Power generation investment opportunities evaluation: A comparison between net present value and real options approach

To evaluate an investment project in the competitive electricity market, there are several key factors that affects the project's value: the present value that the project could bring to investor, the possible future course of actions that investor has and the project's management flexibility. The traditional net present value (NPV) criteria has the ability to capture the present value of the project's future cash flow, but it fails to assess the value brought by market uncertainty and management flexibility. By contrast with NPV, the real options approach (ROA) method has the advantage to combining the uncertainty and flexibility in evaluation process. In this paper, a framework for using ROA to evaluate the generation investment opportunity has been proposed. By given a detailed case study, the proposed framework is compared with NPV and showing a different results

Econometrics of yield spreads in the money market:a note

The literature on bond markets and interest rates has focused largely on the term structure of interest rates, specifically, on the so-called expectations hypothesis. At the same time, little is known about the nature of the spread of the interest rates in the money market beyond the fact that such spreads are generally unstable. However, with the evolution of complex financial instruments, it has become imperative to identify the time series process that can help one accurately forecast such spreads into the future. This article explores the nature of the time series process underlying the spread between three-month and one-year US rates, and concludes that the movements in this spread over time is best captured by a GARCH(1,1) process. It also suggests the use of a relatively long term measure of interest rate volatility as an explanatory variable. This exercise has gained added importance in view of the revelation that GARCH based estimates of option prices consistently outperform the corresponding estimates based on the stylized Black-Scholes algorithm.

The forecast performance of competing implied volatility measures:the case of individual stocks

This study examines the information content of alternative implied volatility measures for the 30 components of the Dow Jones Industrial Average Index from 1996 until 2007. Along with the popular Black-Scholes and \model-free" implied volatility expectations, the recently proposed corridor implied volatil- ity (CIV) measures are explored. For all pair-wise comparisons, it is found that a CIV measure that is closely related to the model-free implied volatility, nearly always delivers the most accurate forecasts for the majority of the firms. This finding remains consistent for different forecast horizons, volatility definitions, loss functions and forecast evaluation settings.

FX modelling under collateralization

We present the market practice for interest rate yield curves construction and pricing interest rate derivatives. Then we give a brief description of the Vasicek and the Hull-White models, with an example of calibration to market data. We generalize the classical Black-Scholes-Merton pricing formulas, considering more general cases such as perfect or partial collateral, derivatives on a dividend paying asset subject to repo funding, and multiple currencies. Finally we derive generic pricing formulae for different combinations of cash flow and collateral currencies, and we apply the results to the pricing of FX swaps and CCS, and we discuss curve bootstrapping.

Evaluación de la aplicación de dos modelos de valoración de opciones a la administración de portafolios

El artículo revisa la teoría de opciones y propone un método para la implementación del «Portfolio Insurance » basado en el modelo binomial, el cual es evaluado en oposición al modelo de Black-Scholes. Usando datos reales y simulados se encuentra que el método de Black-Scholes se desempeña mejor en condiciones «inestables »; el modelo binomial, en cambio,obtiene mejores resultados con tendencias definidas en los precios de las acciones (crecientes, decrecientes o estables durante un período extendido).

