Gabriel J. Power

Gabriel J. Power
Université Laval | ULAVAL · Department of Finance and Insurance

PhD

About

59
Publications
7,098
Reads
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483
Citations
Additional affiliations
August 2010 - May 2016
Université Laval
Position
  • Research Assistant
September 2004 - January 2007
Cornell University
Position
  • Research Assistant

Publications

Publications (59)
Article
Developing proper maintenance and rehabilitation investment plans is vital for prolonging the service life of road infrastructures while preserving required service level under capital constraints. This paper proposes a reinforcement learning approach for determining an optimal policy of selecting maintenance, repair, and rehabilitation alternative...
Article
Full-text available
Infrastructure asset management is concerned with the efficient and sustainable utilization of resources. There are numerous sources of uncertainties associated with the physical state of the infrastructure, climate change, and the economy. Thus, the most appropriate decision-making process to select maintenance and replacement strategies that are...
Article
This paper investigates international index return predictability using daily-updated option-implied information in predictive regressions and out-of-sample forecasts. We document the joint predictive power of a variance risk premium (VRP) proxy (defined as risk-neutral variance minus realized variance), Generalized Riskiness (GR), and higher-order...
Article
The degradation of a concrete structure in northern climate is mainly due to the corrosion of steel reinforcements and cumulative damages from mechanical loading. Infrastructure managers heavily rely on ratings obtained from visual field surveys and the interpretation of inspection reports to predict the future structure states and to plan appropri...
Article
The Ross recovery theorem shows that option data can reveal the market’s true (physical) expectations. We adapt this approach to international index options data (S&P, FTSE, CAC, SMI, and DAX) to improve volatility forecasting. We separate implied volatility into Ross-recovered expected volatility and a risk preference proxy. We investigate the per...
Article
The dominant mode of deterioration of concrete bridge structures in North America is corrosion associated with the ingress of chloride ions from salt spreading. Finite element and finite difference models can be utilized to predict the chloride ion content as a function of space and time in concrete and to estimate the time to the corrosion initiat...
Article
This paper studies crude oil market integration and spillovers between Brent and WTI oil indexes over the 2006-2019 period. In addition to prices, we estimate time series of model-free option-implied moments to capture forward-looking market views and anticipations of different risk categories. We describe the WTI-Brent equilibrium relationship in...
Article
Do alternative assets such as commodities improve portfolio diversification? The empirical evidence is generally positive but mixed, and almost exclusively focuses on U.S. data. Using several distinct commodity indexes over the period 1993–2019, we investigate the case of an investor in Canada, a commodity-currency country where equities are alread...
Article
Large-scale investment projects face significant long-run uncertainty in interest rates. However, little is known about the effect of long-term discount rate uncertainty on capital investment real option values. This paper bridges the long-run discount rate uncertainty literature developed in climate change economics with the financial literature o...
Article
Full-text available
Currently, there is significant interest in ensuring the sustainability and serviceability of infrastructure systems in the context of climate change. Indeed, a large proportion of existing structures already are in an advanced state of deterioration, thus affecting the sustainability and usefulness of these structures, and highlighting the need fo...
Article
Modelling futures term structures (price forward curves) is essential for commodity-related investments, portfolios, risk management, and capital budgeting decisions. This paper uses a novel strategy, wavelet thresholding, to de-noise futures price data prior to estimation in a state-space framework in order to improve model fit and prediction. Rat...
Article
The traditional approach to hedging the crude oil refining margin (crack spread) adopts a fixed 3:2:1 ratio between the futures positions of crude oil, gasoline, and heating oil. However, hedging the latter in arbitrary proportions might be more effective under some conditions. The paper constructs optimal hedging strategies for both scenarios duri...
Article
It is commonly held that revealed managerial decisions depend on the interaction of risk attitudes and preferences, as well as market and firm conditions. In agriculture, production plans can have a horizon of a few months to several years. However, it is not always the case that managers follow through on their plans once established. The purpose...
Article
We investigate irreversible investment behavior under uncertainty of payoffs using U.S. firm-level panel data. Specifically, we estimate the relationship between the firm's investment to capital ratio and the interest rate, while controlling for investment opportunities, real option values, uncertainty, and profitability. The results indicate that...
Article
