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Research on Option Pricing and Applications in Container Shipping Market

On 02/11/2014, in Economics papers, by rain

Since the financial crisis in2008, as a representative of the shipping market, freight rate of container shipping market fluctuates significantly increased. The risks that shipping operators,which including Chinese shipping Enterprise have to face are growing. In this case, freight derivatives, as a risk Management tools, is introduced to the shipping market. Freight derivatives in the dry bulk cargo and oil tanker transport market have developed very well, but in container transport market, freight derivatives development has just started. Because freight options have high efficiency in hedging and speculative benefit, shipping operators like freight options. But now in container freight derivatives market, there is only futures products, so the launch of container freight options can provide more effective hedging tool for container transportation managers.Option pricing is the central part of options trading. Because the freight options is a new type of option, pricing research literature about freight options is less. Most of the study about freight options pricing is based on the classical option pricing model, i.e. B-S model. Because the container freight options is a kind of arithmetic average Asian options, and this kind of options do not have explicit expression in the classic option pricing model, i.e. B-S model, so in this paper we change container freight options into a kind of special form of European options, and we obtain the option pricing model of container freight combined with container freight fluctuation characteristics of futures contracts. Because the volatility in the freight option pricing is very important, we introduce the model to calculate the freight volatility. And we make a case analysis about estimating volatility and option pricing.In this study, we introduced development present situation, the function and the members of the market of the container freight derivatives market, and we construct the container freight options market. In order to describe hedging benefit of freight options, this paper makes a case analysis from the liner companies and owner of cargo respectively, and analyzes hedging effect of the container freight option by using real examples.

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Risk Analysis of Investment in Project Based on CIM-AHP

On 01/11/2014, in Economics papers, by rain

The risk of the Investment on the project has been the concern of investors at home and abroad. Scholars domestic and abroad who have done a lot of research in this domain have made some significant theoretical results. Through the application of these theoretical results to the actual Investment risk Management,the manager of the project improved the skills in the project Management.This paper makes comprehensive analysis of achievement on the investment risks of project domestic and abroad,combined with the present situation of the risk analysis of project in our country,it also gives evaluation criteria on the risk of the project,which laid the foundation of risk assessment system. In this study,the paper makes comprehensive comparative analysis on the risk assessment model which is widely used,and then it analyze the features and compatibility between the CIM Model and AHP method,aiming to combining them to be applied to the risk evaluation of the project investment.It not only makes use of the features of the CIM model,but also solve the problem that different risk factor have different influence in the risk analysis. It shows that the joined model played well in the risk analysis of the project. Finally,the effect of the CIM-AHP model was well illustrated by a project which is a port project. In this case,through the analysis of the investment risk of the project,we identify each investment risk factor of the project,combined with the risk evaluation index system established in this paper,we makes use of CIM-AHP model to analyse the risk factors of the project,and get a good result in this risk analysis.So it can help the manager of this project do good decision on the choice of the plan.

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Study on Investment Risk Control Model in Supply Chain Background Based on Optimization Theory

