Optimal Investment in the Development of Oil and Gas Field

Let an oil and gas field consists of clusters in each of which an investor can launch at most one project. During the implementation of a particular project, all characteristics are known, including annual production volumes, necessary investment volumes, and profit. The total amount of investments that the investor spends on developing the field during the entire planning period we know. It is required to determine which projects to implement in each cluster so that, within the total amount of investments, the profit for the entire planning period is maximum. The problem under consideration is NP-hard. However, it is solved by dynamic programming with pseudopolynomial time complexity. Nevertheless, in practice, there are additional constraints that do not allow solving the problem with acceptable accuracy at a reasonable time. Such restrictions, in particular, are annual production volumes. In this paper, we considered only the upper constraints that are dictated by the pipeline capacity. For the investment optimization problem with such additional restrictions, we obtain qualitative results, propose an approximate algorithm, and investigate its properties. Based on the results of a numerical experiment, we conclude that the developed algorithm builds a solution close (in terms of the objective function) to the optimal one

Optimal leverage from non-ergodicity

In modern portfolio theory, the balancing of expected returns on investments against uncertainties in those returns is aided by the use of utility functions. The Kelly criterion offers another approach, rooted in information theory, that always implies logarithmic utility. The two approaches seem incompatible, too loosely or too tightly constraining investors' risk preferences, from their respective perspectives. The conflict can be understood on the basis that the multiplicative models used in both approaches are non-ergodic which leads to ensemble-average returns differing from time-average returns in single realizations. The classic treatments, from the very beginning of probability theory, use ensemble-averages, whereas the Kelly-result is obtained by considering time-averages. Maximizing the time-average growth rates for an investment defines an optimal leverage, whereas growth rates derived from ensemble-average returns depend linearly on leverage. The latter measure can thus incentivize investors to maximize leverage, which is detrimental to time-average growth and overall market stability. The Sharpe ratio is insensitive to leverage. Its relation to optimal leverage is discussed. A better understanding of the significance of time-irreversibility and non-ergodicity and the resulting bounds on leverage may help policy makers in reshaping financial risk controls.Comment: 17 pages, 3 figures. Updated figures and extended discussion of ergodicit

Portfolio selection problems in practice: a comparison between linear and quadratic optimization models

Several portfolio selection models take into account practical limitations on the number of assets to include and on their weights in the portfolio. We present here a study of the Limited Asset Markowitz (LAM), of the Limited Asset Mean Absolute Deviation (LAMAD) and of the Limited Asset Conditional Value-at-Risk (LACVaR) models, where the assets are limited with the introduction of quantity and cardinality constraints. We propose a completely new approach for solving the LAM model, based on reformulation as a Standard Quadratic Program and on some recent theoretical results. With this approach we obtain optimal solutions both for some well-known financial data sets used by several other authors, and for some unsolved large size portfolio problems. We also test our method on five new data sets involving real-world capital market indices from major stock markets. Our computational experience shows that, rather unexpectedly, it is easier to solve the quadratic LAM model with our algorithm, than to solve the linear LACVaR and LAMAD models with CPLEX, one of the best commercial codes for mixed integer linear programming (MILP) problems. Finally, on the new data sets we have also compared, using out-of-sample analysis, the performance of the portfolios obtained by the Limited Asset models with the performance provided by the unconstrained models and with that of the official capital market indices

Quantifying the behavior of stock correlations under market stress

Understanding correlations in complex systems is crucial in the face of turbulence, such as the ongoing financial crisis. However, in complex systems, such as financial systems, correlations are not constant but instead vary in time. Here we address the question of quantifying state-dependent correlations in stock markets. Reliable estimates of correlations are absolutely necessary to protect a portfolio. We analyze 72 years of daily closing prices of the 30 stocks forming the Dow Jones Industrial Average (DJIA). We find the striking result that the average correlation among these stocks scales linearly with market stress reflected by normalized DJIA index returns on various time scales. Consequently, the diversification effect which should protect a portfolio melts away in times of market losses, just when it would most urgently be needed. Our empirical analysis is consistent with the interesting possibility that one could anticipate diversification breakdowns, guiding the design of protected portfolios

Commercializing Biomedical Research Through Securitization Techniques

Biomedical innovation has become riskier, more expensive and more difficult to finance with traditional sources such as private and public equity. Here we propose a financial structure in which a large number of biomedical programs at various stages of development are funded by a single entity to substantially reduce the portfolio's risk. The portfolio entity can finance its activities by issuing debt, a critical advantage because a much larger pool of capital is available for investment in debt versus equity. By employing financial engineering techniques such as securitization, it can raise even greater amounts of more-patient capital. In a simulation using historical data for new molecular entities in oncology from 1990 to 2011, we find that megafunds of $5–15 billion may yield average investment returns of 8.9–11.4% for equity holders and 5–8% for 'research-backed obligation' holders, which are lower than typical venture-capital hurdle rates but attractive to pension funds, insurance companies and other large institutional investors

The role of government co-investment funds in the supply of entrepreneurial finance: An assessment of the early operation of the UK Angel Co-investment Fund

