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on Computational Economics |
|
Issue of 2012‒05‒08
fourteen papers chosen by |
| By: | Verche Cvetanoska; Toni Stojanovski |
| Abstract: | High performance computing (HPC) is a very attractive and relatively new area of research, which gives promising results in many applications. In this paper HPC is used for pricing of American options. Although the American options are very significant in computational finance; their valuation is very challenging, especially when the Monte Carlo simulation techniques are used. For getting the most accurate price for these types of options we use Quasi Monte Carlo simulation, which gives the best convergence. Furthermore, this algorithm is implemented on both GPU and CPU. Additionally, the CUDA architecture is used for harnessing the power and the capability of the GPU for executing the algorithm in parallel which is later compared with the serial implementation on the CPU. In conclusion this paper gives the reasons and the advantages of applying HPC in computational finance. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1205.0106&r=cmp |
| By: | Richard W. Evans (Department of Economics, Brigham Young University); Kerk L. Phillips (Department of Economics, Brigham Young University) |
| Abstract: | In 2008, the Utah Retirement System experienced a negative return of almost 25 percent on its portfolio. This resulted in an underfunding of the pension system. In 2010 the Utah legislature reformed state pension participation, placing all new employees hired after mid-2011 in a new hybrid pension system. Employees hired prior to July 2011 continue to participate in the previous defined benefits program. This paper models and simulates the effects of Utah's pension reform on the balance in the defined benefits fund. In our baseline simulations, we find that the recent reform has extended fund solvency, but not eliminated the threat. Our simulations show that there is at least a ten percent chance of pension fund insolvency sometime in the next two decades. |
| Keywords: | Pension reform, Numerical simulation, Simulation modeling, State pensions, Utah |
| JEL: | C63 C68 E37 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:byu:byumcl:201201&r=cmp |
| By: | Andrew Macintosh; Lauren Waugh |
| Abstract: | Carbon-based border tax adjustments (BTAs) have recently been proposed by some OECD countries to level the carbon playing field and target major emerging economies. This paper applies a multi-sector dynamic computable general equilibrium (CGE) model to estimate the impacts of the BTAs implemented by US and EU on ChinaÕs sectoral carbon emissions. The results indicate that BTAs will cut down export prices and transmit the effects to the whole economy, reducing sectoral output-demands from both supply side and demand side. On the supply side, sectors might substitute away from exporting toward domestic market, increasing sectoral supply; while on the demand side, the domestic income may be strikingly cut down due to the decrease in export price, decreasing sectoral demand. Furthermore, such shrinkage of demand may similarly reduce energy prices, which leads to energy substitution effect and somewhat stimulates carbon emissions. Depending on the relative strength of the output-demand effect and energy substitution effect, sectoral carbon emissions and energy demands will vary across sectors, with increasing, decreasing or moving in a different direction. These results suggest that an incentive mechanism to encourage the widespread use of environment-friendly fuels and technologies will be more effective. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:ccepwp:1203&r=cmp |
| By: | Ana Corina Miller (IIIS and Department of Economics, Trinity College Dublin); Alan Matthews (IIIS and Department of Economics, Trinity College Dublin); Trevor Donnellan (Rural Economy Research Centre, Teagasc); Cathal O'Donoghue (Rural Economy Research Centre, Teagasc) |
| Abstract: | This paper describes the construction of a social accounting matrix with disaggregated agricultural and food industry sectors for Ireland for the purpose of agri-food policy simulations. The base year for the AgriFood–SAM is 2005 and it draws on a recently constructed 2005 SAM for Ireland (Miller et al., 2011). Its unique features include a high level of disaggregation of the agricultural and food industry sectors as well as the integration of individual household data for the purposes of micro-simulation analysis. The AgriFood–SAM documented here can be used as a tool to analyse the intersectoral linkages between the agri-food sectors and the Irish economy. Multiplier effects for exogenous changes in final demand for different agri-food activities are presented. This paper also presents the economic impact of reducing GHG emissions from the agricultural sectors by 20%, using a SAM multiplier analysis. The linear SAM model is based on the Leontief model, but as it incorporates income generation and distribution as well as the production side, it captures the complete circular flow of the economy. The results suggest that a 20% reduction in GHG emission by 2020 will have a contractionary effect in the whole economy. This policy will reduce the total gross output in the economy by more than half a billion euro and have an indirect effect on the household by reducing its total income with more than €200 million. In interpreting the results form a multiplier analysis we should be careful as the model assumes fixed proportion production functions, fixed prices and free availability of resources. In other words if cattle output reduces by 12.6% in 2020 then the level of inputs used in by this sectors is assumed to be reduced by same percentage. Similarly employment and income are assumed to be reduced in the same proportions. Also, multipliers are based on the state of technology within a sector at a point in time. Hence, multipliers may change in different sectors over time as technology changes. |
| Keywords: | social accounting matrix, input-output table, agriculture, multiplier analysis, Ireland |
