What does shadow pricing mean? The economic implications of shadow prices

Shadow ** is considered to be a "reasonable evaluation of labor, capital, and the importation of goods for scarce resources". In 1954, he defined shadow ** as:"In the sense of equilibrium, it means that the factors of production or products are intrinsic or real"。Samuelson goes a step further by suggesting that shadow is a mathematically expressed way of reflecting the optimal use of resources.

The United Nations defines shadow as "the opportunity cost of an input (such as capital, labor, and foreign exchange) or the loss of its quantity by one unit to the economy as a whole".

The former Soviet economist L. V. Kantrovich put forward the optimal theory according to the economic development of the Soviet Union at that time and the requirements of reasonable commodity pricing. The main point of view is to take the finite nature of resources as the starting point and the optimal allocation of resources as the basis for the formation of the first one, that is, the optimal one does not depend on the average consumption of the sector, but is determined by the individual consumption (marginal consumption) under the worst production conditions. This optimality is regarded as a shadow by the American-Dutch economist Koopman and the former Soviet economic community.

Shadow pricing is also known as "Calculation", "Shadow", "Optimum". It was first proposed by the Dutch economist Jenn Tinbergen at the end of the 30s of this century, using the mathematical method of linear programming, which reflects the optimal allocation of social resources.

Shadow pricing refers to the re-evaluation of the valuation object held by the manager on each valuation date using market interest rates and transactions, i.e., "shadow pricing".

When the deviation between the NAV and the shadow pricing reaches or exceeds the NAV, or when the Manager believes that other material deviations have occurred, the Manager may, after agreement with the Custodian, make adjustments to make the NAV more fairly reflect the value of the asset and ensure that the NAV calculated by the amortized cost method will not cause material damage to the holders.

The role of shadow pricing is to avoid a significant deviation between the net asset value calculated using the amortized cost method and the net asset value calculated at market interest rates and market prices, thereby producing dilutive and unfair results for the interests of the holders.

The shadow of a certain resource is the value by which one unit of the resource is added to increase the target profit.

Shadow refers to the re-evaluation of the valuation object held by the manager on each valuation date using market interest rates and transactions. When the deviation between the net asset value and the shadow reaches or exceeds the net asset value, or the manager believes that other material deviations have occurred, the manager may make adjustments after agreement with the custodian to make the net asset value more fairly reflect the asset value and ensure that the net asset value calculated by the amortized cost method will not cause material damage to the holders. Shadow** reflects the marginal contribution of a resource to the objective function.

That is, the efficiency with which resources are converted into economic benefits. Shadow** reflects the scarcity of resources and reflects the marginal use value of resources.

Shadow is the type of bond that the company calculates based on the estimated market yield, reflecting the level at which the money market holds the bond under existing market conditions. **The company routinely calculates its net asset value using the amortization method, which is based on the premium and discount of the historical cost and amortization of the bonds. If there is a large change in the market, there will be a large difference between the valuation of the shadow** and the cost amortization method.

When the deviation between the two is large, the company should adjust the portfolio according to the situation to control the risk.

The ** calculated by the linear rule method reflects the optimal use of resources. Calculus is used to describe the shadow of a resource, that is, when a resource is increased by a quantity to obtain a new maximum value of the objective function, the ratio of the increment of the maximum value of the objective function to the increment of the resource is the first-order partial derivative of the objective function to the constraint (i.e., the resource). When the linear programming method is used to solve the optimal utilization of resources, that is, in the process of solving how to maximize the total output of limited resources, the corresponding minimum value is obtained, and the solution is the dual solution, and the minimum value is used as the economic evaluation of the resource, which is manifested as a shadow.

Shadow is the actual production and operation activities of the material form to hide the micro of the non-material market, from the side of the product reflects its meaning and potential value, so as to make the most reasonable feedback on the evaluation and decision-making of the market.

It refers to when the social economy is in a certain optimal state, it can reflect the consumption of the society, the scarcity of funds and the demand for final products.

If the objective function is profit, here is the shadow profit (which is of little significance); If the objective function is the amount of sales, here is the shadow**. People usually talk about the latter, where the objective function is the amount of sales, which is the shadow. From the interpretation of the formula, one can see that the shadow of this resource is the resource itself plus its marginal profit contribution to the product.

From this, people can see that it is the marginal ** and the highest purchase price of resources; It is the opportunity cost of the resource, the lowest selling price. This is the economic significance of shadow**.

Now people look at this text: "Under the conditions of a complete market economy, when the market price of a certain resource is lower than that of the shadow**, enterprises should buy the resource to expand production; When the market price of a resource is higher than the company's shadow**, the company's decision-makers should sell the existing resources." When the market of a resource is lower than the shadow, buy to expand production, and the marginal contribution of the resource to production is the difference between the shadow and the market. When the market of a certain resource is higher than the shadow, the existing resource is sold, and the effect is:

This resource does not need to be put into production to obtain excess profits equivalent to the difference between the market and the shadow. Of course, in order to ensure the realization of the overall goal, the resource should be sold at a higher market than the shadow under the premise of meeting the production of the factory.