A retail benchmarking approach to efficient two-way access pricing

We study a retail benchmarking approach to determine access prices for interconnected networks. Instead of considering fixed access charges as in the existing literature, we study access pricing rules that determine the access price that network i pays to network j as a linear function of the marginal costs and the retail prices set by both networks. In the case of competition in linear prices, we show that there is a unique linear rule that implements the Ramsey outcome as the unique equilibrium, independently of the underlying demand conditions. In the case of competition in two-part tariffs, we consider a class of access pricing rules, similar to the optimal one under linear prices but based on average retail prices. We show that firms choose the variable price equal to the marginal cost under this class of rules. Therefore, the regulator (or the competition authority) can choose one among the rules to pursue additional objectives such as consumer surplus, network coverage or investment: for instance, we show that both static and dynamic e±ciency can be achieved at the same time.

The pricing of academic journals: A two-sided market perspective

More and more academic journals adopt an open-access policy, by which articlesare accessible free of charge, while publication costs are recovered through authorfees. We study the consequences of this open access policy on a journal s qualitystandard. If the journal s objective was to maximize social welfare, open accesswould be optimal as long as the positive externalities generated by its diffusionexceed the marginal cost of distribution. However, we show that if an open accessjournal has a different objective (such as maximizing readers payoffs, the impactof the journal or its profit), it tends to choose a quality standard below the sociallyefficient level.

Asset prices and the measurement of wealth and saving

The paper defines concepts of real wealth and saving which take into account the intertemporal index number problem that results from changing interest rates. Unlike conventional measures of real wealth, which are based on the market value of assets and ignore the index number problem, the new measure correctly reflects the changes in the welfare of households over time. An empirically operational approximation to the theoretical measure is provided and applied to US data. A major empirical finding is that US real financial wealth increased strongly in the 1980s, much more than is revealed by the market value of assets.

Job search and asset accumulation under borrowing constraints

In this paper I show how borrowing constraints and job search interact.I fit a dynamic model to data from the National Longitudinal Survey(1979-cohort) and show that borrowing constraints are significant. Agentswith more initial assets and more access to credit attain higher wagesfor several periods after high school graduation. The unemployed maintaintheir consumption by running down their assets, while the employed saveto buffer against future unemployment spells. I also show that, unlikein models with exogenous income streams, unemployment transfers, byallowing agents to attain higher wages do not 'crowd out' but increasesaving.

Monetary policy and rational asset price bubbles

I examine the impact of alternative monetary policy rules on arational asset price bubble, through the lens of an overlapping generations model with nominal rigidities. A systematic increase in interestrates in response to a growing bubble is shown to enhance the fluctuations in the latter, through its positive effect on bubble growth. Theoptimal monetary policy seeks to strike a balance between stabilization of the bubble and stabilization of aggregate demand. The paper'smain findings call into question the theoretical foundations of the casefor "leaning against the wind" monetary policies.

Access by Capacity and Peak-Load Pricing

Several European telecommunications regulatory agencies have recently introduced a fixed capacity charge (flat rate) to regulate access to the incumbent's network. The purpose of this paper is to show that the optimal capacity charge and the optimal access-minute charge analysed by Armstrong, Doyle, and Vickers (1996) have a similar structure and imply the same payment for the entrant. I extend the analysis tothe case where there is a competitor with market power. In this case, the optimalcapacity charge should be modified to avoid that the entrant cream-skims the market,fixing a longer or a shorter peak period than the optimal. Finally, I consider a multiproduct setting, where the effect of the product differentiation is exacerbated.

Health and (Other) Asset Holdings

Despite clear evidence of correlations between financial and medical statuses and decisions, most models treat financial and health-related choices separately. This article bridges this gap by proposing a tractable dynamic framework for the joint determination of optimal consumption, portfolio holdings, health investment, and health insurance. We solve for the optimal rules in closed form and capitalize on this tractability to gain a better understanding of the conditions under which separation between financial and health-related decisions is sensible, and of the pathways through which wealth and health determine allocations, welfare and other variables of interest such as expected longevity or the value of health. Furthermore we show that the model is consistent with the observed patterns of individual allocations and provide realistic estimates of the parameters that confirm the relevance of all the main characteristics of the model.