We thank the project monitor, Jonathan Peters (City University of New York) for invaluable help. Funding support from the University Center for Transportation Mobility is gratefully acknowledged. 1 Abstract Innovative financing approaches such as public-private partnerships (PPPs) have been suggested to solve transportation budgetary crises in the...
Article
This paper investigates international cointegration and financial integration among equity market indexes using index option data, providing an ex-ante analysis through investor anticipations. Daily time series of risk-neutral variance, skewness, and kurtosis are constructed for five major indexes for three sub-periods between 2003 and 2013. Fracti...
Article
Purpose – The purpose of this paper is to investigate and test for changes in investor risk aversion and the stochastic discount factor (SDF) using options data on the West Texas Intermediate crude oil futures contract during the 2007-2011 period. Design/methodology/approach – Risk aversion functions and SDFs are estimated using parametric approac...
Article
Experimentalresearch suggests the Walrasian tâtonnement auction encourages traders to under-reveal preferences, even encouraging initial pledges contrary to true desires, because pledges are not binding. We analyze the timing and characteristics of individual trades during 9,604 auctions for redbeans conducted by the Tokyo Grain Exchange. We find n...
Article
We study the equilibrium relationship between the WTI and the Brent crude oil indexes in prices and in option-implied moments using fractional cointegration models from 2008-2016. This period has been subject to changing constraints in terms of rising US inventories and falling demand. Our results suggest there exists a cointegrating relationship i...
Article
Purpose – The purpose of this paper is to propose a risk-based framework to estimate the option value of infrastructure investment, accounting for the stochastic behavior of both financial and physical (engineering) variables. Design/methodology/approach – This study uses a real-options approach and computes the optimal investment dates and option...
Article
This article investigates the time series relationship between equity and crude oil markets using option-implied risk-neutral moments. We recover daily time series of constant-maturity risk-neutral volatility (RNV), skewness and kurtosis using options data for the S&P 500 and WTI oil futures over the period January 1996 to October 2011. The transmi...
Article
Commodity cash and futures prices experienced a severe boom-and-bust cycle between 2006 and 2009. Increases in commodity price volatility have raised concerns about the usefulness of commodity futures and options as risk management tools. Dynamic hedging strategies have the potential to improve risk management when conditional (co)variances depart...
Article
Commodity price volatility increased during 2006 to 2011 first with the commodity bull cycle of 2006 to 2008 and then with the credit freeze crisis and Great Recession. This letter uses both high- and low-frequency data over 1990 to 2011 to examine the link between economic fundamentals and measures of realized volatility and convenience yield comp...
Article
To explain price volatility in the U.S. agricultural, energy, and metal futures markets, we estimate a model of common and commodity-specific, high- and low-frequency factors by building on the spline-GARCH model of Engle and Rangel (2008). A better model fit results from allowing the unconditional variance to slowly change over time. Moreover, the...
Article
The effect of four distinct events on investor risk aversion is evaluated using options data on the WTI crude oil futures contract during the 2007-2011 period. Absolute risk aversion functions and pricing kernels are estimated for eight fifteen-trading day windows -- before and after each event. Risk-neutral densities are parameterised under two ca...
Article
A number of problems in agricultural economics involve modeling joint distributions for which the assumption of multivariate normality may not be warranted. Yet, very little work has been conducted evaluating competing methods for modeling joint dependence. We develop a simulation framework to evaluate the bias and efficiency impacts of copula choi...
Article
Full-text available
Long memory in futures price volatility is a well-documented stylized fact with implications for market efficiency, risk management, forecasting and option pricing bias. The implications of long-memory differ, however, based on whether it is of a 'fractional' or of a 'stochastic' type. The aims of this article are to determine, in the case of agric...
Article
Commodity futures prices and volatility increased dramatically from 2006 to 2008, following a period during which index traders, a class of large investment funds, took on massive commodity futures positions. This article presents a method to reveal the extent to which index trader trading activity (volume) might have caused increases in futures pr...
Article
Improving volatility modeling has important implications for option pricing, risk management, and forecasting, among other uses. Bayesian state-space framework is used because classical likelihood-based estimation of SV models using the Kalman filter tends to be unreliable due to the nonlinearity of the model. An increasingly used, Bayesian analog...
Conference Paper
Full-text available
This study assesses the performance of several alternative methods for modeling dependence between random variables in the context of pricing an agricultural insurance contract with multiple underlying risk exposures. Simulation methods are used to estimate the sampling distribution of the insurance rates generated under alternative methods. The re...
