Separation and hedging results with state-contingent production

A state-contingent model of production under uncertainty is developed and compared with more traditional models of production under uncertainty. Producer behaviour with both production and price risk, in the presence and in the absence of futures and forward markets, is analysed in this state-contingent framework. Conditions for the optimal hedge to be positive or negative are derived. We also show that, under plausible conditions, a risk-averse producer facing price uncertainty and the ability to hedge price risk will never willingly adopt a nonstochastic technology. New separation results, which hold in the presence of both price and production risk, are then developed. These separation results generalize Townsend's spanning results by reducing the number of necessary forward markets by one.

Potential demand for hedging by Australian wheat producers

The potential for hedging Australian wheat with the new Sydney Futures Exchange wheat contract is examined using a theoretical hedging model parametised from previous studies. The optimal hedging ratio for an 'average' wheat farmer was found to be zero under reasonable assumptions about transaction costs and based on previously published measures of risk aversion. The estimated optimal hedging ratios were found by simulation to be quite sensitive to assumptions about the degree of risk aversion. If farmers are significantly more risk averse than is currently believed, then there is likely to be an active interest in the new futures market.

A hedging point strategy - balancing effluent quality, economy and robustness in the control of wastewater treatment plants

An operational space map is an efficient tool to compare a large number of operational strategies to find an optimal choice of setpoints based on a multicriterion. Typically, such a multicriterion includes a weighted sum of cost of operation and effluent quality. Due to the relative high cost of aeration such a definition of optimality result in a relatively high fraction of the effluent total nitrogen in the form of ammonium. Such a strategy may however introduce a risk into operation because a low degree of ammonium removal leads to a low amount of nitrifiers. This in turn leads to a reduced ability to reject event disturbances, such as large variations in the ammonium load, drop in temperature, the presence of toxic/inhibitory compounds in the influent etc. Hedging is a risk minimisation tool, with the aim to "reduce one's risk of loss on a bet or speculation by compensating transactions on the other side" (The Concise Oxford Dictionary (1995)). In wastewater treatment plant operation hedging can be applied by choosing a higher level of ammonium removal to increase the amount of nitrifiers. This is a sensible way to introduce disturbance rejection ability into the multi criterion. In practice, this is done by deciding upon an internal effluent ammonium criterion. In some countries such as Germany, a separate criterion already applies to the level of ammonium in the effluent. However, in most countries the effluent criterion applies to total nitrogen only. In these cases, an internal effluent ammonium criterion should be selected in order to secure proper disturbance rejection ability.

Post-fledging care, philopatry and recruitment in brown thornbills

1. We describe patterns of post-fledging care, dispersal and recruitment in four cohorts of brown thornbills Acanthiza pusilla. We examine what factors influence post-fledging survival and determine how post-hedging care and the timing of dispersal influence the probability of recruitment in this small, pair breeding, Australian passerine. 2. Fledgling thornbills were dependent on their parents for approximately 6 weeks. Male fledglings were more likely than female fledglings to survive until independence. For both sexes, the probability of reaching independence increased as nestling weight increased and was higher for nestlings that fledged later in the season. 3. The timing of dispersal by juvenile thornbills was bimodal. Juveniles either dispersed by the end of the breeding season or remained on their natal territory into the autumn and winter. Juveniles that delayed dispersal were four times more likely to recruit into the local breeding population than juveniles that dispersed early. 4. Delayed dispersal was advantageous because individuals that remained on their natal territory suffered little mortality and tended to disperse only when a local vacancy was available. Consequently, the risk of mortality associated with obtaining a breeding vacancy using this dispersal strategy was low. 5. Males, the more philopatric sex, were far more likely than females to delay dispersal. Despite the apparent advantages of prolonged natal philopatry, however, only 54% of pairs that raised male fledglings to independence had sons that postponed dispersal, and most of these philopatric sons gained vacancies before their parents bred again. Consequently, few sons have the opportunity to help their parents. Constraints on delayed dispersal therefore appear to play a major role in the evolution of pair-breeding in the brown thornbill.

Practices and attitudes to derivatives use in Australian commonwealth organisations

Little is known about risk management in the public sector This study reports on a survey of senior officers in Australian Commonwealth companies and statutory authorities concerning their practice and attitudes towards the use of derivative instruments for risk management. Using a variety of tests, the most important issue identified by respondents concerning the use of derivatives is for budgeting purposes. Of note, respondents rank commonly cited reasons advanced in the private sector such as reduced bankruptcy costs and taxation, as being relatively unimportant, which is consistent with arguments advanced in the paper The results also indicate that there are significant differences in the level of importance in some issues regarding derivatives use across public sector organisations, particularly those differentiated by a documented risk management plan. The study also documents for the first time the extent of derivatives use in the Australian public sector.

The geometric meaning of macroevolution

Although the concept of bet-hedging has been useful in microevolutionary studies for over 25 years, a recent paper by Andrew Simons suggests that it is also applicable to macroevolutionary events, with the same fundamental process of selection working at all temporal scales.