Price risk management in the copper market using commodity derivatives and options strategies

Metals price risk management is a key issue related to financial risk in metal markets because of uncertainty of commodity price fluctuation, exchange rate, interest rate changes and huge price risk either to metals’ producers or consumers. Thus, it has been taken into account by all participants in metal markets including metals’ producers, consumers, merchants, banks, investment funds, speculators, traders and so on. Managing price risk provides stable income for both metals’ producers and consumers, so it increases the chance that a firm will invest in attractive projects. The purpose of this research is to evaluate risk management strategies in the copper market. The main tools and strategies of price risk management are hedging and other derivatives such as futures contracts, swaps and options contracts. Hedging is a transaction designed to reduce or eliminate price risk. Derivatives are financial instruments, whose returns are derived from other financial instruments and they are commonly used for managing financial risks. Although derivatives have been around in some form for centuries, their growth has accelerated rapidly during the last 20 years. Nowadays, they are widely used by financial institutions, corporations, professional investors, and individuals. This project is focused on the over-the-counter (OTC) market and its products such as exotic options, particularly Asian options. The first part of the project is a description of basic derivatives and risk management strategies. In addition, this part discusses basic concepts of spot and futures (forward) markets, benefits and costs of risk management and risks and rewards of positions in the derivative markets. The second part considers valuations of commodity derivatives. In this part, the options pricing model DerivaGem is applied to Asian call and put options on London Metal Exchange (LME) copper because it is important to understand how Asian options are valued and to compare theoretical values of the options with their market observed values. Predicting future trends of copper prices is important and would be essential to manage market price risk successfully. Therefore, the third part is a discussion about econometric commodity models. Based on this literature review, the fourth part of the project reports the construction and testing of an econometric model designed to forecast the monthly average price of copper on the LME. More specifically, this part aims at showing how LME copper prices can be explained by means of a simultaneous equation structural model (two-stage least squares regression) connecting supply and demand variables. A simultaneous econometric model for the copper industry is built: {█(Q_t^D=e^((-5.0485))∙P_((t-1))^((-0.1868) )∙〖GDP〗_t^((1.7151) )∙e^((0.0158)∙〖IP〗_t ) @Q_t^S=e^((-3.0785))∙P_((t-1))^((0.5960))∙T_t^((0.1408))∙P_(OIL(t))^((-0.1559))∙〖USDI〗_t^((1.2432))∙〖LIBOR〗_((t-6))^((-0.0561))@Q_t^D=Q_t^S )┤ P_((t-1))^CU=e^((-2.5165))∙〖GDP〗_t^((2.1910))∙e^((0.0202)∙〖IP〗_t )∙T_t^((-0.1799))∙P_(OIL(t))^((0.1991))∙〖USDI〗_t^((-1.5881))∙〖LIBOR〗_((t-6))^((0.0717) Where, Q_t^D and Q_t^Sare world demand for and supply of copper at time t respectively. P(t-1) is the lagged price of copper, which is the focus of the analysis in this part. GDPt is world gross domestic product at time t, which represents aggregate economic activity. In addition, industrial production should be considered here, so the global industrial production growth that is noted as IPt is included in the model. Tt is the time variable, which is a useful proxy for technological change. A proxy variable for the cost of energy in producing copper is the price of oil at time t, which is noted as POIL(t ) . USDIt is the U.S. dollar index variable at time t, which is an important variable for explaining the copper supply and copper prices. At last, LIBOR(t-6) is the 6-month lagged 1-year London Inter bank offering rate of interest. Although, the model can be applicable for different base metals' industries, the omitted exogenous variables such as the price of substitute or a combined variable related to the price of substitutes have not been considered in this study. Based on this econometric model and using a Monte-Carlo simulation analysis, the probabilities that the monthly average copper prices in 2006 and 2007 will be greater than specific strike price of an option are defined. The final part evaluates risk management strategies including options strategies, metal swaps and simple options in relation to the simulation results. The basic options strategies such as bull spreads, bear spreads and butterfly spreads, which are created by using both call and put options in 2006 and 2007 are evaluated. Consequently, each risk management strategy in 2006 and 2007 is analyzed based on the day of data and the price prediction model. As a result, applications stemming from this project include valuing Asian options, developing a copper price prediction model, forecasting and planning, and decision making for price risk management in the copper market.

