Price indices, types

Duration increases as coupon and yield decrease. The lower the coupon, the greater the relative weight of the cash flows received on the maturity date, and this causes duration to rise. T ong the non—plain vanilla types of bonds are some whose coupon rate varies according to an index, usually the consumer price index. Index-linked bonds generally have much lower coupons than vanilla bonds with similar maturities. This is true because they are inflation-protected, causing the real yield required to be lower than the nominal yield, but their durations tend to be higher. 

In lengthy projects or projects where there is a commitment to long term maintenance, the supplier will wish to ensiue protection against the effects of unpredictable inflation. To handle this problem, it is customary to include a clause which allows charges to be increased in accordance with the rise in costs. The Government publishes several different financial indices the Retail Price Index is the most widely known but the most appropriate one for the purposes of this type of contract is the Business Costs Index. 

Table 9-50 gives typical values of the exponent n for many types of equipment. Prices are North American with a Marshall and Swift index of 1000, mainly for carbon steel equipment. 

Several sources (References 19. 20, 21, and 22) are available for estimating pumps and drivers to check in-house coiTelations or to fill in w here data is not available. Care must be exercised in using construction cost indexes to update the literature data. It would be w ise to calibrate the indexes and literature data by getting vendor prices on a few of the larger, more expensive pumps, and 5% or 10% of the common types of pumps in the project being estimated. 

A collection of scenarios is generated that best captures the trend of raw material prices of the different types of crude oil and the sales prices of the saleable refining products for a representative period of time based on available historical data. A probability ps, with index s denoting the sth scenario, is assigned to each scenario to reflect the likelihood of each scenario being realized with ps = 1. 

The most accurate method for determining process equipment costs is to obtain firm bids from fabricators or suppliers. Often, fabricators can supply quick estimates which will be very close to the bid price but will not involve too much time. Second best in reliability are cost values from the file of past purchase orders. When used for pricing new equipment, purchase-order prices must be corrected to the current cost index. Limited information on process-equipment costs has also been published in various engineering journals. Costs, based on January 1, 1990 prices, for a large number of different types and capacities of equipment are presented in Chaps. 14 through 16. A convenient reference to these various cost figures is given in the Table of Contents and in the subject index. 

However, this cost in 1991 dollars has to be escalated to 2001 dollars. As shown in Problem 18.2, the escalated cost is the product of the base cost and the escalation factor. The costs of gas absorbers can be escalated via one of the Vatavuk Air Pollution Control Cost Indexes (VAPCCIs). Updated quarterly since 1994 and published in Chemical Engineering, the VAPCCIs have been developed for gas absorbers and eight other types of air pollution control devices. The annual indices for gas absorbers for the years 1994 and 2001 are 100.8 and 114.4, respectively. In addition, the EPA study documenting the development of the VAPCCIs showed that gas absorber prices increased by 5.06% from 1991 to 1994 [Ref. 7]. Combining this increase with the VAPCCI data, we get... 

The reverse convertible bonds have increased popularity in Europe and United States. This type of instrument gives to the issuer (not the bondholder) at maturity the right to exchange the bond into shares or to redeem it at par value plus accrued interests. In the first case, the bond is exchanged if the share price is less than conversion price, or if the conversion value is less than par value. Conversely, the issuer can redeem the bond. They typically have a domestic stock as underlying security, but they can also include foreign shares and indexes. 

In April 1999 the SNDO launched two new linkers, a new 30-year bond (3104, 3.5% 2028) and a new 16-year bond (3105, 3.5% 2015). These two bonds were issued with an inflation floor, meaning that the new bonds had a similar structure to United States and French inflation-indexed bonds. The format of issuing inflation linked bonds was changed, this time moving back to bid price auctions, every three months. The reason being that this type of auction was common at the international level, allowing clearer signals of the volume on offer. The primary dealers were permitted to switch linkers directly with the SNDO on a daily basis, in order to enhance the liquidity of the market. 

The M S Index and the CE Index can also be used for world-price comparison, if the changes in costs according to the local economics, type of industry, and kind of equipment (besides time) are accounted for [19]. 

The value of a solvent for industrial use is largely determined by a limited number of properties. Apart from price, these are solvent power, volatility, stability and ease of handling. Other physical properties such as density, refractive index etc. are usually of secondary importance, with viscosity taking an intermediate position. The viscosity of solvents and their blends is in general low and as such of limited importance. Solution viscosity, however, usually plays a major role in solvent selection, but is mainly determined by the type and quantity of solute. 

The calorific value can be correlated with the fixed carbon content of the coal. It is a good parameter for coal classification of specific coal types and as a price determination index ( per MBtu) for commercial steam coals. 

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