On 27/10/2014, in Economics papers, by rain

With the development of network information technology and rapid globalization process, the environment of company’s supply chain operation has been undergoing great changes and supply chain Management has gradually become the focus in academic and business field.The network competition has been much fiercer under the global market economy. The competition has gradually changed from the original single companies to the supply chain field. Meanwhile the expand of the supply chain in global scope leads to its uncertainty, thus it encounters more risk factors than before, and the Management of the supply chain risk has become a new and pressing issue at present.However the research about the management of the supply chain risk is relatively rare from the Investment risk avoidance aspect. Although some valuable conclusions about risk warning in advance has been made from the exiting risk research form the point of risk identification and early-warning, and there are some researches about the selection of supply chain partners and facility locations. However, there is still a lack of models and researches about logistics project risk Investment. All this provides a brand-new issue about supply chain risk management.Based on the above analysis, this topic has been chosen as the main research subject in this thesis. Through analyzing and summarizing the existing supply chain risk management research, the author clearly proposes the research content about it and further chooses demand uncertainty and rate changes as the main research contents.Through analyzing the main logistics service vendor’s Investment plan about operation ability, the investment decision-making and risk control model have been proposed and further gotten explanation about model optimization strategies been made. Finally through AutoMod logistics simulation experiment platform the main logistics service vendor’s Basic investment risk control model have been experimented and analyzed. The solution accounts for the validation the model. The follows aspects are the relative specific procedure:This thesis first reviews the definition about the supply chain and supply chain risk management, then studies supply chain risk identification and controlling research at present, next analyzes the selecting standard about supply chain risk, thus considers the supply chain investment risk control as the subjects of this thesis, and the uncertainty of the investment plan’s operating ability as the main research subject.Then, based on the existing controlling model under the random factors the investment planning problem about the logistics operators’operating ability has been proposed, and the Basic investment planning and risk controlling two-stages plan model have been proposed based on the risk factors in the investment procedure. Meanwhile this model has been extended with the account of the rate change factors. This thesis introduces the solving strategies about the model and further provides the employment of the rapid coverage and SAA-Sample Average Approximation strategy for the two-stage plan model, and thus analyzes solution procedure in detail.Finally this thesis proposes the Basic investment plan simulation model, undergo simulation experiments, and get the optimizing solution to the model. Through introducing AutoMod logistics simulation experiment platform, the two-stages planning model simulation experiments have been undergone based on the logistics basic investment planning and risk controlling. Through employing AutoMod Stat analysis tool, the model’s optimization, capacity and transportation decision-making have been optimizing analyzed. Through the analysis of the basic investment planning and risk controlling model, the validity of the proposed model and the feasibility about solution results have been tested.

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The Surveillance and Risk Analysis of Lymantridae in Xiamen City

On 21/10/2014, in Economics papers, by rain

The distribution and population composition of Lymantridae in Xiamen City were investigated by collection, light trap and pheromone trap in the present paper. It was showed that Lymantria xylina was the predominant species and L. dispar was not found in Xiamen Area. Meanwhile, Pest risk analysis of L. dispar was carried out to know about the risk of L. dispar to invade Xiamen Area and the R value was 2.2311, which showed the insect was the pest with high risk in Xiamen Area.Finally, the material and literature of L. dispar was listed systematically in the present paper to establish the database to be convinent to inquire.

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Research on the Risk Management Mode of Product Liability Insurance

On 18/10/2014, in Economics papers, by rain

Because of the subject of insurance is not sufficiently clear and the risk is difficult to be controled for Liability insurance compared to property insuranc , the level of its risk Management will directly affect the operation and efficiency of insurance companies. As an important part of liability insurance ,the research for risk Management model of Product liability insurance is an important measure to solve the problems of product liability insurance and to improve the level of risk management of insurance companies.At present,the risk classification table for product liability insurance which we are using can not describe completely the nature of product risks, therefore, using it as the basis of underwriting and risk control is unfavorable to the stability operation of the Product liability insurance.For risk assessment model of single product, this paper used two-dimensional parameters: the severity and possibility, to descript the risk of single product, and take into account the differences of the nature of risk between group and single product, therefore, based on considering the possibility and severity, the paper introde a third parameter TR–reaction time of loss, using three-dimensional variables to describe the risk characteristics of group products, and set up risk assessment model of group products.Risk management of product liability insurance in our country is not maturity, it only refers to the product performance and accident before underwriting. It hasn’t included the whole life-cycle risk management. The thesis establishes product liability insurance risk management model from many references to the MIL-STD-882D. It shows the risk management in the whole life-cycle, such as risk survey,underwriting , risk tracking during the insurance. At the same time, it shows the risk management desires to products which have different risk styles in the whole life-cycle, and controls the risk to acceptable.Finally, it obtains the stated loss ratio to ensure the running of product liability insurance better.

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With the fast development of Chinese insurance industry, insuranceco…

