Lo C.C.,University of Macau |
Skindilias K.,University of Greenwich |
Skindilias K.,ABM Analytics Ltd |
Karathanasopoulos A.,American University of Beirut
Journal of Forecasting | Year: 2016
We propose a new methodology for filtering and forecasting the latent variance in a two-factor diffusion process with jumps from a continuous-time perspective. For this purpose we use a continuous-time Markov chain approximation with a finite state space. Essentially, we extend Markov chain filters to processes of higher dimensions. We assess forecastability of the models under consideration by measuring forecast error of model expected realized variance, trading in variance swap contracts, producing value-at-risk estimates as well as examining sign forecastability. We provide empirical evidence using two sources, the S&P 500 index values and its corresponding cumulative risk-neutral expected variance (namely the VIX index). Joint estimation reveals the market prices of equity and variance risk implicit by the two probability measures. A further simulation study shows that the proposed methodology can filter the variance of virtually any type of diffusion process (coupled with a jump process) with a non-analytical density function. Copyright © 2015 John Wiley & Sons, Ltd.
Ayres R.,INSEAD |
Voudouris V.,ESCP Europe |
Voudouris V.,ABM Analytics Ltd
Energy Policy | Year: 2014
We show that the application of flexible semi-parametric statistical techniques enables significant improvements in model fitting of macroeconomic models. As applied to the explanation of the past economic growth (since 1900) in US, UK and Japan, the new results demonstrate quite conclusively the non-linear relationships between capital, labour and useful energy with economic growth. They also indicate that output elasticities of capital, labour and useful energy are extremely variable over time. We suggest that these results confirm the economic intuition that growth since the industrial revolution has been driven largely by declining energy costs due to the discovery and exploitation of relatively inexpensive fossil fuel resources. Implications for the 21st century, which are also discussed briefly by exploring the implications of an ACEGES-based scenario of oil production, are as follows: (a) the provision of adequate and affordable quantities of useful energy as a pre-condition for economic growth and (b) the design of energy systems as 'technology incubators' for a prosperous 21st century. © 2013 Elsevier Ltd.
Matsumoto K.,University of Shiga Prefecture |
Matsumoto K.,London Metropolitan University |
Matsumoto K.,ABM Analytics Ltd |
Voudouris V.,London Metropolitan University |
And 5 more authors.
Energy Policy | Year: 2012
As the world economy highly depends on crude oil, it is important to understand the dynamics of crude oil production and export capacity of major oil-exporting countries. Since crude oil resources are predominately located in the OPEC Middle East, these countries are expected to have significant leverage in the world crude oil markets by taking into account a range of uncertainties. In this study, we develop a scenario for crude oil export and production using the ACEGES model considering uncertainties in the resource limits, demand growth, production growth, and peak/decline point. The results indicate that the country-specific peak of both crude oil export and production comes in the early this century in the OPEC Middle East countries. On the other hand, they occupy most of the world export and production before and after the peak points. Consequently, these countries are expected to be the key group in the world crude oil markets. We also find that the gap between the world crude oil demand and production broadens over time, meaning that the acceleration of the development of ultra-deep-water oil, oil sands, and extra-heavy oil will be required if the world continuous to heavily rely on oil products. © 2012 Elsevier Ltd.
Voudouris V.,ABM Analytics Ltd |
Voudouris V.,ESCP Europe
Lecture Notes in Energy | Year: 2013
Purpose: The chapter presents a new approach to address energy policy and security based upon the ACEGES (Agent-based Computational Economics of the Global Energy System) model and the SPT (stochastic portfolio theory). Design/Methodology/Approach: The ACEGES model is an agent-based model for exploratory energy policy by means of controlled computational experiments. The ACEGES model is designed to be the foundation for large custom-purpose simulations of the global energy system by modeling explicitly 216 countries. Findings: By using the ACEGES model, we can better explore the energy markets at the country level and provide assessments on export capacity (for energy producers) and import needs (for energy consumers) within a single umbrella. Based upon these country-specific assessments, the SPT framework provides a flexible framework for analyzing the energy market structure from a theoretical and practical perspective. As a theoretical methodology, the SPT framework provides insight into questions of market behavior and arbitrage and can be used to construct hedging energy portfolios with controlled behaviors. As a practical tool, the SPT framework can be applied to the analysis and optimization of energy portfolios for physical trade for energy export-oriented and import-oriented countries. Practical Implications: The integration of the ACEGES model and the SPT framework provides a way of analyzing the dynamics of the energy markets (for energy policy) and constructing energy portfolios for physical trade that can affect bilateral and multilateral energy trade agreements. Originality/Value: The paper provides a conceptual and a practical framework to address issues of energy policy and security by integrating for the first time the ACEGES model and the SPT framework to develop import and export portfolios for physical trade between countries. © Springer-Verlag London 2013.