| JEL: | C67 D57 Q12 Q18 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:iis:dispap:iiisdp372&r=cmp |
| By: | Richard W. Evans (Department of Economics, Brigham Young University); Kerk L. Phillips (Department of Economics, Brigham Young University) |
| Abstract: | The overlapping generations (OLG) model is an important framework for analyzing any type of question in which age cohorts are affected differently by exogenous shocks. However, as the dimensions and degree of heterogeneity in these models increase, the computational burden imposed by rational expectations solution methods for nonstationary equilibrium transition paths increases exponentially. As a result, these models have been limited in the scope of their use to a restricted set of applications and a relatively small group of researchers. In addition to providing a detailed description of the benchmark rational expectations computational method, this paper presents an alternative method for solving for equilibrium transition paths in OLG life cycle models that is new to this class of model. The key insight is that even naive limited information forecasts within the model produce aggregate time series similar to full information rational expectations time series as long as the naive forecasts are updated each period. We find that our alternate model forecast method reduces computation time by 85 percent, and the approximation error is small. |
| Keywords: | Computable General Equilibrium Models, Heterogeneous Agents, Overlapping Generations Model, Distribution of Savings |
| JEL: | C63 C68 D31 D91 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:byu:byumcl:201204&r=cmp |
| By: | Inge Mayeres; Alex Van Steenbergen; Marie Vandresse |
| Abstract: | This paper seeks to extend the PLANET model to allow for an endogenous influence of transport sector outcomes on the economy. To this end, we embed the PLANET data on freight and household transport for 2003 into a static CGE model of the Belgian economy. Households use transport for commuting and leisure transport, while production sectors use freight as an input. We allow for important feedback effects on generalized transport costs through congestion. To illustrate the model, we contrast the effects of a kilometre charge on freight only and a charge that targets household transport as well. |
| JEL: | C68 D58 D62 R41 |
| Date: | 2011–08–25 |
| URL: | http://d.repec.org/n?u=RePEc:fpb:wpaper:1112&r=cmp |
| By: | Matt P. Dziubinski (Aarhus University and CREATES); Stefano Grassi (Aarhus University and CREATES) |
| Abstract: | This paper shows the potential of heterogeneous computing in solving dynamic equilibrium models in economics. We illustrate the power and simplicity of the C++ Accelerated Massive Parallelism recently introduced by Microsoft. Starting from the same exercise as Aldrich et al. (2011) we document a speed gain together with a simplified programming style that naturally enables parallelization. |
| Keywords: | Code optimization, CUDA, C++, C++ AMP, Data parallelism, DSGE models, Econometrics, Heterogeneous computing, Highperformance computing, Parallel computing. |
| JEL: | C88 |
| Date: | 2012–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:aah:create:2012-15&r=cmp |
| By: | Sund, Björn (Dept. of Economics) |
| Abstract: | We explored how different response times from out-of-hospital cardiac arrest (OHCA) to defibrillation in the County of Stockholm, Sweden, affect patients’ survival rates. This was done by combining a geographic information systems (GIS) simulation of driving times with register data on survival rates. The emergency resources comprised ambulance alone and ambulance plus fire services. The simulation model predicted a baseline survival rate of 3.9 percent, and reducing the ambulance response time by one minute increased survival to 4.6 percent. Adding the fire services as first responders (dual dispatch) increased survival to 6.2 percent from the baseline level. The model predictions were vali-dated using empirical data. |
| Keywords: | out-of-hospital cardiac arrest; defibrillation; response time; survival rate; geographic information systems; fire services |
| JEL: | D61 H43 I10 |
| Date: | 2012–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:kaunek:0004&r=cmp |
| By: | Poudel, Diwakar (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Sandal, Leif K. (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Kvamsdal, Sturla F. (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration) |
| Abstract: | In commercial fisheries, stock collapse is an intrinsic problem caused by overexploitation or due to pure stochasticity. To analyze the risk of stock collapse, we apply a relatively simple Monte Carlo approach which can capture complex stock dynamics. We use an economic model with downward sloping demand and stock dependent costs. First, we derive an optimal exploitation policy as a feedback control rule and analyze the effects of stochasticity. We observe that the stochastic solution is more conservative compared to the deterministic solution at low level of stochasticity. For moderate level of stochasticity, a more myopic exploitation is optimal at small stock and conservative at large stock level. For relatively high stochasticity, one should be myopic in exploitation. Then, we simulate the system forward in time with the optimal solution. In simulated paths, some stock recovered while others collapsed. From the simulation approach, we estimate the probability of stock collapse and characterize the long term stable region. |
| Keywords: | Stochasticity; Ensemble Kalman filter; Stock Collapse; Probability |
| JEL: | C61 Q22 Q57 |
| Date: | 2012–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2012_004&r=cmp |
| By: | M. Martin Boyer; Lars Peter Stentoft |
