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ID: 162332

Biodiesel investment in a disruptive tax-credit policy environment / Liu, Shen

Liu, Shen	Journal Article
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Summary/Abstract

An investigation of Poisson type policy jumps on biodiesel investment considers the theory of investment under uncertainty. The analysis studies the probability of implementing a policy if it is not in effect and the probability of withdrawal if it is in effect. An application models the policy-switching regime of the discontinuous U.S. federal tax credit of $1.00 per gallon on biodiesel. Results support that time inconsistent government policies do lead to market uncertainty. The analysis reveals a pronounced negative impact on decisions to invest in a biodiesel refinery. Results do indicate a consistent policy-switching regime may not be that disruptive to the emerging biodiesel industry. It is policy uncertainty that drives the option-pricing thresholds and a consistent policy switching does not increase the uncertainty.

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Real Options ; Biodiesel Investment ; Disruptive Biodiesel Policy ; Poisson Policy ; Jumps

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ID: 184052

Jumps in Geopolitical Risk and the Cryptocurrency Market: The Singularity of Bitcoin / Bouri, Elie; Gupta, Rangan; Vo, Xuan Vinh

Gupta, Rangan	Journal Article
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Are price discontinuities in cryptocurrencies jointly related to large swings in geopolitical risk? This is a relevant question to answer given recent news from the press that Bitcoin’s price jumps are driven by jumps in the level of geopolitical risk index. To answer this question, we examine first the jump incidence of daily returns for Bitcoin and other leading cryptocurrencies and then study the co-jumps between cryptocurrencies and the geopolitical risk index using logistic regressions. Our dataset is at the daily frequency and covers the period 30 April 2013 to 31 October 2019. The results show that the price behaviour of all cryptocurrencies under study is jumpy but only Bitcoin jumps are dependent on jumps in the geopolitical risk index. This revealed evidence of significant co-jumps for the case of Bitcoin only nicely complements previous studies arguing that Bitcoin is a hedge against geopolitical risk.

Key Words

GARCH ; Geopolitical Risk ; Bitcoin ; Jumps ; Cryptocurrencies

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