Pernille Wegener Jessen

Optimal Investment in Structured Bonds

Structured investment vehicles for retail customers have become increasingly prevalent, and also increasingly complex. Yet numerous articles have shown that many popular structures offer rather poor performance for the buyer, relative to the expected payoff and to the cost of producing that payoff with a combination of simpler derivative contracts. Retail investors seem to like payoffs resembling that of a protectiveput strategy very much, with exposure on the upside but limited risk of loss on the downside. Why should they be willing to pay more for such products than they are worth? In this article, Jessen and Jørgensen show that such structured products can make sense for an investor with an ordinary utility function if the diversification value of exposure to the underlying index is great enough and the structured product is the only way they can obtain exposure to that index.

Smart metering systems and data sharing: why getting a smart meter should also mean getting strong information privacy controls to manage data sharing

Smart meters are being installed in consumers’ homes as the world moves to the smart grid of intelligent energy networks. Smart meters are near real-time communication devices that can collect and communicate a vast amount of personal data about each customer’s energy use. Questions about who should have access to such data and for what purposes raise significant consumer privacy concerns about data sharing. Because data sharing facilitates secondary uses of energy use data and is essential for third party access to the data, data sharing is a critical activity that needs to be analysed from an information privacy perspective. This article makes three important contributions. First, it identifies the key privacy and data protection concerns for both the EU and USA consumers related to data sharing in smart metering systems. Second, it provides a comparison of EU and US privacy and data protection law as it applies to smart metering systems, revealing gaps in coverage in both systems. Third, it explains how important privacy concerns related to data sharing are being addressed in the EU and the USA, including specific examples of legislation and self-regulatory mechanisms that have been adopted to protect privacy in smart metering systems. From this comparative analysis, potential privacy-enhancing solutions can be identified. Ultimately it will be up to government regulators and industry to adopt local solutions, but the goal of this article is to encourage adoption of regulatory solutions and industry best practices that are consistent with privacy rights and information privacy principles. K E Y W O R D S : smart meters, data sharing, privacy, data protection, EU, USA College of Business, Oregon State University, Corvallis, Oregon, USA School of Business and Social Sciences, Aarhus University, Denmark *Corresponding author. E-mail: pwj@asb.dk VC The Author (2014). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oup.com. 1 International Journal of Law and Information Technology, 2014, 0, 1–39 doi: 10.1093/ijlit/eau001 Article at M ount R oyal U niersity on Jne 4, 2015 http://ijlirdjournals.org/ D ow nladed from 1 . I N T R O D U C T I O N Smart meters are being installed in consumers’ homes as the world moves to the smart grid of intelligent energy networks. The EU has made substantial investments in the smart grid, with the EU seeking to have 80 per cent of customers using smart meters for the electricity and gas markets by 2020. The USA has also set goals to reduce energy demand and has made significant investments to promote smart grid technologies. Although the USA has not set a national target for smart meter installation and adoption has been relatively slow, it is estimated that nearly half of USA homes will have a smart meter by 2015. 1 Stephan Renner and others, European Smart Metering Landscape Report, Deliverable D2.1 of the project ‘SmartRegions – Promoting best practices of innovative smart metering services to European regions’ funded by Intelligent Energy – Europe (Contract N: IEE/09/775/S12.558252, Vienna (February 2011) (European Smart Metering Landscape Report), available in PDF through Google search (accessed 18 October 2013); ‘Advanced Electric Meter Installations Rising in Homes and Businesses,’ US Energy Information Administration (EIA), (15 March 2011) 1 (EIA Report) (reporting that 39% of all US electrical customers had advanced meters as of 2009), <http://www.eia.gov/todayinenergy/detail.cfm?id1⁄4510> accessed 18 October 2013. 2 Commission’s Recommendation of 9 March 2012 on preparation for the roll-out of smart metering systems (2012/148/EU), Official Journal of the European Union, L 73/11, note 1 (9 March 2012) (Commission’s Recommendation on Smart Metering Systems); Article 29 Data Protection Working Party’s Opinion 12/2011 on smart metering, p 2, 00671/11/EN/WP 183 (4 April 2011) (Art 29 Opinion 12/2011) (discussing milestones in the EU’s Third Energy Package adopted in 2009); Opinion of the European Data Protection Supervisor (EDPS) on the Commission Recommendation on preparations for the roll-out of smart metering systems, EDPS, p 2 (8 June 2012) (commenting that the roll-out of smart metering systems for the electricity and gas markets is required under Directive 2009/72/EC concerning common rules for the internal market in electricity and Directive 2009/73/EC concerning common rules for the internal market in natural gas (OJ L 211, 14.08.2009, p 95) (EDPS Opinion on Smart Metering Systems). 3 The USA has also made commitments to improve energy efficiency and update the electric grid, although it has not set national numerical adoption goals for smart metering systems. A Policy Framework for the 21st Century Grid: Enabling Our Secure Energy Future, Executive Office of the President of the United States, p 1 (June 2011) (US Energy Framework for the 21st Century) <http://www.whitehouse.gov/ sites/default/files/microsites/ostp/nstc-smart-grid-june2011.pdf> accessed 18 October 2013. Since Congress adopted the Energy Independence and Security Act of 2007 (EISA), Pub L 110-140, 121 Stat 1492 (2007) (EISA, codified at 42 USC s 17381 et seq.) and the American Recovery and Reinvestment Act of 2009, Pub L No 111-5, div A, title IV, 123 Stat 115 (2009), the US Department of Energy has awarded billions of dollars in federal funding for smart grid projects that include support for smart meter installation to enable conversion to the smart electrical grid. US Energy Framework for the 21st Century, p 2 (reporting that recipients of the federal funding to upgrade the smart electrical grid include private companies, service providers, manufacturers and cities and that total public–private investment exceeds

