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.

Potentials and limitations of coordinated spatial and non-spatial information

Information management and geoinformation systems (GIS) have become indispensable in a large majority of protected areas all over the world. These tools are used for management purposes as well as for research and in recent years have become even more important for visitor information, education and communication. This study is divided into two parts: the first part provides a general overview of GIS and information management in a selected number of national park organizations. The second part lists and evaluates the needs of evolving large protected areas in Switzerland. The results show a wide use of GIS and information management tools in well established protected areas. The more isolated use of singular GIS tools has increasingly been replaced by an integrated geoinformation management. However, interview partners pointed out that human resources for GIS in most parks are limited. The interviews also highlight uneven access to national geodata. The view of integrated geoinformation management is not yet fully developed in the park projects in Switzerland. Short-term needs, such as software and data availability, motivate a large number of responses collected within an exhaustive questionnaire. Nevertheless, the need for coordinated action has been identified and should be followed up. The park organizations in North America show how an effective coordination and cooperation might be organized.

Potentials and constraints of modeling for transdisciplinary co-producing strategies for sustainable water governance

Both climate change and socio-economic development will significantly modify the supply and consumption of water in future. Consequently, regional development has to face aggravation of existing or emergence of new conflicts of interest. In this context, transdisciplinary co-production of knowledge is considered as an important means for coping with these challenges. Accordingly, the MontanAqua project aims at developing strategies for more sustainable water management in the study area Crans-Montana-Sierre (Switzerland) in a transdisciplinary way. It strives for co-producing system, target and transformation knowledge among researchers, policy makers, public administration and civil society organizations. The research process basically consisted of the following steps: First, the current water situation in the study region was investigated. How much water is available? How much water is being used? How are decisions on water distribution and use taken? Second, participatory scenario workshops were conducted in order to identify the stakeholders’ visions of regional development. Third, the water situation in 2050 was simulated by modeling the evolution of water resources and water use and by reflecting on the institutional aspects. These steps laid ground for jointly assessing the consequences of the stakeholders’ visions of development in view of scientific data regarding governance, availability and use of water in the region as well as developing necessary transformation knowledge. During all of these steps researchers have collaborated with stakeholders in the support group RegiEau. The RegiEau group consists of key representatives of owners, managers, users, and pressure groups related to water and landscape: representatives of the communes (mostly the presidents), the canton (administration and parliament), water management associations, agriculture, viticulture, hydropower, tourism, and landscape protection. The aim of the talk is to explore potentials and constraints of scientific modeling of water availability and use within the process of transdisciplinary co-producing strategies for more sustainable water governance.

Academic cooperation to foster research and advocacy competences in the occupied Palestinian territory (West Bank)

Palestinians living in the West Bank, a territory occupied by the State of Israel according to International Law, face deprived access to land and a limited ability to move freely which pertains to the presence of Israeli settlements and other infrastructure (closures, restricted or forbidden roads, etc.). This confinement has significant impacts on their economic and social livelihoods, and it is even worsening with the on-going construction of a 709 km long Barrier which mainly runs inside the West Bank. With regard to this situation, there is a clear need to strengthen the capacity of civil society and its representatives to apply sound research processes as a basis for improved advocacy for Palestinian human rights. Monitoring processes and tools are needed to assess the impacts of the Palestinians’ confinement, particularly in relation to the Barrier’s construction. Reliable data has also to be collected, managed, and above all, shared. These challenges have been addressed within the Academic Cooperation Palestine Project (ACPP) that brings together academic partners from the occupied Palestinian territory (oPt) West Bank (WB), and Switzerland as well as other international academic institutions and Palestinian governmental and non-governmental agencies. ACPP started in early 2011 and is designed as a large cooperation networking platform involving researchers, students, public servants and experts from the oPt WB. A large set of actions have already been developed during the first year of the project, including courses, training, and research actions. First relevant results and impacts of the different actions are presented in this paper. Taken as a whole, the project produces valuable results for all partners: useful advocacy material for the Palestinian partners, and a unique “real-scale laboratory” where investigations are jointly conducted to develop novel confinement and change indicators.

