A line of recent studies cast doubt on the efficacy of the lifecycle investment strategy, which calls for switching into a more conservative investment portfolio as retirement approaches, as a suitable way to provide for the retirement needs of workers with defined-contribution pensions. After...

Basu and Drew (in the JPM Spring 2009 issue) argue that lifecycle asset allocation strategies are counterproductive to the retirement savings goals of typical individual investors. Because of the portfolio size effect, most portfolio growth will occur in the years just before retirement when...

Capacity expansion models in the power sector were among the first applications of operations research to the industry. We introduce stochastic equilibrium versions of these models that we believe provide a relevant context for looking at the current very risky market where the power industry...

We explore income and consumption smoothing patterns among European Community countries and among OECD countries during the period 1966-90. We find that for OECD as well as for EC countries about 40 percent of shocks to GDP are smoothed at the one year frequency, with about half the smoothing...

This paper analyzes the potential and the limits of project finance for the provision of local public services and compares them with alternative instruments in the light of current regulation. The main requirements for project finance, even in non “pure” forms, to justify its complex...

We give theoretical, partial equilibrium comparisons of a tax with thresholds, tradable targets ('emissions trading' or ET), and non-tradable targets, as mechanisms to abate well-mixed ('global') emissions from many parties, under independent uncertainties in both future business-as-usual...

We study the representative consumer's risk attitude and efficient risk-sharing rules in a single-period, single-good economy in which consumers have homogeneous probabilistic beliefs but heterogeneous risk attitudes. We prove that if all consumers have convex absolute risk tolerance, so must...

New entrants in liberalised electricity markets which are not vertically integrated and do not operate a large and diversified portfolio of generation technologies are likely to favour technologies which offer the best prospects to manage fuel and electricity price risks through contractual...

This paper reviews the limits of the traditional ‘levelised cost’ approach to properly take into account risks and uncertainties when valuing different power generation technologies. We introduce a probabilistic valuation model of investment in three base-load technologies (combined cycle...

Conventional one-period utility functions in economics assume that initial wealth only enters preferences through the definition of final wealth. As a consequence, those utility functions most utilised (i.e. exponential and quadratic) have implausible risk characteristics. The authors...