Economics - Research Publications
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ItemEmissions variability in tradable permit markets with imperfect enforcement and banking( 2004-09)Unexpected variation in emissions can have a substantial impact on the prices and efficiency oftradable emission permit markets. In this paper we report results from a laboratory experiment inwhich subjects participate in an emissions trading market in the presence of emissionsuncertainty. Subjects face exogenous, random positive or negative shocks to their emission levelsafter they make production and emission control plans. In some sessions we allow subjects tobank their unused permits for future use. In all sessions, subjects can trade in a reconciliationperiod to buy or sell extra permits following the shock realization. Subjects then report theiremissions to the regulatory authority and they are placed in different inspection groupsdepending on their compliance history. The design of our experiment allows us to identifyimportant interactions between emission shocks, banking, compliance and enforcement. We findthat the relationship between emission shocks and price changes is significantly stronger withoutbanking, so banking helps smooth out the price variability arising from the imperfect control ofemissions. This greater price stability comes at a cost, however, since noncompliance andemissions are significantly greater when banking is allowed.
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ItemInvestment decisions and emissions reductions: results from experiments in emissions trading( 2005-07)Emissions trading is an important regulatory tool in environmental policy making.Unfortunately the effectiveness of these regulations is difficult to measure in the field due to theunavailability of appropriate data. In contrast, experiments in the laboratory can provideguidance to regulators and legislatures about the performance of different market features inemission trading programs. This paper reports on the implementation of three differentinstitutional designs, and presents experimental results investigating important features ofemissions trading regimes: the ability to make investments in emissions abatement, ability tobank allowances and a declining emissions cap, both with and without uncertainty. Thesefeatures are observed in virtually all existing air pollution emissions trading programs currentlyin place and will almost certainly be part of future applications. Like previous experimentalstudies of emissions trading, this paper shows that the efficiency gains expected from economictheory emerge observationally. We also show reduced efficiency when permits are bankable dueto over-banking and when investments in emissions abatement are possible due to overinvesting.These tendencies do not worsen, however, when emissions caps decline.
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ItemOptimal dynamic reinsurance( 2006)
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ItemDeviations from uncovered interest parity in Malaysia(Informa UK Limited, 2006-06-15)
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ItemOptimal Dividends Under a Ruin Probability Constraint(Cambridge University Press (CUP), 2006-09)ABSTRACT We consider a classical surplus process modified by the payment of dividends when the insurer's surplus exceeds a threshold. We use a probabilistic argument to obtain general expressions for the expected present value of dividend payments, and show how these expressions can be applied for certain individual claim amount distributions. We then consider the question of maximising the expected present value of dividend payments subject to a constraint on the insurer's ruin probability.
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ItemSome Optimal Dividends Problems(Cambridge University Press (CUP), 2004-05)We consider a situation originally discussed by De Finetti (1957) in which a surplus process is modified by the introduction of a constant dividend barrier. We extend some known results relating to the distribution of the present value of dividend payments until ruin in the classical risk model and show how a discrete time risk model can be used to provide approximations when analytic results are unavailable. We extend the analysis by allowing the process to continue after ruin.
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ItemThe density of the time to ruin in the classical Poisson risk model( 2005)We derive an expression for the density of the time to ruin in the classical risk model by inverting its Laplace transform. We then apply the result when the individual claim amount distribution is a mixed Erlang distribution, and show how finite time ruin probabilities can be calculated in this case.