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.

Response to price and production risk: The case of Australian wheat

A model of Australian wheat grower supply response was specified under the constraints of price and yield uncertainty, risk aversion, partial adjustment, and quadratic costs. The model was solved to obtain area planted. The results of estimation indicate that risk arising from prices and climate have had a significant influence on producer decision making. The coefficient of relative risk aversion and short-run and long-run elasticities of supply with respect to price were calculated. Wheat growers' risk premium, expected at the start of the season for exposed price and yield risk, was 2.8 percent of revenue or 10.4 percent of profit as measured by producer surplus. (C) 2000 John Wiley & Sons, Inc.

Price stabilization and the risk-averse firm

An analytically simple and tractable approach to firm-level welfare analysis of complete and partial mean-preserving price stabilization for producers with general risk-averse preferences facing a stochastic technology is developed. Necessary and sufficient conditions for price stabilization to be welfare enhancing are derived under different assumptions of the producer's preferences and the producer's technology. Existing stabilization results for the risk-averse firm are shown to be corollaries of these more general results.

Asset Price Instability and Policy Responses: The Legacy of Liberalisation

The debate about the dynamics and potential policy responses to asset inflation has intensified in recent years. Some analysts, notably Borio and Lowe, have called for 'subtle' changes to existing monetary targeting frameworks to try to deal with the problems of asset inflation and have attempted to developed indicators of financial vulnerability to aid this process. In contrast, this paper argues that the uncertainties involved in understanding financial market developments and their potential impact on the real economy are likely to remain too high to embolden policy makers. The political and institutional risks associated with policy errors are also significant. The fundamental premise that a liberalised financial system is based on 'efficient' market allocation cannot be overlooked. The corollary is that any serious attempt to stabilize financial market outcomes must involve at least a partial reversal of deregulation.

Fuel stagnation temperature effects on mixing with supersonic combustion flows

An experimental study of the effect of fuel stagnation temperature on mixing in a supersonic hydrogen-air flame is described, The combustor consisted of a constant-area rectangular duct with a centrally located fuel-injection strut that spanned the width. A high-enthalpy stream of air was supplied by a free-piston shock tunnel, and heated hydrogen fuel, supplied by a gun-tunnel, was injected into the freestream as a coflowing planar jet. The freestream total enthalpies were 5.6, 6.5, and 9 MJ/kg, and fuel stagnation temperatures were 300, 450, and 700 K, Raising the fuel stagnation temperature increased the fuel velocity to be near that of the airstream and resulted in a decrease in the mixing rate, Even as the fuel and air velocities became equal, significant mixing still occurred because of a large difference in density, Increasing the freestream enthalpy reduced the difference between the initial air temperature and the adiabatic flame temperature, which in turn reduced the heat addition, and subsequently, the amount of pressure rise in the duct.

Risk exposures and international diversification: Evidence from iShares

We examine the newly developed international diversification instruments–iShares traded on the American Stock Exchange. Given the fact that iShares can be created and redeemed at will, the daily price of an iShare is expected to be equal to the daily portfolio value of the underlying assets in the home-country market. Therefore, theoretically, iShare pricing should be influenced by the risk from the iShare's home-country market and not the risk from the US market, per se. We evaluate the risk exposure of iShare prices to the US market (non-fundamental effect) as well as the home-country market (the fundamental effect). We find that most iShare returns are significantly influenced by and sensitive to the US market risk. Moreover, the US market appears to be the key permanent driving factor and the home-country market is a pronounced transitory driving force for iShare prices. These findings indicate the presence of limits of international arbitrage for iShares. As a result, the international diversification benefits of iShares become questionable.

Fuel cells, hydrogen and energy supply in Australia

Australia is unique in terms of its geography, population distribution, and energy sources. It has an abundance of fossil fuel in the form of coal, natural gas, coal seam methane (CSM), oil, and a variety renewable energy sources that are under development. Unfortunately, most of the natural gas is located so far away from the main centres of population that it is more economic to ship the energy as LNG to neighboring countries. Electricity generation is the largest consumer of energy in Australia and accounts for around 50% of greenhouse gas emissions as 84% of electricity is produced from coal. Unless these emissions are curbed, there is a risk of increasing temperatures throughout the country and associated climatic instability. To address this, research is underway to develop coal gasification and processes for the capture and sequestration Of CO2. Alternative transport fuels such as biodiesel are being introduced to help reduce emissions from vehicles. The future role of hydrogen is being addressed in a national study commissioned this year by the federal government. Work at the University of Queensland is also addressing full-cycle analysis of hydrogen production, transport, storage, and utilization for both stationary and transport applications. There is a modest but growing amount of university research in fuel cells in Australia, and an increasing interest from industry. Ceramic Fuel Cells Ltd. (CFCL) has a leading position in planar solid oxide fuel cells (SOFCs) technology, which is being developed for a variety of applications, and next year Perth in Western Australia is hosting a trial of buses powered by proton-exchange fuel cells. (C) 2004 Elsevier B.V. All rights reserved.

