Because of their stationary nature, price is not included as a state variable in the model. The financial risk associated with the uncertainty of market prices is the expected profit that could be gained or lost by not harvesting in the current period and holding out for a better market price in a future period. Natural disasters include hurricanes, forest fires and insect outbreaks. When a stand is affected by a natural disaster, we model it as if it may or may not succumb to the disaster. If it does not succumb, no damage is done and the stand remains unchanged. If it does succumb, we model this as if it will be completely wiped out and the value of the wood products on the stand would only be enough to pay for the cost of removing them, therefore the stand has no salvage value. Therefore, the financial risk associated with the uncertainty of natural disaster occurrence is the loss of potential future profit because the stand has succumbed before a planned harvest. Modelling hurricanes and fires is a matter of determining the probabilities of a stand ending up in any one of the regeneration states in any given period. Stands have a higher probability of succumbing to hurricanes as they get older and stems become more rigid and break more easily. In the case of fires, the opposite occurs as older trees have thicker bark that protects them from the heat. If an insect outbreak occurs, the stand will be affected and older trees are modeled to have a higher probability of succumbing as they offer better food and shelter for invading insects. Uncertain market prices, all three types of natural disasters and uncertain regeneration are assumed independent of each other. Unplanted stands, once regenerated, grow as natural stands. Within certain diameter limits, they can be pre-commercially thinned (PCT) a preference for one species will remove more of the other. The forestry field handbook (1993) published by Nova Scotia Department of Natural Resources (NSDNR) recommends spacing between 2.1m and 3.0m depending on the type and condition of the stand. Plantations can have either early competition control or not. Those without early competition control have a certain probability of reverting to a well-stocked natural stand. Plantations or PCT stands can be commercially thinned (CT) once they reach certain diameter limits.
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