Scaling and data collapse for the mean exit time of asset prices

We study theoretical and empirical aspects of the mean exit time (MET) of financial time series. The theoretical modeling is done within the framework of continuous time random walk. We empirically verify that the mean exit time follows a quadratic scaling law and it has associated a prefactor which is specific to the analyzed stock. We perform a series of statistical tests to determine which kind of correlation are responsible for this specificity. The main contribution is associated with the autocorrelation property of stock returns. We introduce and solve analytically both two-state and three-state Markov chain models. The analytical results obtained with the two-state Markov chain model allows us to obtain a data collapse of the 20 measured MET profiles in a single master curve.

Estimation of jump-diffusion processes via empirical characteristic functions

Preface The starting point for this work and eventually the subject of the whole thesis was the question: how to estimate parameters of the affine stochastic volatility jump-diffusion models. These models are very important for contingent claim pricing. Their major advantage, availability T of analytical solutions for characteristic functions, made them the models of choice for many theoretical constructions and practical applications. At the same time, estimation of parameters of stochastic volatility jump-diffusion models is not a straightforward task. The problem is coming from the variance process, which is non-observable. There are several estimation methodologies that deal with estimation problems of latent variables. One appeared to be particularly interesting. It proposes the estimator that in contrast to the other methods requires neither discretization nor simulation of the process: the Continuous Empirical Characteristic function estimator (EGF) based on the unconditional characteristic function. However, the procedure was derived only for the stochastic volatility models without jumps. Thus, it has become the subject of my research. This thesis consists of three parts. Each one is written as independent and self contained article. At the same time, questions that are answered by the second and third parts of this Work arise naturally from the issues investigated and results obtained in the first one. The first chapter is the theoretical foundation of the thesis. It proposes an estimation procedure for the stochastic volatility models with jumps both in the asset price and variance processes. The estimation procedure is based on the joint unconditional characteristic function for the stochastic process. The major analytical result of this part as well as of the whole thesis is the closed form expression for the joint unconditional characteristic function for the stochastic volatility jump-diffusion models. The empirical part of the chapter suggests that besides a stochastic volatility, jumps both in the mean and the volatility equation are relevant for modelling returns of the S&P500 index, which has been chosen as a general representative of the stock asset class. Hence, the next question is: what jump process to use to model returns of the S&P500. The decision about the jump process in the framework of the affine jump- diffusion models boils down to defining the intensity of the compound Poisson process, a constant or some function of state variables, and to choosing the distribution of the jump size. While the jump in the variance process is usually assumed to be exponential, there are at least three distributions of the jump size which are currently used for the asset log-prices: normal, exponential and double exponential. The second part of this thesis shows that normal jumps in the asset log-returns should be used if we are to model S&P500 index by a stochastic volatility jump-diffusion model. This is a surprising result. Exponential distribution has fatter tails and for this reason either exponential or double exponential jump size was expected to provide the best it of the stochastic volatility jump-diffusion models to the data. The idea of testing the efficiency of the Continuous ECF estimator on the simulated data has already appeared when the first estimation results of the first chapter were obtained. In the absence of a benchmark or any ground for comparison it is unreasonable to be sure that our parameter estimates and the true parameters of the models coincide. The conclusion of the second chapter provides one more reason to do that kind of test. Thus, the third part of this thesis concentrates on the estimation of parameters of stochastic volatility jump- diffusion models on the basis of the asset price time-series simulated from various "true" parameter sets. The goal is to show that the Continuous ECF estimator based on the joint unconditional characteristic function is capable of finding the true parameters. And, the third chapter proves that our estimator indeed has the ability to do so. Once it is clear that the Continuous ECF estimator based on the unconditional characteristic function is working, the next question does not wait to appear. The question is whether the computation effort can be reduced without affecting the efficiency of the estimator, or whether the efficiency of the estimator can be improved without dramatically increasing the computational burden. The efficiency of the Continuous ECF estimator depends on the number of dimensions of the joint unconditional characteristic function which is used for its construction. Theoretically, the more dimensions there are, the more efficient is the estimation procedure. In practice, however, this relationship is not so straightforward due to the increasing computational difficulties. The second chapter, for example, in addition to the choice of the jump process, discusses the possibility of using the marginal, i.e. one-dimensional, unconditional characteristic function in the estimation instead of the joint, bi-dimensional, unconditional characteristic function. As result, the preference for one or the other depends on the model to be estimated. Thus, the computational effort can be reduced in some cases without affecting the efficiency of the estimator. The improvement of the estimator s efficiency by increasing its dimensionality faces more difficulties. The third chapter of this thesis, in addition to what was discussed above, compares the performance of the estimators with bi- and three-dimensional unconditional characteristic functions on the simulated data. It shows that the theoretical efficiency of the Continuous ECF estimator based on the three-dimensional unconditional characteristic function is not attainable in practice, at least for the moment, due to the limitations on the computer power and optimization toolboxes available to the general public. Thus, the Continuous ECF estimator based on the joint, bi-dimensional, unconditional characteristic function has all the reasons to exist and to be used for the estimation of parameters of the stochastic volatility jump-diffusion models.

