The new Surface Pro for business

4 stars based on 51 reviews

Water trading is the process of buying and selling water access entitlements, also often called water rights. The terms of the trade can be either permanent or temporary, depending on the legal status of the water rights. Some consider Australia's to be the most sophisticated and effective in the world. Water markets tend to be local and informal, as opposed to more formal schemes. Some economists argue that water trading can promote more efficient water allocation because a market based price acts as an incentive for users to allocate resources from low value activities to high value trading business surfaces.

There are debates about the extent to which water markets operate efficiently in practice, what the social and environmental outcomes of water trading schemes are, and the ethics of applying economic principles to a resource such as water. In the United States, water trading takes on several forms that differ from project to project, and are dependent upon the history, geography, and other factors of the area.

Water law in many western U. Water markets are promoted as a way to correct these inefficiencies. This industry, which often bottles common ground water and sells it as trading business surfaces water, competes with local communities for access to their water supplies, and is accused of reselling the water at drastically higher prices compared to what citizens pay for tap water. Water trading is a voluntary exchange or transfer of a quantifiable water allocation between a willing buyer and seller.

In a water trading market, the seller holds a water right or entitlement trading business surfaces is surplus to its current water demand, and the buyer faces a water deficit and is willing to pay to meet its water demand. Local exchanges that occur for short durations between neighbors are considered "spot markets" and may operate under rules different from water rights trading markets. Economic theory suggests that trade in water rights is a way to reallocate water from less to more economically productive activities.

Water trading trading business surfaces be Pareto efficientwhich means that the socially optimal water allocation is an allocation such that no person can be made better off without making someone worse off, and includes compensating transfers of money to losers.

Several types of stakeholders are recognized as potential participants in a water market, including agricultural users, industrial, and urban, as well as those who value in stream uses for recreation, habitat preservation, or other environmental benefits.

Trades can then be long-term leases, permanent transfers, short-term leases, or a callable transfer, which is the ability of a city to lease water under specified drought conditions. While many areas have detached these two types of rights from one another, some still prohibit the severing of rights and thus continue to promote water ranching.

In the event of water ranching, the groundwater removed from the property is often much greater than that which would be used for average agricultural use, [23] which can be harmful to the ecosystems which rely on it. This practice also creates inefficiency in the dispersal of land and water access ownership, as non-agricultural parties, such as municipalities, may purchase a plot of land simply for its water.

The idea is to have a tradable certificate which notifies the quantity of water saved by an institution, organization or an individual this would help in maximum utilization of every available drop of trading business surfaces. It may be defined as a permit that allows the holder to trade the conserved water in the international market at their current market price.

Establishing a water market may be an appropriate solution for distributing scarce water resources among increasing trading business surfaces, depending on the historical, political, legal, and economic context of a community.

For example, where prior-appropriation water rights dictate freshwater allocation, such as in the Western United States, new consumers may have little recourse to obtain sufficient water quantities to meet their demands without the use of water markets alternatives to water markets are discussed below.

Thus, historical appropriative rights might neglect trading business surfaces willing to pay more than current consumers. Also, instream demands that reflect the benefits that fisheries and lentic and lotic ecosystems receive from greater water flows, as well as benefits to water-dependent recreational activities or aesthetic appreciation might be ignored trading business surfaces an appropriative system.

For example, institutions governing water resources in the Trading business surfaces have historically favored water allocation to uses that stimulate the economy, such as agricultural, hydroelectric, or trading business surfaces application. Trading business surfaces are multiple manifestations of water rights.

Most commonly, water rights fall into the categories of prior-appropriation water rights and riparian water rights. Prior appropriation dictates that the first party to use the water for beneficial use maintains right to continue using it in this manner, unless they elect to sell or lease these rights. Frequently with riparian rights, the water rights cannot be severed from the land rights, and the water found within may not be transferred outside the watershed of origin.

The senior rights holders receive their trading business surfaces first, to be followed by the junior rights holders, and trading business surfaces there would be sufficient water for each party to redeem their allotments. In the absence of water trading, a drought may cause rights holders to lose their full access. Where water is scarce, tradable water rights may incentivize water conservation and make more water available for trading.

Water markets may trading business surfaces appropriate where there are no or inefficient rules established to govern groundwater use. Because groundwater is generally available to anyone who sinks a well and pumps, water tables worldwide have fallen precipitously in the last several decades. Generally, water markets are considered flexible instruments that, in theory, should adjust for changing prices, and respond to changing markets conditions e.

