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In order to determine an appropriate size of paper-making reconstituted tobacco, three kinds of tobacco sheets with different sizes were made. Its moisture retention performance and hygroscopicity were analyzed and its cutting performance was evaluated. The processing performance of the pipe tobacco on the silk processing line was studied, and then the pipe tobacco was applied to the cigarette products for comparative analysis of sensory quality. The results showed that there was no significant difference in moisture retention performance and hygroscopicity among three kinds of tobacco sheets, but the water absorption and water loss rate of small-sized tobacco sheets were slightly faster. The whole cutting rate of small-sized tobacco sheets decreased slightly, and the shredding rate increased slightly, but the difference between medium-sized and small-sized tobacco sheets was not obvious. The blending uniformity of finished pipe tobacco blended with small-sized tobacco sheets was better, the filament winding and caking were reduced, the crushing in the processing process was reduced, and the physical index of the cigarette in the rolling process was stable, which could reduce the consumption of pipe tobacco to a certain extent. The cigarette samples blended with small-sized tobacco sheets had lower smoke irritation and improved aroma texture. [ABSTRACT FROM AUTHOR]

The aim of this paper is to assess to what extent the Taylor rule can be considered an appropriate representation of the tendency of central banks to react to inflation. After an overview of the origin and use of the Taylor rule, the paper stresses some difficulties in its implementation and the limits of its interpretation by the New Consensus models. Specifically, the inherent difficulties stemming from the notion and estimates of a benchmark interest rate determined by 'productivity and thrift' are pointed out. We then move on to advance an alternative interpretation of the Taylor rule along Classical-Keynesian lines. In this context, inflation is fuelled by conflicting claims on income distribution and the rule will be interpreted, as it is in actual fact, as a flexible and non-mechanical benchmark for monetary policies which will be seen to affect the division of product between wages and profits. [ABSTRACT FROM AUTHOR]

This paper investigates the long-run and short-run relationship between money supply and inflation in Pakistan, utilizing annual data spanning from 1981 to 2021. The key objective is to assess the impact of monetary policy, specifically money supply, on inflation dynamics in the country. To achieve this, the Autoregressive Distributed Lag (ARDL) bounds testing approach is employed, which is suitable for analyzing cointegration among variables with mixed integration orders. The results reveal both short and long-run cointegration between inflation, money supply, unemployment, and interest rates. Notably, unemployment demonstrates a negative correlation with inflation, while money supply and interest rates exhibit a positive relationship. These findings underscore the importance of dedicated policy measures to manage inflation effectively. The paper concludes by recommending the establishment of a policy implementation body and collaboration between the government and the central bank to ensure financial stability and control inflation through well-calibrated monetary and fiscal policies. [ABSTRACT FROM AUTHOR]

The object of the investigation is a model of the incomplete financial market. It includes a bank deposit with a known interest rate and basic risky securities. The instant interest rate and volatility are governed by a hidden market regime, represented by some finite-state Markov jump process. The paper presents a solution to two problems. The first one consists of the characterization of the derivatives based on the existing market securities, which are valid to complete the considered market. It is determined that for the market completion, it is sufficient to add the number of derivatives equal to the number of possible market regimes. A generalization of the classic Black–Scholes equation, describing the evolution of the fair derivative price, is obtained along with the structure of a self-financing portfolio, replicating an arbitrary contingent claim in the market. The second problem consists of the online estimation of the market regime, given the observations of both the underlying and derivative prices. The available observations are either a combination of the time-discretized risky security prices or some high-frequency multivariate point processes associated with these prices. The paper presents the numerical algorithms of the market regime tracking for both observation types. The comparative numerical experiments illustrate the high quality of the proposed estimates. [ABSTRACT FROM AUTHOR]

This paper investigates whether green credit policy can mitigate firms' financialization. Using data from Chinese non-financial public listed firms during 2008 to 2019, we take the green credit policy promulgated in 2012 as a quasi-natural experiment and find that: (1) the green credit policy can reduce firms' entrusted loans, especially affiliated entrusted loans. Moreover, the governance effect exerted by banks' green credit policy reduces free cash flow and excess cash in heavily polluting firms, as shown in mechanism analysis. (2) The profit-seeking incentive dominates shadow banking activities in heavily polluting enterprises. (3) The 2012 green credit guidelines reduce entrusted loans maturity but increase the interest rate. The findings of this paper provide market-oriented insights into the regulation of shadow banking activities. This research also contributes to the literature on the effects of green credit policy by exploring their impact on firm shadow banking activities, and takes one step further to investigate the effect of green credit policy on firms' entrusted loans. This paper also sheds light on how green credit policy can alleviate the imperfections and distortions of financial markets in the emerging market. [ABSTRACT FROM AUTHOR]

Purpose: Credit is an essential element in the production process in agriculture. There are two sources from which farm households can access credit: institutional sources and non-institutional or informal sources of credit. The informal sources of credit, such as moneylenders, charge exorbitant rates of interest, which further puts a financial burden on the farmers. Hence, to increase the flow of credit from institutional sources, a policy known as the interest subvention scheme (ISS) was introduced in the year 2006. This paper aims to find the effect of the ISS on the behaviour of farm households. Design/methodology/approach: The author has used difference-in-difference analysis for estimation. In the analysis, the author has taken Madhya Pradesh as the treatment state and Andhra Pradesh as the controlled state. The author has used the Village Dynamics in South Asia (VDSA) dataset of ICRISAT for analysis. The author has used data from 2009 to 2014 for the two states. Findings: The author has found that the difference between the average interest rate of Andhra Pradesh and Madhya Pradesh is significant for both pre-treatment and post-treatment periods and this gap has increased after the intervention period. The results suggest that the share of informal sector borrowings has reduced in the treatment group (Madhya Pradesh) as compared to the control group (Andhra Pradesh) in the post-treatment period. Originality/value: This paper is particularly important because of the dearth of literature on the impact of this scheme in India and may shed light on the much-needed policy implications of this particular policy. [ABSTRACT FROM AUTHOR]