Investigating the effect of construction management strategies on project greenhouse gas emissions using interactive simulation

The challenges posed by global climate change are motivating the investigation of strategies that can reduce the life cycle greenhouse gas (GHG) emissions of products and processes. While new construction materials and technologies have received significant attention, there has been limited emphasis on understanding how construction processes can be best managed to reduce GHG emissions. Unexpected disruptive events tend to adversely impact construction costs and delay project completion. They also tend to increase project GHG emissions. The objective of this paper is to investigate ways in which project GHG emissions can be reduced by appropriate management of disruptive events. First, an empirical analysis of construction data from a specific highway construction project is used to illustrate the impact of unexpected schedule delays in increasing project GHG emissions. Next, a simulation based methodology is described to assess the effectiveness of alternative project management strategies in reducing GHG emissions. The contribution of this paper is that it explicitly considers projects emissions, in addition to cost and project duration, in developing project management strategies. Practical application of the method discussed in this paper will help construction firms reduce their project emissions through strategic project management, and without significant investment in new technology. In effect, this paper lays the foundation for best practices in construction management that will optimize project cost and duration, while minimizing GHG emissions.

Assessing Decision Making Strategies In Construction Management By Using A Schedule-Based Simulation Framework

During the project, managers encounter numerous contingencies and are faced with the challenging task of making decisions that will effectively keep the project on track. This task is very challenging because construction projects are non-prototypical and the processes are irreversible. Therefore, it is critical to apply a methodological approach to develop a few alternative management decision strategies during the planning phase, which can be deployed to manage alternative scenarios resulting from expected and unexpected disruptions in the as-planned schedule. Such a methodology should have the following features but are missing in the existing research: (1) looking at the effects of local decisions on the global project outcomes, (2) studying how a schedule responds to decisions and disruptive events because the risk in a schedule is a function of the decisions made, (3) establishing a method to assess and improve the management decision strategies, and (4) developing project specific decision strategies because each construction project is unique and the lessons from a particular project cannot be easily applied to projects that have different contexts. The objective of this dissertation is to develop a schedule-based simulation framework to design, assess, and improve sequences of decisions for the execution stage. The contribution of this research is the introduction of applying decision strategies to manage a project and the establishment of iterative methodology to continuously assess and improve decision strategies and schedules. The project managers or schedulers can implement the methodology to develop and identify schedules accompanied by suitable decision strategies to manage a project at the planning stage. The developed methodology also lays the foundation for an algorithm towards continuously automatically generating satisfactory schedule and strategies through the construction life of a project. Different from studying isolated daily decisions, the proposed framework introduces the notion of {em decision strategies} to manage construction process. A decision strategy is a sequence of interdependent decisions determined by resource allocation policies such as labor, material, equipment, and space policies. The schedule-based simulation framework consists of two parts, experiment design and result assessment. The core of the experiment design is the establishment of an iterative method to test and improve decision strategies and schedules, which is based on the introduction of decision strategies and the development of a schedule-based simulation testbed. The simulation testbed used is Interactive Construction Decision Making Aid (ICDMA). ICDMA has an emulator to duplicate the construction process that has been previously developed and a random event generator that allows the decision-maker to respond to disruptions in the emulation. It is used to study how the schedule responds to these disruptions and the corresponding decisions made over the duration of the project while accounting for cascading impacts and dependencies between activities. The dissertation is organized into two parts. The first part presents the existing research, identifies the departure points of this work, and develops a schedule-based simulation framework to design, assess, and improve decision strategies. In the second part, the proposed schedule-based simulation framework is applied to investigate specific research problems.

Gender on the Range: Feminine Strategies in the 1913 Michigan Copper Strike

In the autumn of 1913, a small, remote Michigan mining community attracted national attention as miners and management found themselves embroiled in a conflict that would prove no easy victory for either side. The strike came as a shock to management, who, with the help of a nearly perfected paternal system, had come to expect a generally docile and compliant workforce. But what was even more shocking was the involvement of the miners’ wives in the strike effort, and the lengths they went to in order to keep men from crossing the picket line. This paper focuses on that effort, arguing that the women of the Michigan copper country developed strike strategies that were derived from their domestic experience, and justified their involvement through maternal arguments. However, these public actions allowed the management to disregard the respect and courtesy generally given to the domestic sphere as police and private agents perpetrated a number of home invasions in an attempt to break the strike. The involvement of women in male dominated labor disputes (mining, steel productions) has been largely ignored in the literature due to their indirect connection to the company as wives and not workers. This paper seeks to remedy this gap, and gain a better understanding of that indirect relationship. Sources include newspaper articles, private correspondence, public investigation records, and oral histories, found largely in the Michigan Tech Archives and Copper Country Historical Collections, Michigan Technological University, Michigan.

