Railway Freight Pricing Model Based On Option Theory

As a major source of income for railway transportation, railway freight traffic have attracted much attention in years. In order to promote railway freight traffic meeting the market requirement, actively participating market competition, improving railway freight traffict situation, China Railways Corporation implemented reform for railway freight traffic organization on June 15,2013. The enterprise functions exercise by China Railways Corporation means that the railway freight transportation is gradually realize marketization operation. However, on the course of railway freight transportation realizing marketization operation, Freight rate as an important part of railway market reform is unavoidable.Freight, one of the most complex and sensitive market factors, is the main economic leverage of railway transportation. Whether the freight institution used properly, will affect the interests of the state and consumers, further more it will affecte the economic benefits and development of China Railways Corporation. Especially, under the pressure of China Railways Corporation's debt and profit, the researchs that can providing theoretical basis and technical support for building the price mechanism enhance railway transportation efficiency and market competitiveness, improving the China Railways Corporation's management status quo, realizing rail freight prices with the dynamic adjustment to market, have high theoretical value and practical significance.Around the core themes, this paper analyzes the management status of railway freight rate, in allusion to the problems of price mechanism, puts forward a urgency proposal that establish the railway freight rate system adapted to market economy. Then, under the background of relax railway freight rate control already proven, introducing the option theory into railway freight pricing activities, it establishes a financial econometric model to maximize the expectation of transportation enterprise and contract customers. Furthermore it analyzes the optimal pricing decision of the railway transportation enterprise and compares customers'optimal purchase decisions, wishing provide theoretical basis and technical support for realize railway freight price with the dynamic adjustment to market. The works finished in this paper are as follows:(1) Summarizing the domestic and foreign researchs on freight rail industry control, revenue management, pricing methods and freight options, Discussing the applicability and limitations of these works, mining the Vacuum fields that have research value. All of these will provide the reference for further research.(2) Redefine the railway industry has demi-natural monopoly characteristics based on economic attributes. Analyze Rail freight rate management status from three dimensional including railway freight rate management mechanism changes, the present situation of management system, and the freight rate structure. Analyze Rail freight administrative privileges from three dimensional including the freight management purview division, the freight rate formulation principle, and the freightrate formulation process. Then analysis the main problems of railway freight rate management in China, puts forward a urgency proposal that establish the railway freight rate system adapted to market economy.(3) Under the background of regulation failure, this paper considers the expectations of the railway transportation marketization after the super ministry reform in China. It establishes a multidimensional different dynamical system that conforms to the characteristics of railway transportation market under the problem of discrete time. This model can be regarded as an extension to Meijdam and Verhoeven 's. It solves the condition of eigenvalue as multiple root and coefficient matrix unable to diagonalize using recursive principle and transformation.To discuss the policies that government could change impact on the variable such as freight, freight volumes after reform utilizes comparative static analysis, prove the feasibility of government relaxed railway freight rate control at long-term(4) Building a multidimensional differential dynamical system that conforms to the characteristics of railway transportation market under the problem of continuous time. The model can be viewed as an extension to Judd's which solves the condition of eigenvalue as multiple root and coefficient matrix unable to diagonalization using recursive principle and Laplace transformation. To discuss the policies that government could change impact on the variable such as freight, labor after reformation utilizes comparative static analysis in short-term, prove the feasibility of government relaxed railway freight rate control at short-term(5) According to the concept of options, combining with the characteristics of railway freight transportation market, Introducing the option theory into railway freight pricing activities, this paper establishes a multi-phase trigeminal tree pricing model to maximize the expectation of transportation enterprise and contract customers. Then it analyzes the optimal pricing decision of the railway transportation enterprise and compares customers'optimal purchase decisions.Study the intrinsic relationship among the basic elements of the optimum option order, option prices and Exercise Price. Provide theoretical support for the design of railway freight options.(6) In order to depict the fluctuations in railway freight option pricing strategy caused by the nonmarketing uncertainty which arrive at random discrete time points. A multi-phase trigeminal tree pricing model is established with jump diffusion process, then the transformation of martingale measure is carried out using Girasol theorem effectively which can simplify the solution of the nonlinear discrete jump process, and then the railway freight option pricing problem is researched with jump diffusion process.