Application of modern financial portfolio theory to water resource portfolios

2006 ◽  
Vol 6 (5) ◽  
pp. 35-41 ◽  
Author(s):  
M. Beuhler

Modern portfolio theory developed for financial markets has application to water resource portfolios. It can help make decisions on how to optimally meet future water needs. By explicitly considering volatility and correlations among water resource alternatives, rational resource combinations can be selected. It enables water planners to decide how much to invest in traditional ways to meet water needs such as surface and groundwater supplies and to decide how much to invest in non-traditional, more expensive supplies such as recycling, conservation, and desalination. It enables explicit risk reduction of systematic risks due to the hydrologic cycle such as drought, and non-systematic risks such as water quality, climate, and energy. This paper describes a qualitative application of modern portfolio theory to water resources. Quantitative application will require the development of additional data.

Author(s):  
A. C. Sun ◽  
V. C. Tidwell ◽  
R. Thomas ◽  
J. R. Brainard ◽  
P. H. Kobos ◽  
...  

Water resource management for most Southwestern states requires collaborative solutions that cross regional, state, and federal judicial boundaries. As most of the region experiences drought-like conditions as well as population growth, there is a growing concern about sustainability of the water resource to meet industrial, agricultural, and residential demands. Technically, seeking a consensus path requires modeling of the hydrologic cycle within a prescribed region. Credible models must capture key interdependencies of various water resources, use historical data for calibration, and provide temporal/spatial resolutions that are aligned with the interests of the decision makers.


Water ◽  
2021 ◽  
Vol 13 (24) ◽  
pp. 3534
Author(s):  
Bofan Wang ◽  
Yutong Tian ◽  
Xuanjin Li ◽  
Chunhui Li

In addition to the social economy and the rapid development of industry and agriculture, water demand is increasing and poses challenges in the over-exploitation of water resources. This research establishes a model to assess the sustainable exploitation of water resources based on system dynamics theory and STELLA software, which solves the imbalanced allocation of industrial water, agricultural water and domestic water. The model is composed of two parts: the water quantity system (including economy, population, water availability and water demand) and the water quality system (composed of the aquatic environment), which is suitable for Chengde City with a water resource shortage. The proposed model is established by data of Chengde City from 2007 to 2016 and is verified by 2017 data. Furthermore, in order to compare the water quality and water utilization of Chengde City under different development scenarios up to 2025, the sensitivity analysis of each variable (e.g., population) is carried out in this model, and thereby the water resource utilization scenarios are acquired. Specifically, four scenarios are designed and denoted: Scenario 1: keeping the status quo unchanged, Scenario 2: slowing down economic development and devoting more energy to environmental protection, Scenario 3: only focusing more on economic development and Scenario 4: aiming at steady and rapid economic growth and an eco-friendly environment. The results shows that Scenarios 2 and 3 facilitate high-effective water resource utilization compared with the current development, Scenario 1. Scenario 4 fosters the balance of water resources supply–demand in the future and preserves the water quality. This study provides an inspiring method for realizing the sustainable utilization and optimizing allocation of water resources in Chengde City.


2013 ◽  
Vol 67 (7) ◽  
pp. 1634-1641 ◽  
Author(s):  
Y. Huang ◽  
J. Chen ◽  
S. Zeng ◽  
F. Sun ◽  
X. Dong

Urban water is facing the challenges of both scarcity and water quality deterioration. Consideration of nonconventional water resources has increasingly become essential over the last decade in urban water resource planning. In addition, rapid urbanization and economic development has led to an increasing uncertain water demand and fragile water infrastructures. Planning of urban water resources is thus in need of not only an integrated consideration of both conventional and nonconventional urban water resources including reclaimed wastewater and harvested rainwater, but also the ability to design under gross future uncertainties for better reliability. This paper developed an integrated nonlinear stochastic optimization model for urban water resource evaluation and planning in order to optimize urban water flows. It accounted for not only water quantity but also water quality from different sources and for different uses with different costs. The model successfully applied to a case study in Beijing, which is facing a significant water shortage. The results reveal how various urban water resources could be cost-effectively allocated by different planning alternatives and how their reliabilities would change.


