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.

Factors controlling the origin of gas in Australian Bowen Basin coals

Open system pyrolysis (heating rate 10 degrees C/min) of coal maturity (vitrinite reflectance, VR) sequence (0.5%, 0.8% and 1.4% VR) demonstrates that there are two stages of thermogenic methane generation from Bowen Basin coals. The first and major stage shows a steady increase in methane generation maximising at 570 degrees C, corresponding to a VR of 2-2.5%. This is followed by a less intense methane generation which has not as yet maximised by 800 degrees C (equivalent to VR of 5%). Heavier (C2+) hydrocarbons are generated up to 570 degrees C after which only the C-1 (CH4, CO and CO2) gases are produced. The main phase of heavy hydrocarbon generation occurs between 420 and 510 degrees C. Over this temperature range,methane generation accounts for only a minor component, whereas the wet gases (C-2-C-5) are either in equal abundance or are more abundant by a factor of two than the liquid hydrocarbons. The yields of non-hydrocarbon gases CO2 and CO are greater then methane during the early stages of gas generation from an immature coal, subordinate to methane during the main phase of methane generation after which they are again dominant. Compositional data for desorbed and produced coal seam gases from the Bowen show that CO2 and wet gases are a minor component. This discrepancy between the proportion of wet gas components produced during open system pyrolysis and that observed in naturally matured coals may be the result of preferential migration of wet gas components, by dilution of methane generated during secondary cracking of bitumen, or kinetic effects associated with different activations for production of individual hydrocarbon gases. Extrapolation of results of artificial pyrolysis of the main organic components in coal to geological significant heating rates suggests that isotopically light methane to delta(13)C of -50 parts per thousand can be generated. Carbon isotope depletions in C-13 are further enhanced, however, as a result of trapping of gases over selected rank levels (instantaneous generation) which is a probable explanation for the range of delta(13)C values we have recorded in methane desorbed from Bowen Basin coals (-51 +/- 9 parts per thousand). Pervasive carbonate-rich veins in Bowen Basin coals are the product of magmatism-related hydrothermal activity. Furthermore, the pyrolysis results suggest an additional organic carbon source front CO2 released at any stage during the maturation history could mix in varying proportions with CO2 from the other sources. This interpretation is supported by C and O isotopic ratios, of carbonates that indicate mixing between magmatic and meteoric fluids. Also, the steep slope of the C and O isotope correlation trend suggests that the carbonates were deposited over a very narrow temperature interval basin-wide, or at relatively high temperatures (i.e., greater than 150 degrees C) where mineral-fluid oxygen isotope fractionations are small. These temperatures are high enough for catagenic production of methane and higher hydrocarbons from the coal and coal-derived bitumen. The results suggests that a combination of thermogenic generation of methane and thermodynamic processes associated with CH4/CO2 equilibria are the two most important factors that control the primary isotope and molecular composition of coal seam gases in the Bowen Basin. Biological process are regionally subordinate but may be locally significant. (C) 1998 Published by Elsevier Science Ltd. All rights reserved.

The application of electron microscopy and microanalysis in conjunction with organic petrology to further the understanding of organic-mineral association: examples from Mount Isa and McArthur Basins, Australia

Organic petrology supported by electron microscopical and micro-analytical techniques was applied to organic matter in Proterozoic sediments to better understand hydrothermal processes responsible for ore-grade mineralisation. It was shown that organic maturation was not only closely linked to the geological history of the sediments, but also highlighted heat transfer by convection as differentiated from conduction solely through sediment burial and step-wise subsidence. Water-rock ratios effect organic maturation in hydrothermal systems, and erratic reflectance profiles are indicators of convective heat transfer. Identification and characterisation of organic materials in terms of source rock and migrated hydrocarbons was shown to be a powerful tool in reconstructing the thermal history of sediments, identifying hydrothermal episodes, fluid pathways and heat source in the northern Australian Proterozoic basins. Higher reflectance of organic matter towards the central parts of the Mount Isa Basin and some of the most northerly parts point to proximity to higher heat flow at times, in contrast to relatively low temperatures prevailing in the western parts of the basin, next to the Murphy Inlier. A close correlation shown between peak organic reflectance values and super-sequence boundaries farther highlighted the valuable information to be gained from organic petrology, by allowing the separation of processes responsible for metal dissolution and transportation from those inducing precipitation. (C) 2001 Elsevier Science B.V All rights reserved.

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.

Management motivation for using financial derivatives in Australia

This study takes a direct approach to determine management motivation for the use of financial derivatives. We survey a sample of Australian firms on attitudes to derivative use and financial risk management. Management views are sought on the importance of a series of theoretical reasons for using derivatives. Generally, we find that managers are focused on the broad reduction of risk and volatility of cash flows and earnings in using derivatives. Specific issues such as reducing bankruptcy costs, debt levels and taxation are not considered as important. A further interesting result from this research is that even though firms may use derivatives they may not necessarily hedge all of their annual exposures across different financial risks. This helps explain the inconsistency of results in many empirical studies on the determinants of derivative use.

Two conceptions of reason

Two conceptions of reason are considered - the planning conception, embodied, for example, in rational choice theory and other familiar paradigms, and the improvisational conception, emerging from work on artificial intelligence and organization theory. Two illustrations are given of the problematic nature of the planning conception: ( 1) the inevitability of incompleteness in contracting and ( 2) the burdens of reason identified by John Rawls. Two diagnoses are provided for these infirmities: ( 1) the inexhaustibility of description and ( 2) the constructed nature of preferences and values. An alternative improvisational model is sketched and risk-spreading and bet-hedging are identified as two of its key technologies.