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.

Through the back door : Melungeon literacies and 21st century technologies

The Melungeons, a minority recognized in Southern Appalachia where they settled in the early 1800s, have mixed heritage—European, Mediterranean, Native American, and Sub-Saharan African. Their dark skin and distinctive features have marked them and been the cause of racial persecution both by custom and by law in Appalachia for two centuries. Their marginalization has led to an insider mentality, which I call a “literacy” of Melungeon-ness that affects every facet of their lives. Just a century ago, while specialized practices such as farming, preserving food, hunting, gathering, and distilling insured survival in the unforgiving mountain environment, few Melungeons could read or write. Required to pay property taxes and render military service, they were denied education, suffrage, and other legal rights. In the late 1890s visionary Melungeon leader Batey Collins invited Presbyterian homemissionaries to settle in one Tennessee Melungeon community where they established a church and built a school of unparalleled excellence. Educator-ministers Mary Rankin and Chester Leonard creatively reified the theories of Dewey, Montessori, and Rauschenbusch, but, despite their efforts, school literacy did not neutralize difference. Now, taking reading and writing for granted, Melungeons are exploring their identity by creating websites and participating in listserv discussions. These online expressions, which provide texts for rhetorical, semiotic, and socio-linguistic analysis, illustrate not solidarity but fragmentation on issues of origins and legitimacy. Armed with literacies of difference stemming from both nature and nurture, Melungeons are using literacy practices to embrace the difference they cannot escape.

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.

A PHENOMENOLOGY OF MIMETIC LEARNING AND MULTIMODAL COGNITION: INTEGRATING EXPERIENTIAL KNOWLEDGE INTO PROGRAMS IN RHETORIC, COMPOSITION, AND TECHNICAL COMMUNICATION

My dissertation emphasizes a cognitive account of multimodality that explicitly integrates experiential knowledge work into the rhetorical pedagogy that informs so many composition and technical communication programs. In these disciplines, multimodality is widely conceived in terms of what Gunther Kress calls “socialsemiotic” modes of communication shaped primarily by culture. In the cognitive and neurolinguistic theories of Vittorio Gallese and George Lakoff, however, multimodality is described as a key characteristic of our bodies’ sensory-motor systems which link perception to action and action to meaning, grounding all communicative acts in knowledge shaped through body-engaged experience. I argue that this “situated” account of cognition – which closely approximates Maurice Merleau-Ponty’s phenomenology of perception, a major framework for my study – has pedagogical precedence in the mimetic pedagogy that informed ancient Sophistic rhetorical training, and I reveal that training’s multimodal dimensions through a phenomenological exegesis of the concept mimesis. Plato’s denigration of the mimetic tradition and his elevation of conceptual contemplation through reason, out of which developed the classic Cartesian separation of mind from body, resulted in a general degradation of experiential knowledge in Western education. But with the recent introduction into college classrooms of digital technologies and multimedia communication tools, renewed emphasis is being placed on the “hands-on” nature of inventive and productive praxis, necessitating a revision of methods of instruction and assessment that have traditionally privileged the acquisition of conceptual over experiential knowledge. The model of multimodality I construct from Merleau-Ponty’s phenomenology, ancient Sophistic rhetorical pedagogy, and current neuroscientific accounts of situated cognition insists on recognizing the significant role knowledges we acquire experientially play in our reading and writing, speaking and listening, discerning and designing practices.