2020 ◽  
Author(s):  
Athina Angeli ◽  
Eleni Karkani ◽  
Angelos Alamanos ◽  
Stefanos Xenarios ◽  
Nikitas Mylopoulos

<p>Water security poses one of the biggest challenges of the century. It is a versatile problem, going beyond the traditional concepts of hydrology and water quality. It is difficult to give a single definition, since water security signifies a "safe operating subspace" within a multi-dimensional space that maps physical resource availability, water quality, demand, infrastructure and economic choices. The main idea of water security, as addressed in the present study, is the need to balance human and environmental water needs.</p><p>In arid and semi-arid areas, including Greece, intensification of agriculture accompanied with poor management is a common phenomenon. These attempts to meet economic and productive objectives, combined with the physical characteristics of these areas, has led to quantitative and qualitative water degradation, questioning the sustainability of water resources. In Greece, the Ministry of Environment Management Plans found that only 1 or 2 cases in the country are in “a good status”. This study aims to propose a way towards integrated and sustainable management, through hydro-economic tools: water balance, profits from agricultural activities, water value, and water quality. Water security is examined based on these terms in several Greek rural watersheds.</p><p>The methodology consists of the estimation of water availability, water demand, and thus water balance in surface and groundwater resources. The profits from the agricultural activities are estimated from a straightforward economic model, based on the gross profits and production costs. Water quality is based on measurements on concentrations of fertilizers, chemical parameters and pesticides, and its improvement is examined through the quantitative replenishment due to several strategies exploiting dilution processes in surface and groundwater. The analysis used data from the period 2005-2015, and a set of management scenarios were examined, suggesting technical measures (e.g. reducing losses, improving irrigation methods) and crop replacement scenarios, taking into account factors affecting these decisions, and also the Ministry’s recommendations. The water value was calculated using the “change of the net-income” method. All the above factors’ results indicate the degradation of the examined areas.</p><p>More specifically, the watersheds of Lake Karla, Almyros, Koronia, and Loudia were selected as the most representative cases. These watersheds seem to have limited water availability, intensified agriculture, poor water quality and management issues. The Lake Karla watershed is characterized from overexploited surface and groundwater resources, Loudia and Koronia watersheds face the same issues plus a strong qualitative degradation, Almyros watershed main issue is the salinization of its coastal aquifer. In conclusion, the first steps that are introduced in this study can be a starting point for more integrated water security management, helping local water managers understand and address the above issues.</p><p>Overall, it is a novel attempt to integrate all the above parameters in one framework, for a ten-year horizon, and comparing rural Greek case studies. Non-comparable factors also exist among different case studies, which are discussed, however the evidences support the finding of the general degradation and unsustainable management in the country.</p><p><strong>KEYWORDS:</strong> Water Security, agricultural watersheds, Greece, Water Resources Management, Hydro-economic modeling, water quality, scenario analysis.</p>


Water ◽  
2019 ◽  
Vol 11 (12) ◽  
pp. 2443 ◽  
Author(s):  
Marnix van der Vat ◽  
Pascal Boderie ◽  
Kees Bons ◽  
Mark Hegnauer ◽  
Gerrit Hendriksen ◽  
...  

The Ganga Basin in India experiences problems related to water availability, water quality and ecological degradation because of over-abstraction of surface and groundwater, the presence of various hydraulic infrastructure, discharge of untreated sewage water, and other point and non-point source pollution. The basin is experiencing rapid socio-economic development that will increase both the demand for water and pollution load. Climate change adds to the uncertainty and future variability of water availability. To support strategic planning for the Ganga Basin by the Indian Ministry of Water Resources, River Development and Ganga Rejuvenation and the governments of the concerned Indian states, a river basin model was developed that integrates hydrology, geohydrology, water resources management, water quality and ecology. The model was developed with the involvement of key basin stakeholders across central and state governments. No previous models of the Ganga Basin integrate all these aspects, and this is the first time that a participatory approach was applied for the development of a Ganga Basin model. The model was applied to assess the impact of future socio-economic and climate change scenarios and management strategies. The results suggest that the impact of socio-economic development will far exceed the impacts of climate change. To balance the use of surface and groundwater to support sustained economic growth and an ecologically healthy river, it is necessary to combine investments in wastewater treatment and reservoir capacity with interventions that reduce water demand, especially for irrigation, and that increase dry season river flow. An important option for further investigation is the greater use of alluvial aquifers for temporary water storage.


