Publication Cover
The Engineering Economist
A Journal Devoted to the Problems of Capital Investment
Volume 60, 2015 - Issue 2
342
Views
4
CrossRef citations to date
0
Altmetric
Original Articles

Using Copula Functions in Bayesian Analysis: A Comparison of the Lognormal Conjugate

&

References

  • Aitchison, J. and Brown, J.A. C. (1957) The lognormal distribution. Cambridge University Press, Cambridge, England.
  • Armstrong, M., Galli, A., Bailey, W. and Couet, B. (2004) Incorporating technical uncertainty in real option valuation of oil projects. Journal of Petroleum Science and Engineering, 44, 67–82.
  • Bierman, H., Jr., Bonini, C.P. and Hausman, W.H. (1977) Quantitative analysis for business decisions, 5th ed., Irwin, Homewood, Ill..
  • Bierman, H., Jr. and Hausman, W.H. (1972) The resolution of investment uncertainty through time. Management Science, Series B, 18(12), 656–662
  • Bierman, H., Jr. and Rao, V.R. (1978) Investment decisions with sampling. Financial Management, 7(3), 19–24.
  • Carter, P.L. (1972) A Bayesian approach to quality control. Management Science, 18(11), 647–655.
  • Cherubini, U., Luciano, E. and Vecchiato, W. (2004) Copula methods in finance. John Wiley and Sons, West Sussex.
  • Cherubini, U. and Luciano, E. (2002) Bivariate option pricing with copulas. Applied Mathematical Finance, 8, 69–85.
  • Dias, M.A. G. (2004) Valuation of exploration and production assets: an overview of real options models. Journal of Petroleum Science and Engineering, 44, 93–114.
  • Embrechts, P. (2009) Linear correlation and EVT: properties and caveats. Journal of Financial Econometrics, 7(1), 30–39.
  • Frees, E.W. and Valdez, E. (1998) Understanding relationships using copulas. North American Actuarial Journal, 2(1), 1–25.
  • Gemmill, G. (1992) Option pricing and international perspective. McGraw-Hill Book Company, London.
  • Genest, C. and Rivest, L. (1993) Statistical inference procedures for bivariate Archimedean copulas, Journal of the American Statistical Association, 88, 1034–1043.
  • Grégoire, V., Genest, C. and Gendron, M. (2008) Using copulas to model price dependence in energy markets. Energy Risk, 58–64.
  • Grenadier, S.R. and Malenko, A. (2010) A Bayesian approach to real options: The case of distinguishing between temporary and permanent shocks. Journal of Finance, 65, . October. 1949–1986.
  • Harel, A. and Harpaz, G. (2005) Project valuation with time-varying cash flows: a Bayesian approach. Engineering Economist, 50, 337–359.
  • Hays, W.L. and Winkler, R.L. (1971) Statistics-probability, inference and decision. Holt, Rinehart and Winston Inc., Austin.
  • Herath, H.S. B., Kumar, P. and Amershi, A.H. (2013) Crack spread option pricing with copulas. Journal of Economics and Finance, 37(1), 100–121.
  • Herath, H.S. B. and Herath, T.C. (2011) Copula-based actuarial model for pricing cyber-insurance policies. Insurance Markets and Companies: Analyses and Actuarial Computations, 2(1), 40–53.
  • Herath, H.S. B. and Herath, T.C. (2009) Investments in information security: a real options perspective with Bayesian post-audit. Journal of Management Information Systems, 25 (3), 337–375.
  • Herath, H.S. B. and Kumar, P. (2007) New research directions in engineering economics-modeling dependencies with copulas. Engineering Economist, 52(4), 304–331.
  • Herath, H.S. B. and Park, C.S. (2001) Real options valuations and its relationship to Bayesian decision-making methods. Engineering Economist, 46(1), 1–32.
  • Herath, H.S. B., Park, C.S. and Prueitt, G.C. (1995) Monitoring projects using cash flow control charts. Engineering Economist, 41(1), 27–52.
  • Joe, H. (1997) Multivariate models and dependence concepts. Chapman Hall, London.
  • Kaufman, G.M. (1968) Optimal sample size in two-action problems when the sample observations are lognormal and the precision h is known. Journal of the American Statistical Association, 63(322), 653–659.
  • Kaufman, G.M. (1963) Statistical decision and related techniques in oil and gas exploration. Prentice-Hall Inc. New York.
  • Kirge, D.G. (2004) Some practical aspects of the use of lognormal models for confidence limits and block distributions in South African gold mines. Journal of the South African Institute of Mining and Metallurgy, , 285–289.
  • Miller, E.M. (2001) The cutoff benefit-cost ratio should exceed one. Engineering Economist, 46(4), 312–319.
  • Miller, L.T. (2010) PMA license valuation: A Bayesian learning real options approach. Review of Financial Economics, 19, 28–37.
  • Miller, L.T. and Park, C.S. (2005) A learning real options framework with application to process design and capacity planning. Production and Operations Management, 14(1), 5–20.
  • Modarres, M., Kaminskiy, M. and Krivtsov, V. (2010) Reliability engineering and risk analysis—a practical guide. CRC Press, Boca Raton, FL.
  • Morrison, J. (1958) The lognormal distribution in quality control. Journal of the Royal Statistical Society, 7(3), 160–172.
  • Leunberger, D.G. (1998) Investment science. Oxford University Press, New York.
  • Nelsen, R.B. (1999) An introduction to copulas. Springer-Verlag, New York.
  • Park, S.Y. (1987) The value of information in multi-period capital budgeting. Unpublished Ph.D. dissertation, Auburn University, Auburn.
  • Phillips, J., Newman, A.M. and Walls, M.R. (2009) Utilizing a value of information framework to improve ore collection and classification procedures. Engineering Economist, 54, 50–74.
  • Prueitt, G.C. and Park, C.S. (1997) Phased capacity expansion-using continuous distributions to model prior beliefs. Engineering Economist, 42(2), 91–110.
  • Prueitt, G.C. and Park, C.S. (1991) Monitoring project performance with post-audit information: cash flow control charts. Engineering Economist, 36(4), 307–335.
  • Prueitt, G.C. and Park, C.S. (1990) Incremental automation with sampling applied to an advanced manufacturing system. Engineering Economist, 35, 255–293.
  • Raiffa, H. and. Schlaifer, R. (1961) Applied statistical decision theory, Harvard University Press, Boston.
  • Riddlehoover, J. (2004) Applying Monte Carlo simulation and risk analysis to the facility location problem. Engineering Economist, 49, 237–252.
  • Ross, S.M. (1999) An introduction to mathematical finance. Cambridge University Press, Cambridge.
  • Shen, H. and Brown, L.D. (2006) Non-parametric modelling of time-varying customer service times at a bank call centre. Applied Stochastic Models in Business and Industry, 22, 297–311.
  • Sklar, A. (1959) Fonctions de repartition à n dimensions et leurs marges,” Publ. Inst. Statist. Univ. Paris, 8, 229–231.
  • Trivedi, P.K. and Zimmer, D.M. (2005) Copula modeling: an introduction for practitioners. Foundations and Trends in Econometrics, 1, 1–111.
  • Van Horne, J.C. (1969) The analysis of uncertainty resolution in capital budgeting for new products. Management Science, Series B, 15(8), 376–387.
  • Zellner, A. (1971) Bayesian and non-Bayesian analysis of the log-normal distribution and log-normal regression. Journal of the American Statistical Association, 66, 327–330.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.