Potential demand for hedging by Australian wheat producers

The potential for hedging Australian wheat with the new Sydney Futures Exchange wheat contract is examined using a theoretical hedging model parametised from previous studies. The optimal hedging ratio for an 'average' wheat farmer was found to be zero under reasonable assumptions about transaction costs and based on previously published measures of risk aversion. The estimated optimal hedging ratios were found by simulation to be quite sensitive to assumptions about the degree of risk aversion. If farmers are significantly more risk averse than is currently believed, then there is likely to be an active interest in the new futures market.

Risk management under a two-factor model of the term structure of interest rates

This paper presents several applications to interest rate risk managementbased on a two-factor continuous-time model of the term structure of interestrates previously presented in Moreno (1996). This model assumes that defaultfree discount bond prices are determined by the time to maturity and twofactors, the long-term interest rate and the spread (difference between thelong-term rate and the short-term (instantaneous) riskless rate). Several newmeasures of ``generalized duration" are presented and applied in differentsituations in order to manage market risk and yield curve risk. By means ofthese measures, we are able to compute the hedging ratios that allows us toimmunize a bond portfolio by means of options on bonds. Focusing on thehedging problem, it is shown that these new measures allow us to immunize abond portfolio against changes (parallel and/or in the slope) in the yieldcurve. Finally, a proposal of solution of the limitations of conventionalduration by means of these new measures is presented and illustratednumerically.

Variance reduction properties of dynamic hedging models - empirical evidence from BRICS countries

This Master’s Thesis analyses the effectiveness of different hedging models on BRICS (Brazil, Russia, India, China, and South Africa) countries. Hedging performance is examined by comparing two different dynamic hedging models to conventional OLS regression based model. The dynamic hedging models being employed are Constant Conditional Correlation (CCC) GARCH(1,1) and Dynamic Conditional Correlation (DCC) GARCH(1,1) with Student’s t-distribution. In order to capture the period of both Great Moderation and the latest financial crisis, the sample period extends from 2003 to 2014. To determine whether dynamic models outperform the conventional one, the reduction of portfolio variance for in-sample data with contemporaneous hedge ratios is first determined and then the holding period of the portfolios is extended to one and two days. In addition, the accuracy of hedge ratio forecasts is examined on the basis of out-of-sample variance reduction. The results are mixed and suggest that dynamic hedging models may not provide enough benefits to justify harder estimation and daily portfolio adjustment. In this sense, the results are consistent with the existing literature.

The effect of asymmetries on optimal hedge ratios

There is widespread evidence that the volatility of stock returns displays an asymmetric response to good and bad news. This article considers the impact of asymmetry on time-varying hedges for financial futures. An asymmetric model that allows forecasts of cash and futures return volatility to respond differently to positive and negative return innovations gives superior in-sample hedging performance. However, the simpler symmetric model is not inferior in a hold-out sample. A method for evaluating the models in a modern risk-management framework is presented, highlighting the importance of allowing optimal hedge ratios to be both time-varying and asymmetric.

Better cross hedges with composite hedging? Hedging equity portfolios using financial and commodity futures

Unless a direct hedge is available, cross hedging must be used. In such circumstances portfolio theory implies that a composite hedge (the use of two or more hedging instruments to hedge a single spot position) will be beneficial. The study and use of composite hedging has been neglected; possibly because it requires the estimation of two or more hedge ratios. This paper demonstrates a statistically significant increase in out-of-sample effectiveness from the composite hedging of the Amex Oil Index using S&P500 and New York Mercantile Exchange crude oil futures. This conclusion is robust to the technique used to estimate the hedge ratios, and to allowance for transactions costs, dividends and the maturity of the futures contracts.

Optimal hedging with higher moments

This study proposes a utility-based framework for the determination of optimal hedge ratios (OHRs) that can allow for the impact of higher moments on hedging decisions. We examine the entire hyperbolic absolute risk aversion family of utilities which include quadratic, logarithmic, power, and exponential utility functions. We find that for both moderate and large spot (commodity) exposures, the performance of out-of-sample hedges constructed allowing for nonzero higher moments is better than the performance of the simpler OLS hedge ratio. The picture is, however, not uniform throughout our seven spot commodities as there is one instance (cotton) for which the modeling of higher moments decreases welfare out-of-sample relative to the simpler OLS. We support our empirical findings by a theoretical analysis of optimal hedging decisions and we uncover a novel link between OHRs and the minimax hedge ratio, that is the ratio which minimizes the largest loss of the hedged position. © 2011 Wiley Periodicals, Inc. Jrl Fut Mark

