Exchange rate economic exposure and hedging:the significance of currency options

This thesis focuses on the theoretical examination of the exchange rate economic (operating) exposure within the context of the theory of the firm, and proposes some hedging solutions using currency options. The examination of economic exposure is based on such parameters as firms' objectives, industry structure and production cost efficiency. In particular, it examines an hypothetical exporting firm with costs in domestic currency, which faces competition from foreign firms in overseas markets and has a market share expansion objective. Within this framework, the hypothesis is established that economic exposure, portrayed in a diagram connecting export prices and real exchange rates, is asymmetric (i.e. the negative effects depreciation are higher than the positive effects of a currency depreciation). In this case, export business can be seen as a real option, given by exporting firms to overseas customer. Different scenarios about the asymmetry hypothesis can be derived for different assumptions about the determinants of economic exposure. Having established the asymmetry hypothesis, the hedging against this exposure is analysed. The hypothesis is established, that a currency call option should be used in hedging against asymmetric economic exposure. Further, some advanced currency options stategies are discussed, and their use in hedging several scenarios of exposure is indicated, establishing the hypothesis that, the optimal options strategy is a function of the determinants of exposure. Some extensions on the theoretical analysis are examined. These include the hedging of multicurrency exposure using options, and the exposure of a purely domestic firm facing import competition. The empirical work addresses two issues: the empirical validity of the asymmetry hypothesis and the examination of the hedging effectiveness of currency options.

An extensive laboratory investigation of the use of bio-oil modified bitumen in road construction

Several roads in Iceland with bio-oil modified surface dressings exhibited severe distresses such as bleeding, binder drain down, and eventually as surface dressing sticking to tires. Samples from six road sections were evaluated in the laboratory to determine the causes of the failure. Binders with and without bio-oil, rapeseed oil and fish oil, were evaluated through a comprehensive rheological and chemical characterization. Both oils, exhibited solubility issues with the bitumen; consequently, the oils covered the aggregates, preventing bonding between binder and stones. It appears that fish oil worked a little better than rapeseed oil for binder modification.

Low frequency dielectric spectroscopy of bitumen binders as an indicator of adhesion potential to quartz aggregates using Portland cement

The purpose of this investigation was to interpret the bitumen-aggregate adhesion based on the dielectric spectroscopic response of individual material components utilizing their dielectric constants, refractive indices and average tangent of the dielectric loss angle (average loss tangent). Dielectric spectroscopy of bitumen binders at room temperature was performed in the frequency range of 0.01–1000 Hz. Dielectric spectroscopy is an experimental method for characterizing the dielectric permittivity of a material as a function of frequency. Adhesion data has been determined using the Rolling bottle method. The results show that the magnitude of the average tangent of the dielectric loss angle (average loss tangent) depends on bitumen type. The average loss tangent in the frequency range 0.01–1 Hz is introduced as a potential indicator for predicting polarizability and, thereby, adhesion potential of bitumen binders to quartz aggregates when using Portland cement. In order to obtain acceptable adhesion of 70/100 penetration grade bitumen binders and quartz aggregates when using Portland cement, it is suggested that the binder have an average tan δ > 0.035 in the frequency range 0.01–1 Hz.

Hedging under liquidity constraints

Although risk management can be justified by financial distress, the theoretical models usually contain hedging instruments free of funding risk. In practice, management of the counterparty risk in derivative transactions is of enhanced importance, consequently not only is trading on exchanges subject to the presence of a margin account, but also in bilateral (OTC) agreements parties will require margins or collateral from their partners in order to hedge the mark-tomarket loss of the transaction. The aim of this paper is to present and compare two models where the financing need of the hedging instrument also appears, influencing the hedging strategy and the optimal hedging ratio. Both models contain the same source of risk and optimisation criterion, but the liquidity risk is modelled in different ways. In the first model, there is no additional financing resource that can be used to finance the margin account in case of a margin call, which entails the risk of liquidation of the hedging position. In the second model, the financing is available but a given credit spread is to be paid for this, so hedging can become costly.

Experimental and Conceptual Approaches to Studying Bet Hedging in Microorganisms

Bet-hedging strategies are used by organisms to survive in

unpredictable environments. To pursue a bet-hedging strategy, an

organism must produce multiple phenotypes from a single genotype. What

molecular mechanisms allow this to happen? To address this question, I

created a synthetic system that displays bet-hedging behavior, and

developed a new technique called `TrackScar' to measure the fitness

and stress-resistance of individual cells. I found that bet-hedging

can be generated by actively sensing the environment, and that

bet-hedging strategies based on active sensing need not be

metabolically costly. These results suggest that to understand how

bet-hedging strategies are produced, microorganisms must be

examined in the actual environments that they come from.