2014 ◽  
Vol 36 (1) ◽  
pp. 23-44 ◽  
Author(s):  
Cécile Edlinger ◽  
Antoine Parent

This article is an addition to the revisited history of financial economics. While Markowitz (1952, 1959), Roy (1952), and Tobin (1958) are recognized as the founding fathers of Modern Portfolio Theory, we recall that its origins should be traced prior to 1914. We consider two, turn-of-the-century, French, financial analysts and suggest that notions such as risk aversion and risk premium, international diversification and correlation, specific and systematic risks and arbitrage were common sense for Leroy-Beaulieu (1906) and Neymarck (1913). The contribution of these authors to the development of Modern Portfolio Theory—long before the 1950s—should not be underestimated.


Water ◽  
2020 ◽  
Vol 13 (1) ◽  
pp. 16
Author(s):  
Ge Wang ◽  
Changlai Xiao ◽  
Zhiwei Qi ◽  
Xiujuan Liang ◽  
Fanao Meng ◽  
...  

In view of the large spatial difference in water resources, the water shortage and deterioration of water quality in the Chang-Ji Economic Circle located in northeast China, the water resource carrying capacity (WRCC) from the perspective of time and space is evaluated. We combine the gray correlation analysis and multiple linear regression models to quantitatively predict water supply and demand in different planning years, which provide the basis for quantitative analysis of the WRCC. The selection of research indicators also considers the interaction of social economy, water resources, and water environment. Combined with the fuzzy comprehensive evaluation method, the gray correlation analysis and multiple linear regression models to quantitatively and qualitatively evaluate the WRCC under different social development plans. The developmental trends were obtained from 2017 to 2030 using four plans designed for distinct purposes. It can be seen that the utilization of water resource is unreasonable now and maintains a poor level under a business-as-usual Plan I. Plan II and Plan III show that resource-based water shortage is the most critical issue in this region, and poor water quality cannot be ignored either. Compared with Plan I, the average index of WRCC in Plan IV increased by 51.8% and over 84% of the regions maintain a good level. Strengthening sewage treatment and properly using transit water resources are more conducive to the rapid development of Chang-Ji Economic Circle.


2018 ◽  
Vol 20 (3) ◽  
pp. 739-750 ◽  
Author(s):  
Sangmin Shin ◽  
Heekyung Park

Abstract Recent water-related disasters have shown that not all disrupted events are prevented with water infrastructure systems and current water systems are becoming more vulnerable to disruptions due to the high uncertainty of disrupted events. Many scholars in various fields suggest diversification in the system as a way to respond to the uncertainty. In the real world, however, it is difficult to maximize its use, especially with water infrastructure, due to high costs and incomplete assessment methods. Thus this study attempts to develop a method to quantify cost-effectiveness of diversification using a drought case study in Korea. Modern Portfolio Theory is used to find optimal combinations of water resources infrastructures in terms of diversification. First, expected return and risk of individual water resources for water supply are estimated. Then, expected return and risk of individual portfolios of the water resources are evaluated by varying their shares of 0 to 100%. Finally, non-inferior portfolios are identified and an optimal portfolio for an acceptable return or risk is selected as a solution. Consequently, a portfolio is selected as a desirable one to practically enhance diversification in water infrastructure systems against real world uncertainty in consideration of cost and budget.


2021 ◽  
Vol 13 (19) ◽  
pp. 10835
Author(s):  
Chong Meng ◽  
Siyang Zhou ◽  
Wei Li

Sustainable watershed development suffers from severe challenges, such as water pollution and water scarcity. Based on an analysis of water quality and water utilization in the Fenhe River Basin, an inexact two-stage stochastic programming model with downside-risk aversion was built for optimal water resource allocations for the four primary water use sectors (industry, domestic use, agriculture, and the environment) in the Fenhe River Basin. The model aims to maximize the comprehensive watershed benefits, including water benefits, water costs, water treatment costs, and downside risks. The constraints are water quality, available water resources, and sectoral demands in different hydrological scenarios. The results show that pollutant emissions decrease as risk-aversion levels increase and show the opposite trend in the midstream and downstream areas. The increase in water resource allocation for agriculture and reduction in ecological water indicate that agriculture suffered the greatest water shortage and risk. Improving water recycling and coordinating the transferred water resources increases the comprehensive benefits and reduces sectoral risks. The model effectively manages rational water allocations under dual constraints and provides support for coordinating socio-economic development and environmental protection in the river basin.


