical results we show that the noise is substantial compared with the unconditional mean and variance of integrated volatility even if one employs five minute returns we also propose a simple approach to capture the information about integrated volatility contained in the returns through the leverage effect we show that in practice the leverage effect does not matter copyright 2002 john wiley sons ltd

a conditional extreme value volatility estimator based on high frequency returns abstract this paper introduces a conditional extreme value volatility estimator evt based on high frequency returns the relative performance of the evt is compared with the discrete time garch and implied volatility models for 1 day and 20 day ahead forecasts of realized volatility this is also a first attempt towards detecting any time series variation in extreme value distributions using high frequency intraday data the information content of evt is examined in the context of forecasting sp 2 vix generally yields a less accurate characterization of realized volatility than evt and garch models these results have implications for financial risk management and are thus relevant to both regulators and practitioners

forecasting realized volatility with linear and nonlinear univariate models in this paper we consider a nonlinear model based on neural networks as well as linear models to forecast the daily volatility of the s p 500 and ftse 100 futures as a proxy for daily volatility we consider a consistent and unbiased estimator of the integrated volatility that is computed from high frequency intraday returns we also consider a simple algorithm based on bagging bootstrap aggregation in order to specify the models analysed in this paper

optimal design of subsidy to stimulate renewable energy investments the case of china this paper proposes a real options model for estimating the optimal subsidy for renewable energy power generation project by using stochastic process to describe the market price of electricity co2 price and investment cost two indicators i e project value and threshold value are used to derive the optimal subsidy the least squares monte carlo simulation method is used to solve the model the proposed model is used to empirically evaluate the optimal level of subsidy for solar photovoltaic power generation in china the results show that carbon emission trading scheme helps reduce subsidy unit generating capacity market price of electricity co2 price and the volatility of investment cost are negatively related with subsidy whereas investment cost and the volatility of electricity price and co2 price are positively related with subsidy it is suggested that chinese governments take some measures e g promoting technological progress establishing a nationwide carbon emission trading market promoting the competition in renewable energy industry as well as maintaining the stability of co2 price and electricity price to reduce the required subsidy

bundling information goods of decreasing value consumers average value for information goods websites weather forecasts music and news declines with the number consumed this paper provides simple guidelines to optimal bundling marketing strategies in this case if consumers values do not decrease too quickly we show that bundling is approximately optimal if consumers values to subsequent goods decrease quickly we show by example that one should expect bundling to be suboptimal

low or no subsidy proposing a regional power grid based wind power feed in tariff benchmark price mechanism in china abstract the chinese government plans to adopt a low or no subsidy policy mechanism on renewable energy power development in the future to achieve a balance between reducing financial burden on the government and ensuring profitability of investors as well as to account for the regional differences in china a novel regional wind power grid feed in tariff benchmark price mechanism by net present value npv method and real option ro method is proposed in this paper the results voice support on the appropriateness of gradually decreasing the wind feed in tariff fit benchmark price to as low as the coal fired fit the proposed fit price level is presented as a price range on the basis of a guaranteed internal rate of return irr falls in between 8 to 15 for wind power investors the results indicate that the current fit price should be readjusted and redistributed although the fit price in central and south china grids is recommended to be relatively high the npv of wind farm project value in six regional grids are at the same level

user delay costs and internal pricing for a service facility this paper studies optimal pricing and capacity decisions for a service facility in an environment where users delay cost is important the model assumes a general nonlinear delay cost structure and incorporates the tradeoff between the delay cost and capacity cost we find necessary and sufficient conditions for the optimality of a pricing rule that charges out service resources at their marginal capacity cost we examine the issue of budgetary balance and find that net value maximization entails a budget deficit for the service facility that is the service facility should be evaluated as a deficit center the results provide guidelines under which the optimal magnitude of the deficit can be determined

what do we know about the study of distributed generation policies and regulations in the americas a systematic review of literature abstract policy makers are increasingly in search for evidence based solutions for meeting contemporary challenges of energy services that are both low carbon and sustainable one of the emerging trends are policies and regulations that incent distributed electricity generation dg the question that this article addresses is what is the current state of the study of these policies or regulations in the americas the focus on the americas was chosen because the article is part of a larger research project that explores regulations for dg in brazil and canada this article uses a non traditional means for synthesizing academic work systematic literature review to explore the current state of peer reviewed publications on the subject it is a means of transparently locating evaluating and synthesizing information to avoid bias in data collection in total 87 articles were included in the review climate change is the main driving force for dg as identified in the articles job creation or the green economy was cited as a motivating factor more strongly in north america while in the southern countries the issue of diversifying the energy mix and avoiding infrastructure costs was more pronounced many articles dealt with the issue of mechanisms for incenting dg and over half of these focused on aspects of feed in tariffs incentive mechanisms vary depending on policy goals of the jurisdictions with renewable portfolio standards being more popular in the u s the review showed that there is little emphasis on the social impacts and benefits of the regulations or policies and that specific urban challenges and local governance is not widely investigated pointing to a need for future study in these areas