Over the last decades, despite the remarkable progress toward the harmonization of banking regulation, interest rate differentials in the Eurozone remain large. In this context, rejecting the law of one price as a measure of financial integration, this paper applies the co-integration technique to investigate the presence of a long-run equilibrium relationship among retail interest rates. The data sample of the co-integration analysis conducted in this paper includes three (3) loan and two (2) deposit interest rates data sets from the 12 original Eurozone member countries for the time period 2000–2020, filling in that way the gap in the existing research by extending the application of this methodology to incorporate an updated database. The empirical findings of the paper provide evidence that in most of cases, there is a co-movement and a long-run equilibrium relationship between retail interest rates. On the basis of the co-integration approach, these findings are being perceived as a signal of retail banking market integration in the Eurozone. [ABSTRACT FROM AUTHOR]

The contributions of this paper are twofold: we define and investigate the properties of a short rate model driven by a general Gaussian Volterra process and, after defining precisely a notion of convexity adjustment, derive explicit formulae for it. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to contribute to the analysis concerning how inflation forecasts from different economic agents (professional forecasters and consumers) lead to varying levels of central bank credibility and how it affects the monetary policy interest rate and its expectations. Design/methodology/approach: Based on the Brazilian economy data from June 2007 to May 2022, the authors provide evidence that is useful for search mechanisms that improve the conduct of monetary policy through the management of inflation expectations. The authors perform several ordinary least squares and generalized method of moments regressions inspired by the Taylor rule principle. In brief, the benchmark model considers that the monetary policy interest rate and its expectations respond to departures of inflation expectations to the target (a proxy for central bank credibility) and the level of economic activity. Findings: The main result of the analysis is that inflation expectations from professional forecasters and consumers imply different perceptions of central bank credibility that affect the monetary policy interest rate and expectations for horizons until one year ahead. Originality/value: The novelty that the authors bring from the analysis is that the authors calculate central bank credibility by taking into account the "public beliefs" of different economic agents. Furthermore, the authors analyze the effect of central bank credibility from professional forecasters and consumers on the monetary policy interest rate and its expectations. [ABSTRACT FROM AUTHOR]

In this paper, we present a hybrid Agent-Based Stock-Flow-Consistent (AB-SFC) model about the macroeconomic and distributional implications of central bank's decision to leave a "Low(-for-long) Interest Rate Environment" (LIRE). Our goal is to study the non-linear effects of monetary tightening when implemented under LIRE than in an alternative "Higher Interest Rate" setting (HIRE). This way, we shed light over the interaction between monetary policy, inequality, and macro-financial fragility in a financialized economy characterized by the presence of securitization and the production of complex financial products, i.e., Asset-Backed Securities (ABSs). We obtain three main findings. First, consistent with existing empirical literature, LIRE may be sources of vulnerabilities in the financial industry (i.e., lower banks' profitability and capital adequacy ratio). However, it may reduce systemic macro-financial risk by stimulating faster growth, lower unemployment and inequality records alongside with lower public and private indebtedness and lower-scale securitization. Second, central bank's decision to raise interest rates improves financial sector's performance indicators at the costs of harsh real-side consequences, i.e., permanently higher unemployment and inequality, when implemented under LIRE. Third, financialization structurally changes the functioning of the economy by feeding the creation of a debt-led economy in which monetary policy becomes less effective in its attempt of controlling inflation. Central bank's reaction in the form of a permanently tighter monetary policy stance eventually prompts a more unequal and unstable rentier-friendly economy. • We study central bank's decision to leave a Low Interest Rate Environment (LIRE). • We show how leaving LIRE causes permanent employment losses and higher inequality. • We show how securitization reduces the effectiveness of monetary policy. • We show how securitization may give rise to a rentier-friendly economy. [ABSTRACT FROM AUTHOR]

In this paper, we consider the time-fractional Black–Scholes model with deterministic, time-varying coefficients. These time parametric constituents produce a model with greater flexibility that may capture empirical results from financial markets and their time-series datasets. We make use of transformations to reduce the underlying model to the classical heat transfer equation. We show that this transformation procedure is possible for a specific risk-free interest rate and volatility of stock function. Furthermore, we reverse these transformations and apply one-dimensional optimal subalgebras of the infinitesimal symmetry generators to establish invariant solutions. [ABSTRACT FROM AUTHOR]

In this paper, we study the pricing of contracts in fixed income markets under volatility uncertainty in the sense of Knightian uncertainty or model uncertainty. The starting point is an arbitrage-free bond market under volatility uncertainty. The uncertainty about the volatility is modeled by a G-Brownian motion, which drives the forward rate dynamics. The absence of arbitrage is ensured by a drift condition. Such a setting leads to a sublinear pricing measure for additional contracts, which yields either a single price or a range of prices and provides a connection to hedging prices. Similar to the forward measure approach, we define the forward sublinear expectation to simplify the pricing of cashflows. Under the forward sublinear expectation, we obtain a robust version of the expectations hypothesis, and we show how to price options on forward prices. In addition, we develop pricing methods for contracts consisting of a stream of cashflows, since the nonlinearity of the pricing measure implies that we cannot price a stream of cashflows by pricing each cashflow separately. With these tools, we derive robust pricing formulas for all major interest rate derivatives. The pricing formulas provide a link to the pricing formulas of traditional models without volatility uncertainty and show that volatility uncertainty naturally leads to unspanned stochastic volatility. [ABSTRACT FROM AUTHOR]