Differences in coronary risk factors, procedural characteristics, mortality and stent thrombosis between two all-comers percutaneous coronary intervention registries from Europe and Japan: a patient-level data analysis of the Bern-Rotterdam and j-Cypher registries

Aims: The reported rate of stent thrombosis (ST) after drug-eluting stent (DES) implantation varies among registries. To investigate differences in baseline characteristics and clinical outcome in European and Japanese all-comers registries, we performed a pooled analysis of patient-level data. Methods and results: The j-Cypher registry (JC) is a multicentre observational study conducted in Japan, including 12,824 patients undergoing SES implantation. From the Bern-Rotterdam registry (BR) enrolled at two academic hospitals in Switzerland and the Netherlands, 3,823 patients with SES were included in the current analysis. Patients in BR were younger, more frequently smokers and presented more frequently with ST-elevation myocardial infarction (MI). Conversely, JC patients more frequently had diabetes and hypertension. At five years, the definite ST rate was significantly lower in JC than BR (JC 1.6% vs. BR 3.3%, p<0.001), while the unadjusted mortality tended to be lower in BR than in JC (BR 13.2% vs. JC 14.4%, log-rank p=0.052). After adjustment, the j-Cypher registry was associated with a significantly lower risk of all-cause mortality (HR 0.56, 95% CI: 0.49-0.64) as well as definite stent thrombosis (HR 0.46, 95% CI: 0.35-0.61). Conclusions: The baseline characteristics of the two large registries were different. After statistical adjustment, JC was associated with lower mortality and ST.

All-ceramic or metal-ceramic tooth-supported fixed dental prostheses (FDPs)? A systematic review of the survival and complication rates. Part I: Single crowns (SCs).

OBJECTIVE To assess the 5-year survival of metal-ceramic and all-ceramic tooth-supported single crowns (SCs) and to describe the incidence of biological, technical and esthetic complications. METHODS Medline (PubMed), Embase, Cochrane Central Register of Controlled Trials (CENTRAL) searches (2006-2013) were performed for clinical studies focusing on tooth-supported fixed dental prostheses (FDPs) with a mean follow-up of at least 3 years. This was complimented by an additional hand search and the inclusion of 34 studies from a previous systematic review [1,2]. Survival and complication rates were analyzed using robust Poisson's regression models to obtain summary estimates of 5-year proportions. RESULTS Sixty-seven studies reporting on 4663 metal-ceramic and 9434 all-ceramic SCs fulfilled the inclusion criteria. Seventeen studies reported on metal-ceramic crowns, and 54 studies reported on all-ceramic crowns. Meta-analysis of the included studies indicated an estimated survival rate of metal-ceramic SCs of 94.7% (95% CI: 94.1-96.9%) after 5 years. This was similar to the estimated 5-year survival rate of leucit or lithium-disilicate reinforced glass ceramic SCs (96.6%; 95% CI: 94.9-96.7%), of glass infiltrated alumina SCs (94.6%; 95% CI: 92.7-96%) and densely sintered alumina and zirconia SCs (96%; 95% CI: 93.8-97.5%; 92.1%; 95% CI: 82.8-95.6%). In contrast, the 5-year survival rates of feldspathic/silica-based ceramic crowns were lower (p<0.001). When the outcomes in anterior and posterior regions were compared feldspathic/silica-based ceramic and zirconia crowns exhibited significantly lower survival rates in the posterior region (p<0.0001), the other crown types performed similarly. Densely sintered zirconia SCs were more frequently lost due to veneering ceramic fractures than metal-ceramic SCs (p<0.001), and had significantly more loss of retention (p<0.001). In total higher 5 year rates of framework fracture were reported for the all-ceramic SCs than for metal-ceramic SCs. CONCLUSIONS Survival rates of most types of all-ceramic SCs were similar to those reported for metal-ceramic SCs, both in anterior and posterior regions. Weaker feldspathic/silica-based ceramics should be limited to applications in the anterior region. Zirconia-based SCs should not be considered as primary option due to their high incidence of technical problems.

All-ceramic or metal-ceramic tooth-supported fixed dental prostheses (FDPs)? A systematic review of the survival and complication rates. Part II: Multiple-unit FDPs.