Empirical research established that outcomes of long-term sustainability and successful management of common pool resources CPR depend on the governing institutions involved, [31] [32] and that no single type of institution or management system uniformly manages common pool resources trading business surfaces across all scenarios.

A CPR is "a natural or man-made resource system sufficiently large as to make it costly but not impossible to exclude beneficiaries from obtaining benefits from its trading business surfaces [33]. Water is inherently a common pool resource; however it takes on qualities of a private good when property trading business surfaces are trading business surfaces and its consumption becomes both rival and excludable by a water rights holder.

Still, water is not a pure private good when property rights are assigned because non-water rights holding beneficiaries can access water upstream. Irrigation water will also percolate and recycle back to the stream so non-water rights holding beneficiaries downstream will benefit from return flows.

Thus, water retains certain common pool resource qualities even in a water trading market and must be managed as such. In the world of common pool resources, an appropriator is a person who withdraws from the resource system, providers are agents who arrange the provision of a CPR, trading business surfaces producers construct, repair, or take action to ensure long terms sustenance of a CPR system.

To redress this, one traditional scheme for common pool resource management is a "Leviathan" strategy, in which a central authority like government must enforce rules, and coerce and punish appropriators as necessary to obey resource rules; however a large enforcer cannot catch all offenders or obtain complete information so the Leviathan strategy is not a perfect solution. As an alternative, Elinor Ostrom posits common pool resources are embedded in complex, social-ecological systems [35] and can be managed by nested or polycentric public enterprises, where trading business surfaces at different scales e.

External enforcers do not necessarily need to monitor and enforce penalties; trading business surfaces, participants can internally monitor appropriations and levy sanctions. Also, those internal actors who know best about costs and benefits of local resource appropriation participate in management. Impediments to the development of water markets include the fact that water is largely a public good, and water rights rest with a governing body while individuals essentially have "use" rights.

Third party effects of water trading can be positive or negative and will occur when the benefits or costs of a trade accrue to persons besides the buyer and seller involved in a water right trade. Where water markets are either not viable or desired, the following mechanisms may be used to allocate scarce water resources:.

The first time that water access entitlements were separated from land title in Australia was inwhen South Australia introduced a permanent water trading scheme. Many irrigation settlements were trading business surfaces in inappropriate parts of the landscape where the risks of waterlogging, land salinisation or river salinisation were high and returns from production were low. Irrigators were in this way condemned to a frugal existence from the start. Changing commodity markets and trading business surfaces all changing irrigation technologies amplified these initial errors and left Australian irrigation with difficult adjustment problems.

Irrigators who can generate higher returns are now buying water from those who believe they can make more money by selling their water entitlements rather than using them. Nonetheless, the instinct for central planning lives on and some policy makers are tempted to favour those crops deemed to produce high gross values per megalitre when economics teaches that it is marginal valuations that are trading business surfaces.

This distinction is critical because many ostensibly water efficient crops have limited markets. Rather than trading business surfaces judgements about what crops should be grown on farms, economic orthodoxy is to let individual irrigators make their own judgements about whether they can profit from their investment in water entitlements. Nevertheless, in popular discussion, there is considerable emphasis on the crops being trading business surfaces when what matters most trading business surfaces public policy is the amount of water taken from rivers and any externalities associated with irrigation.

Upon doing this, steps were taken to increase the efficiency of water distribution. Decentralized markets are created such that trading business surfaces water exchange does not process all trades. A trade may occur between a private buyer and seller, through a broker or through an exchange. Some brokers may use an exchange to locate buyers or sellers. The Murray-Darling Basin is one area in Australia studied for its water trading schemes. In the s, the Australian Government has shifted its emphasis from building dams and subsidizing water from area farmers to the establishment of trading business surfaces and trading within the water market.

Trading for these rights occur across Australian states, with caps being set for each area to assure that water is not being over-extracted from the Basin to another region.

This method operates on estimated net benefits, including the return flow to the Basin. As the second driest continent on Trading business surfaces, the water allocations are more valuable when distributed as seasonal allocation or temporary trades, to ensure that, should it be necessary, water can be returned to the Murray-Darling Basin region.

The Water Services Association of Australia operates on a volume-metering system. This means that market players do not simply apply to possess the water rights, but instead they are paying for the quantity of water they consume. Yet, recent reports raise concerns regarding over-allocation and the confusion between environmental outcomes and economic efficiency.