We analyze the problem of constructing multiple buy-and-hold mean-variance portfolios over increasing investment horizons in continuous-time arbitrage-free stochastic interest rate markets. The orthogonal approach to the one-period mean-variance optimization of Hansen and Richard (Econometrica 55(3):587–613, 1987) requires the replication of a risky payoff for each investment horizon. When many maturities are considered, a large number of payoffs must be replicated, with an impact on transaction costs. In this paper, we orthogonally decompose the whole processes defined by asset returns to obtain a mean-variance frontier generated by the same two securities across a multiplicity of horizons. Our risk-adjusted mean-variance frontier rests on the martingale property of the returns discounted by the log-optimal portfolio and features a horizon consistency property. The outcome is that the replication of a single risky payoff is required to implement such frontier at any investment horizon. As a result, when transaction costs are taken into account, our risk-adjusted mean-variance frontier may outperform the traditional mean-variance optimal strategies in terms of Sharpe ratio. Realistic numerical examples show the improvements of our approach in medium- or long-term cashflow management, when a sequence of target returns at increasing investment horizons is considered. [ABSTRACT FROM AUTHOR]

We prove that if the total factor productivity A of an aggregative economy is right at the barrier $ \sigma +\lambda $ σ + λ , with σ being the growth rate of labor force and λ the real interest rate, then the unique policy to optimally control the economy is the same as the one for optimally controlling weak economies, where $ A \lt \sigma +\lambda $ A < σ + λ. This result gives a complete answer for the interesting open question raised by Vu Thi Huong in her recent paper [Optimal economic growth problems with high values of total factor productivity. Appl Anal. 2022;101:1315–1329]. [ABSTRACT FROM AUTHOR]

Knock-in options are a type of barrier option that become active when the value of the underlying asset exceeds a predetermined target. This paper investigates knock-in options based on the mean-reverting stock model within an uncertain environment where the interest rate is dynamic and the stock price follows a geometric process. We subsequently provide the price formulas for the European up-and-in call option and European down-and-in put option. Additionally, we apply real data from the financial market and employ moments estimation to derive the optimal parameters of the stock model under bullish and bearish conditions, respectively. Hypothesis testing is subsequently utilized to assess the fitting effect between the model and data. Finally, the numerical experiments are set to verify the validity of the formulas by observing the influence of parameters on the option price. [ABSTRACT FROM AUTHOR]

Significant efforts have went towards coupling portable mass spectrometric systems and ambient ionization methods, with a culminating goal of field-based, point-of-need screening of harmful chemicals. While fieldable, ambient MS methods are an intriguing combination, ruggedness of these ionization methods in regard to naturally-occurring environmental conditions while operating in-situ , such as ambient temperature, relative humidity (RH) and wind, bears further investigation, as such reports are limited. In this work, a systematic characterization of paper spray ionization-mass spectrometry (PSI-MS) performance under variable environmental conditions was undertaken on a field-deployable MS system. Of all conditions, the presence of wind speeds greater than 3 m/s (∼7 MPH) was shown to have the most substantial effect on the spectral attributes of signal intensity and duration of the PSI-MS spraying event. Generally, moderate ambient temperature and %RH produced the best spectral performance for PSI-MS. Heat maps were generated from field-collected data across variable temperature and %RH in an effort to inform general PSI-MS performance trends and guide on-site operation by potential users. [Display omitted] • The environmental ruggedness of PSI-MS operating in the field was evaluated. • Performance attributes were shown susceptible to moderate wind speeds. • Performance was best at moderate ambient temperature and high relative humidity. • No appreciable effect on false negative rate was observed at extreme temperatures. • Data is presented to inform and guide potential field operators and SOP generation. [ABSTRACT FROM AUTHOR]

This objective of this paper is to analyze the impact of monetary policy on economic growth in Tunisian. After a revolution or significant political changes, countries may reassess and adjust their economic policies, including monetary policy, to address new challenges and align with the evolving economic and political landscape. Central banks often play a crucial role in maintaining economic stability, and changes in leadership or government can lead to shifts in monetary policy objectives and strategies. Using an ARDL model applied to monthly data over the 2011/2021 period, the results revealed that money supply has a positive long-run impact on economic growth in Tunisian after revolution. On the other hand; other instruments such as the interest rate, exchange rate have a significant negative relationship with economic growth. In fact, when interest rates are high, it becomes more expensive to borrow money, so people and businesses are less likely to invest and spend. Findings also depict that increase in Domestic Credit to Private Sector hurts the economic growth. A negative effect on domestic credit could lead a central bank to consider lowering interest rates or implementing other measures to stimulate credit growth and support economic activity. Besides, inflation was shown to play an indirect role by increasing the impact of economic growth. Due to the effect of the revolution, the political instability and high international food and fuel prices negatively affected the domestic prices; Tunisia reached an inflation rate of 4.8% in 2021. Findings of the study have important implications that may discuss the need to adapt monetary policy to ensure economic stability in the aftermath of the Tunisian revolution. This could involve addressing challenges such as inflation, exchange rate fluctuations, and overall economic uncertainty. There might be recommendations for adjustments to monetary policy tools and strategies. This could include changes in interest rates, currency management, and liquidity measures to support economic recovery and growth. The implications might involve collaboration between monetary authorities and the government to implement coordinated fiscal and monetary policies. This synergy is often necessary to address broader economic challenges and promote sustainable growth. [ABSTRACT FROM AUTHOR]

This paper investigates the effects of the Brazilian Central Bank (BCB) credibility on the outcomes of its monetary policy. In this sense, we seek to characterize periods in which the central bank can be categorized as strong (high credibility) or weak (low credibility) through a VAR methodology with an endogenously estimated threshold parameter. The econometric model includes the credibility variable, which defines the regimes, along with the output gap, inflation, 12 months ahead inflation expectations, the policy interest rate, and a long-term interest rate. Our dataset spans from 2003 to 2022, with monthly data. The estimations suggest a significant threshold parameter at 1%, with a value of 1.75 percentage points. Thus, we highlight that the BCB operates in a low credibility regime when inflation expectations exceed the tolerance bands around the inflation target. In fact, this occurred in 19% of the considered sample, equivalent to 46 months. Despite the relatively low frequency of periods in which the Brazilian Central Bank operated in a low credibility context, such a regime should be diligently avoided, as our evidence demonstrates that this regime is associated with a substantial reduction in the effectiveness of monetary policy in the country. We show, for example, that with low credibility, the BCB practically loses the ability to affect productive activity and the dynamics of prices (inflation and inflation expectations). When examining the possible causes of the reduction in the effectiveness of monetary policy conditional on the credibility regimes, we show that this variable can affect the existing trade-off between output and inflation in the economy. In other words, our results suggest that credibility regimes can influence the observed inclinations in the country's Phillips curve. Specifically, we point out that in a low credibility regime, inflation shocks generate recessionary effects on output, and inflation becomes more responsive to increases in inflation expectations, thereby reducing the degree of price rigidity. In conclusion, monetary policy in Brazil has effects that systematically depend on the credibility regime in operation. Therefore, maintaining a high credibility regime should remain a priority for the BCB, as it facilitates the achievement of favorable outcomes, including meeting inflation targets. [ABSTRACT FROM AUTHOR]

