Investment in deepwater oil and gas exploration projects:a multi-factor analysis with a real options model

Deepwater oil and gas projects embody high risks from geology and engineering aspects, which exert substantial influence on project valuation. But the uncer- tainties may be converted to additional value to the projects in the case of flexible management. Given the flexibility of project management, this paper extends the classical real options model to a multi-factor model which contains oil price, geology, and engineering uncertainties. It then gives an application example of the new model to evaluate deepwater oil and gas projects with a numerical analytical method. Compared with other methods and models, this multi-factor real options model contains more project information. It reflects the potential value deriving not only from oil price variation but also from geology and engi- neering uncertainties, which provides more accurate and reliable valuation information for decision makers.

FUNCTIONAL ANALYSIS METHOD FOR THE M/G/1 QUEUEING MODEL WITH OPTIONAL SECOND SERVICE

By studying the spectral properties of the underlying operator corresponding to the M/G/1 queueing model with optional second service we obtain that the time-dependent solution of the model strongly converges to its steady-state solution. We also show that the time-dependent queueing size at the departure point converges to the corresponding steady-state queueing size at the departure point.

Application of Binomial Option Pricing Model to the Appraisal of Knowledge Management Investment

This paper views knowledge management （KM） investment from the angle of real options, and demonstrates the utility of the real options approach to KM investment analysis. First, KM project has characteristics of uncertainty, irreversibility and choice of timing, which suggests that we can appraise KM investment by real options theory. Second, the paper analyses corresponding states of real options in KM and finance options. Then, this paper sheds light on the way to the application of binomial pricing method to KM investment model, which includes modeling and conducting KM options. Finally, different results are shown of using DCF method and binomial model of option evaluation via a case.

Financial Rogue Waves

We analytically give the financial rogue waves in the nonlinear option pricing model due to Ivancevic,which is nonlinear wave alternative of the Black-Scholes model.These rogue wave solutions may be used to describe thepossible physical mechanisms for rogue wave phenomenon in financial markets and related fields.

Option Pricing under the Double Exponential Jump-Diffusion Model with Stochastic Volatility and Interest Rate

This paper proposes an efficient option pricing model that incorporates stochastic interest rate(SIR),stochastic volatility(SV),and double exponential jump into the jump-diffusion settings.The model comprehensively considers the leptokurtosis and heteroscedasticity of the underlying asset’s returns,rare events,and an SIR.Using the model,we deduce the pricing characteristic function and pricing formula of a European option.Then,we develop the Markov chain Monte Carlo method with latent variable to solve the problem of parameter estimation under the double exponential jump-diffusion model with SIR and SV.For verification purposes,we conduct time efficiency analysis,goodness of fit analysis,and jump/drift term analysis of the proposed model.In addition,we compare the pricing accuracy of the proposed model with those of the Black-Scholes and the Kou(2002)models.The empirical results show that the proposed option pricing model has high time efficiency,and the goodness of fit and pricing accuracy are significantly higher than those of the other two models.

Applicability Assessment of the 1998–2018 CLDAS Multi-Source Precipitation Fusion Dataset over China

Traditional hourly rain gauges and automatic weather stations rarely measure solid precipitation, except for those stations with weighing-type precipitation sensors. Microwave remote sensing has only a low ability to retrieve solid precipitation. In addition, there are no long-term, high-quality precipitation data in China that can be used to drive land surface models. To address these issues, in the China Meteorological Administration(CMA) Land Data Assimilation System(CLDAS), we blended the Climate Prediction Center(CPC) morphing technique(CMORPH) and Modern-Era Retrospective analysis for Research and Applications version 2(MERRA2) precipitation datasets with observed temperature and precipitation data on various temporal scales using multigrid variational analysis and temporal downscaling to produce a multi-source precipitation fusion dataset for China(CLDAS-Prcp). This dataset covers all of China at a resolution of 6.25 km at hourly intervals from 1998 to 2018. We performed dependent and independent evaluations of the CLDAS-Prcp dataset from the perspectives of seasonal total precipitation and land surface model simulation. Our results show that the CLDAS-Prcp dataset represents reasonably the spatial distribution of precipitation in China. The dependent evaluation indicates that the CLDAS-Prcp performs better than the MERRA2 precipitation, CMORPH precipitation, Global Land Data Assimilation System version 2(GLDAS-V2.1) precipitation,and CLDAS-V2.0 winter precipitation, as compared to the meteorological observational precipitation. The independent evaluation indicates that the CLDAS-Prcp dataset performs better than the Global Precipitation Measurement(GPM) precipitation dataset and is similar to the CLDAS-V2.0 summer precipitation dataset based on the hydrological observational precipitation. The simulated soil moisture content driven by CLDAS-Prcp is slightly better than that driven by the CLDAS-V2.0 precipitation, whereas the snow depth simulation driven by CLDAS-Prcp is much better than that driven by the CLDAS-V2.0 precipitation. This is because the CLDAS-Prcp data have included solid precipitation. Overall, the CLDAS-Prcp dataset can meet the needs of land surface and hydrological modeling studies.