forecasting realized volatility a bayesian model averaging approach summary how to measure and model volatility is an important issue in finance recent research uses high frequency intraday data to construct ex post measures of daily volatility this paper uses a bayesian modelaveraging approach to forecast realized volatility candidate models include autoregressive and heterogeneous autoregressive specifications based on the logarithm of realized volatility realized power variation realized bipower variation a jump and an asymmetric term applied to equity and exchange rate volatility over several forecast horizons bayesian model averaging provides very competitive density forecasts and modest improvements in point forecasts compared to benchmark models we discuss the reasons for this including the importance of using realized power variation as a predictor bayesian model averaging provides further improvements to density forecasts when we move away from linear models and average over specifications that allow for garch effects in the innovations to log volatility copyright 2009 john wiley sons ltd

integration of renewable energy sources in southeast europe a review of incentive mechanisms and feasibility of investments abstract incentivizing development and deployment of renewable energy sources res but also other low carbon technologies lct has been a successful way of promoting new technologies by creating a feasible investment case and making them competitive with traditional energy sources although different incentive mechanisms exist feed in tariffs have shown to be the best model for accelerating lct development guaranteeing producers preferential prices for the produced electricity over a period of time and enabling them access to the power network to sell inject produced electricity due to these benefits feed in tariff models are the most common model for stimulating res integration in southeast europe the paper reviews the current state of preferential tariffs for res in countries of southeast europe while some countries already have significant installed res capacity others are still in the planning stage the review shows that the amount of installed capacity of a specific technology has a strong impact on the support for the future projects for same technology this comprehensive review of legislative development supporting res as well as technologies preferred in different countries of the region is supported with feasibility assessment of investing in res using the example of two different technology projects wind and photovoltaic analysing the impact of the current tariffs on the return on investment for each country of the region

online shopping and platform design with ex ante registration requirements we study platform design in online markets in which buying involves a nonmonetary cost for consumers caused by privacy and security concerns firms decide whether to require registration at their website before consumers learn relevant product information we derive conditions under which a monopoly seller benefits from ex ante registration requirements and demonstrate that the profitability of registration requirements is increased when taking into account the prospect of future purchases or an informational value of consumer registration to the firm moreover we consider the effectiveness of discounts store credit as a means to influence the consumers registration decision finally we confirm the profitability of ex ante registration requirements in the presence of price competition the online appendix is available at https doi org 10 1287 mnsc 2016 2595 this paper was accepted by j miguel villas boas marketing

properties of realized variance under alternative sampling schemes this article investigates the statistical properties of the realized variance estimator in the presence of market microstructure noise different from the existing literature the analysis relies on a pure jump process for high frequency security prices and explicitly distinguishes among alternative sampling schemes including calendar time sampling business time sampling and transaction time sampling the main finding in this article is that transaction time sampling is generally superior to the common practice of calendar time sampling in that it leads to a lower mean squared error mse of the realized variance the benefits of sampling in transaction time are particularly pronounced when the trade intensity pattern is volatile based on ibm transaction data over the period 2000 2004 the empirical analysis finds an average optimal sampling frequency of about 3 minutes with a steady downward trend and significant day to day variation related to market liquidity and a consistent reduction in mse of th

assessing market microstructure effects via realized volatility measures with an application to the dow jones industrial average stocks transaction prices of financial assets are contaminated by market microstructure effects this is particularly relevant when estimating volatility using high frequency data in this article we assess statistically the effect of microstructure noise on volatility estimators and test the hypothesis that its variance is independent of the sampling frequency we provide evidence based on the dow jones industrial average stocks we find that noise has a statistically significant effect on volatility estimators at frequencies of 2 3 min or higher the independently and identically distributed specification with constant variance seems to be a plausible model for microstructure noise except for ultra high frequencies

estimating quadratic variation using realized variance this paper looks at some recent work on estimating quadratic variation using realised variance rv that is sums of m squared returns this econometrics has been motivated by the advent of the common availability of high frequency financial return data when the underlying process is a semimartingale we recall the fundamental result that rv is a consistent as m estimator of quadratic variation qv we express concern that without additional assumptions it seems difficult to give any measure of uncertainty of the rv in this context the position dramatically changes when we work with a rather general sv model which is a special case of the semimartingale model then qv is integrated variance and we can derive the asymptotic distribution of the rv and its rate of convergence these results do not require us to specify a model for either the drift or volatility functions although we have to impose some weak regularity assumptions we illustrate the use of the limit theory on some exchange rate data and some stock data we show that even with large values of m the rv is sometimes a quite noisy estimator of integrated variance