With China's commitment to achieving a carbon peak and carbon neutralisation by 2030 and 2060, respectively, the government's requirements for enterprises to adopt green technology are becoming increasingly urgent. We established a tripartite evolutionary game model of an enterprise, government and bank. We analysed conditions for the existence of stable points and factors affecting the choice of stakeholder's strategy. The influence of the change in each parameter on the evolutionary stable strategy was further studied. We found that the government's reward, subsidy and taxes for enterprise's green technology innovation can increase the willingness of enterprises to implement green technology innovation, and the role of taxes is greater than that of subsidies. The preferential interest rate for green innovation is conducive to stimulating enterprises to engage in green innovation, but the increase in the cost of green credit will reduce the willingness of banks to provide green credit. With the increase in the subsidy, incentives and the cost of environmental regulation, the policy burden of the government will gradually increase, thus reducing the willingness of the government to implement environmental regulation policy. The research presented in this paper furthers work on the theoretical modelling of green credit and environmental regulation policy. [ABSTRACT FROM AUTHOR]

Some e‐platforms such as Amazon and JD.com are increasingly active in financing business, but theoretical research on this business is not comprehensive enough. This paper uses game theory model to compare the equilibrium of e‐platform financing (EPF) and bank financing (BF) in terms of pricing, quality, suppliers' competition, participants' profits, and consumer welfare. We find that a monopolistic supplier can always enjoy a lower loan interest rate and borrow more loans to improve production quantity or quality under EPF, which benefits to the participants and consumers. Interestingly, the e‐platform provides free loans and only profits from commission fee under some conditions. When there are two suppliers competing for the market share, the absolute advantage of EPF will change. If the supply chain or market environment is bad (production cost or commission rate is high; the potential market or initial budget is low), the e‐platform will offer lower interest rates than bank to reduce the strength gap between the suppliers; thus, the capital‐constrained supplier prefers EPF, which shows that the EPF business is an effective means to regulate upstream competition. However, when there are more competitive suppliers, the preferences of the suppliers with less initial capital are the same as the scenario of the two competitive suppliers, while the preference of the supplier with more initial capital is just the opposite. Finally, if the commission rate is endogenous, we demonstrate that the e‐platform will offer free loans but charge a relatively high commission fee. [ABSTRACT FROM AUTHOR]

The hybrid microgrid system (HMS) can offer a cost-effective system for isolated areas by optimizing energy sources. This paper presents a design approach for a wind turbine (WT)/hydrogen HMS with eight alternative small horizontal-axis WTs and arrives at a conclusion based on the total annual cost (TAC), cost of energy (COE), and the loss of power supply possibility throughout the project's life cycle. The effect of adding solar panels to the HMS is investigated in different scenarios. The modified bio-inspired optimization algorithm with high efficiency is used, and its results are validated using an original particle swarm optimization in different unavailability levels. Owing to a sensitivity analysis that utilized the wind speed, load demand, and interest rate, the potential of the proposed algorithm to achieve the optimal off-grid HMS design was highlighted. Among the investigated systems (more than 16 systems), the Winds WT/hydrogen energy/solar configuration with $11,952 TAC and 0.3458$/kWh COE has the minimum cost while setting the unavailability level to 2%. In addition, the adding of solar panels, variation of small WT models, wind speed, load demand, and interest rate levels have a significant impact on COE value and number of components. • A design approach for a wind/hydrogen system with various small horizontal-axis WT is proposed. • The effect of adding solar panel to the hybrid system is investigated in different scenarios. • The modified bio-inspired optimization algorithm with high efficiency is proposed. • The algorithm results are validated using an original PSO in different reliability level. • Sensitivity analysis to account for uncertainties in the optimal system is investigated. [ABSTRACT FROM AUTHOR]

Vanilla options become effective immediately after they are entered, while some exotic options will only come to effective some time after they are bought or sold. Forward starting options are one kind of such exotic options started actually at some pre-specified future date. This paper presents an extension of regime-switching jump diffusion model, in which the parameters are driven by a continuous time and stationary Markov chain on a finite state space, by introducing the Wishart process into the instantaneous variance-covariance matrix of the risky asset price and stochastic interest rate. We derive the discounted conditional joint characteristic function and the forward characteristic function of the log-asset price and its the instantaneous variance-covariance process, and thereby the price of forward starting options are well evaluated by the probabilistic approach combined with the Fourier-cosine (COS) method. We also provide efficient Monte Carlo simulation of this proposed model, and simulated solutions to forward starting options pricing within a two-state regime switching framework. Numerical results show that the COS method is accurate and efficient for pricing forward starting options. Finally, we analyse impacts of some main parameters (especially, parameters in the Wishart stochastic volatility) in this proposed model on option prices and Δ values. Also, we consider the forward implied volatility. Furthermore, the forward starting options under the regime-switching jump diffusion model with Wishart stochastic volatility and stochastic interest rate which we derived are more generalized than those recently appeared in the derivatives pricing literature, and thus have wider application. [ABSTRACT FROM AUTHOR]