Pricing and hedging short sterling options using artificial neural networks

This paper compares the performance of artificial neural networks (ANNs) with that of the modified Black model in both pricing and hedging Short Sterling options. Using high frequency data, standard and hybrid ANNs are trained to generate option prices. The hybrid ANN is significantly superior to both the modified Black model and the standard ANN in pricing call and put options. Hedge ratios for hedging Short Sterling options positions using Short Sterling futures are produced using the standard and hybrid ANN pricing models, the modified Black model, and also standard and hybrid ANNs trained directly on the hedge ratios. The performance of hedge ratios from ANNs directly trained on actual hedge ratios is significantly superior to those based on a pricing model, and to the modified Black model.

The (de)merits of minimum-variance hedging: application to the crack spread

We study the empirical performance of the classical minimum-variance hedging strategy, comparing several econometric models for estimating hedge ratios of crude oil, gasoline and heating oil crack spreads. Given the great variability and large jumps in both spot and futures prices, considerable care is required when processing the relevant data and accounting for the costs of maintaining and re-balancing the hedge position. We find that the variance reduction produced by all models is statistically and economically indistinguishable from the one-for-one “naïve” hedge. However, minimum-variance hedging models, especially those based on GARCH, generate much greater margin and transaction costs than the naïve hedge. Therefore we encourage hedgers to use a naïve hedging strategy on the crack spread bundles now offered by the exchange; this strategy is the cheapest and easiest to implement. Our conclusion contradicts the majority of the existing literature, which favours the implementation of GARCH-based hedging strategies.

The cross-currency hedging performance of implied versus statistical forecasting models

This article examines the ability of several models to generate optimal hedge ratios. Statistical models employed include univariate and multivariate generalized autoregressive conditionally heteroscedastic (GARCH) models, and exponentially weighted and simple moving averages. The variances of the hedged portfolios derived using these hedge ratios are compared with those based on market expectations implied by the prices of traded options. One-month and three-month hedging horizons are considered for four currency pairs. Overall, it has been found that an exponentially weighted moving-average model leads to lower portfolio variances than any of the GARCH-based, implied or time-invariant approaches.

Analysis of the Iberian electricity forward market hedging efficiency

An assessment of the hedging performance in the Iberian Forward Electricity Market is performed. Aggregated data from the Portuguese and Spanish clearing houses for energy derivatives are considered. The hedging performance is measured through the ratio of the final open interest of a month derivatives contract divided by its accumulated cleared volume. The base load futures in the Iberian energy derivatives exchange show the lowest ratios due to good liquidity. The peak futures show bigger ratios as their reduced liquidity is produced by auctions fixed by Portuguese regulation. The base load swaps settled in the clearing house located in Spain show initially large values due to low registered volumes, as this clearing house is mainly used for short maturity (daily and weekly swaps). This hedging ratio can be a powerful oversight tool for energy regulators when accessing to all the derivatives transactions as envisaged by European regulation.

Improved Selective Cholesterol Adsorption By Molecularly Imprinted Poly(methacrylic Acid)/silica (pmaa-sio₂) Hybrid Material Synthesized With Different Molar Ratios.

The present paper describes the synthesis of molecularly imprinted polymer - poly(methacrylic acid)/silica and reports its performance feasibility with desired adsorption capacity and selectivity for cholesterol extraction. Two imprinted hybrid materials were synthesized at different methacrylic acid (MAA)/tetraethoxysilane (TEOS) molar ratios (6:1 and 1:5) and characterized by FT-IR, TGA, SEM and textural data. Cholesterol adsorption on hybrid materials took place preferably in apolar solvent medium, especially in chloroform. From the kinetic data, the equilibrium time was reached quickly, being 12 and 20 min for the polymers synthesized at MAA/TEOS molar ratio of 6:1 and 1:5, respectively. The pseudo-second-order model provided the best fit for cholesterol adsorption on polymers, confirming the chemical nature of the adsorption process, while the dual-site Langmuir-Freundlich equation presented the best fit to the experimental data, suggesting the existence of two kinds of adsorption sites on both polymers. The maximum adsorption capacities obtained for the polymers synthesized at MAA/TEOS molar ratios of 6:1 and 1:5 were found to be 214.8 and 166.4 mg g(-1), respectively. The results from isotherm data also indicated higher adsorption capacity for both imprinted polymers regarding to corresponding non-imprinted polymers. Nevertheless, taking into account the retention parameters and selectivity of cholesterol in the presence of structurally analogue compounds (5-α-cholestane and 7-dehydrocholesterol), it was observed that the polymer synthesized at the MAA/TEOS molar ratio of 6:1 was much more selective for cholesterol than the one prepared at the ratio of 1:5, thus suggesting that selective binding sites ascribed to the carboxyl group from MAA play a central role in the imprinting effect created on MIP.