a complete solution to a class of principal agent problems with an application to the control of a self managed firm this paper considers a class of principal agent problems which have the following features 1 there is adverse selection because the principal ignores the value of one parameter of the agent s true characteristics 2 leaving aside the information parameter the principal s welfare as well as the agent s welfare depend on two types of variables observable to both of them the first ones possibly multidimensional are called action variable s and the second one which is one dimensional has in general the meaning of a money transfer 3 the principal is a stackelberg leader of the two person game he can commit himself to decision rules which are admissible on informational grounds he optimizes within the adequate class taking into account besides the agent s reaction one constraint which has generally the meaning of an individual rationality constraint and sometimes of a feasibility constraint the optimization is limited to the class of non stochastic mechanisms 4 the problem can also receive an alternative interpretation the principal faces a continuum of agents of unknown characteristics the distribution being known however stylized principal agent problems of this type have often been considered in the economic literature in particular the reader will later be able to recognize that the standard income tax model a la mirrlees 1971 the quality or quantity choice model of the monopolist a la mussa and rosen 1978 or maskin and riley 1982 and the model of government regulation of the private monopolist of baron and myerson 1982 all belong to

an experimental approach to climate finance the impact of auction design and policy uncertainty on renewable energy equity costs in europe abstract this paper aims at shedding some lights on how policy induced uncertainty affects the cost of capital of renewable energy power plants to this end the paper focuses on renewable energy auctions and on the ongoing brexit negotiations first the paper reviews auction frameworks across europe and discusses the impact of the different designs on project risk then a stated preference approach is leveraged to investigate how policy design and the uncertainty regarding the future arrangements between the uk and the eu contribute to determine the cost of equity for renewable energy the results show that improved auction design can help to lower the equity cost between 0 5 and 1 5 the evidence on brexit is rather weak and if anything suggests only a higher relevance of these negotiations for english based investors than for those based in eu27

the large scale solar feed in tariff reverse auction in the australian capital territory australia abstract feed in tariffs fits offer renewable energy developers significant investor certainty but sometimes at the cost of being misaligned with generation costs reverse fit auctions where the fit rights for a predetermined capacity are auctioned can overcome this problem but can be plagued by non delivery risks particularly of competitively priced proposals in 2012 and 2013 the australian capital territory act government in australia conducted a fit reverse auction for 40 mw of large scale solar generating capacity the first such auction undertaken in the country the auction was highly competitive in relation to price and demonstrating low delivery risks proposal capital costs particularly engineering procurement and construction costs as well as internal rates of return were lower than expected the auction process revealed limited land availability for large scale solar developments in the act as well as a significant perceived sovereign risk issue the auction process was designed to mitigate non delivery risk by requiring proposals to be pre qualified on the basis of delivery risk before considering fit pricing the scheme is likely to be used by the act government to support further large scale renewable energy development as part of its greenhouse gas reduction strategy which is underpinned by a 90 per cent by 2020 renewable energy target

option values under stochastic volatility theory and empirical estimates abstract this paper numerically solves the call option valuation problem given a fairly general continuous stochastic process for return volatility statistical estimators for volatility process parameters are derived and parameter estimates are calculated for several individual stocks and indices the resulting estimated option values do not differ dramatically from black scholes values in most cases although there is some evidence that for longer maturity index options black scholes overvalues out of the money calls in relation to in the money calls

online low price guarantees a real options analysis a common practice among large retailers is the low price guarantee rebating consumers if they find an identical product cheaper elsewhere this provides consumers with some level of comfort in their purchase decision a similar low price guarantee is provided by numerous service industries that allow reservation of capacity yet do not penalize the consumer for failure to keep that reservation examples include hotels and car rental given that a consumer is not required to keep the reservation they may make another reservation either at a competing firm or the same firm if future prices decline the increasing availability of pricing information on the internet affords consumers the opportunity to be more strategic in their purchasing behavior as consumers we are able to quickly and easily check prices from numerous service or goods providers the ease of price information potentially makes these guarantees very costly to the service or good provider we analyze the implied costs associated with these guarantees by making analogies to financial options motivation for this research comes from a large car rental firm dollar thrifty automotive group inc that considered offering a low price guarantee to all consumers that book a reservation though their website

real option valuation in renewable energy literature research focus trends and design abstract in light of intensive development of the renewable energy re sector a growing number of academic papers address the complexity of re investment planning and valuation to take account of the high risk profile and irreversibility of re investments researchers have resorted to sophisticated real options ro approaches that enable flexibility to be incorporated into project design in the face of an uncertain environment the variety of different frameworks and models adopted as well as a lack of aggregated analysis of the field suggest a need for a critical review of ro methodology and design in re assessment this study describes the research focus trends and design found in contemporary academic literature devoted to re valuation with a ro approach particular attention is given to ro in project and policy design the results give a comprehensive picture of existing research on the topic thus providing researchers with a solid foundation for further study and indications of directions for future development furthermore the findings provide policymakers and project planners with valuable insights into key aspects of re project and policy design