• Employment is wage-constrained and real depreciation raises exports. • Neither the real exchange rate nor exports affect domestic sales. • There is a lack of transmission from investment to growth. • Volatility effects are weak for exports and inconsistent for investment. • There is little evidence of an interest rate effect for investment. This paper evaluates South African manufacturing performance over 25 years. It reports the evolution of five basic variables: employment, mark-ups, exports, domestic sales, and investment, using an aggregated sample of firms from a reliable business database. The approach differs from other economic models by the complementary use of management perceptions in estimated equations. The results reinforce some previous findings; for example, wage pressure tends to constrain domestic sales while the relative wage incentivizes capital investment. The exchange rate matters for exports and investment is constrained by skill shortages. Other findings add evidence to contested issues such as the importance of the interest rate level for investment and exchange rate stability for export growth. Relationships between key variables can help to identify growth constraints and the potential for manufacturing jobs. In particular, the lack of transmission from exports to employment or to domestic sales and the response of the mark-up to investment suggest institutional failures in coordinating market activity. [ABSTRACT FROM AUTHOR]

This paper examines how the public's expectations for the chair of the monetary policy committee influence policy outcomes. We show that the expectation that the chair will propose their ideal policy at the meeting can lead a majority of the committee to reject the policy change. The result suggests that the expectation of the chair's agenda setting is a determinant of interest rate persistence. • We examine an agenda-setting model of the monetary policy committee. • Assume that the committee members are relatively hawkish. • Consider expectations that the chair will propose their ideal policy at the meeting. • We show that such expectations can be a cause of persistent interest rates. [ABSTRACT FROM AUTHOR]

In this paper, in order to serve credit risk management, we introduce a pricing model for a vulnerable Bull Spread options in a Mixed Modified Fractional Hull-White-Vasicek stochastic volatility and stochastic interest rate model. We use Milstein scheme to find the sample paths of asset price and its volatility, and the sample paths of interest rates of asset price movement. We use the double Mellin transform to obtain an analytical vulnerable bull spread call option formula and an analytical vulnerable bull spread put option formula under fractional stochastic volatility and fractional stochastic interest rates. [ABSTRACT FROM AUTHOR]

The objective of this paper is to emphasize the differences between a call and a warrant as well as the different valuation methods of warrants which have been introduced in the financial literature. For the sake of simplicity and applicability, we only consider a debt-free equity-financed firm. More recently a formal distinction between structural and reduced form pricing models has been introduced. This distinction is important whether one wishes to price a new warrant issue or outstanding warrants. If we are interested in pricing a new issue of warrants, e.g. in the context of a management incentive package, one has to rely on a structural model. However most of practitioners use the simple Black-Scholes formula. In this context, we analyze the accuracy of the approximation of the "true" price of a warrant by the Black-Scholes formula. We show that in the current low interest rate environment, the quality of the approximation deteriorates and the sensitivity of this approximation to the volatility estimate increases. [ABSTRACT FROM AUTHOR]

The COVID-19 pandemic has given rise to a spike in financial market volatility. In this paper, we attempt to assess the effects of financial & news-driven uncertainty shocks in growing Asian economies, using country-specific bond volatility shocks as a measure of local interest rate uncertainty. Also, we contrast the effects of local uncertainty with global stock market uncertainty. Using bond market data from nine Asian markets, we uncover a transmission mechanism of uncertainty shocks via the bond market. The mechanism works as a crowding-out effect due to government-led excessive market borrowing with supply-side consequences for the private sector, as opposed to economic policy or global stock market uncertainty which works more like a demand shock as in the literature. We conclude that countries with growing fiscal deficits that entail a larger government bond market or higher current account deficits, tend to experience an increase in the cost of borrowing due to this bond market volatility or interest rate uncertainty shocks. [ABSTRACT FROM AUTHOR]

• A direct evaporative cooler (DEC) integrates with split air conditioner (SAC). • DECSAC significantly improves C O P by 10.54 %−70.14 %. • Total cost rate (T C R) of DECSAC reduces by 5.07 %−25.36 %. • Water consumption for 1 kWh energy saving varies between 5.5 – 9.8 L. • Simple payback period lies between 1.21 to 2.99 years with maximum I R R being 59 %. As concerns regarding energy consumption and environmental impact continue to grow, the need for efficient and sustainable cooling technologies becomes increasingly significant. Among various alternatives, direct evaporative cooling (DEC) has emerged as a promising solution due to its energy-efficient operation and low environmental footprint. This paper aims to provide a comprehensive thermo-economic assessment of a 5.25 kW capacity split air conditioner (SAC) integrated with direct evaporative cooling, focusing on evaluating its performance, energy consumption, coefficient of performance (C O P) , and economic viability. A numerical model is developed to determine the reduction in the condenser inlet air temperature due to direct evaporative cooling. The ambient temperature (30–45 ⁰C), relative humidity (20–80 %), and evaporator temperature (3–12 ⁰C) are taken as the design variables. Box–Behnken design (BBD) technique of response surface methodology is applied for multi-objective optimization. The C O P , total cost rate (T C R) , and total exergy destruction ( E ˙ D , t ) are set as the objective functions. Cooling capacity, life period, operation time, interest rate, maintenance factor, and electricity cost are taken as constants. The thermoeconomic optimization evolved maximized C O P enhancement of 68.94 %, and reduction in TCR and E D , t by 26.12 % and 57.23 %, respectively. The water consumption to energy saving ratio varies from 5.5 to 9.8 L/kWh for different months of the cooling season. The thermoeconomic performance and sustainability of DECSAC is observed to significantly improve compared to conventional SAC specifically in hot-dry climates. The simple payback of the proposed system ranges between 1.21 to 2.99 years depending upon the operating conditions. [ABSTRACT FROM AUTHOR]