OBJECTIVE To assess the 5-year survival of metal-ceramic and all-ceramic tooth-supported fixed dental prostheses (FDPs) and to describe the incidence of biological, technical and esthetic complications. METHODS Medline (PubMed), Embase and Cochrane Central Register of Controlled Trials (CENTRAL) searches (2006-2013) were performed for clinical studies focusing on tooth-supported FDPs with a mean follow-up of at least 3 years. This was complemented by an additional hand search and the inclusion of 10 studies from a previous systematic review [1]. Survival and complication rates were analyzed using robust Poisson's regression models to obtain summary estimates of 5-year proportions. RESULTS Forty studies reporting on 1796 metal-ceramic and 1110 all-ceramic FDPs fulfilled the inclusion criteria. Meta-analysis of the included studies indicated an estimated 5-year survival rate of metal-ceramic FDPs of 94.4% (95% CI: 91.2-96.5%). The estimated survival rate of reinforced glass ceramic FDPs was 89.1% (95% CI: 80.4-94.0%), the survival rate of glass-infiltrated alumina FDPs was 86.2% (95% CI: 69.3-94.2%) and the survival rate of densely sintered zirconia FDPs was 90.4% (95% CI: 84.8-94.0%) in 5 years of function. Even though the survival rate of all-ceramic FDPs was lower than for metal-ceramic FDPs, the differences did not reach statistical significance except for the glass-infiltrated alumina FDPs (p=0.05). A significantly higher incidence of caries in abutment teeth was observed for densely sintered zirconia FDPs compared to metal-ceramic FDPs. Significantly more framework fractures were reported for reinforced glass ceramic FDPs (8.0%) and glass-infiltrated alumina FDPs (12.9%) compared to metal-ceramic FDPs (0.6%) and densely sintered zirconia FDPs (1.9%) in 5 years in function. However, the incidence of ceramic fractures and loss of retention was significantly (p=0.018 and 0.028 respectively) higher for densely sintered zirconia FDPs compared to all other types of FDPs. CONCLUSIONS Survival rates of all types of all-ceramic FDPs were lower than those reported for metal-ceramic FDPs. The incidence of framework fractures was significantly higher for reinforced glass ceramic FDPs and infiltrated glass ceramic FDPs, and the incidence for ceramic fractures and loss of retention was significantly higher for densely sintered zirconia FDPs compared to metal-ceramic FDPs.

A methodology for appraising and selecting strategies to mitigate desertification based on stakeholder participation and global best practices

The main aim of the methodology presented in this paper is to provide a framework for a participatory process for the appraisal and selection of options to mitigate desertification and land degradation. This methodology is being developed within the EU project DESIRE (www.desire-project.eu/) in collaboration with WOCAT (www.wocat.org). It is used to select promising conservation strategies for test-implementation in each of the 16 degradation and desertification hotspot sites in the Mediterranean and around the world. The methodology consists of three main parts: In a first step, prevention and mitigation strategies already applied at the respective DESIRE study site are identified and listed during a workshop with representatives of different stakeholders groups (land users, policy makers, researchers). The participatory and process-oriented approach initiates a mutual learning process among the different stakeholders by sharing knowledge and jointly reflecting on current problems and solutions related to land degradation and desertification. In the second step these identified, locally applied solutions (technologies and approaches) are assessed with the help of the WOCAT methodology. Comprehensive questionnaires and a database system have been developed to document and evaluate all relevant aspects of technical measures as well as implementation approaches by teams of researchers and specialists, together with land users. This research process ensures systematic assessing and piecing together of local information, together with specific details about the environmental and socio-economic setting. The third part consists of another stakeholder workshop where promising strategies for sustainable land management in the given context are selected, based on the best practices database of WOCAT, including the evaluated locally applied strategies at the DESIRE sites. These promising strategies will be assessed with the help of a selection and decision support tool and adapted for test-implementation at the study site.

Implications of Longterm Diameter-Limit Harvesting: Effects on Radial Growth of Red Spruce (Picea rubens) and Genetic Diversity of White Pine (Pinus strobus)