AGENT BASED, DISTRIBUTED CONTROL STRATEGIES AND OPTIMIZATION OF PLUG-IN ELECTRIC VEHICLES ON SMART/MICROGRID ARCHITECTURES

This thesis will present strategies for the use of plug-in electric vehicles on smart and microgrids. MATLAB is used as the design tool for all models and simulations. First, a scenario will be explored using the dispatchable loads of electric vehicles to stabilize a microgrid with a high penetration of renewable power generation. Grid components for a microgrid with 50% photovoltaic solar production will be sized through an optimization routine to maintain storage system, load, and vehicle states over a 24-hour period. The findings of this portion are that the dispatchable loads can be used to guard against unpredictable losses in renewable generation output. Second, the use of distributed control strategies for the charging of electric vehicles utilizing an agent-based approach on a smart grid will be studied. The vehicles are regarded as additional loads to a primary forecasted load and use information transfer with the grid to make their charging decisions. Three lightweight control strategies and their effects on the power grid will be presented. The findings are that the charging behavior and peak loads on the grid can be reduced through the use of distributed control strategies.

INVESTIGATION OF STRATEGIES TO PROMOTE EFFECTIVE TEACHER PROFESSIONAL DEVELOPMENT EXPERIENCES IN EARTH SCIENCE

This dissertation serves as a call to geoscientists to share responsibility with K-12 educators for increasing Earth science literacy. When partnerships are created among K-12 educators and geoscientists, the synergy created can promote Earth science literacy in students, teachers, and the broader community. The research described here resulted in development of tools that can support effective professional development for teachers. One tool is used during the planning stages to structure a professional development program, another set of tools supports measurement of the effectiveness of a development program, and the third tool supports sustainability of professional development programs. The Michigan Teacher Excellence Program (MiTEP), a Math/Science Partnership project funded by the National Science Foundation, served as the test bed for developing and testing these tools. The first tool, the planning tool, is the Earth Science Literacy Principles (ESLP). The ESLP served as a planning tool for the two-week summer field courses as part of the MiTEP program. The ESLP, published in 2009, clearly describe what an Earth science literate person should know. The ESLP consists of nine big ideas and their supporting fundamental concepts. Using the ESLP for planning a professional development program assisted both instructors and teacher-participants focus on important concepts throughout the professional development activity. The measurement tools were developed to measure change in teachers’ Earth science content-area knowledge and perceptions related to teaching and learning that result from participating in a professional development program. The first measurement tool, the Earth System Concept Inventory (ESCI), directly measures content-area knowledge through a succession of multiple-choice questions that are aligned with the content of the professional development experience. The second measurement, an exit survey, collects qualitative data from teachers regarding their impression of the professional development. Both the ESCI and the exit survey were tested for validity and reliability. Lesson study is discussed here as a strategy for sustaining professional development in a school or a district after the end of a professional development activity. Lesson study, as described here, was offered as a formal course. Teachers engaged in lesson study worked collaboratively to design and test lessons that improve the teachers’ classroom practices. Data regarding the impact of the lesson study activity were acquired through surveys, written documents, and group interviews. The data are interpreted to indicate that the lesson study process improved teacher quality and classroom practices. In the case described here, the lesson study process was adopted by the teachers’ district and currently serves as part of the district’s work in Professional Learning Communities, resulting in ongoing professional development throughout the district.

THE FANNED FLAMES OF DISCONTENT: A SOLIDARITY-INSPIRED HISTORY OF THE IDENTITY/IDEOLOGY, CULTURAL HISTORY, AND RHETORICAL STRATEGIES OF THE WOBBLIES DURING THE 1916 MINNESOTA IRON ORE STRIKE