Body Mass Index, Cigarette Smoking, and Alcohol Consumption and Cancers of the Oral Cavity, Pharynx, and Larynx: Modeling Odds Ratios in Pooled Case-Control Data

study-specific results, their findings should be interpreted with caution

Frozen Chicken for Wild Fish: Nutritional Transition in the Brazilian Amazon Region Determined by Carbon and Nitrogen Stable Isotope Ratios in Fingernails

Objectives: Amazonian populations are experiencing dietary changes characteristic of the nutrition transition. However, the degree of change appears to vary between urban and rural settings. To investigate this process, we determined carbon and nitrogen stable isotope ratios in fingernails and dietary intake of Amazonian populations living along a rural to urban continuum along the Solimoes River in Brazil. Methods: Carbon and nitrogen stable isotope ratios were analyzed from the fingernails of 431 volunteer subjects living in different settings ranging from rural villages, small towns to urban centers along the Solimoes River. Data from 200 dietary intake surveys were also collected using food frequency questionnaires and 24-h recall interviews in an effort to determine qualitative aspects of diet composition. Results: Fingernail delta(13)C values (mean standard deviation) were -23.2 +/- 1.3, 20.2 +/- 1.5, and 17.4 +/- 1.3 parts per thousand and delta(15)N values were 11.8 +/- 0.6, 10.4 +/- 0.8, and 10.8 +/- 0.7 parts per thousand for those living in rural villages, small towns, and major cities, respectively. We found a gradual increase in the number of food items derived from C(4) plant types (meat and sugar) and the replacement of food items derived from C(3) plant types (fish and manioc flour) with increasing size of urban centers. Conclusion: Increasing urbanization in the Brazilian Amazon is associated with a significant change in food habits with processed and industrialized products playing an increasingly important role in the diet and contributing to the nutrition transition in the region. Am. J. Hum. Biol. 23:642-650, 2011. (C) 2011 Wiley-Liss, Inc.

Application of molecular techniques to evaluate the methanogenic archaea and anaerobic bacteria in the presence of oxygen with different COD : sulfate ratios in a UASB reactor

In this paper, the microbial characteristics of the granular sludge in the presence of oxygen (3.0 +/- 0.7 mg O-2 1(-1)) were analyzed using molecular biology techniques. The granules were provided by an upflow anaerobic sludge blanket (UASB) operated over 469 days and fed with synthetic substrate. Ethanol and sulfate were added to obtain different COD/SO42- ratios (3.0, 2.0, and 1.6). The results of fluorescent in situ hybridization (FISH) analyses showed that archaeal cells, detected by the ARC915 probe, accounted for 77%, 84%, and 75% in the COD/SO42- ratios (3.0, 2.0, and 1.6, respectively). Methanosaeta sp. was the predominant acetoclastic archaea observed by optical microscopy and FISH analyses, and confirmed by sequencing of the excised bands of the DGGE gel with a similarity of 96%. The sulfate-reducing bacterium Desulfovibrio vulgaris subsp. vulgaris (similarity of 99%) was verified by sequencing of the DGGE band. Others identified microorganism were similar to Shewanella sp. and Desulfitobacterium hafniense, with similarities of 95% and 99%, respectively. These results confirmed that the presence of oxygen did not severely affect the metabolism of microorganisms that are commonly considered strictly anaerobic. We obtained mean efficiencies of organic matter conversion and sulfate reducing higher than 74%. (C) 2008 Elsevier Ltd. All rights reserved.

Sampled Control for Mean-Variance Hedging in a Jump Diffusion Financial Market

In this technical note we consider the mean-variance hedging problem of a jump diffusion continuous state space financial model with the re-balancing strategies for the hedging portfolio taken at discrete times, a situation that more closely reflects real market conditions. A direct expression based on some change of measures, not depending on any recursions, is derived for the optimal hedging strategy as well as for the ""fair hedging price"" considering any given payoff. For the case of a European call option these expressions can be evaluated in a closed form.