nep-cmp New Economics Papers
on Computational Economics
Issue of 2012‒09‒22
fourteen papers chosen by
Stan Miles
Thompson Rivers University

  1. Integration von Nachhaltigkeitsfaktoren bei der Bestimmung kostenoptimaler Bestellzyklen in der Sustainable Supply Chain By Jürgen Wicht
  2. The Impact of Population Ageing on the Labour Market: Evidence from Overlapping Generations Computable General Equilibrium (OLG-CGE) Model of Scotland (*) By Katerina Lisenkova; Marcel Merette; Robert Wright
  3. The 2012 Power Trading Agent Competition By Ketter, W.; Collins, J.; Reddy, P.; Weerdt, M.M. de
  5. Payment System Design and Participant Operational Disruptions By Ashwin Clarke; Jennifer Hancock
  6. Estimating Dynamic Equilibrium Models with Stochastic Volatility By Jesus Fernandez-Villaverde; Pablo A. Guerrón-Quintana; Juan Rubio-Ramírez
  7. Theory and Practice in Business Intelligence By Muntean, Mihaela
  8. Looking Inward for Growth By Rod Tyers
  9. Numerical Valuation of Bermudan and Path-Dependent Interest Rate Derivatives via PDE Expansions By Christoph Reisinger; Rasmus Wissmann
  10. An assessment of bioeconomic modeling of pest resistance with new insights into dynamic refuge fields By Desquilbet, Marion; Hermann, Markus
  11. Notes on Computational Complexity of GE Inequalities By Donald Brown
  12. Investitionsbewertung unter Berücksichtigung von Umweltschutz als eigenständigem Formalziel By Stefan Stahl
  13. Quantitative investment strategies and portfolio management. By Guo, J.
  14. The Effects of the Length of the Period of Commitment on the Size of Stable International Environmental Agreements By Nkuiya, Bruno

  1. By: Jürgen Wicht (Schumpeter School of Business and Economics)
    Abstract: Simulations can be an appropriate tool in the determination of cost-optimal ordering and delivery requirements considering medium and long-term manipulable constraints. Against the background of sustainable supply chain management increasingly relevant environmental factors can be taken into account within such simulations by determining process-related CO2-costs and including these costs into the validation of individual simulation results. This is demonstrated by using the replenishment process between the distribution center and a store of an international drug store chain. Based on actual sales data, logistical product data and given restrictions on date and frequency of possible orders and deliveries different order cycles are simulated, subsequently evaluated and analyzed in terms of costs.
    Keywords: Carbon Footprint, Logistics Costs, Order Cycle, Replenishment, Simulation, Sustainable Supply Chain Management
    JEL: C6 L1 L8
    Date: 2012–09
  2. By: Katerina Lisenkova (National Institute of Economic and Social Research); Marcel Merette (University of Ottawa); Robert Wright (Department of Economics, University of Strathclyde)
    Abstract: This paper presents a dynamic Overlapping Generations Computable General Equilibrium (OLG-CGE) model of Scotland. The model is used to examine the impact of population ageing on the labour market. More specifically, it is used to evaluate the effects of labour force decline and labour force ageing on key macro-economic variables. The second effect is assumed to operate through age-specific productivity and labour force participation. In the analysis, particular attention is paid to how population ageing impinges on the government expenditure constraint. The basic structure of the model follows in the Auerbach and Kotlikoff tradition. However, the model takes into consideration directly age-specific mortality. This is analogous to “building in†a cohort-component population projection structure to the model, which allows more complex and more realistic demographic scenarios to be considered.
    Keywords: CGE modelling, population ageing, Scotland
    JEL: J11
    Date: 2012–09
  3. By: Ketter, W.; Collins, J.; Reddy, P.; Weerdt, M.M. de
    Abstract: This is the specification for the Power Trading Agent Competition for 2012 (Power TAC 2012). Power TAC is a competitive simulation that models a “liberalized†retail electrical energy market, where competing business entities or “brokers†offer energy services to customers through tariff contracts, and must then serve those customers by trading in a wholesale market. Brokers are challenged to maximize their profits by buying and selling energy in the wholesale and retail markets, subject to fixed costs and constraints. Costs include fees for publication and withdrawal of tariffs, and distribution fees for transporting energy to their contracted customers. Costs are also incurred whenever there is an imbalance between a broker’s total contracted energy supply and demand within a given time slot.The simulation environment models a wholesale market, a regulated distribution utility,and a population of energy customers, situated in a real location on Earth during a specific period for which weather data is available. The wholesale market is a relatively simple call market, similar to many existing wholesale electric power markets, such as Nord Pool in Scandinavia or FERC markets in North America, but unlike the FERC markets we are modeling a single region, and therefore we do not model location-marginal pricing. Customer models include households and a variety of commercial and industrial entities, many of which have production capacity (such as solar panels or wind turbines) as well as electric vehicles. All have “real-time†metering to support allocation of their hourly supply and demand to their subscribed brokers, and all are approximate utility maximizers with respect to tariff selection, although the factors making up their utility functions may include aversion to change and complexity that can retard uptake of marginally better tariff offers. The distribution utility models the regulated natural monopoly that owns the regional distribution network, and is responsible for maintenance of its infrastructure and for real-time balancing of supply and demand. The balancing process is a market-based mechanism that uses economic incentives to encourage brokers to achieve balance within their portfolios of tariff subscribers and wholesale market positions, in the face of stochastic customer behaviors and weather-dependent renewable energy sources. The broker with the highest bank balance at the end of the simulation wins.