Article
Real estate bubbles have attracted much attention in the research literature following substantial growth in prices. Given the recent subprime mortgage crisis, this article is concerned with the related problem of possible bubbles in rural land values, given that at the margin urban real estate exerts pressure on rural land markets. Land is the mos...
Article
Commodity futures have long been used to facilitate risk management and inventory stabilization. The study of commodity futures prices has attracted much attention in the literature because they are highly volatile and because commodities represent a large proportion of the export value in many developing countries. Previous research has found appa...
Article
Economists who deal with time-series data usually take the unit root test as the ‘prerequisite’ test for a Brownian motion. It is typical for any researchers to apply a battery of well-known unit root tests to their models to confirm stationarity in the model specification. Nonetheless, often times, we see a conclusion that fail to reject the null...
Article
Full-text available
Purpose The purpose of this paper is to analyze the effect of the 2008 Farm Bill's average crop revenue election (ACRE) program on the risk‐reducing effectiveness of crop insurance products. Design/methodology/approach Three crop/region combinations are examined, representing regions with both high and low price‐yield correlation regions. Actual p...
Article
This study analyzes the problem of multi-commodity hedging from the downside risk perspective. The lower partial moments (LPM2)-minimizing hedge ratios for the stylized hedging problem of a typical Texas panhandle feedlot operator are calculated and compared with hedge ratios implied by the conventional minimum-variance (MV) criterion. A kernel cop...
Article
Default risk associated with forward contracts can be substantial, yet these financial instruments are widely used to hedge price risk. An objectively priced exit option on the forward contract would help reduce the likelihood of litigation associated with contract default. A method is proposed to compute the exit option's value for an arbitrary fo...
Article
We estimate a model of common and commodity-specific, high- and low-frequency factors, built on the spline-GARCH model of Engle and Rangel (2008) to explain the period of exceptionally high price volatility in commodity markets during 2006-2008. We find that decomposing realized volatility into high- and low-frequency components reveals the impact...
Article
Full-text available
Traffic flows in the U.S. have been affected by the substantial increase and, as of January 2009, decrease in biofuel production and use. This paper considers a framework to study the effect on grain transportation flows of the 2005 Energy Act and subsequent legislation, which mandated higher production levels of biofuels, e.g. ethanol and biodiese...
Article
Full-text available
Both prices and the volatility of storable agricultural commodity futures contracts have been rising since 2005 and particularly since 2007. This paper aims to answer two principal questions: (i) How has the behavior of these futures prices over time and across maturities changed with the rise of biofuels and their demand-side pres- sure on corn an...
Article
Full-text available
Commodity cash and futures prices have been rising steadily since 2006. As evidenced by the April 2008 Commodity Futures Trading Commission Agricultural Forum, there is much concern among traditional futures and options market participants that the usefulness of commodity derivatives has been compromised. When basis risk is particularly high, dynam...
Article
The article contributes to the literature by examining all sixteen North American BSE cases, by using daily futures settlement prices to precisely identify the timing of the structural breaks and to assess the differentiated impact of BSE cases by contract maturity month, and by analyzing their impact on futures price volatility. The structural bre...
Article
Full-text available
Long memory, and more precisely fractionally integration, has been put forward as an explanation for the persistence of shocks in a number of economic time series data as well as to reconcile misleading findings of unit roots in data that should be stationary. Recent evidence suggests that long memory characterizes not commodity futures prices but...
Article
Full-text available
This paper investigates whether the assumption of Brownian motion often used to describe commodity price movements is satisfied. Using historical data from 17 commodity futures contracts specific tests of fractional and ordinary Brownian motion are conducted. The analyses are conducted under the null hypothesis of ordinary Brownian motion against t...
Article
We investigate irreversible investment behavior under uncertainty of payoffs using U.S. firm-level panel data. We estimate the relationship between the firm’s investment to capital ratio and the interest rate, while controlling for investment opportunities, real option values, uncertainty and profitability. The results indicate the investment deman...
Article
The commodity bull cycle of 2006-2008 and subsequent dramatic price decline have been a source of hardship for traditional commodity market participants such as producers and merchant/shippers. The usefulness of futures markets has been called into question, especially given that some market movements did not appear to be justified by economic fund...

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