Trading business surfaces sustainability of the present trading business surfaces for water marketing may be affected by the structure and trading business surfaces conditionalities of marketable rights. While in the US water marketing is limited to effectively used rights, and to historical water consumption, Australian water marketing accepts the marketing of sleeper rights that have not been utilized. The Chilean system is characterized by a strongly free-market approach, and trading business surfaces been controversial both in Chile and in international circles.

As part of the water resources management in Chileunder the Water Code water lawwater rights are private property, separate from land, can be freely traded, are subject to minimal state regulation and are trading business surfaces by trading business surfaces law. Under the Code, the Chilean state grants the existing water users the property rights for surface water and groundwater without any additional fee. Any new or unallocated water rights are auctioned and then can be sold or transferred at price.

During the s, the World Bank and the Inter-American Development Bank actively promoted the Chilean system as an example of effective and efficient water resources management. Other institutions, such as Eclac Economic Commission for Latin America and the Caribbean, United Nationsquestioned the structure and conditionalities of Chilean water rights, and consequently the resulting market for water rights, on grounds of efficiency and equity.

As Trading business surfaces, Chile allows the marketing of unused trading business surfaces rights. While the US marketing systems limit trading business surfaces to historically consumed waters, according to effective trading business surfaces beneficial trading business surfaces, Chile allows the transaction of nominal entitlements, without limitation to effective use and consumption.

Water rights are not forfeited if not utilized. This resulted in the monopolization of water rights on one hand, and on the trading of nominal entitlements on the other, with negative impacts on sustainability and trading business surfaces parties. A Water Law Reform partially amended the system, but water marketing in some areas is still affected by sustainability problems.

Sustainability may also be affected by public subsidies to irrigation, which are not environmentally trading business surfaces.

Although the Chilean model has been recommended for adoption in other Latin American countries, none has yet accepted it in its original form. The proposed transfer of one element of the Chilean model played a role in the water war in Cochabamba, Bolivia; that which awarded ownership of all water resources to the new concessionaire, International Water.

This legal change meant that existing users, which included peasant farmers and small-scale water supply networks, were immediately illegalized, resulting in widespread angry protests. In Chile, opinion over the effectiveness and the fairness of the water markets model is deeply divided.

Specific concerns that have arisen include the hoarding of water rights without using them for speculative purposes and the lack of state regulation to ensure that the market works properly and fairly. Some researchers have argued that the model does deliver economic benefits, but other evidence shows that the system does not work well in practice and that poorer water users such as peasant farmers have less access to water rights.

Some of these trading business surfaces led to the trading business surfaces of the Water Code in Iran has been in the throes of a water crisis for the past few decades. Water trading in the UK is open since Currently, only the trading of water rights trading of licenses is authorised. Some changes in the policies are being trading business surfaces by the Environment Agency. Water trading in the United States varies by state, according to the state's water code, trading business surfaces of water rights, and governmental bodies involved in regulating water trading.

Water trading is practiced more in western states, where states historically have followed a water rights system of prior appropriation, and vast regions are arid so water is naturally scarce.

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The old 'rubbish in rubbish out' adage has always been particularly applicable to derivatives traders, who rely on automated pricing and risk management systems for their livelihood. These are principally the volatility surface and interest rate curves. The keystone to derivative trading is the quality, accuracy and reliability of these data across asset classes and markets, which has to be delivered electronically in real time or as close to real time as possible in order to allow distribution tools to be automated.

A 'beer mat' Black Scholes Merton approximation for at the money ATM options, with zero interest rates can be reduced to:. With a volatility of zero and some time remaining, an option price will equal zero.

Time value can therefore be considered volatility value. Consequently, the foundation of any derivatives business is volatility, or more accurately the volatility surface. Volume is the focus, as spreads have been in pretty consistent long term decline, so income growth can only happen through improved distribution. Combining this volume increase with today's automated distribution tools means that any errors or slow updates in volatility surfaces which cause mispricing of options only exacerbate the problem of market makers' liquidity their main business asset being given away at a loss.

SuperDerivatives VolSurface is intended to prevent your options business from falling into this trap. The service combines SuperDerivatives' benchmark pricing model with market rates collected from a selection of active market participants. The VolSurface function is to deliver an accurate, automated, and validated volatility feed for a range of both liquid and illiquid markets. See sidebar "VolSurface at a Glance". Starting with the raw data, it is evident that VolSurface casts its net pretty wide; sources include interbank brokers, major market makers in the OTC markets, international and domestic brokers, exchanges and other market data sources including Reuters.