This paper expands traditional stochastic volatility models by allowing for time-varying skewness without imposing it. While dynamic asymmetry may capture the likely direction of future asset returns, it comes at the risk of leading to overparameterization. Our proposed approach mitigates this concern by leveraging sparsity-inducing priors to automatically select the skewness parameter as dynamic, static or zero in a data-driven framework. We consider two empirical applications. First, in a bond yield application, dynamic skewness captures interest rate cycles of monetary easing and tightening and is partially explained by central banks' mandates. In a currency modeling framework, our model indicates no skewness in the carry factor after accounting for stochastic volatility. This supports the idea of carry crashes resulting from volatility surges instead of dynamic skewness. [ABSTRACT FROM AUTHOR]

In this paper, we concentrate on the European option pricing problem in incomplete markets by taking Vasicek stochastic interest rate model into account and expanding it in accordance with a Lévy process named Variance Gamma (VG) process. In doing so, first, we prove the existence and uniqueness of the solution to the stochastic differential equation of this model. Then, by the means of the hedging and replicating techniques, pricing formulas for the bond and, in succession, for European options are established. Finally, from a numerical point of view, we will analyze the value of a bond based on our consideration model and also, we will study a European call option bond price. All these results are reported through the Monte-Carlo simulation method. [ABSTRACT FROM AUTHOR]

This paper investigates the impacts of economic (in)stability on carbon emissions and the role of renewable energy in these effects at the crossroads of accelerated climate change and rising global economic instability. The paper hypothesizes that these implications should be examined not by direct impacts across variables, but rather via indirect effects serially mediated by renewable energy consumption and economic growth. This paper analyzes the United States from January 1980 and April 2022 using manifest structural equation modeling. The paper reaches two major conclusions. First, there are clear distinctions between (i) the direct and indirect effects of economic stability, surrogated by inflation and policy interest rate, on carbon emissions, (ii) the symmetric and asymmetric indirect effects, and (iii) the roles of aggregate renewable energy and its components, such as biomass and hydropower energy use, in mediating these symmetric and asymmetric indirect effects. Second, renewable energy significantly reduces the carbon-increasing effects of inflation and interest rates. The paper contains proper policy suggestions based on the findings. [ABSTRACT FROM AUTHOR]

Islam allowed the selling transaction and prohibited the interest rate. So, can an economy function properly and efficiently without an interest rate? In a conventional economy the interest rate is used as a tool to stimulate investment, savings, money supply, exchange rate, and other economic variables. Thus, the concept of an interest rate is deeply embedded, and plays a vital role in an economy. It is not easy to remove this concept from an economy. The purpose of this paper is to demonstrate that an economy can function properly without the use of an interest rate by looking at the Palestinian economy. The Palestinian economy is a small, open, and semi-independent on the Israeli economy; it is thus unique in nature, where it is an economy that has no local currency. Palestinians use the New Israeli Shekel, US Dollar, Jordanian Dinar, and Euro. So, the Palestine Monetary Authority (PMA) place the role of monitoring the function of the banks, rather than the role of a Central Bank. This is of course due to the absence of a local currency. Therefore, the Palestinian Government has no monetary policy, i.e., monetary policy does not exist in the Palestinian economy. In addition, the concept of an interest rate to an individual Palestinian can be replaced by the concept of profit sharing. That is, a Palestinian can be driven by the concept of profit sharing rather than the concept of an interest rate. This paper concludes by using an empirical example that an economy can function without an interest rate. [ABSTRACT FROM AUTHOR]

This paper primarily investigates uncertain barrier swaption pricing problem based on the fractional differential equation in Caputo sense and analyzes the corresponding efficiency index (validity index and survival index). To a certain extent, barrier swaption can control the gains or losses of swaption investors within a certain range. The existing barrier swaption pricing model cannot fully reflect the hereditability and memorability of the real financial market, so this paper aims to solve such difficulties and further measure the exercise ability of the barrier swaption pricing model. Firstly, the floating interest rate is regarded as an uncertain process because there exists difficult to obtain historical data for real financial model. Then the Caputo type fractional differential operator is introduced into the original barrier swaption pricing model, and a new uncertain barrier swaption model of floating interest rate is established. Secondly, based on the first hitting time, the pricing formulas and the corresponding efficiency index of four kinds of barrier swaptions under the floating rate model are derived, respectively. Finally, the rationality of the model is verified by numerical examples and corresponding methods, and gives the monotonicity of four numerical examples. [ABSTRACT FROM AUTHOR]

This paper studies insurance companies' optimal reinsurance–investment strategy under the stochastic interest rate and stochastic volatility model, taking the HARA utility function as the optimal criterion. It uses arithmetic Brownian motion as a diffusion approximation of the insurer's surplus process and the variance premium principle to calculate premiums. In this paper, we assume that insurance companies can invest in risk-free assets, risky assets, and zero-coupon bonds, where the Cox–Ingersoll–Ross model describes the dynamic change in stochastic interest rates and the Heston model describes the price process of risky assets. The analytic solution of the optimal reinsurance–investment strategy is deduced by employing related methods from the stochastic optimal control theory, the stochastic analysis theory, and the dynamic programming principle. Finally, the influence of model parameters on the optimal reinsurance–investment strategy is illustrated using numerical examples. [ABSTRACT FROM AUTHOR]

The primary objective of this paper is to expand Jamshidian's bond option formula and compatible one-factor term structure models by incorporating the existence of uncertainty in the parameters governing interest-rate fluctuations. Specifically, we consider imprecision in the parameters related to the speed of reversion, equilibrium short-term interest rate, and volatility. To model this uncertainty, we utilize fuzzy numbers, which, in this context, are interpreted as epistemic fuzzy sets. The second objective of this study is to propose a methodology for estimating these parameters based on historical data. To do so, we use the possibility distribution functions capability to quantify imprecise probability distributions. Furthermore, this paper presents an application to the term structure of fixed-income bonds with the highest credit rating in the Euro area. This empirical application allows for evaluating the effectiveness of the fuzzy extension in fitting the dynamics of interest rates and assessing the suitability of the proposed extension. [ABSTRACT FROM AUTHOR]

