期刊
JOURNAL OF ECONOMIC DYNAMICS & CONTROL
卷 36, 期 2, 页码 201-219出版社
ELSEVIER
DOI: 10.1016/j.jedc.2011.08.010
关键词
Regime switching; Optimal tree harvesting; Mean reverting price; Lumber derivatives prices; Hamilton-Jacobi-Bellman variational inequality
类别
This paper investigates whether a regime switching model of stochastic lumber prices is better for the analysis of optimal harvesting problems in forestry than a more traditional single regime model. Prices of lumber derivatives are used to calibrate a regime switching model, with each of two regimes characterized by a different mean reverting process. A single regime, mean reverting process is also calibrated. The value of a representative stand of trees and optimal harvesting prices are determined by specifying a Hamilton-Jacobi-Bellman Variational Inequality, which is solved for both pricing models using a implicit finite difference approach. The regime switching model is found to more closely match the behavior of futures prices than the single regime model. In addition, analysis of a tree harvesting problem indicates significant differences in terms of land value and optimal harvest thresholds between the regime switching and single regime models. (C) 2011 Elsevier B.V. All rights reserved.
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