    Keywords: power;portfolio management;sustainability;preferences;energy;trading agent competition;autonomous agents;policy guidance;electronic commerce
    Date: 2012–09–10
  4. By: Stepanenko-Lypovyk, Bohdana
    Abstract: The results of simulation modeling of impact of green business financial mechanism elements on economic, social and ecologic development of Ukraine are presented in the article. Also the elements that most contribute to the establishment of green business and sustainable development are highlighted.
    Keywords: Sustainable development; green business; financial mechanism; simulation model
    JEL: C32 C23
    Date: 2012–02
  5. By: Ashwin Clarke (Reserve Bank of Australia); Jennifer Hancock (Reserve Bank of Australia)
    Abstract: Real-time gross settlement (RTGS) systems often incorporate features designed to economise on liquidity. Such 'hybrid features' have the potential to mitigate the systemic impact of operational disruptions of participants. This paper simulates operational disruptions of participants, using data from Australia's RTGS system – the Reserve Bank Information and Transfer System (RITS) – to analyse the effect of these hybrid features on the systemic impact of such disruptions. The results suggest that the bilateral-offset algorithm and sub-limit feature in RITS generally mitigate the impact of a participant's operational disruption, even if there is less liquidity committed to the RTGS system. The hybrid features of the Australian RTGS system also mean that the size of the participant with the operational disruption has less effect on the systemic impact of that disruption than otherwise. While a central queue, in and of itself, would tend to mitigate the impact of a participant's operational disruption, methodological issues make it difficult to draw any conclusions regarding this hybrid feature in this paper.
    Keywords: large-value payment system; operational disruption; liquidity; simulation
    JEL: E42 E58 G21
    Date: 2012–09
  6. By: Jesus Fernandez-Villaverde; Pablo A. Guerrón-Quintana; Juan Rubio-Ramírez
    Abstract: We propose a novel method to estimate dynamic equilibrium models with stochastic volatility. First, we characterize the properties of the solution to this class of models. Second, we take advantage of the results about the structure of the solution to build a sequential Monte Carlo algorithm to evaluate the likelihood function of the model. The approach, which exploits the profusion of shocks in stochastic volatility models, is versatile and computationally tractable even in large-scale models, such as those often employed by policy-making institutions. As an application, we use our algorithm and Bayesian methods to estimate a business cycle model of the U.S. economy with both stochastic volatility and parameter drifting in monetary policy. Our application shows the importance of stochastic volatility in accounting for the dynamics of the data.
    JEL: C1 E30
    Date: 2012–09
  7. By: Muntean, Mihaela
    Abstract: The debate is developed based on the following considerations: 1 - Business Intelligence (BI) is unanimous considered the art of gaining business advantage from data; therefore BI systems and infrastructures must integrate disparate data sources into a single coherent framework for real-time reporting and detailed analysis within the extended enterprise; 2 - Business Intelligence can be described as a value proposition that helps organizations in their decision-making processes; 3 – the Business Intelligence Value Chain represents a „From DATA To PROFIT“ approach and is recommended to ground any performance management program. Different aspects, including theoretical considerations and practice examples, regarding location intelligence, mobile BI, cloud-based BI, social BI and collaborative Business Intelligence will be treated, pointing out some of the author’s contributions. Nowadays, organizations have adopted more prudent policies requiring a financial justification for nearly every IT initiative, including Business Intelligence system implementations. A business-driven methodology is recommended in any BI project management approach, project scoping and planning being vital for the project success. A business-driven approach of a BI project implementation starts with a feasibility study. The decision-making process for large projects is very complicated, and will not be subject of this paper. Having in mind a middle-sized BI project, a feasibility study based on the Monte Carlo simulation method will be conducted.
    Keywords: Business Intelligence (BI); BI value chain; BI project; Location Intelligence; Social BI; Mobile BI; Cloud BI; Collaborative BI
    JEL: M10 L86
    Date: 2012–08–05
  8. By: Rod Tyers (Business School, University of Western Australia)
    Abstract: Export led growth has been very effective in transforming China’s economy and establishing a large high-saving middle class. Notwithstanding political opposition from trading partners, this growth strategy has also offered the rest of the world an improved terms of trade and cheaper finance. Yet it is believed by China’s government that this convenient strategy has run its course and the transition has begun to a model that “looks inward” for growth, to be driven by expanding consumption and home investment. This paper uses a numerical model of the Chinese economy with oligopoly behaviour to examine the available “inward” sources of transformative growth along with the policies needed to exploit them. Success will require the redistribution of the considerable rents now accruing to connections of key state owned enterprises, suggesting the potential for political resistance and the yet-avoidable possibility that China could fall into a “middle incometrap”.