A mixture of both traded and quoted vols are collected. Obviously with such a range of raw data, initial data validation and cleaning are important. SuperDerivatives has a dedicated data management unit responsible for running a mixture of manual and automated data validations.

The consequences of an inaccurate volatility surface see box "How do I misprice thee? A weak counterparty might therefore have a liability to the bank that is being understated, so the counterparty appears to be below its assigned credit limit - when in reality it is above it. Inaccurate volatility surfaces therefore result in weak risk management of option trading activity.

These risk sensitivities change dramatically as the volatility surface changes. Therefore even small discrepancies in the volatility surface can result in the trader over or under hedging their actual risk, with inevitably negative consequences for profitability. Once the data validation is completed, SuperDerivatives weights the data based upon a number of criteria, including:.

Therefore the accuracy and realism of any method used for interpolating synthetic values between 'real' ones on the surface is critical.

A variety of methods are currently in use in the market, some considerably less accurate than others. Often extensive manual tweaking is required to obtain a surface that is remotely realistic and safe to deploy. A key requirement is the smoothness of the interpolation method through time.

Older systems using a manual update of twelve or so volatility nodes will be subject to errors see Figure 1. A portfolio moving one day through time blue line in Figure 1 can cause one of these fixed buckets to fall into a new volatility band green line in Figure 1. This causes the three month bucket to be valued on the eleventh node on one day and with the same surface be valued on the tenth node the next! This step change causes large swings in P and L and Greeks, to say nothing of pricing accuracy on quotes.

A smooth surface is therefore a must for any derivatives operation. Rather than any of the traditional methods such as linear or cubic spline interpolation , SuperDerivatives uses a proprietary model for obtaining VolSurface synthetic values where market-sourced values are not available. The model requires three volatility data points per tenor, so for example in the FX market it uses three standard inputs - the ATM volatility, 25 delta risk reversal and 25 delta butterfly.

The limited number of inputs required and their inherently liquid and available nature represents a significant advantage. When calculating the tenor timeline interpolation for missing data points in low liquidity time horizons, SuperDerivatives' proprietary interpolation methodology allows for all currency-specific day count issues, such as public holidays, weekends and the number of days in the year.

In order to illustrate one possible use of VolSurface, we put together some simple VBA code that would run in a middle office risk manager's spreadsheet and compare EURUSD VolSurface values with those in a volatility surface maintained by a trader in Excel on a remote machine. The VBA code would then automatically highlight any important discrepancies in the trader's surface.

The starting point is a spreadsheet maintained in the middle office that automatically downloads the VolSurface from the SuperDerivatives FTP site, using some of the VBA time functions. For the purposes of this review we are only downloading data once a day at set times for three major markets - Tokyo, New York and London - but the code could be easily modified to perform hourly or other time interval downloads.

The VolSurface data is imported into the risk management spreadsheet, which also contains a link to the volatility surface in the trader's spreadsheet on a separate machine in real life on the trading floor.

As can be seen from Figures 3a and 3b, there are very significant differences between the SuperDerivatives VolSurface Figure 3a and the trader's volatility surface Figure 3b. This can be seen in Figure 4, which also shows a warning alert that automatically pops up when certain levels of deviation between the two surfaces are exceeded. In addition, so as to provide an audit trail, a further segment of VBA code writes a record to a log file every time a deviation alert is triggered.

This is just a very simple example for a single currency pair. Obviously, the risk management team could write a complete rule set for every instrument that would trigger alerts when certain points on any trader's volatility surface exceeded or undershot the corresponding VolSurface values by a specific margin.

Furthermore, rather than merely flagging these with certain colours on a surface chart, it would also be possible to colour flag individual cells containing errant values in the trader's volatility surface table by using Excel's conditional formatting feature. The red alert colouring on the difference surface in Figure 4 highlights three 'real world' volatility errors:. Because these longer dates are usually less frequently traded, it is not uncommon for traders to take the nearest active period and assume a flat volatility surface beyond that point.

Nevertheless, given the greater sensitivity of long dated options to volatility changes, the risks of this approach are significant. Small differences here have a large impact on a portfolio's value and validation should continue until these differences are zero. Especially since the combination of interest rate and spot rate volatility has such a major impact on these longer dates.

Like the longer dated options highlighted by Letter A, further out of the money strikes tend to trade less frequently. Not uncommon, but still bad practice that could prove expensive.