Osakeindeksioption implisiittisen volatiliteetin informaatiosisältö

Volatiliteetilla mitataan arvopaperin toteutuneen tuoton epävarmuutta ja sillä on keskeinen rooli riskienhallinnassa sekä arvopapereiden hinnoittelussa. Volatiliteetin estimoimiseen on kaksi vaihtoehtoista lähestymistapaa. Historiallinen volatiliteetti estimoidaan toteutuneesta hintadatasta, kun taas implisiittinen volatiliteetti voidaan johtaa optioiden markkinahinnoista käyttämällä Black-Scholes-Merton-hinnoittelumallia tai vaihtoehtoisesti Britten-Jonesin ja Neubergerin kehittämää mallia (mallivapaa implisiittinen volatiliteetti), joka ei ole riippuvainen mistään tietystä hinnoittelumallista, vaan johdetaan suoraan optioiden markkinahinnoista. Implisiittinen volatiliteetti edustaa näin ollen markkinaosapuolten näkemystä option jäljellä olevana juoksuaikana toteutuvasta volatiliteetista. Toteutuvan volatiliteetin ennustamista implisiittisen ja historiallisen volatiliteetin avulla on tutkittu laajalti 1970-luvulta lähtien ja tulokset ovat olleet ristiriitaisia sekä historiallisen ja implisiittisen volatiliteetin keskinäisessä vertailussa että kahden eri implisiittisen volatiliteetin vertailussa. Tämän tutkielman tavoite on selvittää ennustaako implisiittinen volatiliteetti toteutuvaa volatiliteettia. Tutkielmassa syvennytään erityisesti vertailemaan historiallisen volatiliteetin, Black–Scholes-implisiittisen sekä mallivapaan implisiittisen volatiliteetin paremmuutta toteutuvan volatiliteetin ennusteina. Tutkielman empiirinen osuus on suoritettu eurooppalaisella aineistolla käyttämällä EURO STOXX 50 -indeksin, siihen liittyvien osto-optioiden sekä VSTOXX-volatiliteetti-indeksin hintatietoja vuosilta 2006–2014. Aikasarjatutkimus on suoritettu ei-päällekkäisillä havainnoilla niin, että jokaista volatiliteettiennustetta kohden on tasan yksi kuukauden mittainen periodi, jolta toteutunut volatiliteetti lasketaan. Empiirinen tarkastelu on suoritettu PNS-regressioanalyysillä, jolla on ensin tutkittu jokaisen volatiliteettiennusteen kykyä selittää toteutuvaa volatiliteettia sekä erikseen että yhdessä. Tulosten perusteella mallivapaa implisiittinen volatiliteetti on harhainen, mutta tutkituista ennusteista selkeästi tehokkain ennustamaan toteutuvaa volatiliteettia ja sisällyttää itseensä sekä Black–Scholes-implisiittisen että historiallisen volatiliteetin sisältämän informaation

Three essays on liquidity

Doutoramento em Gestão.

Valoración de empresas. Aplicación Modelo Black and Scholes

La presente tesis es un trabajo de investigación que trata sobre la aplicación del Modelo Black and Scholes para valorar empresas en el entorno ecuatoriano. Para tener una lógica sencilla y ordena se ha divido el trabajo en cuatro capítulos, los cuales tienen un objetivo específico cada uno y en su conjunto buscan responder las hipótesis planteadas en la tesis. El primer capítulo proporciona una idea general sobre los aspectos teóricos de la valoración de empresas, en este capítulo se encuentra la definición, los conceptos básicos, una explicación de cada uno de los métodos más importantes que se conoce actualmente. El propósito del capítulo es entender la valoración de empresas en su conjunto. El segundo capítulo se orienta en las bases conceptuales desarrolladas por el modelo Black and Scholes referente a valoración de opciones y su comparación con otros modelos, se toma este enfoque debido a que se cuenta con suficiente información para entender adecuadamente el modelo. La finalidad del capítulo es comprender el modelo de Black and Scholes para la valoración de opciones. El tercer capítulo analiza la aplicación del modelo Black and Scholes en la valoración de empresas a través de estudios previos, los fundamentos, las variables que se requieren y la forma de obtener las mismas. El capítulo tiene como propósito analizar la valoración de empresas aplicando el modelo Black and Scholes. El último capítulo se centra en realizar la aplicación práctica en el entorno ecuatoriano de valorar empresas a través del modelo Black and Scholes, en el mismo se describe paso a paso como se realizó la valoración y se detalla los resultados obtenidos. El objetivo del capítulo es aplicar los conocimientos desarrollados y obtener resultados que permitan tener fundamentos suficientes para obtener las conclusiones finales.