This paper performs a case study analysis of a deal (snowball swap) conducted by a state-owned transportation firm in Portugal. This deal lowered immediately the financing costs by 3 percentage points in the first 2 years and then it would cost an additive spread (snowball) if the Euribor interest rate crossed the barrier of 2% to 6%. The Euribor interest rate dropped to levels well below 2% and these contracts, which had a notional value of 80 million euros, had a cost of around 700 million euros. From the analysis of the contours of this business, it is possible to conclude that the corporate governance model of state-owned companies does not prevent situations of lack of independence of managers from the political power and this leads to a very short-term vision of these managers and creates adverse incentives for these managers. The paper concludes with a discussion of this case study implications for public policy on state-owned firms' governance. [ABSTRACT FROM AUTHOR]

Purpose: The agricultural sector remains the backbone of several emerging economies, including Kenya, where it contributes 34% to its gross domestic product (GDP). However, access to financing for agricultural activities appears to be very low compared to developed economies. Following this, governments in a number of countries have sought to introduce banking sector regulations to facilitate increased funding to the agricultural sector. Taking motivation of the interest rate capping regulations by the Central Bank of Kenya (CBK) in 2016, this paper examined the effect of these interest rate ceiling regulations on agri-lending in Kenya. Design/methodology/approach: The paper employs random effects technique to estimate a panel data of 26 commercial banks in Kenya from 2014 to 2018 using the ratio of loans to agricultural sector to gross loans and the natural logarithm of loans to agricultural sector as proxies for agri-lending. Bank size, equity, asset quality, liquidity, revenue concentration and bank concentration are employed as control variables. Findings: The results of the panel regression estimations show that the introduction of the interest cap resulted in increases in the proportion and growth in agri-lending compared with the pre-interest cap period. In addition, large banks and highly capitalised banks were found to be associated with lower agri-lending, with differences in the effects across pre-cap and post-cap periods. Practical implications: From a policy perspective, the findings highlight the effectiveness of interest rate capping in meeting this objective and supports the calls for strengthening cooperation between the government and key stakeholders in the financial sector. This will allow for the effective enforcement of policies by the regulatory powers in a manner that guarantees sound and dynamic financial systems, particularly within the agricultural sector. Originality/value: As far as the authors are aware, this the first paper to examine the effect of the interest rate cap regulation on agri-lending in Kenya. [ABSTRACT FROM AUTHOR]

Fuzzy random option pricing in continuous time (FROPCT) has emerged as an active research field over the past two decades; thus, there is a need for a comprehensive review that provides a broad perspective on the literature and identifies research gaps. In this regard, we conducted a structure review of the literature by using the WoS and SCOPUS databases while following the PRISMA criteria. With this review, we outline the primary research streams, publication outlets, and notable authors in this domain. Furthermore, the literature review revealed a lack of advancements for the equilibrium models of the yield curve. This finding serves as a primary motivation for the second contribution of this paper, which involves an extension of Vasicek's yield curve equilibrium model. Specifically, we introduce the existence of fuzzy uncertainty in the parameters governing interest rate movements, including the speed of reversion, equilibrium short-term interest rate, and volatility. By incorporating fuzzy uncertainty, we enhance the model's ability to capture the complexities of real-world interest rate dynamics. Moreover, this paper presents an empirical application of the proposed extension to the term structure of fixed-income public bonds in European Union. The empirical analysis suggests the suitability of the proposed extension of Vasicek's model for practical applications. [ABSTRACT FROM AUTHOR]

The aim of this paper is to study the influence of the current regulatory environment on the investment decisions of sustainability-oriented institutional investorswithin theGerman-speaking region of Europe. Through the use of a structured questionnaire, aimed at institutional investors, this paper presents detailed insights into the preferences of investors when purchasing green bonds, bonds that contribute to reducing or preventing adverse effects stemming fromclimate change. After analysing our sample of 179 participants, it is demonstrated that the credibility of a green bond is a basic prerequisite for an investor to purchase such an instrument. Additionally, the attractiveness of green bonds is influenced by financial factors such as tax incentives as well as the interest rate environment. Furthermore, this paper studies the influence of environmental, social and governance (esg) strategies on green bond investment decisions, where it is revealed that the environmental pillar is the most important for investors. [ABSTRACT FROM AUTHOR]

The existing estimators for the drift coefficient in the diffusion model with jumps involve jump components and possess larger boundary error. How to effectively estimate the drift function is an important issue that faces challenges and has theoretical significance. In this paper, the gamma asymmetric kernel for boundary correction and threshold function eliminating jump impacts are combined to estimate the unknown drift coefficient in the jump diffusion process of interest rate. The asymptotic large sample property and the better finite sample property through the Monte Carlo numerical simulation experiment and the empirical analysis of SHIBOR and LIBOR for the corresponding estimator are considered in detail. It is found that the estimator proposed in this paper can correct the estimation error near or far away from the origin point, which provides a more asymptotic unbiased estimator for the drift function in diffusion models with jumps. [ABSTRACT FROM AUTHOR]

This paper analyses the direction and intensity of the impact of economic trends on the profitability of banks in Serbia and Croatia in the period between the years 2006 and 2021. This paper aims to determine which indicators of economic trends have the most substantial impact on the profitability of banks in the selected countries. As key indicators of economic trends, GDP per capita, the GDP growth rate, inflation rate, real interest rate, broad money growth, general government final consumption expenditure, current account balance, gross savings, trade, and unemployment are selected as independent variables. At the same time, bank profitability was measured with bank return on equity, in percentages (ROE), and bank return on assets, in percentages (ROA) – two indicators which represent the dependent variables selected for this research. Descriptive analysis, mean difference, correlation, and univariate and multivariate regression were used in the research. Research results show that changes in real interest rates and unemployment have a significant impact on the profitability of banks in both of the selected countries, while changes in GDP per capita growth have a statistically significant effect only in Serbia, and general government final consumption expenditure has a statistically significant impact only in Croatia. The influence of other indicators of economic trends is not statistically significant. [ABSTRACT FROM AUTHOR]