A particular problem is that the low vols on the trader's surface would have meant that any trades outstanding at these low deltas would probably have failed to appear on any conventional risk management radar. Therefore, as a single instance this is not likely to prove a massive issue.

However, the risk manager might be well advised to keep an eye on the alert log to make sure the trader isn't doing this all the time. The whole approach to risk management of option desks has changed in recent years.

Given the scale of their operations, at least one large bank has already acknowledged to regulators that the days of risk managing traders through micromanaged policing are effectively over.

Their alternative is to adopt a joint responsibility approach involving both traders and risk managers that includes regular and detailed communication, which is then circulated in a condensed form to senior management.

VolSurface fits well with this or pretty much any other approach to managing the risks of volatility surface errors. Having said that, many traders will also quickly appreciate that the service is not just a middle or back office tool, but something that will benefit their own trading profitability - especially where they are active in maintaining auto quoting vols.

There will always unfortunately be traders who deliberately manipulate vols in order to create fictitious profits and bonuses, and VolSurface would be a powerful means of preventing this. However, the majority of traders will welcome anything that gives them a clearer picture of where their vols are in relation to the market. In addition to the modelling-related errors outlined in the "The top four vol suspects" sidebar, VolSurface will also be of value in saving traders from the consequences of any 'fat finger' errors.

In automated options trading, where trade and data volumes flow ever faster and larger, VolSurface's widely sourced data, broad coverage and statistical rigour make it a strong contender. Where raw data are not available, values are calculated using a proprietary methodology intended to replicate the logic used by the most active traders in the market. The following are examples of some of the common ways in which traders' vol surfaces go awry, and which products such as SuperDerivatives' VolSurface are intended to prevent: Price trap A vanilla option is a commoditised product that is not particularly onerous to price and distribute.

By contrast exotic options have added risks that require more than just expiry date volatility to price. Basic exotic modelling requires a replication portfolio a butterfly, two at the money options and a low delta call and put to be priced in order to calculate the additional hedging costs of these options.

This in turn requires a volatility surface that is accurate across its entire surface and not just the maturity. Just a small deviation on the surface can alter hedging costs and prices significantly. As automated trading of options by counterparties has moved from the vanilla into the exotic, the negative consequences of this sort of inaccuracy have increased near exponentially.

Aggregated trading platforms accessed by automated models can capture and arbitrage any pricing discrepancies in milliseconds. Therefore market makers providing liquidity particularly in exotic options have to ensure that they are not susceptible to this sort of arbitrage by maintaining accurate volatility surfaces. Unfortunately, by no means all do.

For example, a common situation is that directly quoted vols are usually unavailable on FX cross rates between minor illiquid currencies. In those situations, dealers or auto quoting platforms will derive synthetic values for these minor pairs from the rates quoted for each minor currency against a major one, for example EUR.

But what if both the volatility surfaces for EUR versus the minor currencies are awry? Admittedly there is a chance that the errors may cancel each other out, but it is at least as likely that they will exacerbate the mispricing for the synthetic pair. The net result is then a potentially substantial loss. On that basis, if three month volatility moves from 10 to 11, then the assumption would be that one month and 12 month volatility would also rise by one. In practice, when underlying markets move quickly, short dated volatilities react and move much faster than long dated ones.

The following method is therefore more accurate:. Assume a flat 10 'at the money' term structure of volatility; to allow for a non-linear shift in volatility, traders simply weight the volatilities by time. They commonly use a base of 90 days and simply state that if volatility goes up by one point then the 90 day volatility will also go up by one point.

Therefore the factor for 30 days would be 1. As existing volatilities are being multiplied by a factor, any error in the volatility surface is being compounded - yet again emphasising the key importance of an accurate surface. Data that matters A 'beer mat' Black Scholes Merton approximation for at the money ATM options, with zero interest rates can be reduced to: Time x Constant x Volatility With a volatility of zero and some time remaining, an option price will equal zero.

The profitability of a derivative business is based on the formula: Staying in line SuperDerivatives VolSurface is intended to prevent your options business from falling into this trap.

Risks The consequences of an inaccurate volatility surface see box "How do I misprice thee? VolSurface at a Glance Vendor: How do I misprice thee? Let me count the ways… The following are examples of some of the common ways in which traders' vol surfaces go awry, and which products such as SuperDerivatives' VolSurface are intended to prevent: The following method is therefore more accurate: A factor is then used, namely: