Search Results (89)

This paper proposes a two-stage stochastic non-cooperative game model to solve relief supplies procurement and distribution optimization of multiple rescue organizations in crisis rescue. Rescue organizations with limited budgets minimize rescue costs through relief supply procurement, storage, and transportation in an uncertain environment. Under a mild assumption, we establish the existence and uniqueness of the equilibrium point and derive the optimality conditions by using the duality theory, characterizing the saddle point in the Lagrange framework. The problem is further reformulated as a constraint system governed by Lagrange multipliers, and its optimality is characterized by the Karush–Kuhn–Tucker condition. The economic interpretation of the multipliers as shadow prices is elucidated. Numerical experiments verify the effectiveness of the model in cost optimization in crisis rescue scenarios. Full article

Heat stress is becoming an increasing concern for dairy farmers due to elevated temperatures and wind shadow caused by rural development. Mechanical ventilation helps mitigate heat stress; however, transitioning from natural to mechanical ventilation increases operational costs. In this study, the number of days with no heat stress, as well as mild, moderate, and severe heat stress, was calculated for Madison, Wisconsin, over the past five years. Monthly milk margins were determined using all milk prices and feed costs from the Dairy Margin Coverage (DMC) program. The goal was to compare the potential reduction in milk margin coverage to the electricity costs of operating ventilation fans. The results indicated that while the five-year average milk margin reduction due to heat stress was USD 20,204 for a 600-head facility, the electricity cost accounted for approximately 42.6% of this amount. However, milk margins fluctuated annually due to volatility in milk and feed markets. For example, in 2021, the reduction in milk margins was estimated at USD 9804, while electricity costs reached USD 8574. It was concluded that in some years, when no severe heat stress occurs, the benefits of ventilation may be close to the expenses. Therefore, adhering to best management practices is critical for minimizing electricity costs while using ventilation fans in dairy operations. Full article

Environmental, social and governance (ESG) ratings (scores) provide quantitative measures for socially responsible investment. We consider ESG scores to be a third independent variable—on par with financial risk and return—and incorporate such numeric scores into dynamic asset pricing. Based on this incorporation, we develop the entire investment process for the ESG market: portfolio optimization and efficient frontier, capital market line (the market portfolio), risk-assessment measures and hedging instruments (options). There is currently no riskless asset available in such an ESG market; to address this, we develop the so-called shadow riskless rate, applicable to markets having only risky assets. We believe this to be the first paper that fully develops, under a single dynamic pricing framework, the entire investment process for an ESG market. As there are significant differences in methodologies developed by providers of ESG scores, we do not take the position that data from any single agency are to be favored. Consequently, we utilize ESG scores from Refinitiv in the manuscript’s empirical studies and redo all computations using S&P Global RobeoSAM ESG scores. Full article

Electric Road Systems (ERS) are emerging technologies that enable electricity transfer to electric vehicles in motion. However, their implementation presents challenges due to high energy demands and infrastructure requirements. This technology offers a significant opportunity for decarbonizing road freight transport, one of the most carbon-intensive sectors, contributing to the European Union’s climate goals. This study hypothesizes that implementing an inductive ERS for freight transport along the AP-7 corridor in Spain will generate environmental benefits—primarily through greenhouse gas (GHG) emission reductions—that outweigh the associated socioeconomic costs, making it a viable decarbonization strategy. To test this hypothesis, an impact assessment framework based on Cost–Benefit Analysis (CBA) is conducted, incorporating climate change and other environmental benefits. The framework is applied to a section of the Mediterranean Highway Corridor AP-7 in Spain. The results indicate that the most significant benefits are derived from positive environmental impacts and lower vehicle operation costs. Through a sensitivity analysis, our research identifies key variables affecting the system’s socioeconomic profitability, including payload capacity, volatility of energy prices and shadow prices of GHG emissions. The study provides insights for policymakers to optimize ERS deployment strategies, ensuring maximum social benefits while addressing economic and environmental challenges. Full article

Hainan Island has rich water resources and unique lake ecosystems. Organically connecting lakes and wetlands with forest ecosystems should be considered in order to strengthen biodiversity protection, form a continuous green corridor to promote species migration and gene exchange, and enhance the stability and resilience of the overall ecological system and maximize its benefits. The method of linear programming was used in this study to analyze the forest ecosystem on Hainan Island in China in order to provide a scientific basis for the integration, protection and management of lakes, wetlands and forests. This study points out that the ratio of the area of timber forest, protection forest, special-purpose forest and bamboo forest should be adjusted from the current 68:22.9:7.1:1.8 to 24:72.8:2.5:0.6. The average shadow price of the reasonable use of different forest lands on Hainan Island is 2512.46 CNY/ha and the optimal value of special-purpose forest is 4376.04 CNY/ha, rather than the current 6888.50 CNY/ha. This study also shows that the timber forest, special-purpose forest and bamboo forest on Hainan Island are short-term products, while protection forest, wood-fuel forest, economic forest, open forest land, shrub land, young afforested land and non-forest land are long-term products, for which it is not easy to obtain benefits in the short-term. A combination of long- and short-term forest ecological planning should be considered to maintain the various long-term benefits. This study finally proposes that Hainan Island should reduce its proportion of timber forest area; increase its proportion of protection forest area; focus on the integrated development of lakes, wetlands and forests and biodiversity conservation goals; and pay close attention to the adjustment of forest type structure in order to meet the needs of ecological province construction and sustainable development. Full article