On 17/10/2014, in Economics papers, by rain

With the fast development of Chinese insurance industry, insurancecompanies gradually tend to focus on the quality of the businessdevelopment as well as risk control and prevention to steadily improveeconomic efficiency, As for the insurance industry, Economic Capital isthe capital they should hold to deal with the unexpected risk. EconomicCapital becomes the popular internal capital Management frameworkand ERM tool in global insurance industry, and also already getinsurance companies’ and regulators’ approval in the home. A keyproblem that insurance industry measure total Economic Capital is risksintegration. The traditional measuring methods in the literatures oftenuse simple risks dependent hypothesis to integrate risks, such ascompletely related or linear correlation of risks. In fact, thediversification of modern insurance products and the complicated ofinsurance contracts make risk measurement be not able to accuratelydescribe the various and complex relationship of risks under the linearrelated assumption. So these cant accurately give Economic Capitalvalue.Copula functions (also called connection functions) are widelyused to measure the dependency relationships of variables. Thedevelopment of Copula functions and related theories providestheoretical basis and quantitative methods for insurance industry tocalculate Economic Capital by Copula functions. The accuratemeasurement of the insurance industry’s Economic Capital is helpful tomaintain a reasonable asset scale and reduce unnecessary assets. Itcan also enhance the flexibility of the assets Investment which willincrease assets Investment returns as well as improve shareholders’value and benefits of the insurance companies.Measure the given period expected maximum loss in a confidence level commonly uses VaR(Value at Risk) method. According to describethe characteristics of “risk” or “loss”, we also can calculate TVaR(Tail-VaR). Through collecting, sorting and analysing the compensationdata of the Health insurance and life insurance, we get Frank Copulafunction to simulate dependency structure between the healthinsurance and life insurance. Monte Carlo simulation is used to estimatethe VaR and TVaR of the Economic Capital. When the life insuranceindustry compensation amount to the minimum value, the healthinsurance policies take up the optimal proportion of the whole policiesof life insurance industry. Based on this, we get the amount of EconomicCapital and the proportion it accounts for the premium income of lifeinsurance industry. It is our life insurance industry need in November of2011to cover unexpected loss and face risk impact. The measurementof Economic Capital based on Copula functions provides referenceand basis for insurance supervision department to regulate lifeinsurance companies.

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Bound VaR and EVT Risk Management Model and Its Empirical Research

On 08/10/2014, in Economics papers, by rain

There are different types of financial risks, e.g., market risk, credit risk, operational risk, liquidity risk, business risk, etc. Managing these risks to minimize potential losses is essential to ensure viability, profitability and good reputation for a financial institution, especially when the financial crisis occurs. Value at Risk (VaR) method provides a single risk measure, which can measure the overall risk for financial institutions. However, most of the time financial returns exhibit fat-tails, skewness, kurtosis and other departures from normality. The traditional VaR measure, based on the assumption that portfolio returns are normal distributed, not only overestimates the market risk during market calmness, but also has difficulty in controlling the market risk during market crashes. In order to deal with the fat-tail problem, there are three common approaches. The first one is called nonparametric technique, including historical simulation and Monte Carlo simulation methods. The second is parametric technique. This method constructs a conditional-normal model, based on ARCH/GARCH model. The third is Extreme Value Theory (EVT) method.In recent years, the trading accounts at large financial institutions have grown rapidly and become more complex progressively. In this situation, a portfolio in its trading book may includes hundreds of trade positions, which suffer huge potential losses from hundreds of risk factors. At this time, computing the profit and losses (P&L) distribution of the portfolio will be a tough task. Since the suggested approaches mentioned above are always complex and computationally heavy, we want to find a new approach, which is fast, straightforward and computationally easy. Luciano and Marena presented a quick-to-compute VaR bounds as an alternative to these three methods for VaR assessment. This approach can cope with any distribution for marginal returns, including the fat-tailed ones. We do not require hypothesis on the joint distribution or its dependence structure. This method not only requires little information, but is also easy to compute. In this paper, the VaR bound method and EVT method are applied to study the risk of domestic stock market and the risk of domestic future market. Corresponding policy proposals for risk Management are discussed.The innovation in this paper lies in three parts: First, we evaluate the performance of VaR risk model in domestic market. At the same time, we provide a detailed analysis on the violation clustering phenomenon of domestic market, and discuss the corresponding model back-testing procedure, which is also used to test the performance of bound VaR method during market crisis. In the second part, we incorporate the liquidity risk with the market risk and then evaluate the margin level setting in domestic future exchange by the EVT and bound VaR approaches. In the third part, we consider the diversity effect in the portfolio of future contracts. Considering the diversity, we find a balance for the future margin level setting, in the trade-off between little risk and higher efficiency of the capital.

