• Environmental and Resource Economics Review
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• v.17 no.2
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• pp.327-347
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• 2008

This study proposes a new answering mechanism of deciding whether to purchase or not under uncertainty-real risk answering mechanism (R-RAM) for real transaction and hypothetical risk answering mechanism (H-RAM). It IS also. shown that the traditional answering mechanism (TAM) assumed in most of existing contingent valuation methods should be applied in a real transaction without uncertainty. While the willingness to pay (WTP) being simply compared with the bidding price m TAM, the mean of WTP should be greater than the bidding pnce at least by the risk premium for a purchase decision m R-RAM and H-RAM. Only difference between R-RAM and H-RAM is risk premium. The H-RAM takes a smaller risk premium than the R-RAM. This study proposes the contingent valuation method (CVM) with H-RAM could be an alternative to reducing the under-or over-estimation of WTP by comparing the WTP estimates obtained from three different CVMs with TAM, R-RAM and H-RAM.

• Environmental and Resource Economics Review
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• v.14 no.4
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• pp.793-816
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• 2005

This paper proposes a new answering mechanism called RAM (Risk Answering Mechanism) which can be applied to a contingent valuation method. The RAM is derived from the theory of expected utility maximization under the assumption that there exists an uncertainty in a nonmarket good of interest. In RAM, a respondent would accept an uncertain offer only if his or her WTP for the mean of the offer is large enough to exceed the bidding price by more than a risk premium. This is in a striking contrast with a traditional answering mechanism (TAM) in which the WTP is simply compared with the bidding price. Therefore, the TAM would underestimate the WTP by a risk premium without considering the uncertainty a respondent may face. An empirical comparison is made between RAM and TAM using a survey data on the Tong river. It is found that underestimation problem is very serious in the TAM.

• Environmental and Resource Economics Review
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• v.21 no.1
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• pp.129-156
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• 2012

This study analyzes the contribution to the national economy of the stable water supply through managing multi-purpose dam. For the analysis, we consider 17 major multi-purpose dams and build a CGE model with summer water and winter water being the production factors as the base year of 2007. We analyze the economic impact of meeting water demand due to the dam management and estimate the risk premium of reducing the uncertainty of water supply. The analysis results show a significant production decrease in the industries of agriculture, forestry and fisheries and tap water as well as the food and beverage industry using the former industries' output as intermediates in the production and show an production increase largely in steel industry and electronic and electrical industries. Being compared to the benchmark solution, GNP is analyzed as being reduced by 0.22~0.68%. Meanwhile, the risk premium is estimated to be about 4 billion to 24 billion won for the value 01 the measure of relative risk aversion in the range 01 0.5 to 3.0.

• KDI Journal of Economic Policy
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• v.35 no.4
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• pp.31-61
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• 2013

The purpose of this study is to calculate the economic value of transport demand forecasting risks in the road PPP project. Under the assumption that volatility of the road PPP project value occurs only in regard with uncertainty of traffic volume forecasting, this study calculates the economic value of the traffic forecasting risks in the case of the road PPP project. To that end, forecasted traffic volume is assumed to be a stochastic variable and to follow the Geometric Brownian motion as time passes. In particular, this study attempts to differentiate itself from existing studies that simply use an arbitrary assumption by presenting the application of different traffic volume growth volatility and the rates before and after the ramp-up period. Analysis of the case projects reveals that the risk premium related to traffic volume forecast of the project turns out as 7.39~8.30%, without considering option value-such as minimum revenue guarantee-while the project value volatility caused by transport demand forecasting risks is 17.11%. As the discount rate grows higher, the project value volatility tends to decrease and volatility in project value is always suggested to be larger than that in transport volume influenced by leverage effect due to fixed expenditure. The market value of transport demand forecasting risk-calculated using the project value volatility and risk premium-is analyzed to be between 0.42~0.50, implying that a 1% increase or decrease in the transport amount volatility would lead to a 0.42~0.50% increase or decrease in risk premium of the project.

• Asia-Pacific Journal of Business Venturing and Entrepreneurship
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• v.11 no.3
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• pp.131-143
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• 2016

This study investigated how corporation-CEO reputation gap, corporation-related knowledge, CEO-related knowledge, and corporate involvement influence respectively individuals' purchase intention, growth prospect, investment attraction, and corporate preference. Corporation-CEO reputation gap was divided into two groups, CEO reputation risk vs. CEO reputation premium. The survey(N = 451) with a nationwide stratified sampling found the following. First, corporate involvement and corporation-related knowledge have a positive(+) effect on purchase intention, growth prospect, investment attraction, and corporate preference. But CEO-related knowledge and corporation-CEO reputation gap have a negative(-) effect on them. Second, in CEO reputation risk group, CEO-related knowledge has a negative(-) effect on them.

• The Korean Journal of Financial Management
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• v.22 no.2
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• pp.165-187
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• 2005

This paper tries to investigate the relationships among stock return volatility, time-varying risk premium and Korea Discount. Using Korean Composite Stock Price Index (KOSPI) return from January 4, 1980 to August 31, 2005, this study finds possible links between time-varying risk premium and Korea Discount. First of all, this study classifies Korean stock returns during the sample period by three regime-switching volatility period that is to say, low-volatile period medium-volatile period and highly-volatile period by estimating Markov-Switching ARCH model. During the highly volatile period of Korean stock return (09/01/1997-05/31/2001), the estimated time-varying unit risk premium from the jump-diffusion GARCH model was 0.3625, where as during the low volatile period (01/04/1980-l1/30/1985), the time-varying unit risk premium was estimated 0.0284 from the jump diffusion GARCH model, which was about thirteen times less than that. This study seems to find the evidence that highly volatile Korean stock market may induce large time-varying risk premium from the investors and this may lead to Korea discount.