The main objective of this study is to determine the existence and uniqueness of solutions to the fractional Black–Scholes equation. The solution to the fractional Black–Scholes equation is expressed as an infinite series of converging Mittag-Leffler functions. The method used to discover the new solution to the fractional Black–Scholes equation was the Daftardar-Geiji method. Additionally, the Picard–Lindelöf theorem was utilized for the existence and uniqueness of its solution. The fractional derivative employed was the Caputo operator. The search for a solution to the fractional Black–Scholes equation was essential due to the Black–Scholes equation's assumptions, which imposed relatively tight constraints. These included assumptions of a perfect market, a constant value of the risk-free interest rate and volatility, the absence of dividends, and a normal log distribution of stock price dynamics. However, these assumptions did not accurately reflect market realities. Therefore, it was necessary to formulate a model, particularly regarding the fractional Black–Scholes equation, which represented more market realities. The results obtained in this paper guaranteed the existence and uniqueness of solutions to the fractional Black–Scholes equation, approximate solutions to the fractional Black–Scholes equation, and very small solution errors when compared to the Black–Scholes equation. The novelty of this article is the use of the Daftardar-Geiji method to solve the fractional Black–Scholes equation, guaranteeing the existence and uniqueness of the solution to the fractional Black–Scholes equation, which has not been discussed by other researchers. So, based on this novelty, the Daftardar-Geiji method is a simple and effective method for solving the fractional Black–Scholes equation. This article presents some examples to demonstrate the application of the Daftardar-Gejji method in solving specific problems. [ABSTRACT FROM AUTHOR]

The aim of this study is to analyze bifurcation points in financial models using colored noise as a stochastic component. The research investigates the impact of colored noise on change-points and approach to their detection via neural networks. The paper presents a literature review on the use of colored noise in complex systems. The Vasicek stochastic model of interest rates is the object of the research. The research methodology involves approximating numerical solutions of the model using the Euler–Maruyama method, calibrating model parameters, and adjusting the integration step. Methods for detecting bifurcation points and their application to the data are discussed. The study results include the outcomes of an LSTM model trained to detect change-points for models with different types of noise. Results are provided for comparison with various change-point windows and forecast step sizes. [ABSTRACT FROM AUTHOR]

With this paper, our objective is to empirically study public debt sustainability by estimating a fiscal reaction function where the primary balance relative to GDP is assumed to be a function of the public debt to GDP ratio of the previous year and of other macroeconomic variables. In particular, we take into account the effects of the lagged real long term interest rate and of the lagged inflation rate on the primary budget of the governments to account for monetary policy influences. We resort to the fixed effects and to the random effects models for a panel of 12 euro area economies from 1996 to 2020. We find statistical evidence for sustainable debt policies and detect that both monetary policy variables are positively correlated with the primary balance to GDP ratio. This holds both for the fixed and for the random effects estimation, when those variables are included simultaneously. [ABSTRACT FROM AUTHOR]

In this paper, we measured the uncertainty synchrony level of Chilean business economic perception and consumer economic perception, both affected by common external factors reflected in the Global Economy Perception Index (GEPI), unemployment, inflation, interest rate, Monthly Economic Activity (MEAI) and the Economic Policy Uncertainty (EPUI) indexes. We propose using the Composite Multiscale Partial Cross-Sample Entropy (CMPCSE), which quantifies the intrinsic similarity of both time series affected by a common external factor. Uncertainty is measured through the Business Confidence Index (BCI) and Consumer Perception Index (CPI). BCI time series provide useful information about industry, commerce, and the finance, mining, construction and agricultural sectors, the global economic and general business situation. CPI time series measure consumer perception regarding the state of the economy, with consumers evaluating their economic situation and expectations. Results showed a high level of synchronization between business and consumer perceptions in the indexes due to different factors. The most influential in the long term corresponded to unemployment, interest rates, and inflation, EPUI and MEAI, generating uncertainty over a longer period. In addition, the GEPI was found to have an immediate effect on synchronization and high dependence on global uncertainty. Therefore, results could be useful for decision-making related to public policies based on microeconomic indicators of the construction and natural resource sectors, for example. [ABSTRACT FROM AUTHOR]

This research paper aims to investigate. the impact of inflation. on financial sector performance in Western. Balkan. countries. The topic was chosen considering the financial sector's fundamental role and its. impact on sustainable economic growth. This impact is measured through the effect that macroeconomic determinants of financial. performance such. as inflation, GDP. growth, general government final consumption expenditure, trade, and the lending interest rate have on credit to private sector as a share of GDP and broad definition of money as a ratio of GDP, which were used to proxy financial sector development. The data are provided by the World Bank as well as the Central. Banks. of the respective countries, for the period 2002–2021. The research methodology consists of different panel regression models such as OLS, OLS robust, Fixed effects, Random effects, and Generalized method of moments (GMM). Findings indicate that domestic credit to the private sector and inflation are positively correlated, whereas broad money and inflation are negatively correlated. [ABSTRACT FROM AUTHOR]

This paper empirically assesses the role of monetary policy, real estate prices, housing rent, and consumer prices in the determination of autonomous consumption and output. To do this, six different Structural VAR models are estimated on US quarterly data for the period 1970-2020. The estimations suggest that: i. houses' own interest rate (which reflects the actual cost of buying a house) produces more persistent and statistically significant effects on autonomous consumption and on output than the real interest rate; ii. monetary policy transmission works through autonomous consumption, in particular via changes in housing prices; iii. autonomous consumption shocks trigger persistent and long-lasting effects on the output level. Last, when analysing separately the three price indexes considered, it is possible to observe the emergence of a price puzzle. • Monetary policy works through the autonomous consumption channel. • A positive monetary policy shock leads to an increase in rents and in the CPI. • Housing price dynamics also affect autonomous consumption and output. • Autonomous consumption shocks have long-lasting effects on output. • The effect of demand shocks on output is not confined by the response of monetary policy. [ABSTRACT FROM AUTHOR]