Using extreme value theory to measure value-at-risk for daily electricity spot prices

The recent deregulation in electricity markets worldwide has heightened the importance of risk management in energy markets. Assessing Value-at-Risk (VaR) in electricity markets is arguably more difficult than in traditional financial markets because the distinctive features of the former result in a highly unusual distribution of returns-electricity returns are highly volatile, display seasonalities in both their mean and volatility, exhibit leverage effects and clustering in volatility, and feature extreme levels of skewness and kurtosis. With electricity applications in mind, this paper proposes a model that accommodates autoregression and weekly seasonals in both the conditional mean and conditional volatility of returns, as well as leverage effects via an EGARCH specification. In addition, extreme value theory (EVT) is adopted to explicitly model the tails of the return distribution. Compared to a number of other parametric models and simple historical simulation based approaches, the proposed EVT-based model performs well in forecasting out-of-sample VaR. In addition, statistical tests show that the proposed model provides appropriate interval coverage in both unconditional and, more importantly, conditional contexts. Overall, the results are encouraging in suggesting that the proposed EVT-based model is a useful technique in forecasting VaR in electricity markets. (c) 2005 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.

Electronic commerce investments, the resource-based view of the firm, and firm market value

Firms have embraced electronic commerce as a means of doing business, either because they see it as a way to improve efficiency, grow market share, expand into new markets, or because they view it as essential for survival. Recent research in the United States provides some evidence that the market does value investments in electronic commerce. Following research that suggests that, in certain circumstances, the market values noninnovative investments as well as innovative investments in new products, we partition electronic commerce investment project announcements into innovative and noninnovative to determine whether there are excess returns associated with these types of announcements. Apart from our overall results being consistent with the United States findings that the market values investments in electronic commerce projects, we also find that noninnovative investments are perceived as more valuable to the firm than innovative investments. On average, the market expects innovative investments to earn a return commensurate with their risk. We conclude that innovative electronic commerce projects are most likely seen by the capital market as easily replicable, and consequently have little, if any, competitive advantage period. On the other hand, we conclude from the noninnovative investment results that these types of investments are seen as being compatible with a firm's assets-in-place, in particular, its information technology capabilities, a view consistent with the resource-based view of the firm.

On the existence of solutions to boundary value problems on time scales

This work formulates existence theorems for solutions to two-point boundary value problems on time scales. The methods used include maximum principles, a priori bounds and topological degree theory.

The chemical composition of α cen A: Strong lines and the ABO theory of collisional line broadening

The mean abundances of Mg, Si, Ca, Ti, Cr, and Fe based on both strong and weak lines of alpha CenAare determined by matching the observed line profiles with those synthesised from stellar atmospheric models and comparing these results with a similar analysis for the Sun. There is good agreement between the abundances from strong and weak lines. Strong lines should generally be an excellent indicator of abundance and far easier to measure than the weak lines normally used. Until the development of the Anstee, Barklem, and O'Mara ( ABO) theory for collisional line broadening, the uncertainty in the value of the damping constant prevented strong lines being used for abundance determinations other than in close differential analyses. We found that alpha Cen A has a mean overabundance of 0.12 +/- 0.06 dex compared to solar mean abundances. This result agrees remarkably well with previous studies that did not use strong lines or the ABO theory for collisional line broadening. Our result supports the conclusion that reliable abundances can be derived from strong lines provided this new theory for line broadening is used to calculate the van derWaals damping.

Features of nitrogen adsorption on nonporous carbon and silica surfaces in the framework of classical density functional theory

Equilibrium adsorption data of nitrogen on a series of nongraphitized carbon blacks and nonporous silica at 77 K were analyzed by means of classical density functional theory to determine the solid-fluid potential. The behavior of this potential profile at large distance is particularly considered. The analysis of nitrogen adsorption isotherms seems to indicate that the adsorption in the first molecular layer is localized and controlled mainly by short-range forces due to the surface roughness, crystalline defects, and functional groups. At distances larger than approximately 1.3-1.5 molecular diameters, the adsorption is nonlocalized and appears as a thickening of the adsorbed film with increasing bulk pressure in a relatively weak adsorption potential field. It has been found that the asymptotic decay of the potential obeys the power law with the exponent being -3 for carbon blacks and -4 for silica surface, which signifies that in the latter case the adsorption potential is mainly exerted by surface oxygen atoms. In all cases, the absolute value of the solid-fluid potential is much smaller than that predicted by the Lennard-Jones pair potential with commonly used solid-fluid molecular parameters. The effect of surface heterogeneity on the heat of adsorption is also discussed.

