{"title":"A multiperiod model of an emissions trading system","authors":"Ricarda Rosemann, Jörn Sass","doi":"10.1002/asmb.2867","DOIUrl":"10.1002/asmb.2867","url":null,"abstract":"<p>Emissions trading systems (ETS) constitute a widely used tool to control greenhouse gas emissions and thus are vital to the global efforts to mitigate climate change. As most ETS' are divided into separate phases, this raises the policy question whether emissions allowances can be banked, that is, transferred to subsequent phases for later use. We provide a continuous-time stochastic ETS model in a multiperiod setting that can allow for banking across phases. In particular, we are able to represent the influence of emissions development on the value of banked allowances. We introduce two distinct approaches to the multiperiod model: A basic approach delivers a model that is analytically more tractable and computationally less costly, while our more complex two-dimensional approach entails a more realistic representation of the system. Numerical results show that banking decreases the mean emissions and increases allowance prices; at the same time, it increases the probability of complying with the emissions cap. In combination with the current penalty of the EU ETS at 100 Euro per ton, banking essentially guarantees compliance. We therefore conclude that banking is a crucial policy choice to improve the effectiveness and the reliability of an ETS.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 6","pages":"1498-1543"},"PeriodicalIF":1.3,"publicationDate":"2024-06-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/asmb.2867","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141353693","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Giovanna Apicella, Enrico De Giorgi, Emilia Di Lorenzo, Marilena Sibillo
{"title":"Gender-inclusive financial and demographic literacy: Monetizing the gender mortality gap","authors":"Giovanna Apicella, Enrico De Giorgi, Emilia Di Lorenzo, Marilena Sibillo","doi":"10.1002/asmb.2876","DOIUrl":"10.1002/asmb.2876","url":null,"abstract":"<p>Longevity crucially affects demand for pensions, insurance products and annuities. Consistent empirical evidence shows that women have historically experienced lower mortality rates than men. In this article, we study a measure of the gender gap in mortality rates, we call “Gender Gap Ratio”, across a wide range of ages and for four countries: France, Italy, Sweden, and USA. We show the stylized facts that characterize the trend of the Gender Gap Ratio, both in its historical evolution and future projection. Focusing on an example temporary life annuity contract, we give a monetary consistency to the Gender Gap Ratio. We show evidence that a Gender Gap Ratio that ranges between 1.5 and 2.5, depending on age, translates into a significant reduction of up to 23% in the benefits from a temporary life annuity contract for women with respect to men, against the same amount invested in the life annuity. The empirical evidence discussed in this article documents the crucial importance of working toward a more widespread demographic literacy, for example, a range of tools and strategies to raise longevity consciousness among individuals and policy-makers, in the framework of gender equality policies.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 4","pages":"1082-1104"},"PeriodicalIF":1.3,"publicationDate":"2024-06-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/asmb.2876","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141363719","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Allan Jonathan da Silva, Jack Baczynski, José V. M. Vicente
{"title":"Efficient pricing of path-dependent interest rate derivatives","authors":"Allan Jonathan da Silva, Jack Baczynski, José V. M. Vicente","doi":"10.1002/asmb.2877","DOIUrl":"10.1002/asmb.2877","url":null,"abstract":"<p>Interest rate derivative pricing is a critical aspect of fixed-income markets, where efficient methods are essential. This study introduces a novel approach to pricing path-dependent interest rate derivatives within a broad class of affine jumps. The study's particular setting is the Fourier-cosine series (COS) method adaptation, which offers an accurate and computationally efficient method for pricing interest rate derivatives. The Fourier-cosine series approach can be used to compute probability density functions and option pricing with a linear computing complexity and exponential convergence rate. The lack of a quick and precise pricing technique for Asian interest rate options in diverse fixed-income market scenarios is a research gap that is being addressed. This approach closes this gap by providing quasi-closed and closed-form equations for a range of density and characteristic functions, resulting in precise pricing. The results demonstrate the versatility of the COS method in interest rate markets. Similar to what has been previously reported for stock options, the numerical findings demonstrate the extreme precision and computing speed of the pricing and hedging estimations provided here. This method is an innovative approach to interest rate derivative pricing, offering researchers and practitioners a powerful tool for efficiently calculating prices and calibrating options across strikes and maturities.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 4","pages":"1105-1124"},"PeriodicalIF":1.3,"publicationDate":"2024-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141191884","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"On optimal allocation of redundancies in random weighted \u0000 \u0000 \u0000 k\u0000 \u0000 $$ k $$\u0000 -out-of-\u0000 \u0000 \u0000 n\u0000 \u0000 $$ n $$\u0000 systems","authors":"Tanmay Sahoo, Nil Kamal Hazra","doi":"10.1002/asmb.2875","DOIUrl":"10.1002/asmb.2875","url":null,"abstract":"<p>Random weighted <span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>k</mi>\u0000 </mrow>\u0000 <annotation>$$ k $$</annotation>\u0000 </semantics></math>-out-of-<span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>n</mi>\u0000 </mrow>\u0000 <annotation>$$ n $$</annotation>\u0000 </semantics></math> systems are very useful in modeling the lifetimes of systems, wherein the success or failure of a system depends not only on its current operational status, but also on the contributions made by its components. In this paper, we consider random weighted <span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>k</mi>\u0000 </mrow>\u0000 <annotation>$$ k $$</annotation>\u0000 </semantics></math>-out-of-<span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>n</mi>\u0000 </mrow>\u0000 <annotation>$$ n $$</annotation>\u0000 </semantics></math> systems with redundant components drawn randomly from a mixed population consisting of <span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>m</mi>\u0000 </mrow>\u0000 <annotation>$$ m $$</annotation>\u0000 </semantics></math> different subpopulations/substocks. We study different optimal allocation policies of active redundancies and minimal repair components in a random weighted <span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>k</mi>\u0000 </mrow>\u0000 <annotation>$$ k $$</annotation>\u0000 </semantics></math>-out-of-<span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>n</mi>\u0000 </mrow>\u0000 <annotation>$$ n $$</annotation>\u0000 </semantics></math> system. Moreover, we investigate how the heterogeneity of subpopulations of items impacts the lifetime of a random weighted <span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>k</mi>\u0000 </mrow>\u0000 <annotation>$$ k $$</annotation>\u0000 </semantics></math>-out-of-<span></span><math>\u0000 <semantics>\u0000 <mrow>\u0000 <mi>n</mi>\u0000 </mrow>\u0000 <annotation>$$ n $$</annotation>\u0000 </semantics></math> system. We also present some simulational results and a real data analysis for illustrative purpose.</p>","PeriodicalId":55495,"journal":{"name":"Applied Stochastic Models in Business and Industry","volume":"40 5","pages":"1245-1274"},"PeriodicalIF":1.3,"publicationDate":"2024-05-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141191883","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}