For over 3 centuries, diameter-limit harvesting has been a predominant logging method in the northeastern United States. Silvicultural theory asserts that such intensively selective harvesting can lead to genetic degradation. A decrease in softwood productivity has recently been reported in Maine - has a long history of dysgenic selection degraded the genetic resources of Maine softwoods, contributing to a decrease in growth and productivity? This study examines two aspects of potential implications of diameter-limit harvesting: effects on residual phenotypes of red spruce and impacts on genetic diversity of white pine. Radial growth of residual red spruce trees in stands experiencing 50 years of fixed diameter-limit harvesting was measured using annual increment rings and compared with residual red spruce trees in positive selection stands. Trees remaiaing after several rounds of diameter-limit harvesting exhibited sigdicantl y smaller radial sizes throughout their lives, and displayed significantly slower growth rates for the first 80 years of measured growth. These results strongly suggest that the largest and fastest-growing genotypes and their respective gene complexes determining good radial growth have been removed from the diameter-limit stand. Dysgenic selection can be observed in fixed diarneter-limit stands, resulting in a diminished genetic resource and decreased residual stand value. To examine more direct genetic implications of long-term diameter-limit harvesting, microsatellite DNA markers were implemented to study genetic diversity of eastern white pine in Maine. Three age groups of trees were studied: mature trees older than 200 years, juvenile trees 5-30 years old, and embryos. Trees were genotyped at 10 microsatellite loci. Overall genetic diversity levels of eastern white pine in Maine were extremely high, with an average observed heterozygosity of 0.762. Genetic differentiation was minimal among and between all three age groups, although an excess of heterozygotes was shown in the mature and juvenile groups that was not reflected in the embryo group, which actually had a slight heterozygote deficiency. Allele frequencies did not differ significantly between age groups, but did reveal more rare and low frequency alleles in the embryo groups than in the mature group. Overall, low frequency alleles comprise the largest portion of alleles in the sample population, with no common alleles evident overall. These results suggest that significant genetic degradation has either not occurred for white pine, or that the results of dysgenic selection have not yet emerged. It is clear, however, that selective harvesting could result in a loss of low frequency alleles, which are a primary reserve of evolutionary potential in a species. Implications of these studies affect industrial forestry, regional economics, and ecological concerns for the northeast. Long-term diameter-limit harvesting can lead to a degradation of residual phenotypes, and an overall decrease in stand quality. Potentially, a loss of low frequency, locally adapted alleles could result in a decrease of allelic richness and degradation of the regidnal genetic resource. Decreased genetic variation can lead to seriously limited evolutionary potential of species and ecosystems, particularly in rapidly changing environments. Based on these findings, I recommend a reassessment of any harvesting prescription that includes fixed diameter-limit removals, particularly for species that have low natural genetic diversity levels or a limited natural range, such as red spruce. Maintenance of a healthy genetic reserve can avoid effects of dysgenic harvesting.

Optimally Combining Censored and Uncensored Datasets

Economists and other social scientists often face situations where they have access to two datasets that they can use but one set of data suffers from censoring or truncation. If the censored sample is much bigger than the uncensored sample, it is common for researchers to use the censored sample alone and attempt to deal with the problem of partial observation in some manner. Alternatively, they simply use only the uncensored sample and ignore the censored one so as to avoid biases. It is rarely the case that researchers use both datasets together, mainly because they lack guidance about how to combine them. In this paper, we develop a tractable semiparametric framework for combining the censored and uncensored datasets so that the resulting estimators are consistent, asymptotically normal, and use all information optimally. When the censored sample, which we refer to as the master sample, is much bigger than the uncensored sample (which we call the refreshment sample), the latter can be thought of as providing identification where it is otherwise absent. In contrast, when the refreshment sample is large and could typically be used alone, our methodology can be interpreted as using information from the censored sample to increase effciency. To illustrate our results in an empirical setting, we show how to estimate the effect of changes in compulsory schooling laws on age at first marriage, a variable that is censored for younger individuals. We also demonstrate how refreshment samples for this application can be created by matching cohort information across census datasets.

The Geographic Distribution of the Size and Timing of Monetary Policy Actions

This paper examines the magnitude and timing of the effects of changes in the monetary base on the aggregate and regional changes in bank loans within the United States. We consider both Bureau of Economic Analysis (BEA) regions, and individual states and the District of Columbia for our regional analysis. The empirical analysis provides some insight on the bank-lending channel of monetary policy. We find strong evidence of a 4-quarter lag in the effect of changes in the monetary base on bank loans. That finding proves robust across all regions and nearly all states.

Existence and Uniqueness of Equilibrium in Nonoptimal Unbounded Infinite Horizon Economies

In applied work in macroeconomics and finance, nonoptimal infinite horizon economies are often studied in the the state space is unbounded. Important examples of such economies are single vector growth models with production externalities, valued fiat money, monopolistic competition, and/or distortionary government taxation. Although sufficient conditions for existence and uniqueness of Markovian equilibrium are well known for the compact state space case, no similar sufficient conditions exist for unbounded growth. This paper provides such a set of sufficient conditions, and also present a computational algorithm that will prove asymptotically consistent when computing Markovian equilibrium.