Extreme learning machine for predicting HLA-peptide binding

Machine learning techniques have been recognized as powerful tools for learning from data. One of the most popular learning techniques, the Back-Propagation (BP) Artificial Neural Networks, can be used as a computer model to predict peptides binding to the Human Leukocyte Antigens (HLA). The major advantage of computational screening is that it reduces the number of wet-lab experiments that need to be performed, significantly reducing the cost and time. A recently developed method, Extreme Learning Machine (ELM), which has superior properties over BP has been investigated to accomplish such tasks. In our work, we found that the ELM is as good as, if not better than, the BP in term of time complexity, accuracy deviations across experiments, and most importantly - prevention from over-fitting for prediction of peptide binding to HLA.

A complex systems approach to the value of ecological resources

A theory of value sits at the core of every school of economic thought and directs the allocation of resources to competing uses. Ecological resources complicate the modem neoclassical approach to determining value due to their complex nature, considerable non-market values and the difficulty in assigning property rights. Application of the market model through economic valuation only provides analytical solutions based on virtual markets, and neither the demand nor supply-side techniques of valuation can adequately consider the complex set of biophysical and ecological relations that lead to the provision of ecosystem goods and services. This paper sets out a conceptual framework for a complex systems approach to the value of ecological resources. This approach is based on there being both an intrinsic quality of ecological resources and a subjective evaluation by the consumer. Both elements are necessary for economic value. This conceptual framework points the way towards a theory of value that incorporates both elements, so has implications for principles by which ecological resources can be allocated. (c) 2005 Elsevier B.V. All rights reserved.

An evolutionary framework for studies of hibernation and short-term torpor

Data from diverse studies endorse ideas that short term torpor and hibernation are expressions of ancient characters. In evolutionary terms, their basic mechanisms are probably plesiomorphic (= ancestral/primitive) and physiologically similar. This contrasts with the alternate view that they are apomorphic (= derived, specialized), arising independently in many taxa from homeothermic ancestry by numerous apparent convergences. This paper explores some of the implications of accepting the plesiomorphic interpretation. Hibernation is, of course, a complex phenomenon that has undergone variations and refinements in different mammalian lineages. The argument is not that hibernation in total is a plesiomorphic character, but that it is built upon fundamental processes that are. Taking this view provides a framework for research that emphasizes the value of comparative studies, particularly of reptiles and birds. Studies of reptiles, for example, might unravel the mystery about periodic arousals. A plesiomorphic framework also explains the most extreme examples of hibernation as derived specializations from ancestry in which heterothermy is more about energy management than escape from cold. It cautions against using low body temperature (Tb) alone to diagnose torpor, emphasizes the need to distinguish between constitutional eurythermy (plesiomorphic) and constitutional stenothermy (apomorphic), and leads to a parsimonious theory about the evolution of endothermy. The paper proposes that brown adipose tissue (BAT) is apomorphic within eutheria and highlights the conundrum posed by the occurrence of both nonshivering thermogenesis (NST) and rapid arousal from hibernation in noneutherian mammals that lack BAT and uncoupling protein 1 (UCP1). It endorses the likely existence of a different, ancient and widespread mechanism for regulatory NST in mammals.

Reweaving the Silk Road through outsourcing and offshoring: The need for an externalisation theory

The reweaving and repaving of the modern Silk Road passes through outsourcing and offshoring activities that have a profound impact on both global business psyche and landscape. Firms, in particular, and their global value chain are being shaped and reshaped through a complex concoction of vertical integration and disintegration. The boundary of the firm and the firm/market interface has been of interest to students of organisation and economics for some time. It has provided the context for Internalisation Theory. Within the new economy, the twin trends of globalisation and advancing technologies are giving rise to a hitherto unknown “worldwide market for market transactions? and increased opportunities for international expansion by firms via market-based modes of organisation. We describe these trends and offer an early modeling approach for explaining why some firm’s externalise the marginal transaction in the so-called new economy. The paper further draws attention on the need to articulate an “Externalisation Theory? that adequately accounts for the firm’s offshoring and outsourcing activities, and that parallels as well as complement “Internalisation Theory? for a full explanation of today’s firms behaviour.