Small and medium-sized businesses (SMEs) are an essential subject of economic activity in any country because, without their participation, the development and formation of the very structure of the economy are almost impossible. The role of SMEs is significant since these businesses allow for an increase in the number of jobs, develop competition, and, as a result, improve the quality of goods, creating different price segments. More than 4 million people are employed in this sector in the Republic of Kazakhstan, and their share of GDP is 36.7%. The accelerated contribution of the SME sector to Kazakhstan’s GDP has led to the need to conduct a study in this area. This study analyzes the impact of SME production output on Kazakhstan’s economic growth by considering some macroeconomic variables using the ARDL model. The study’s findings confirm that SME output positively and significantly impacts economic growth. The government of Kazakhstan has been implementing a series of policies and incentive programs to increase the contribution of the SME sector to economic growth since the years of independence. However, SMEs are not able to reach their full potential due to various restrictions that limit their expansion. This study offers some suggestions for the development of the SME sector. In order to ensure SME concentration in the economy, investment in R&D should be a priority incentive. On the other hand, we should recognize the shadow economy problem in the country. Full article

Forecasting stock markets is challenging due to the influence of various internal and external factors compounded by the effects of globalization. This study introduces a data-driven approach to forecast S&P 500 returns by incorporating macroeconomic indicators including gold and oil prices, the volatility index, economic policy uncertainty, the financial stress index, geopolitical risk, and shadow short rate, with ten technical indicators. We propose three hybrid deep learning models that sequentially combine convolutional and recurrent neural networks for improved feature extraction and predictive accuracy. These models include the deep belief network with gated recurrent units, the LeNet architecture with gated recurrent units, and the LeNet architecture combined with highway networks. The results demonstrate that the proposed hybrid models achieve higher forecasting accuracy than the single deep learning models. This outcome is attributed to the complementary strengths of convolutional networks in feature extraction and recurrent networks in pattern recognition. Additionally, an analysis using the Shapley method identifies the volatility index, financial stress index, and economic policy uncertainty as the most significant predictors, underscoring the effectiveness of our data-driven approach. These findings highlight the substantial impact of contemporary uncertainty factors on stock markets, emphasizing their importance in studies analyzing market behaviour. Full article

The integration of ecosystem services (ESs) valuation into agricultural policy frameworks is critical for fostering sustainable land management practices. This study leverages the redesigned version of the bio-economic farm model MODAM (Multi-Objective Decision Support Tool for Agro-Ecosystem Management) to estimate the shadow prices of ESs, enabling the derivation of demand and supply curves for nitrate leaching and soil erosion control, respectively. Two hypothetical farms in Brandenburg, Germany—a smaller, arable farm in Märkisch-Oderland and a larger, diversified farm with livestock in Oder-Spree—are analyzed to explore the heterogeneity in shadow prices and corresponding cropping patterns. The results reveal that larger farms exhibit greater elasticity in response to green taxes on nitrate use and lower costs for supplying erosion control compared to smaller farms. This study highlights the utility of shadow prices as proxies for setting green taxes and payments for ecosystem services (PESs), while emphasizing the need for differentiated policy designs to address disparities between farm types. This research underscores the potential of model-based ESs valuation to provide robust economic measures for policy design, fostering sustainable agricultural practices and ecosystem conservation. Full article

We address the problem of asset pricing in a market where there are no risky assets. Previous work developed a theoretical model for a shadow riskless rate (SRR) for such a market, based on the drift component of the state-price deflator for that asset universe. Assuming that asset prices are modeled by correlated geometric Brownian motion, in this work, we develop a computational approach to estimate the SRR from empirical datasets. The approach employs principal component analysis to model the effects of individual Brownian motions, singular value decomposition to capture abrupt changes in the condition number of the linear system whose solution provides the SRR values, and regularization to control the rate of change of the condition number. Among other uses such as option pricing and developing a term structure of interest rates, the SRR can be used as an investment discriminator between different asset classes. We apply this computational procedure to markets consisting of various groups of stocks, encompassing different asset types and numbers. The theoretical and computational analysis provides the drift as well as the total volatility of the state-price deflator. We investigate the time trajectory of these two descriptive components of the state-price deflator for the empirical datasets. Full article

Shadow rate models of interest rates are based on the assumption that the interest rates are determined by an unobservable shadow rate. This idea dates back to Fischer Black, who understood the interest rate as an option that cannot become negative. Its possible zero values are consequences of negative values of the shadow rate. In recent years, however, the negative interest rates have become a reality. To capture this behavior, shadow rate models need to be adjusted. In this paper, we study Ueno’s model, which uses the Vasicek process for the shadow rate and adjusts its negative values when constructing the short rate. We derive the probability properties of the short rate in this model and apply the maximum likelihood estimation method to obtain the parameters from the real data. The other interest rates are—after a specification of the market price of risk—solutions to a parabolic partial differential equation. We solve the equation numerically and use the long-term rates to fit the market price of risk. Full article

