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Dissertations / Theses on the topic 'Commodity hedging'
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Tkachev, Ilya. "Hedging strategy for an option on commodity market." Thesis, Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE), 2010. http://urn.kb.se/resolve?urn=urn:nbn:se:hh:diva-5393.
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In this work we consider the methods of pricing and hedging an option on the forward commodity market described by the multi-factor diffusion model. In the previous research there were presented explicit valuation formulas for standard European type options and simulation schemes for other types of options. However, hedging strategies were not developed in the available literature. Extending known results this work gives analytical formulas for the price of American, Asian and general European options. Moreover, for all these options hedging strategies are presented. Using these results the dynamics of the portfolio composed of options on futures with different maturities is studied on a commodity market.
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Kimura, Norifumi. "Hedging Default and Price Risks in Commodity Trading." Thesis, North Dakota State University, 2016. https://hdl.handle.net/10365/28055.
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Many risk factors exist in the commodity markets, especially those related to price and quantity. