2019 Volume 18 Article ID: 005
Time variant distribution of stochastic price dynamics models, plays an important role in evaluating the risk of forest management at any given point in time. In this paper, we present demonstrative results on the use of time variant distribution for risk evaluation, using a geometric mean-reverting stochastic model and log price data. The data used for this study comes from national monthly statistical data of 4m long sugi (Cryptomeria japonica) log prices, and the parameters of the model were derived from a pseudo-likelihood approach, using discretization by the Euler method. The time variant distribution for the stochastic model was numerically computed by applying the method of lines to the Fokker-Planck equation. The results of this study showed that when the management risk is defined by the probability that a price falls below a given threshold price to sustain forest management, the risk increase over time. This was true for all scenarios with different reverted mean values. It was also revealed through this study that the management risk under a higher threshold price tends to reach the risk neutral point of 50 % for sustaining forest management, earlier than those scenarios with a lower threshold price.