Laboratory Investigation of Diluted Bitumen Trapping and Dissolution in Gravel

The Canadian economy is largely dependent on the distribution of large volumes of oil to domestic and international markets by a long network of pipelines. Unfortunately, accidents occur, and oil can leak or spill from these pipelines before it reaches its destination. Of particular concern are the long-term consequences of oil spills in freshwater, which include sinking of oil in water and the contamination of sensitive areas, such as where fish (e.g., salmon) deposit their eggs in gravel-dominated river sediments. There is a knowledge gap regarding the fate and behaviour of oil in river sediment. To this end, this study aimed at finding the potential for diluted bitumen (dilbit) oil to become trapped in gravel and to transfer hydrocarbons into water by dissolution, which are harmful to aquatic life. Two sets of laboratory experiments were conducted to simulate conditions of an oil spill on an exposed bank or in shallow water. In the first set, by conducting capillary pressure-saturation (Pc-Sw) experiments it was found that dilbit can enter gravel pores without much resistance and approximately 14% of the pore volume can be occupied by discontinuous single or multipore blobs of dilbit following imbibition of water. Air-water Pc-Sw experiments done in laboratory 1-D columns required gravity correction and could be successfully scaled to predict dilbit-water Pc-Sw curves, except for the trapped amount of dilbit. Trapped dilbit constituents can be dissolved into the water flowing through gravel pores (hyporheic flow) at different velocities. In the second set, dissolution experiments suggested that for the duration of the test, hydrocarbons that cause acute toxicity dissolve rapidly, likely resulting in a decrease in their effective solubility. However, dilbit saturation changed only <2% within that time. Chronically toxic PAH compounds were also detected in the effluent water. The total concentration of all detected PAHs and alkylPAHs exceeded the threshold literature value to protect early-life stage fish. Observations of decreased concentrations with increased aqueous velocities as well as less than equilibrium concentrations indicated that the mass transfer was rate-limited. A correlation was developed for the mass transfer rate coefficient to understand the mass transfer behaviour beyond the conditions used in the experiments, which had a Reynolds number exponent similar to the studies of NAPL dissolution in groundwater.

Rheological Characterization of Bitumen and Asphalt including the effect of Added-recycled Material

This thesis evaluates the rheological behaviour of asphalt mixtures and the corresponding extracted binders from the mixtures containing different amounts of Reclaimed Asphalt (RA). Generally, the use of RA is limited to certain amounts. The study materials are Stone Mastic Asphalts including a control sample with 0% RA, and other samples with RA rates of 30%, 60% and 100%. Another set of studied mixtures are Asphalt Concretes (AC) types with again a control mix having 0% RA rate and the other mixtures designs containing 30%, 60% and 90% of reclaimed asphalt which also contain additives. In addition to the bitumen samples extracted from asphalt mixes, there are bitumen samples directly extracted from the original RA. To characterize the viscoelastic behaviour of the binders, Dynamic Shear Rheometer (DSR) tests were conducted on bitumen specimens. The resulting influence of the RA content in the bituminous binders are illustrated through master curves, black diagrams and Cole-Cole plots with regressing these experimental data by the application of the analogical 2S2P1D and the analytical CA model. The advantage of the CA model is in its limited number of parameters and thus is a simple model to use. The 2S2P1D model is an analogical rheological model for the prediction of the linear viscoelastic properties of both asphalt binders and mixtures. In order to study the influence of RA on mixtures, the Indirect Tensile Test (ITT) has been conducted. The master curves of different mixture samples are evaluated by regressing the test data points to a sigmoidal function and subsequently by comparing the master curves, the influence of RA materials is studied. The thesis also focusses on the applicability and also differences of CA model and 2S2P1D model for bitumen samples and the sigmoid function for the mixtures and presents the influence of the RA rate on the investigated model parameters.