Introduction. Water is the most important resource in human life because the birth and further development of living organisms take place in water. Ancient tribes se???? led close to rivers or other reservoirs where over time there were cities that later became the cradle of entire civilizations. Many civilizations had access to the sea, and that gave them endless opportunities in navigation and development of colonialism. Water-resource potential of the territory is an important indicator that has infl uenced the development of human civilization for millennia. Water resources of a territory have always had a huge impact on the development of a nation, as well as its mentality and culture. The territory of Kyiv region at one time was the cradle of the origin of our people and our culture. Kyiv was built on the slopes of the Dnieper River. Thanks to the great river, in the XI century the city became unprecedented for Europe at that time. The rivers were a source of drinking water, transport routes, protection against nomads and a place to catch fi sh. Over the years, the great importance of the rivers has not diminished, and now the water resources of the region are used no less, but even several times more than at the beginning of civilization. Studying the water-resource potential of Kyiv region is important, as water is involved in all spheres of people’s lives and more detailed study of it can give more accurate information about the amount of water resources and possibilities of their use. The purpose of this article is a comprehensive assessment and territorial features of the water-resource potential of Kyiv region for the purpose of rational water use and water consumption. Contribution of the main research material. Water resources of the area consist of surface and groundwater. There are 1523 rivers in the region, three of them are large (the Dnipro, Desna, Prypyat), eight are medium (the Uzh, Teteriv, Irpin, Ros, Trubizh, Supiy, Rotny Orzhitsa and Rotny Tikіch), others are small rivers with streams. In Kyiv region there are 750 small area lakes. The location of the lakes has a pattern: most lakes are in the north and east. 58 reservoirs and 2389 ponds have been made in the region (total water volume is 462.5 million m3). 17 reservoirs out of such a large number are in poor condition. The largest number of reservoirs is located on the river Ros. There is no any other river in the region that has such a big number of reservoirs. That is related to the peculiarities of the territory and the needs of the people in that area. Rivers are the main suppliers of drinking water in Kyiv region. An integral component of water resources is rivers runoff, which is used for the needs of industry, power engineering, agriculture, transport and household. The volume of the rivers runoff in Kyiv region is considerable, although it still has different values in the districts of the region. The largest runoff volume is in the Kagarlyk and Ivankiv districts, and the lowest is Boryspil, Borodyanka, Vasylkiv and Myronivsk districts of Kyiv region. The formation of runoff is influenced by various factors, such as the area of the district (Ivankiv district is the largest in the region), presence of rivers and their sizes. Generally, areas with access to the banks of the Dnieper River have no water scarcity. An important part of the water resources is the groundwater represented in the region by the Dnieper-Donetsk artesian basin. Groundwater is distributed unevenly within the region, thus, there are more reserves in the northern districts than in the southern ones. However, the depth of the deposit, which increases in the north-east directions towards the sinking of the crystalline rocks, plays a significant role there. The peculiarity of the region is a big difference between the forecasted and approved groundwater reserves. Most of the forecasted resources are concentrated within Vyshhorod district (219.9 million m3 / year), although, the approved ones are only 3.5 million m3 / year, which is a very small indicator. That means that in Vyshhorod district are approved only 2% of the forecasted resources, which is the lowest number in the region. The highest indicator of approved exploited reserves is in Kagarlyk district (100% to the forecasted ones). The forecasted resources are 3.2 million m3 / year, and the approved ones are 3.175 million m3 / year. Vasylkiv, Makariv, Myronivsk, Obukhiv, Poliske and Stavishchansk districts of Kyiv region have also a significant percentage of approved resources. In Zguriv district, groundwater is not commissioned at all. In terms of water resources, the region has enough surface and groundwater resources: in low-water year 95% of supply there is 996.5 thousand m3 of total and 26.4 thousand m3 of local surface water resources per 1 sq.km, and per one inhabitant - 6.48 and 0.18 thousand m3, respectively. Water supply of the territory and population is almost 6-11 times larger and by local resources - 1.2-2.2 times less than on average in Ukraine. Conclusions. Therefore, in most cases the population of cities, districts and industrial sites of the region are concentrated in areas of low water supply. In addition, distribution of rivers runoff is uneven throughout the year and when its use (in summer) increases, it has little value, which may limit further development of water-intensive industries. Distribution of water and resource potential across the region is uneven and varies from 34.78 million m3 (Boryspil district) to 785.36 million m3 (Kagarlyk district). Groundwater is a source of the region’s water resources.


Sign in / Sign up

Export Citation Format

Share Document