Asset Price Instability and Policy Responses: The Legacy of Liberalization

The problem of asset price bubbles, and more generally of instability in the financial system, has been a matter of concern since the 1980s but has only recently moved to the center of the macroeconomic policy debate. The main concern with bubbles arises when they burst, imposing losses on investors holding the bubble assets and potentially on the financial institutions that have extended credit to them. Asset price volatility is an inevitable consequence of financial market liberalization and, in extreme cases, generates asset price bubbles, the bursting of which can impose substantial economic and social costs. Policy responses within the existing liberalized financial system face daunting levels of uncertainty and risk. Given the pattern of increasing asset market volatility over recent decades and the policy issues highlighted in this paper, the future looks uncertain. Another significant cycle of asset price movements, especially in one of the major economies, could see a fundamental revision of thinking about the costs and benefits of liberalized financial systems.

Titanium phosphate for Fuel Cell Proton Conduction Membranes

Environmental issues due to increases in emissions of air pollutants and greenhouse gases are driving the development of clean energy delivery technologies such as fuel cells. Low temperature Proton Exchange Membrane Fuel Cells (PEMFC) use hydrogen as a fuel and their only emission is water. While significant advances have been made in recent years, a major limitation of the current technology is the cost and materials limitations of the proton conduction membrane. The proton exchange membrane performs three critical functions in the PEMFC membrane electrode assembly (MEA): (i) conduction of protons with minimal resistance from the anode (where they are generated from hydrogen) to the cathode (where they combine with oxygen and electrons, from the external circuit or load), (ii) providing electrical insulation between the anode and cathode to prevent shorting, and (iii) providing a gas impermeable barrier to prevent mixing of the fuel (hydrogen) and oxidant. The PFSA (perfluorosulphonic acid) family of membranes is currently the best developed proton conduction membrane commercially available, but these materials are limited to operation below 100oC (typically 80oC, or lower) due to the thermochemical limitations of this polymer. For both mobile and stationary applications, fuel cell companies require more durable, cost effective membrane technologies capable of delivering enhanced performance at higher temperatures (typically 120oC, or higher. This is driving research into a wide range of novel organic and inorganic materials with the potential to be good proton conductors and form coherent membranes. There are several research efforts recently reported in the literature employing inorganic nanomaterials. These include functionalised silica phosphates [1,2], fullerene [3] titania phosphates [4], zirconium pyrophosphate [5]. This work addresses the functionalisation of titania particles with phosphoric acid. Proton conductivity measurements are given together with structural properties.

Functionalisation of nanoparticles as electrolytes in fuel cells

Inorganic metal oxide materials are generally poor proton conductors as conductivities are lower than 10-5-10-6 S.cm-1. However, by functionalising Silica, Zirconia or Titania, proton conduction increases by up to 5 orders of magnitude. Hence, functionalised nanomaterials are becoming very competitive against conventional electrolyte materials such as Nafion. In this work, sol-gel processes are employed to produce silica phosphate, zirconia phosphate and titania phosphate functionalised nanoparticles. Furthermore, conductivities at hydrate conditions are investigated, and nanoparticle formation and functionalisation effects on proton conductivity are discussed. Results show conductivities up to 10-1 S.cm-1 (95% RH). Proton conduction increases with the functionalisation content, however heat treatment of nanoparticles locks the functionality in the crystal phase, thus inhibiting proton conduction. Controlling the mesopore phase allows for high proton conduction at hydrated conditions, clearly indicating facilitated ion transport through the pore channels.

Nanocomposite Nafion-Silica membranes for direct methanol fuel cells

Commercially available proton exchange membranes such as Nafion do not meet the requirements for high power density direct methanol fuel cells, partly due to their high methanol permeability. The aim of this work is to develop a new class of high-proton conductivity membranes, with thermal and mechanical stability similar to Nafion and reduced methanol permeability. Nanocomposite membranes were produced by the in-situ sol-gel synthesis of silicon dioxide particles in preformed Nafion membranes. Microstructural modification of Nafion membranes with silica nanoparticles was shown in this work to reduce methanol crossover from 7.48x10-6 cm2s^-1 for pure Nafion® to 2.86 x10-6 cm2s^-1 for nanocomposite nafion membranes (Methanol 50% (v/v) solution, 75 degrees C). Best results were achieved with a silica composition of 2.6% (w/w). We propose that silica inhibits the conduction of methanol through Nafion by blocking sites necessary for methanol diffusion through the polymer electrolyte membrane. Effects of surface chemistry, nanoparticle formation and interactions with Nafion matrix are further addressed.

Hydrostability and Scaling Up Molecular Sieve Silica (MSS) Membranes for H2/CO Separation in Fuel Cell Systems

MSS membranes are a good candidate for CO cleanup in fuel cell fuel processing systems due to their ability to selectively permeate H2 over CO via molecular sieving. Successfully scaled up tubular membranes were stable under dry conditions to 400°C with H2 permeance as high as 2 x 10-6 mol.m-2.s^-1.Pa^-1 at 200 degrees C and H2/CO selectivity up to 6.4, indicating molecular sieving was the dominant mechanism. A novel carbonised template molecular sieve silica (CTMSS) technology gave the scaled up membranes resilience in hydrothermal conditions up to 400 degrees C in 34% steam and synthetic reformate, which is required for use in fuel cell CO cleanup systems.