Greek wines excel in quality and exports, but the viticultural sector faces significant challenges from complex supply chains, shifting European policies, and the growing need for sustainability amidst climate change and economic pressures. External environmental costs could affect significantly the decision-making process of farmers, reflecting a broader evaluation of sustainability in viticulture. This study evaluates the economic and environmental impacts of organic, integrated, and conventional viticulture management systems in Drama, Greece using a life cycle (LC) approach and data envelopment analysis (DEA) to determine efficiency, quantify environmental impacts in monetary terms, and incorporate these costs into the analysis. Organic management systems have lower energy consumption and emissions compared to integrated and conventional systems, with organic systems ranging from 4546 to 6573 kWh/ha in energy use and 1358 to 1795 kg CO₂ eq./ha in emissions, while integrated and conventional systems range from 9157 to 12,109 kWh/ha and 2961 to 3661 kg CO₂ eq./ha. The DEA analysis reveals that most organic systems perform efficiently when accounting for environmental costs, whereas conventional systems face significant efficiency declines, with only a few maintaining optimal performance. Policy-supported transitions based on the provider gets principle are crucial for balancing economic and environmental goals in viticulture, as the integration of shadow prices significantly impacts efficiency. Full article

After the 2007 financial crisis, many central banks adopted policies to lower their interest rates; the dynamics of these rates cannot be captured using classical models. Recently, Meucci and Loregian proposed an approach to estimate nonnegative interest rates using the inverse-call transformation. Despite the fact that their work is distinguished from others in the literature by their consideration of practical aspects, some technical difficulties still remain, such as the lack of analytic expression for the zero-coupon bond (ZCB) price. In this work, we propose novel approximate closed-form solutions for the ZCB price in the zero lower bound (ZLB) framework, when the underlying shadow rate is assumed to follow the classical one-factor Vasicek model. Then, a filtering procedure is performed using the Unscented Kalman Filter (UKF) to estimate the unobservable state variable (the shadow rate), and the model calibration is proceeded by estimating the model parameters using the Particle Swarm Optimization (PSO) algorithm. Further, empirical illustrations are given and discussed using (as input data) the interest rates of the AAA-rated bonds compiled by the European Central Bank ranging from 6 September 2004 to 21 June 2012 (a period that concerns the ZLB framework). Our approximate closed-form solution is able to show a good match between the actual and estimated yield-rate values for short and medium time-to-maturity values, whereas, for long time-to-maturity values, it is able to estimate the trend of the yield rates. Full article

The virtual water flow behind product trade provides researchers with ideas to alleviate water problems in China’s coastal areas, with accompanying resource and economic implications. This paper adopts a multi-region input–output model to calculate virtual water flows in coastal areas and analyses resource benefits and economic benefits, by combining the water stress index and shadow price, to measure gains and losses of virtual water flow. This study shows that (1) China’s coastal areas depends on external water supplies; (2) virtual water flows between coastal and inland areas generated 38.26 billion m³ of net scarce water savings and CNY 31,751 billion of net economic benefits, indicating that coastal areas benefited from virtual water flows from both resource and economic perspectives; (3) virtual water flows among coastal provinces and cities caused 11.10 billion m³ of net scarce water losses, but generated CNY 9784 billion of net economic gains, indicating that a further intensification of water stress in coastal areas, but such a virtual water flow pattern was beneficial from an economic perspective. This paper reveals the resource and economic impacts of virtual water flow at the national scale and among coastal provinces and cities and further proposes suggestions for promoting the beneficial flow of virtual water in coastal areas. Full article

To mitigate the problem of global climate change, governments have taken measures to reduce greenhouse gas emissions. Carbon emission trading has gradually attracted attention as a market-oriented option. Power industry panel data from 30 provinces in China were used for an empirical analysis in this study. The super-efficiency Slack-Based Measure (SBM) model was used to calculate the shadow price of carbon trading and the green total factor productivity (GTFP), and the Ordinary Least Squares (OLS) regression model was used to quantitatively analyze the correlation between the shadow price of carbon trading and the GTFP of the power industry. The results showed that the shadow price of carbon trading had a significantly negative impact on the GTFP of the power industry; therefore, it needs to be improved and perfected. Through a further analysis using the heterogeneity test, it was found that there were problems in the current carbon trading price mechanism. In the face of the above problems, we offer suggestions for improvement from the perspectives of the government and companies. This study helps deepen the understanding of carbon trading prices and the GTFP in the power industry, and it provides a reference for formulating more effective carbon trading policies and corporate green management strategies. Full article

We propose a general approximation method for the determination of optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several problems, from optimally tracking benchmarks and hedging the log contract to maximizing utility from terminal wealth. Strategies are also approximated by practically executable, discrete trades. We identify the necessary trade-off between the trading frequency and trade size to ensure satisfactory agreement with the theoretically optimal, continuous strategies of infinite activity. Full article