Access by Capacity and Peak-Load Pricing

Several European telecommunications regulatory agencies have recently introduced a fixed capacity charge (flat rate) to regulate access to the incumbent's network. The purpose of this paper is to show that the optimal capacity charge and the optimal access-minute charge analysed by Armstrong, Doyle, and Vickers (1996) have a similar structure and imply the same payment for the entrant. I extend the analysis tothe case where there is a competitor with market power. In this case, the optimalcapacity charge should be modified to avoid that the entrant cream-skims the market,fixing a longer or a shorter peak period than the optimal. Finally, I consider a multiproduct setting, where the effect of the product differentiation is exacerbated.

Maintenance Asset Management Project -- Phase II, July 31, 2013

Expanded abstract: Iowa Department of Transportation (IA DOT) is finalizing research to streamline field inventory/inspection of culverts by Maintenance and Construction staff while maximizing the use of tablet technologies. The project began in 2011 to develop some new best practices for field staff to assist in the inventory, inspection and maintenance of assets along the roadway. The team has spent the past year working through the complexities of identifying the most appropriate tablet hardware for field data collection. A small scale deployment of tablets occurred in spring of 2013 to collect several safety related assets (culverts, signs, guardrail, and incidents). Data can be collected in disconnected or connected modes and there is an associated desktop environment where data can be viewed and queried after being synced into the master database. The development of a deployment plan and related workflow processes are underway; which will eventually feed information into IA DOTs larger asset management system and make the information available for decision making. The team is also working with the IA DOT Design Office on Computer Aided Drafting (CAD) data processing and the IA DOT Construction office with a new digital As-Built plan process to leverage the complete data life-cycle so information can be developed once and leveraged by the Maintenance staff farther along in the process.

Asset Management Program Enhancement Plan: Baseline Assessment Phases I and II, 2015

This project resulted in the development of a framework for making asset management decisions on low-volume bridges. The research focused on low-volume bridges located in the agricultural counties of Iowa because recent research has shown that these counties have the greatest percentage of structurally deficient bridges in the nation. Many of the same counties also have the highest crop yields in the state, creating a situation where detours caused by deficient bridges on farm-to-market roads increase the cost to transport the crops. Thus, the research proposed the use of social return on investment (SROI), a tool used by international institutions such as the World Bank, as an asset management metric to gauge to the socioeconomic impact of structurally deficient bridges on the state in an effort to provide quantified justification to fund improvements on low-volume assets such as these rural bridges. The study found that combining SROI with current asset management metrics like average daily traffic (ADT) made it possible to prioritize the bridges in such a way that the limited resources available are allocated in a manner that promotes a more equitable distribution and that directly benefits the user, in this case Iowa farmers. The result is a system that more closely aligns itself with the spirit of MAP-21, in that infrastructure investments are used to facilitate economic growth for Iowa’s agricultural economy.

Final Report (SPR Project 90-00-RB10-012) on the Maintenance Asset Management Project Phase I, 2012

This project resulted in the development of a proof of concept for a features inventory process to be used by field staff. The resulting concept is adaptable for different asset classes (e.g. culverts, guardrail) and able to leverage existing DOT resources such as the videolog and LRS and our current technology platforms including Oracle and our GIS web infrastructure. The concept examined the feasibility of newly available technologies, such as mobile devices, while balancing ease of use in the field. Implementation and deployment costs were also important considerations in evaluating the success of the project. These project funds allowed the pilot to address the needs of two DOT districts. A report of findings was prepared, including recommendations for or against full deployment of the pilot solution.

Final Report (SPR Project 90-00-RB10-012) on the Maintenance Asset Management Project Phase II, 2013

This project resulted in the development of a proof of concept for a features inventory process to be used by field staff. The resulting concept is adaptable for different asset classes (e.g. culverts, guardrail) and able to leverage existing DOT resources such as the videolog and LRS and our current technology platforms including Oracle and our GIS web infrastructure. The concept examined the feasibility of newly available technologies, such as mobile devices, while balancing ease of use in the field. Implementation and deployment costs were also important considerations in evaluating the success of the project. These project funds allowed the pilot to address the needs of two DOT districts. A report of findings was prepared, including recommendations for a full deployment of a field data collection.