Models for Australian Electricity Derivatives. Electricity derivatives, such as electricity futures and options are used to manage the risk associated with volatility in prices of electricity. This project aims to develop models for pricing electricity derivatives specifically suited for Australia. Because of the non-storable nature of electricity the standard option pricing principle of "no-arbitrage" does not apply to electricity options, such as caps and floors, but applies to options on elec ....Models for Australian Electricity Derivatives. Electricity derivatives, such as electricity futures and options are used to manage the risk associated with volatility in prices of electricity. This project aims to develop models for pricing electricity derivatives specifically suited for Australia. Because of the non-storable nature of electricity the standard option pricing principle of "no-arbitrage" does not apply to electricity options, such as caps and floors, but applies to options on electricity futures. Therefore a specific model is needed that takes into account the pricing principle of "no-arbitrage" and combines it with other factors that drive electricity prices. The novel element in this proposal is incorporation of the weather forecasts into the models for electricity options. As a result of this study appropriate models for electricity derivatives for various geographical regions in Australia will be developed.Read moreRead less
A graphical simulation package for optimal management and risk assessment in urban stormwater harvesting systems. We will develop a Scalar Vector Graphics (SVG) simulation tool for optimal management and risk assessment in urban stormwater harvesting and utilisation schemes. The generic model will be applied to existing and proposed schemes within the City of Salisbury (CoS) and will include a capture dam, one or more storage dams and an aquifer storage and recovery (ASR) facility. The discret ....A graphical simulation package for optimal management and risk assessment in urban stormwater harvesting systems. We will develop a Scalar Vector Graphics (SVG) simulation tool for optimal management and risk assessment in urban stormwater harvesting and utilisation schemes. The generic model will be applied to existing and proposed schemes within the City of Salisbury (CoS) and will include a capture dam, one or more storage dams and an aquifer storage and recovery (ASR) facility. The discrete state vector will be the content of each storage unit and the daily transition will be driven by a new stochastic rainfall model (SRM). The objective will be to find a practical management policy that minimises Conditional Value-at-Risk (CVaR).Read moreRead less
Risk Measurement for Large Portfolios under the Benchmark Approach. The measurement of risk for large portfolios, consisting of basic assets and derivatives, will play a key role in future risk management systems. Based on a new characterization of asymptotic portfolios this project proposes the development, implementation and testing of highly efficient new risk measurement methodologies suitable for portfolios with hundreds or thousands of instruments. Comparisons with standard and new simulat ....Risk Measurement for Large Portfolios under the Benchmark Approach. The measurement of risk for large portfolios, consisting of basic assets and derivatives, will play a key role in future risk management systems. Based on a new characterization of asymptotic portfolios this project proposes the development, implementation and testing of highly efficient new risk measurement methodologies suitable for portfolios with hundreds or thousands of instruments. Comparisons with standard and new simulation methods will demonstrate their superiority. The outcomes of this project will give the Australian industry and the industry partner a competitive advantage in the measurement and management of risk for large portfolios as superannuation funds or portfolios of banks.Read moreRead less
Developing a robust model for pricing inter-related volatility-based financial derivative contracts. Volatility-based financial contracts were developed in the late 1990s to provide an easy way for investors to gain exposure to the future level of volatility and thus provide a means by which they could speculate on its future levels and also hedge unpredictable volatility risk. This would potentially save them from losing vast quantities of money. However these products can only be efficient pr ....Developing a robust model for pricing inter-related volatility-based financial derivative contracts. Volatility-based financial contracts were developed in the late 1990s to provide an easy way for investors to gain exposure to the future level of volatility and thus provide a means by which they could speculate on its future levels and also hedge unpredictable volatility risk. This would potentially save them from losing vast quantities of money. However these products can only be efficient products for trading and risk management if they are priced correctly. This project will benefit investors by providing empirically viable models that will be able to be easily implemented to provide accurate and fast pricing solutions.Read moreRead less
Better communication to solve the under-saving, under-spending puzzle. This project expects to develop evidence-based communication tools that promote life-time financial security, specifically investigating the puzzling and harmful tendency of people to under-save while working and under-spend while retired. To achieve this goal, it will design and experimentally validate innovative boosts to superannuation communication including income projections and goal-setting targeted at common misconcep ....Better communication to solve the under-saving, under-spending puzzle. This project expects to develop evidence-based communication tools that promote life-time financial security, specifically investigating the puzzling and harmful tendency of people to under-save while working and under-spend while retired. To achieve this goal, it will design and experimentally validate innovative boosts to superannuation communication including income projections and goal-setting targeted at common misconceptions and biases. It will use new structural modelling techniques to measure welfare changes. The expected outcomes are rigorous explanations for the saving-spending puzzle, and robust communication strategies for superannuation funds that will benefit workers and retirees by raising financial capability and confidence.Read moreRead less