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Study on Owner’s Risk Management of Overseas Embassy and Consulate Building Projects

On 04/10/2014, in Economics papers, by rain

Overseas Embassy and Consulate Compounds (ECC) not only serve as working and living places for diplomats , but also represent our international image, comprehensive national strength and characteristic culture. The evaluation,approval, design and execution of ECC building projects constitute complicated systematic processes. The factors that ECC building projects are executed abroad and directed by related department in China make them more vulnerable to various risks.Applying the theory of Total Risk Management and the writer’s practical experience in the field of ECC building projects Management,this article identifies and analyzes both subjective and objective risks throughout ECC building projects from the Owner’s perspective,and concludes that all risks eventually belong to the Owner and the Owner shall bear in mind risk management. On that basis,this article explores optional measures for the Owner and believes:it is fundamental to avoid decision making risks and project evaluation and feasibility study should be more comprehensive; Distributing risks rationally leads to effective risk management, contract management must be strengthened and competent project design, construction and supervision teams shall be selected through scientific processes; Modern risk deflection methods such as bond and insurance shall be applied more actively;It is advised to enhance standardized project management and information technology application for the purpose of minimizing subjective risks. It is decisive to select the right project management strategy based on project risk analysis,which is dealt with in the related chapter.

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The Performance Investigation and Risk Management of the Banking Industry in China

On 04/10/2014, in Finance, by rain

Nowadays,the bank is the core of the financial community in the world, theoperation of a country’s Economic is closely related with the bank’s development. Atpresent, the state-owned commercial banks have restructured already, foreign bankscontinue to emerge, in this case, the bank’s performance have become the issue thatthe financial industry most care about.So improving the bank’s performance is thekey to maintain stable Economic development,also the key to improve the bankingmarket competition.Based on this, this paper discusses the influence factors of the commercialbanks’performance in China.First review the international research’s literature onbank performance, then discuss the measuring indicators and methods of bankperformance. And on this basis,the impact factor of bank performance are studiedbased on the theory and evidence: profitability, Management ability, the developmentof capacity and safety. Then this paper determines which factors play a key role inbank performance,thus proposes on how to improve the performance of commercialbanks in China.In addition, on the basis of the research of the bank performance, this paperassess the banks’ risk by introducting the VaR model. As a kind of the quantitativeanalysis tool, VaR model is, in recent years, widely used as a financial riskmeasurement technology in the international financial domain. That it’s a quantitativeanalysis method,makes risk Management objective and scientific. This paper mainlyby combining the performance and VaR model, assess a bank whether there is anyrisk in China, and put forward the VaR model in China’s banking industry in the useof risk Management.The conclusion of this paper is that the bank performance is influenced byprofitability, management ability, the development of capacity and safety. Profitabilityis the most important factor.Management ability is the second one.Next is thedevelopment of capacity.The last one is safety. With the help of the VaR model, theauthor find that the16banks’ performances are good and the market performance isalso good. The risks of these banks are at a low level, the degree of risk managementmay be appropriately lower.

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Calculation of Pledge Ratio in Commercial Banks Based on VaR Method

On 04/10/2014, in Finance, by rain

The NPA (non-performing asset) in China’s banking industry has beenaccumulating from1990s while the booming growth of economy. The whole industryis under the burden of rising NPL (non-performing loan) ratio. In addition, with theto be improved internal credit rating system in China, it is quite difficult to measurecredit risks. As a result, commercial banks in China tend to avoid unsecured creditload and also start to favor carrying out mortgage loan business. Stocks and realestates hold a large proportion in the pledged assets of China’s commercial banks. It isan important task for whole China’s commercial bank industry to identify and preventrisks in stocks and real estates pledged loans by analyzing pledge rates of these assets.The author reviews the research background and significance of credit risk. Thisarticle summarizes the implication of stocks and real estates pledged loan, VaR,EGARCH model, etc. The method of analyzing pledge ratio using VaR is alsoelaborated in this article. An empirical research has been carried out based on finaldaily close prices of54representational stocks and monthly prices of real estates in8different areas. For stock prices with normal distribution, VaR can be calculatedthrough expected yield and volatility estimated from EGARCH model. For real estateprices with unknown distribution, VaR can be estimated by historical simulationmethod, and further calculated the pledge ratio as used for pledge loan.The result indicate that commercial banks will face lower loan risks whilechoosing lower pledge ratio assets, but relatively with less profit. Therefore,determination of optimal pledge ratio will not only help avoiding risks, but also be aneffective method to bolster profits.

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