Co-investment funds – which invest alongside private investors, especially business angels – thereby leveraging their networks and experience and minimizing public sector transaction costs – are a recent approach by governments in various countries to address the early stage entrepreneurial funding gap which is perceived as a barrier to the ability of firms to scale-up. However, little literature exists on their operation, impact and effectiveness. This paper assesses the early operation of the UK’s Angel Co-investment Fund, established in 2011. Interview evidence from angels and business managers suggests that the Angel Co-investment Fund is improving the availability of finance by enabling firms to raise funding rounds of between £500,000 and £2 m, hence addressing some aspects of the broken finance escalator model. However, our evidence suggests that it is not yet impacting the supply side, either in terms of stimulating the formation of new angel groups or enhancing learning amongst less experienced angels. Some aspects of the operation of the investment process have attracted criticism from angels and entrepreneurs which need to be addressed. Nevertheless, there is sufficient evidence for positive impact to justify the scheme’s expansion

Treatment of rising damp in historical buildings: wall base ventilation

Intervention in older buildings increasingly requires extensive and objective knowledge of what one will be working with. The multifaceted aspect of work carried out on buildings tends to encompass a growing number of specialities, with marked emphasis on learning the causes of many of the problems that affect these buildings and the possible treatments that can solve them. Moisture transfer in walls of old buildings, which are in direct contact with the ground, leads to a migration of soluble salts responsible for many building pathologies.http://www.sciencedirect.com/science/article/B6V23-4H7T0H7-1/1/f5e8a4ec173c5dadf120770678facf4

Impact of technology-based interventions for children and young people with type 1 diabetes on key diabetes self-management behaviours and prerequisites: A systematic review

Background The role of technology in the self-management of type 1 diabetes mellitus (T1DM) among children and young people is not well understood. Interventions should aim to improve key diabetes self-management behaviours (self-management of blood glucose, insulin administration, physical activity and dietary behaviours) and prerequisites (psychological outcomes and HbA1c) highlighted in the UK guidelines of the National Institute for Health and Care Excellence (NICE) for management of T1DM. The purpose was to identify evidence to assess the effectiveness of technological tools in promoting aspects of these guidelines amongst children and young people. Methods A systematic review of English language articles was conducted using the following databases: Web of Science, PubMed, Scopus, NUSearch, SAGE Journals, SpringerLink, Google Scholar, Science Direct, Sport Discus, Embase, Psychinfo and Cochrane Trials. Search terms included paediatric, type one diabetes, technology, intervention and various synonyms. Included studies examined interventions which supplemented usual care with a health care strategy primarily delivered through a technology-based medium (e.g. mobile phone, website, activity monitor) with the aim of engaging children and young people with T1DM directly in their diabetes healthcare. Studies did not need to include a comparator condition and could be randomised, non-randomised or cohort studies but not single-case studies. Results Of 30 included studies (21 RCTs), the majority measured self-monitoring of blood glucose monitoring (SMBG) frequency, clinical indicators of diabetes self-management (e.g. HbA1c) and/or psychological or cognitive outcomes. The most positive findings were associated with technology-based health interventions targeting SMBG as a behavioural outcome, with some benefits found for clinical and/or psychological diabetes self-management outcomes. Technological interventions were well accepted by children and young people. For the majority of included outcomes, clinical relevance was deemed to be little or none. Conclusions More research is required to assess which elements of interventions are most likely to produce beneficial behavioural outcomes. To produce clinically relevant outcomes, interventions may need to be delivered for at least 1 year and should consider targeting individuals with poorly managed diabetes. It is not possible to determine the impact of technology-based interventions on insulin administration, dietary habits and/or physical activity behaviour due to lack of evidence

Epilepsy and Psychiatric Comorbidities: Drug Selection.

Purpose of review The pharmacological treatment of patients with epilepsy and psychiatric comorbidities may sometimes represent a therapeutic challenge. This review is focused on the pharmacological management of patients with epilepsy and psychiatric problems in terms of rationalization of the antiepileptic drug (AED) treatment and the pharmacological management of the most clinically relevant psychiatric comorbidities, namely mood and anxiety disorders, psychoses, and attention deficit hyperactivity disorder (ADHD). Recent findings Up to 8% of patients with drug-resistant epilepsy develop treatment-emergent psychiatric adverse events of AED regardless of the mechanism of action of the drug and this is usually related to an underlying predisposition given by the previous psychiatric history and the involvement of mesolimbic structures. Careful history taking, periodic screening for mood and anxiety disorders, low starting doses, and slow titration schedules can reduce the possibility of AED-related problems. A pragmatic checklist for the pharmacological management of patients with epilepsy and psychiatric disorders is presented. Summary patients should be informed of potential behavioral effects of AEDs but no drugs should be excluded a priori. Any psychiatric comorbidity should be addressed in the appropriate setting and full remission and recovery should always represent the first goal of any therapeutic intervention. Neurologists should be aware of the side effects of major psychotropic drug classes in order to fully counsel their patients and other health professionals involved

Protecting tropical forests from the rapid expansion of rubber using carbon payments

Expansion of Hevea brasiliensis rubber plantations is a resurgent driver of deforestation, carbon emissions, and biodiversity loss in Southeast Asia. Southeast Asian rubber extent is massive, equivalent to 67% of oil palm, with rapid further expansion predicted. Results-based carbon finance could dis-incentivise forest conversion to rubber, but efficacy will be limited unless payments match, or at least approach, the costs of avoided deforestation. These include opportunity costs (timber and rubber profits), plus carbon finance scheme setup (transaction) and implementation costs. Using comprehensive Cambodian forest data, exploring scenarios of selective logging and conversion, and assuming land-use choice is based on net present value, we find that carbon prices of $30-$51 per tCO2are needed to break even against costs, higher than those currently paid on carbon markets or through carbon funds. To defend forests from rubber, either carbon prices must be increased, or other strategies are needed, such as corporate zero-deforestation pledges, and governmental regulation and enforcement of forest protection