Optimal responsible investment

8 billion). See also, Russell Frisby and Jonathan Trotta, ‘The Smart Grid: The Complexities and Importance of Data Privacy and Security’ (2011) 19 Comm Law Conspectus 297–341, 297 and 305–10 (providing an overview of US legislation that addresses the smart grid and federal agencies with regulatory responsibilities related to the smart grid). 4 Mark Chediak, ‘Smart-Meter Defiance Slows

Profiling the mobile customer – Privacy concerns when behavioural advertisers target mobile phones – Part I

29 Billion U.S. Grid Upgrade’ Bloomberg (May 2012) <http://www.bloomberg.com/news/2012-05-08/smart-meter-defiance-slows-adoption-of-29-billion-grid. html> accessed 18 October 2013 (reporting statistics for smart meter implementation in the USA, according to the Institute for Electric Efficiency, a Washington-based research group financed by investor-owned utilities) (Chediak). As of September 2011, about 27 million smart meters had been installed in the USA, ibid. 2 Smart metering systems and data sharing at M ount R oyal U niersity on Jne 4, 2015 http://ijlirdjournals.org/ D ow nladed from Smart meters are near real-time communication devices that can collect and communicate a vast amount of personal data about each customer’s energy use. It is anticipated that smart meters connected to smart grids will facilitate better management of the energy supply by making it possible to improve operational efficiency, reliability of delivery, energy conservation and use of renewable power. As end-users at the household level, consumers will benefit from having access to their smart meter data and the ability to use the data to help control their household energy costs and to achieve personal conservation goals. Changing consumers’ behaviour with regard to household energy consumption is regarded as essential to achieving the potential benefits of smart grids. Questions about who should have access to smart meter data and for what purposes raise significant consumer privacy concerns about data sharing under the broader topics of privacy and data protection. Because data sharing facilitates secondary uses of energy use data and is essential for third party access to the data, data sharing is a critical activity that needs to be analyzed from an information privacy perspective. Further, data sharing in smart metering systems is a global concern 5 The term personal data is used in this article consistent with its definition under the Data Protection Directive (95/46/EC) and includes the concept of personally identifying information (PII). See Data Protection Directive, Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, OJ L 281/31, 23.11.95, Art 2 (Data Protection Directive) (providing, ‘personal data’ shall mean any information relating to an identified or identifiable natural person (‘data subject’); an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity). The US analysis of privacy concerns may skip the issue of defining personal data in favour of defining a class of data that is sensitive (eg defining consumer-specific energy usage data or CEUD) and providing enhanced privacy protections for the data. This approach is likely in the USA due to the lack of an agreed definition for personal data under US law, which, in turn, is likely due to lack of a generally applicable federal data protection law that defines personal data. Data Access and Privacy Issues Related to Smart Grid Technologies, US Department of Energy, 3, 9, 29-30 (5 October 2010) (DOE Data Access and Privacy Report) <http://www.smartgrid.gov/sites/default/files/Broadband_Report_Data_Privacy_ 10_5.pdf> accessed 18 October 2013. Even so, the DOE provides definitions of privacy related terms used in its report, including definitions for: personal information, PII, composite personal information and private information. DOE Data Access and Privacy Report, (fn 5) Appendix E. See also discussion of the US regulatory framework for privacy and data protection in Se

Profiling the Mobile Customer – Is Industry Self-Regulation Adequate to Protect Consumer Privacy When Behavioural Advertisers Target Mobile Phones? – Part II

The article examines responsible investment portfolio allocation. The analysis defines an investor-specific measure of portfolio responsibility and incorporates this measure into two different conventional investment approaches. First, investor utility theory describes preferences for portfolio responsibility. The utility setup is intuitive; however, any implementation would require information on investor trade-offs between portfolio risk, expected return and responsibility. Second, mean-variance analysis captures portfolio responsibility with an additional restriction on the investment problem. This approach yields analytical solutions for the optimal responsible investment problem and provides a sensitivity analysis of the required portfolio responsibility. An example concerning index investment corroborates the results.