Bitumen aggregate adhesion and bitumen rheology of hard modified binders

The waterproofing of hydraulic structure is done traiditionally like laying road on dam surface but with specific modified binders. An italian firm recently patented a new method that is re-adaptation of typical surface treatment of roads. The purpose of this study is to find out best aggregate-bitumen mixture that can perform well under service conditions of a large hydraulic structure such as dams. So, 4 different hard modified bitumen were tested with 2 aggregate types i.e. limestone and basalt. The experimental program contained the testing of bitumen aggregate adhesion, using the rolling bottle test and rheology of hard modified binders using multiple stress creep and recovery test and dynamic viscosity test. The results and discussion are presented in detail in this work.

Positioning of Deadeners for Vibration Reduction in Vehicle Roof Using Embedded Sensitivity

The noise, vibration and harshness (NVH) performance of passenger vehicles strongly depends on the fluid-structure interaction between the air in the vehicle cavity and the sheet metal structure of the vehicle. Most of the noise and vibration problems related to this interaction come from resonance peaks of the sheet metal, which are excited by external forces (road, engine, and wind). A reduction in these resonance peaks can be achieved by applying bitumen damping layers, also called deadeners, in the sheet metal. The problem is where these deadeners shall be fixed, which is usually done in a trial-and-error basis. In this work, one proposes the use of embedded sensitivity to locate the deadeners in the sheet metal of the vehicle, more specifically in the vehicle roof. Experimental frequency response functions (FRFs) of the roof are obtained and the data are processed by adopting the embedded sensitivity method, thus obtaining the sensitivity of the resonance peaks on the local increase in damping due to the deadeners. As a result, by examining the sensitivity functions, one can find the optimum location of the deadeners that maximize their effect in reducing the resonance peaks of interest. After locating the deadeners in the optimum positions, it was possible to verify a strong reduction in resonance peaks of the vehicle roof, thus showing the efficiency of the procedure. The main advantage of this procedure is that it only requires FRF measurements of the vehicle in its original state not needing any previous modification of the vehicle structure to find the sensitivity functions. [DOI: 10.1115/1.4000769]

Planning and operation of large-scale water distribution systems with preemptive priorities

This paper describes the development of an optimization model for the management and operation of a large-scale, multireservoir water supply distribution system with preemptive priorities. The model considers multiobjectives and hedging rules. During periods of drought, when water supply is insufficient to meet the planned demand, appropriate rationing factors are applied to reduce water supply. In this paper, a water distribution system is formulated as a network and solved by the GAMS modeling system for mathematical programming and optimization. A user-friendly interface is developed to facilitate the manipulation of data and to generate graphs and tables for decision makers. The optimization model and its interface form a decision support system (DSS), which can be used to configure a water distribution system to facilitate capacity expansion and reliability studies. Several examples are presented to demonstrate the utility and versatility of the developed DSS under different supply and demand scenarios, including applications to one of the largest water supply systems in the world, the Sao Paulo Metropolitan Area Water Supply Distribution System in Brazil.

Experimental Measurement of Water Diffusion through Fine Aggregate Mixtures

The water diffusion attributable to concentration gradients is among the main mechanisms of water transport into the asphalt mixture. The transport of small molecules through polymeric materials is a very complex process, and no single model provides a complete explanation because of the small molecule`s complex internal structure. The objective of this study was to experimentally determine the diffusion of water in different fine aggregate mixtures (FAM) using simple gravimetric sorption measurements. For the purposes of measuring the diffusivity of water, FAMs were regarded as a representative homogenous volume of the hot-mix asphalt (HMA). Fick`s second law is generally used to model diffusion driven by concentration gradients in different materials. The concept of the dual mode diffusion was investigated for FAM cylindrical samples. Although FAM samples have three components (asphalt binder, aggregates, and air voids), the dual mode was an attempt to represent the diffusion process by only two stages that occur simultaneously: (1) the water molecules are completely mobile, and (2) the water molecules are partially mobile. The combination of three asphalt binders and two aggregates selected from the Strategic Highway Research Program`s (SHRP) Materials Reference Library (MRL) were evaluated at room temperature [23.9 degrees C (75 degrees F)] and at 37.8 degrees C (100 degrees F). The results show that moisture uptake and diffusivity of water through FAM is dependent on the type of aggregate and asphalt binder. At room temperature, the rank order of diffusivity and moisture uptake for the three binders was the same regardless of the type of aggregate. However, this rank order changed at higher temperatures, suggesting that at elevated temperatures different binders may be undergoing a different level of change in the free volume. DOI: 10.1061/(ASCE)MT.1943-5533.0000190. (C) 2011 American Society of Civil Engineers.

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.