optimal feed in tariff for solar photovoltaic power generation in china a real options analysis abstract the feed in tariff policy is widely used to promote the development of renewable energy china also adopts feed in tariff policy to attract greater investment in solar photovoltaic power generation this study employs real options method to assess the optimal levels of feed in tariffs in 30 provinces of china the uncertainties in co 2 price and investment cost are considered a method that integrates the backward dynamic programming algorithm and least squares monte carlo method is used to solve the model the results demonstrate that the feed in tariffs of 30 provinces range from 0 68 rmb kwh to 1 71 rmb kwh and the average level is 1 01 rmb kwh on this basis we find that the levels of sub regional feed in tariff announced in 2013 are no longer appropriate and should be adjusted as soon as possible we have also identified the implications of technological progress and carbon emission trading schemes as well as the importance of strengthening electricity transmission it has been suggested that the chinese government takes diverse measures including increasing research and development investment establishing and improving a nationwide carbon emission trading scheme and accelerating the construction of electricity transmission infrastructure to reduce the required feed in tariff and promote the development of solar photovoltaic power generation

socially just support mechanisms for the promotion of renewable energy sources in greece abstract although development of renewable energy sources res projects is essential for the greek national economy to revive cut downs of public spends in greece may equally well extend to affect res support mechanisms in this context an integrated cost benefit analysis is currently undertaken concerning res investments in the greek electricity sector more specifically social support compared with financial benefits accruing from such energy stations reveals hidden imbalances that urge for the reform of the current support status examination of representative case studies currently provided considers the three most widespread res i e wind energy hydropower and solar energy with special emphasis given on the determination of break even feed in tariffs fits and the comparison of life cycle electricity production cost between res and conventional power stations

mechanism design for free but no free disposal services the economics of personalization under privacy concerns online personalization services belong to a class of economic goods with a no free disposal nfd property where consumers do not always prefer more services to less because of the privacy concerns these concerns arise from the revelation of information necessary for the provision of personalization services we examine vendor strategies in a market where consumers have heterogeneous concerns about privacy in successive generalizations we allow the vendor to offer a fixed level of personalization variable levels of personalization and monetary transfers coupons to the consumers that depend on the level of personalization chosen we show that a vendor offering a fixed level of personalization does not offer a coupon unless his marginal value of information mvi is sufficiently high and even when personalization is costless the vendor does not cover the market under a fixed services offering the vendor serves the same market with or without couponing next we demonstrate that in the absence of couponing the vendor s optimal variable personalization services contract maximizes surplus for all heterogeneous consumers which is in contrast to standard results from monopolistic screening when the vendor can offer coupons that vary according to personalization levels the optimal contract is not fully revealing unless his mvi is high and he will not offer coupons when this mvi is low however a vendor with a moderate mvi between certain thresholds offers a bunched contract wherein consumers with low privacy concerns receive a variable services coupon contract those with moderate privacy concerns receive a fixed services coupon contract and those with high privacy concerns do not participate in the market the coupon value is decreasing in privacy sensitivity of consumers

price guarantees in dynamic pricing and revenue management we present a new model for revenue management of product sales that incorporates both dynamic pricing and a price guarantee the guarantee provides customers with compensation if prior to a fixed future date the price of the product drops below a level specified at the time of purchase we consider the problem of simultaneously determining optimal dynamic price and guarantee policies for items from a fixed stock when demand depends both on the price and on the parameters of the price guarantee the model can be used for pricing any items with limited availability over a fixed time horizon we formulate this model as a discrete time optimal control problem prove the existence of its optimal solution explore some of the structural properties of the solution present lower bounding heuristics for solving the problem and report numerical results

optimal design of feed in tariffs to stimulate renewable energy investments under regulatory uncertainty a real options analysis feed in tariffs fits are widely used as policy instruments to promote investments in renewable energy sources res while fits are often regarded as the most effective res support scheme regulators around the world continuously review their fit schemes in the light of budget constraints and evolving policy goals we assess the impact of adjustments to fit schemes by quantifying the relationship between fit levels i e the guaranteed amount paid per quantity of electricity produced and the propensity to invest in res through a regime switching model we quantify the impact of regulatory uncertainty induced by regulators considering moves from a fit scheme to a more market oriented regulatory regime our focus is on market independent fixed fits the dominant scheme in europe receiving increasing attention globally we find that res investment projects under market independent fixed fit schemes become now or never decisions and derive fit thresholds required to induce investment we show that uncertainty regarding future regulatory regimes delays or even reduces investment activity for fit levels near electricity market prices and high probabilities of an imminent regime switch

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had