Development of a Risk Assessment and Cost-Effectiveness Model for Optimising Geotechnical Roadway Assets. Roadway performance is strongly a function of the topography and foundation conditions through which the roadway passes, dictating the need for cuttings and fills, and approaches to handle problematic foundation conditions. The project aims to develop a risk management model to minimise the geotechnical risks and costs involved in roadway construction and maintenance, and maximise design li ....Development of a Risk Assessment and Cost-Effectiveness Model for Optimising Geotechnical Roadway Assets. Roadway performance is strongly a function of the topography and foundation conditions through which the roadway passes, dictating the need for cuttings and fills, and approaches to handle problematic foundation conditions. The project aims to develop a risk management model to minimise the geotechnical risks and costs involved in roadway construction and maintenance, and maximise design life. In Queensland, the value of roadway geotechnical assets is about $ 7.5 billion, with $ 0.5 billion spent annually adding to and maintaining these assets. The expected outcome of the project is maximising the life of geotechnical roadway assets for the funds available.Read moreRead less
Investment Approaches and Applications in Financial Markets: Evolutionary Kernel Based Subset Time-Series Using Semi-Parametric Approaches. The project will develop new investment assessments based on subset time-series modeling. Innovative evolutionary kernel smoothing algorithms using semi-parametric approaches will be introduced. The project will make three important applications of this modeling in financial markets: a) benchmarking and evaluation of inflation-indexed bonds; b) evaluation of ....Investment Approaches and Applications in Financial Markets: Evolutionary Kernel Based Subset Time-Series Using Semi-Parametric Approaches. The project will develop new investment assessments based on subset time-series modeling. Innovative evolutionary kernel smoothing algorithms using semi-parametric approaches will be introduced. The project will make three important applications of this modeling in financial markets: a) benchmarking and evaluation of inflation-indexed bonds; b) evaluation of the performance of global diversified investment funds; and c) prediction to provide early warning of the emergence of destabilising deflation or inflation. These three applications will lead to improved risk management practices and investment performance. Recursive algorithms will provide new statistical methods to study investment asset price movements and market volatility.
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Helping Central Banks Measure Unobserved Variables Using Real-time Forecasts. The project addresses structural measurement problems confronted routinely by central bankers. The techniques developed, and the estimates provided, will aid directly the Partner Organisations (the Reserve Bank of Australia, the Reserve Bank of New Zealand and Norges Bank) and other central banks in formulating monetary policy. The analysis will allow interest rates in Australia and elsewhere to be set with greater pre ....Helping Central Banks Measure Unobserved Variables Using Real-time Forecasts. The project addresses structural measurement problems confronted routinely by central bankers. The techniques developed, and the estimates provided, will aid directly the Partner Organisations (the Reserve Bank of Australia, the Reserve Bank of New Zealand and Norges Bank) and other central banks in formulating monetary policy. The analysis will allow interest rates in Australia and elsewhere to be set with greater precision. The techniques developed in this project will facilitate the understanding and communication of monetary policy within the central banks concerned, and enhance communication of monetary policy strategy to the public.Read moreRead less
Investment approaches and opportunities in renewable energy and financial resource markets, using semi-parametric approaches to evolutionary subset time-series lattice-ladder modelling. The project findings will help Australian exporters and importers understand and manage energy and resource price risks more effectively. The investment community will benefit through selecting optimal asset allocations and enhancing value to investors. It will also benefit many other agencies, particularly in th ....Investment approaches and opportunities in renewable energy and financial resource markets, using semi-parametric approaches to evolutionary subset time-series lattice-ladder modelling. The project findings will help Australian exporters and importers understand and manage energy and resource price risks more effectively. The investment community will benefit through selecting optimal asset allocations and enhancing value to investors. It will also benefit many other agencies, particularly in the service industries. It is not well recognised that in developed countries, including Australia, the financial service and related sectors account for more than 60 percent of economic activity and employment, so it is critical that more sophisticated statistical methods be established, and practical applications conducted, in order to advance the understanding of complexity management in the financial service and related sectors.Read moreRead less
The improvement of investment approaches by developing and applying bootstrap methods to innovative evolutionary kernel-based subset time-series modelling. With over $1 trillion of investors' monies in the hands of fund managers, the importance of efficient investment decisions across all industry sectors is self evident. Even if the modest target of systematically improving decision making by 1 or 2 % is set, the aggregate economic benefit achieved, given the compounding effects will be enormou ....The improvement of investment approaches by developing and applying bootstrap methods to innovative evolutionary kernel-based subset time-series modelling. With over $1 trillion of investors' monies in the hands of fund managers, the importance of efficient investment decisions across all industry sectors is self evident. Even if the modest target of systematically improving decision making by 1 or 2 % is set, the aggregate economic benefit achieved, given the compounding effects will be enormous. Any developed or developing country will profit from such advanced decision-making approaches. Therefore it is critical that more sophisticated statistical methods be established, and practical applications conducted, in order to advance the understanding of complexity management in the financial investment and other relevant sectors.Read moreRead less