Rooted in critical scholarship this dissertation is an interdisciplinary study, which contends that having a history is a basic human right. Advocating a newly conceived and termed, Solidarity-inspired History framework/practice perspective, the dissertation argues for and then delivers a restorative voice to working-class historical actors during the 1916 Minnesota Iron Ore Strike. Utilizing an interdisciplinary methodological framework the dissertation combines research methods from the Humanities and the Social Sciences to form a working-class history that is a corrective to standardized studies of labor in the late 19th and early 20th centuries. Oftentimes class interests and power relationships determine the dominant perspectives or voices established in history and disregard people and organizations that run counter to, or in the face of, customary or traditional American themes of patriotism, the Protestant work ethic, adherence to capitalist dogma, or United States exceptionalism. This dissertation counteracts these traditional narratives with a unique, perhaps even revolutionary, examination of the 1916 Minnesota Iron Ore Strike. The intention of this dissertation's critical perspective is to poke, prod, and prompt academics, historians, and the general public to rethink, and then think again, about the place of those who have been dislocated from or altogether forgotten, misplaced, or underrepresented in the historical record. Thus, the purpose of the dissertation is to give voice to historical actors in the dismembered past. Historical actors who have run counter to traditional American narratives often have their body of "evidence" disjointed or completely dislocated from the story of our nation. This type of disremembering creates an artificial recollection of our collective past, which de-articulates past struggles from contemporary groups seeking solidarity and social justice in the present. Class-conscious actors, immigrants, women, the GLBTQ community, and people of color have the right to be remembered on their own terms using primary sources and resources they produced. Therefore, similar to the Wobblies industrial union and its rank-and-file, this dissertation seeks to fan the flames of discontented historical memory by offering a working-class perspective of the 1916 Strike that seeks to interpret the actions, events, people, and places of the strike anew, thus restoring the voices of these marginalized historical actors.

STUDENTS’ RHETORICAL STRATEGIES IN TRANSLINGUAL ENCOUNTERS ON CAMPUS

This thesis examines the ways in which linguistic minority students assert themselves as rhetorical agents when faced with the expectation of impromptu verbal responses. Based on a study that aims at identifying specific rhetorical strategies these students employ, the goal of this thesis is to theorize ways in which linguistic minorities deal with the challenges of fast-paced, high-stakes interactions. The practices that emerge from data analysis suggest that such strategies tend to be reactive rather than proactive and highly dependent on context. While they are valuable ways for linguistic minorities to navigate their ways in specific moments, the thesis argues that they are ultimately insufficient to create a sense of agency and empowerment. Future research hence needs to address ways in which strategies can be consciously trained and employed in order to create a more inclusive classroom experience for linguistic minority students.

A Cost Analysis Of Carbon Dioxide Emission Reduction Strategies For New Plants In Michigan's Electric Power Sector

This thesis attempts to find the least-cost strategy to reduce CO2 emission by replacing coal by other energy sources for electricity generation in the context of the proposed EPA’s regulation on CO2 emissions from existing coal-fired power plants. An ARIMA model is built to forecast coal consumption for electricity generation and its CO2 emissions in Michigan from 2016 to 2020. CO2 emission reduction costs are calculated under three emission reduction scenarios- reduction to 17%, 30% and 50% below the 2005 emission level. The impacts of Production Tax Credit (PTC) and the intermittency of renewable energy are also discussed. The results indicate that in most cases natural gas will be the best alternative to coal for electricity generation to realize CO2 reduction goals; if the PTC for wind power will continue after 2015, a natural gas and wind combination approach could be the best strategy based on the least-cost criterion.

INTERACTIVE EFFECT OF FIXED TIME ORDER STRATEGIES WITHIN A SUPPLY CHAIN ON ACTUAL IN-STOCK PROBABILITIES

This report mainly deals with the interactive effect of different in-stock probabilities used by every individual in a supply chain. Based on a simulation for 10,000 weeks, the effects of varying in-stock probabilities are observed. Based on these observations, an individual in a supply chain can take counter measures in order to avoid stock out chances hence maintaining profits.

THE EFFECT OF ANNEALING ON AMORPHOUS SILICON BASED SOLAR PHOTOVOLTAIC THERMAL SYSTEM (PV/T) AND APPROPRIATE GLOBAL DISPATCH STRATEGIES

Previous work has shown that high-temperature short-term spike thermal annealing of hydrogenated amorphous silicon (a-Si:H) photovoltaic thermal (PVT) systems results in higher electrical energy output. The relationship between temperature and performance of a-Si:H PVT is not simple as high temperatures during thermal annealing improves the immediate electrical performance following an anneal, but during the anneal it creates a marked drop in electrical performance. In addition, the power generation of a-Si:H PVT depends on both the environmental conditions and the Staebler-Wronski Effect kinetics. In order to improve the performance of a-Si:H PVT systems further, this paper reports on the effect of various dispatch strategies on system electrical performance. Utilizing experimental results from thermal annealing, an annealing model simulation for a-Si:Hbased PVT was developed and applied to different cities in the U.S. to investigate potential geographic effects on the dispatch optimization of the overall electrical PVT systems performance and annual electrical yield. The results showed that spike thermal annealing once per day maximized the improved electrical energy generation. In the outdoor operating condition this ideal behavior deteriorates and optimization rules are required to be implemented.