Valuation error and valuation index smoothing have been the subject of a great deal of recent research efforts, largely due to concerns over the quality of investment decisions that can be made using valuation-based data. To date, unsmoothing models have assumed that the variances in valuation noise and market noise are at a constant ratio, producing a constant unsmoothing parameter. This paper...

As the energy markets continue to evolve, valuation of energy-linked assets has been one of the focal topics of recent finance research. One of the most popular choices for describing asset movements is a class of the so-called ”convenience yield models”. Such models introduce a new unobserved quantity related to physical ownership of the asset. In turn, convenience yield models can be broadly ...

return and volatility spillovers are important for portfolio selection, asset valuation and market efficiency investigation. using a var-bekk framework model, this paper investigates return and volatility spillover effects between three size-sorted equity indices in tehran stock exchange (tse). although daily return of large stocks leads small stocks (lead-lag effect), there wasn’t any spillove...

Volatility is a key parameter used in many financial applications, from derivatives valuation to asset management and risk management. Volatility measures the size of the errors made in modeling returns and other financial variables. It was discovered that, for vast classes of models, the average size of volatility is not constant but changes with time and is predictable. Autoregressive conditi...

This paper presents and applies a methodology for valuing electricity derivatives by constructing replicating portfolios from electricity futures and the risk free asset. Futures based replication is argued to be made necessary by the non-storable nature of electricity, which rules out the traditional spot market, storage-based method of valuing commodity derivatives. Using the futures based ap...

This paper discusses a fundamental market failure regarding environmental conservation, and how the problem can be solved by appropriate policies. A "seller" (or owner of a tropical forest) may be motivated to conserve if a "buyer" is expected to pay. The buyer, however, does not find it necessary to pay as long as the seller conserves in any case. This contradiction implies that the forest wil...

consumers’ willingness to pay for nonmarket commodities such as wildlife, quality of the environment and forest services (including timber production, water conservation, soil conservation, oxygen supply, carbon sequestration, recreation services and wildlife preservation) is a measure of value of these resources. in recent years the contingent valuation has been used to determine this and othe...

We introduce the concept of a rational valuation system which encompasses both the Net Present Value (NPV) methodology and martingale based methods used in connection with discrete time Real Options Analysis (ROA). This way we show that the valuation process can be looked at in separation from a specific valuation technique. We also show that flexibility and adaptability — usually presented as ...