Shadow Pricing

Shadow Pricing

In a cost-benefit analysis, the assignment of a dollar value to an intangible asset or liability that cannot be sold. Shadow pricing is arbitrary; that is, because these assets and liabilities cannot be sold, and analysts must make an educated guess on their value. An example of shadow pricing occurs in the cost-benefit analysis of building a factory. The analysis must calculate the cost of blight on the neighborhood in which the factory is built. Because there is no way to put a real value on the cost of blight, shadow pricing assigns an arbitrary value to it.
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It stated : "Critically, this will reduce revenue leakage based on the product's ability to do shadow pricing on negotiated preferential pricing,"
There are some major issues involved in cost benefit analysis, of which the most important are valuation of costs and benefits, shadow pricing, discounting, income distribution, the treatment of uncertainty and the measurement of externalities (e.
One of the central concerns is the analysis of shadow pricing where economic values of costs and benefits are important issues that need to be specifically measured.
It therefore follows that a financial firm that wants to maximise shareholder value cannot use the relatively straightforward capital pricing tools that are available to nonfinancial firms, and must seek an alternative shadow pricing tool to determine whether an investment adds to or detracts from shareholder value.
RISK MEASUREMENT, SHADOW PRICING AND THE ROLE OF THE SHARPE RATIO
3 For an intuitive discussion of shadow pricing and project evaluation, see Tower (1991).
Any topic of further interest could be selected for in-depth study from Chapters 3 through 10, where welfare weights, competitive equilibrium, allocative and cost efficiencies, shadow pricing and a cost-benefit framework are discussed.
Fitch acknowledges that in the current market environment, portfolio MtoM shadow pricing with references to available market quotations may not necessarily arrive at a fair value of the fund's portfolio, if the fund holds high-quality short-term securities that reasonably can be expected to be held to maturity in the face of redemption activity.
Durdag (1979) Shadow Pricing and Macroeconomic Analysis: Some Illustration is from Pakistan.
We find that best practice in the mining sector vis-a-vis carbon risk management continues to be 1) use of carbon shadow pricing in project planning and development, 2) board-level oversight of corporate carbon performance and 3) strategic consideration of upside opportunities linked to emissions trading, CDM investments and alternative energy infrastructure.
Application of Shadow Pricing to Country Economic Analysis with an Illustration from Pakistan".
One, it bases the economic evaluation on a consistent shadow pricing system, and, two, it incorporates distributional considerations into the analysis.