• The Journal of the Korea Contents Association
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• v.15 no.7
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• pp.531-543
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• 2015

Benjamin, Lusht, and Shilling(1998) suggested that the level of deposit can be used as a tool to resolve the problem of adverse selection by the leaseholder under the circumstance of information asymmetry. In this respect, this research aims to verify how the level of deposit and monthly rent mitigate the problem of information asymmetry existing in the office market in Seoul. So far, the analysis of the office market in Seoul has been difficult due to the fixed rate of deposit and monthly rent. This research attempts to adopt the concept of occupancy cost, a global standard indicator that would replace the default risk of monthly payment for analyzing the market. As a result of a series of empirical analysis, the lessors tend to add about 9 percent of risk premium to the occupancy cost to hedge against the default risk of monthly payment. It allows for estimating at what extent one should reflect the leaseholder's default risk of monthly payment for operating deposit and monthly rent in the office building lease market.

• The Korean Journal of Financial Management
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• v.24 no.4
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• pp.75-106
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• 2007

In this study, it is analyzed whether oil price plays a major role in the pricing return on Koran stock market and examined why the covariance risk between oil and return on stock is different in each industry. Firstly, this study explores whether the expected rate of return on stock is pricing due to global oil price factors as a function of risk premium by using a two-factor APT. Also, it is examined whether spill-over effects of oil price volatility affect the beta risk to oil price. Considering the asymmetry of oil price volatility, we use the GJR model. As a result, it shows that oil price is an independent pricing factor and oil price volatility transmits to stock return in only electricity and electrical equipment. Secondly, the two step-analyzing process is introduced to find why the covariance between oil price factor and stock return is different in each industry. The first step is to study whether beta risk exists in each industry by using two proxy variables like size and liquidity as control variables. The second step is to grasp the systematic relationship between the difference of liquidity and size and beta to oil price factor by using the panel-data model which can be analyzed efficiently using the cross-sectional data formed with time series. Through the analysis, we can argue that oil price factor is an independent pricing factor in only electricity and electrical equipment having the greatest market capitalization, and know that beta risk to oil price factor is a proxy of size in the other industries. According to the result of panel-data model, it is argued that the beta to oil price factor augments when market capitalization increases and this fact supports the first assertion. In conclusion, the expected rate of return of electricity and electrical equipment works as a function of risk premium to market portfolio and oil price, and the reason to make beta risk power differentiated in each industry attributes to the size.

• KDI Journal of Economic Policy
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• v.11 no.4
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• pp.69-92
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• 1989

외국인(外國人) 직접투자(直接投資)의 중요성이 국내(國內) 외(外)에서 커지고 있음과 함께 그 투자본국(投資本國)과 대상국(對象國)이 어떻게 결정(決定)되느냐에 대한 학계(學界)의 관심(關心)이 새로워지고 있다. 본(本) 논문(論文)은, 투자본국(投資本國)-대상국(對象國)의 결정문제(決定問題)에 관해, 이를 생산요소(生産要素)의 국가간이동(國家間移動)으로 파악하려는 종래의 국제경제학(國際經濟學), 기업(企業)의 무형자산(無形資産)에서 그 중요한 이유를 찾으려는 산업조직론(産業組織論), 상이(相異)한 통화권(通貨圈)이 주는 투자상(投資上)의 우위(優位) 열위(劣位)를 중시(重視)하는 국제금융론(國際金融論) 등 제(諸) 접근방법(接近方法)들이 시사(示唆)하는 바를 살펴보고, 환율수준(換率水準) 및 그 예상변화율(豫想變化率) 등이 외국인(外國人) 직접투자(直接投資)에 미치는 영향도 재고(再考)하였다. 실증분석(實證分析)에서는 세계(世界)의 대미직접투자(對美直接投資)의 연도별(年度別) 시계열자료(時系列資料)를 사용하여 GNP, 환율수준(換率水準), 예상환율변화(豫想換率變化) 및 환(換)"리스크 프리미엄" 등 거시경제변수(巨視經濟變數)들의 영향을 추정(推定)하여 보았으며, 대체로 유의도(有意度)가 높고 선험적(先驗的)으로 기대하는 바와 같은 영향이 있다는 결과를 얻었다.

• The Korean Journal of Applied Statistics
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• v.22 no.5
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• pp.937-942
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• 2009

In this paper, a continuous-time risk process in an insurance business is considered, where the premium rate is constant and the claim process forms a compound Poisson process. We say that a ruin occurs if the surplus of the risk process becomes negative. It is practically impossible to calculate analytically the ruin probability because the theoretical formula of the ruin probability contains the recursive convolutions and infinite sum. Hence, many authors have suggested approximation formulas of the ruin probability. We introduce a new approximation formula of the ruin probability which extends the well-known De Vylder's and exponential approximation formulas. We compare our approximation formula with the existing ones and show numerically that our approximation formula gives closer values to the true ruin probability in most cases.