    Date: 2012
  9. By: Christoph Reisinger; Rasmus Wissmann
    Abstract: In this article, we propose a new numerical approach to high-dimensional partial differential equations (PDEs) arising in the valuation of exotic derivatives on the LIBOR curve. The proposed method is adapted from Reisinger and Wittum (2007) and uses principal component analysis (PCA) of the underlying process in combination with a Taylor expansion of the value function into solutions to low-dimensional PDEs. The approximation is related to anchored analysis of variance (ANOVA) decompositions and is expected to be accurate whenever the covariance matrix has one or few dominating eigenvalues. A main purpose of the present article is to give a careful analysis of the numerical accuracy and computational complexity compared to state-of-the-art Monte Carlo methods on the example of Bermudan swaptions and Ratchet floors, which are considered difficult benchmark problems. We are able to demonstrate that for problems with medium to high dimensionality and moderate time horizons the presented PDE method delivers results comparable in accuracy to the MC methods considered here in similar or (often significantly) faster runtime.
    Date: 2012–09
  10. By: Desquilbet, Marion (TSE (INRA,GREMAQ)); Hermann, Markus (Department of Economics University Laval and CREATE, CIRPEE)
    Abstract: We examine the optimal time-variant refuge policy to manage pest resistance to Bt crops in afinite-horizon discrete-time model. We identify analytically the intertemporal effects of refuge fields on the pest population and its susceptibility. The shape of the optimal refuge policy and whether or not pest susceptibility should be exhausted completely at the end of the time horizon depend crucially on the values of a cost premium of Bt seeds and the fitness cost of resistance (over-mortality of resistant pests) and are addressed via numerical simulations. We demonstrate the importance of modeling the dynamics of the biological system accurately, of defining a diploid (and not haploid) biological model, and of using a discrete-time (rather than continuous-time) framework.
    Keywords: Bt crop, optimal control, (non-)renewable resource, pest resistance management, refuge policy.
    Date: 2012–09
  11. By: Donald Brown
    Date: 2012
  12. By: Stefan Stahl (University of Rostock)
    Abstract: As a consequence of rising demand for ethical investments, companies face the challenge to include environmental protection objectives in investment appraisal besides their monetary goals. Existing approaches of investment valuation that take into account environmental protection combine traditional investment appraisal methods for the monetary terms with utility value analysis for the non-monetary terms, or comprise the monetization of environmental variables. Both approaches have shortcomings. As an alternative to the existing approaches, this paper develops an investment evaluation model that simultaneously takes into account the environmental and monetary goals. From the perspective of investors, requirements for such a model are transparency of the investment decision and the possibility of weighting financial and environmental goals. From the perspective of company decision-makers, the main requirements are a low complexity, solvability and a manageable information demand. These requirements are fulfilled by extending an investment valuation model by elements of fuzzy linear programming.
    Keywords: Investment theory, environmental protection, ethical investment, linear programming, fuzzy linear programming
    JEL: G31 M14 C61 Q56
    Date: 2012
  13. By: Guo, J. (Tilburg University)
    Abstract: Abstract: This book contains three essays on alternative investments and portfolio management. Taking from a portfolio investor’s perspective, the first essay analyzes the portfolio implication of investing in hedge funds when there is a hedge fund lockup period. The second essay studies the investment preference by fund of hedge funds managers. The analysis suggests that single-strategy hedge funds enter into the portfolio of funds of funds in a non-random way. Finally, the last essay shows that the equity market momentum is a significant variable in predicting optimal asset allocations and therefore adds value to the active portfolio management. However, an investor may not benefit from the delegated portfolio management, even though the active portfolio management generates a high information ratio.
    Date: 2012
  14. By: Nkuiya, Bruno
    Abstract: This paper extends the standard model of self-enforcing dynamc international environmental agreements by allowing the length of the period of commitment of such agreements to vary as a parameter. It analyzes the pattern of behavior of the size of stable coalitions, the stock of pollution, and the emission rate as a function of the length of the period of commitment. It is shown that the length of the period of commitment can have very significant effects on the equilibrium. We show numerically that at the initial date, as the length of commitment is increased, the potential gain from cooperation tends to diminish, increasing the disincentive to ratify the agreements. This suggests that considerable attention should be given to the determination of the length of such international agreements.
    Keywords: International environmental agreements, global pollution, stock pollution, dynamc games, Environmental Economics and Policy, Q5, C73, F53,
    Date: 2012–08

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