| Abstract: | This paper proposes a unified framework for measuring and managing longevity risk. Specifically, we develop a flexible framework for valuing survivor derivatives like forwards, swaps, as well as options both of European and American style. Our framework is essentially independent of the assumed underlying dynamics and the choice of method for risk neutralization and relies only on the ability to simulate from the risk neutral process. We provide an application to derivatives on the survivor index when the underlying dynamics are from a Lee-Carter model. Our results show that taking the optionality into consideration is important from a pricing perspective. <P> |
| Keywords: | Least squares Monte Carlo, Longevity risk, Reinsurance, Simulation., |
| JEL: | H2 O2 C1 D2 |
| Date: | 2012–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2012s-08&r=cmp |
| By: | Sadeck Melhem; Mahmoud Melhem |
| Abstract: | This paper is a comment on “Re-examining the source of Heteroskedasticity: The paradigm of noisy chaotic models” by kyrtsou. We summarize their results and discuss some of their conclusion. Simulation was investigated to clarify the functionality of the high dimensional dynamical system and its role in generating process. |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:12-13&r=cmp |
| By: | Alfredo Martín-Oliver (Universitat de les Illes Balears); Sonia Ruano (Banco de España); Vicente Salas-Fumás (Universidad de Zaragoza) |
| Abstract: | We examine the consequences of imposing higher capital requirements on banks (as under Basel III or, recently, in the case of large banks in the European context) for bank dynamics in complying with the new standards and for the long-term effects on bank lending rates and the demand for bank credit. The analysis combines econometric estimations of the determinants of equity capital ratios and lending rates with simulations of market equilibrium results for loan interest rates and the demand for bank credit, based on a parameterised model of the Spanish banking industry. We find that the gap between the target and the actual capital ratio is reduced by around 40% every year, mainly with retained earnings. We also find that raising the equity capital ratio by one percentage point increases bank lending rates by 4.2 basis points. Finally, the simulation exercise shows that the estimated increase in the cost of funds for banks associated with a one percentage point increase in the equity capital ratio leads to a fall of 0.8% in the total demand for bank credit. These results suggest that the social costs of higher equity capital requirements for banks are expected to be greater in the transition period, when banks are adjusting to the new standards, than in the steady state of the new industry equilibrium, when all banks comply with the new ratio |
| Keywords: | Bank capital regulation, Basel III, bank lending rates, demand for credit |
| JEL: | D24 G21 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1218&r=cmp |
| By: | Eager,D.; Hobbs, B.; Bialek, J. |
| Abstract: | Many governments who preside over liberalised energy markets are developing policies aimed at promoting investment in renewable generation whilst maintaining the level of security of supply customers have come to expect. Of particular interest is the mix and amount of generation investment over time in response to policies promoting high penetrations of variable output renewable power such as wind. Modelling the dynamics of merchant generation investment in market environments can inform the debate. Such models need improved methods to calculate expected output, costs and revenue of thermal generation subject to varying load and random independent thermal outages in a power system with high penetrations of wind. This paper presents a dynamic simulation model of the aggregated Great Britain (GB) generation investment market. The short-term energy market is simulated using probabilistic production costing based on the Mix of Normals distribution technique with a residual load calculation (load net of wind output). Price mark-ups due to market power are accounted for. These models are embedded in a dynamic model in which generation companies use a Value at Risk (VaR) criterion for investment decisions. An `energy-only' market setting is used to estimate the economic profitability of investments and forecast the evolution of security of supply. Simulated results for the GB market case study show a pattern of increased relative security of supply risk during the 2020s. In addition, fixed cost recovery for many new investments can only occur during years in which more frequent supply shortages push energy prices higher. A sensitivity analyses on a number of key model assumptions provides insight into factors affecting the simulated timing and level of generation investment. This is achieved by considering the relative change in simulated levels of security of supply risk metric such as de-rated capacity margins and expected energy unserved. The model can be used as a decision support tool in policy design, in particular how to address the increased `energy-only market revenue risk facing thermal generation, particularly peaking units, that rely on a small number of high price periods to recover fixed costs and make adequate returns on investment. |
| Keywords: | Power generation economics, Mix of Normals distribution, Thermal power generation, Wind power generation. |
| JEL: | O13 P4 Q4 |
| Date: | 2012–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1217&r=cmp |
| By: | Migheli, Matteo; Ortona, Guido; Ponzano, Ferruccio |
| Abstract: | According to commonsense wisdom, under proportionality a small centrist party enjoys an excess of power with reference to its share of seats (or votes) due to the possibility of blackmailing the larger ones. This hypothesis has been challenged on a theoretical ground, with some empirical support. In this paper we use simulation to test its validity. Our results strongly provide evidence that the hypothesis is actually wrong. What occurs is a transfer of power from the peryphery of the political spectrum towards the center, buth the major gainers are the large centrist parties and not the small ones. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:uca:ucapdv:167&r=cmp |