Three dimensional Lifshitz black hole and the Korteweg-de Vries equation

We consider a solution of three dimensional New Massive Gravity with a negative cosmological constant and use the AdS/CTF correspondence to inquire about the equivalent two dimensional model at the boundary. We conclude that there should be a close relation of the theory with the Korteweg-de Vries equation. (C) 2012 Elsevier B.V..All rights reserved.

Implications of a viscosity bound on black hole accretion

Motivated by the viscosity bound in gauge/gravity duality, we consider the ratio of shear viscosity (eta) to entropy density (s) in black hole accretion flows. We use both an ideal gas equation of state and the QCD equation of state obtained from lattice for the fluid accreting onto a Kerr black hole. The QCD equation of state is considered since the temperature of accreting matter is expected to approach 10(12) K in certain hot flows. We find that in both the cases eta/s is small only for primordial black holes and several orders of magnitude larger than any known fluid for stellar and supermassive black holes. We show that a lower bound on the mass of primordial black holes leads to a lower bound on eta/s and vice versa. Finally we speculate that the Shakura-Sunyaev viscosity parameter should decrease with increasing density and/or temperatures. (C) 2012 Elsevier B.V. All rights reserved.

Holographic dual of linear dilaton black hole in Einstein-Maxwell-dilaton-axion gravity

Motivated by the recently proposed Kerr/CFT correspondence, we investigate the holographic dual of the extremal and non-extremal rotating linear dilaton black hole in Einstein-Maxwell-Dilaton-Axion Gravity. For the case of extremal black hole, by imposing the appropriate boundary condition at spatial infinity of the near horizon extremal geometry, the Virasoro algebra of conserved charges associated with the asymptotic symmetry group is obtained. It is shown that the microscopic entropy of the dual conformal field given by Cardy formula exactly agrees with Bekenstein-Hawking entropy of extremal black hole. Then, by rewriting the wave equation of massless scalar field with sufficient low energy as the SLL(2, R) x SLR(2, R) Casimir operator, we find the hidden conformal symmetry of the non-extremal linear dilaton black hole, which implies that the non-extremal rotating linear dilaton black hole is holographically dual to a two dimensional conformal field theory with the non-zero left and right temperatures. Furthermore, it is shown that the entropy of non-extremal black hole can be reproduced by using Cardy formula.

Entropy of Kaluza-Klein black hole from Kerr/CFT correspondence

We extend the recently proposed Kerr/CFT correspondence to examine the dual conformal field theory of four-dimensional Kaluza-Klein black hole in Einstein-Maxwell-Dilaton theory. For the extremal Kaluza-Klein black hole, the central charge and temperature of the dual conformal field are calculated following the approach of Guica, Hartman, Song and Strominger. Meanwhile, we show that the microscopic entropy given by the Cardy formula agrees with Bekenstein-Hawking entropy of extremal Kaluza-Klein black hole. For the non-extremal case, by studying the near-region wave equation of a neutral massless scalar field, we investigate the hidden conformal symmetry of Kaluza-Klein black hole, and find the left and right temperatures of the dual conformal field theory. Furthermore, we find that the entropy of non-extremal Kaluza-Klein black hole is reproduced by Cardy formula. (C) 2010 Elsevier B.V. All rights reserved.

Studies on the electrical conductivity of carbon black filled polymers

The conductivity mechanism for a carbon black (CB) filled high-density polyethylene (HDPE) compound was investigated in this work. From the experimental results obtained, it can be seen that the relation between electrical current density (J) and applied voltage across the sample (V) coincides with Simmons's equation (i.e., the electrical resistivity of the compound decreases with the applied voltage, especially at the critical voltage). The minimum electrical resistivity occurs near the glass transition temperature (T-g) of HDPE (198 K). It can be concluded that electron tunneling is an important mechanism and a dominant transport process in the HDPE/CB composite. A new model of carbon black dispersion in the matrix was established, and the resistivity was calculated by using percolation and quantum mechanical theories. (C) 1996 John Wiley & Sons, Inc.

The massive neutron star or low-mass black hole in 2S 0921-630

We report on the optical spectroscopy of the eclipsing halo low-mass X-ray binary 2S 0921-630, which reveals the absorption-line radial velocity curve of the K0 III secondary star with a semiamplitude K-2=92.89+/-3.84 km s(-1), a systemic velocity gamma=34.9+/-3.3 km s(-1), and an orbital period P-orb of 9.0035+/-0.0029 days (1 sigma). Given the quality of the data, we find no evidence for the effects of X-ray irradiation. Using the previously determined rotational broadening of the mass donor and applying conservative limits on the orbital inclination, we constrain the compact object mass to be 2.0-4.3 M-circle dot (1 sigma), ruling out a canonical neutron star at the 99% level. Since the nature of the compact object is unclear, this mass range implies that the compact object is either a low-mass black hole with a mass slightly higher than the maximum possible neutron star mass (2.9 M-circle dot) or a massive neutron star. If the compact object is a black hole, it confirms the prediction of the existence of low-mass black holes, while if the object is a massive neutron star, its high mass severely constrains the equation of state of nuclear matter.

Studies on scattering and thermodynamics of black holes in f(R) theory and Einstein's theory

One of the interesting consequences of Einstein's General Theory of Relativity is the black hole solutions. Until the observation made by Hawking in 1970s, it was believed that black holes are perfectly black. The General Theory of Relativity says that black holes are objects which absorb both matter and radiation crossing the event horizon. The event horizon is a surface through which even light is not able to escape. It acts as a one sided membrane that allows the passage of particles only in one direction i.e. towards the center of black holes. All the particles that are absorbed by black hole increases the mass of the black hole and thus the size of event horizon also increases. Hawking showed in 1970s that when applying quantum mechanical laws to black holes they are not perfectly black but they can emit radiation. Thus the black hole can have temperature known as Hawking temperature. In the thesis we have studied some aspects of black holes in f(R) theory of gravity and Einstein's General Theory of Relativity. The scattering of scalar field in this background space time studied in the first chapter shows that the extended black hole will scatter scalar waves and have a scattering cross section and applying tunneling mechanism we have obtained the Hawking temperature of this black hole. In the following chapter we have investigated the quasinormal properties of the extended black hole. We have studied the electromagnetic and scalar perturbations in this space-time and find that the black hole frequencies are complex and show exponential damping indicating the black hole is stable against the perturbations. In the present study we show that not only the black holes exist in modified gravities but also they have similar properties of black hole space times in General Theory of Relativity. 2 + 1 black holes or three dimensional black holes are simplified examples of more complicated four dimensional black holes. Thus these models of black holes are known as toy models of black holes in four dimensional black holes in General theory of Relativity. We have studied some properties of these types of black holes in Einstein model (General Theory of Relativity). A three dimensional black hole known as MSW is taken for our study. The thermodynamics and spectroscopy of MSW black hole are studied and obtained the area spectrum which is equispaced and different thermo dynamical properties are studied. The Dirac perturbation of this three dimensional black hole is studied and the resulting quasinormal spectrum of this three dimensional black hole is obtained. The different quasinormal frequencies are tabulated in tables and these values show an exponential damping of oscillations indicating the black hole is stable against the mass less Dirac perturbation. In General Theory of Relativity almost all solutions contain singularities. The cosmological solution and different black hole solutions of Einstein's field equation contain singularities. The regular black hole solutions are those which are solutions of Einstein's equation and have no singularity at the origin. These solutions possess event horizon but have no central singularity. Such a solution was first put forward by Bardeen. Hayward proposed a similar regular black hole solution. We have studied the thermodynamics and spectroscopy of Hay-ward regular black holes. We have also obtained the different thermodynamic properties and the area spectrum. The area spectrum is a function of the horizon radius. The entropy-heat capacity curve has a discontinuity at some value of entropy showing a phase transition.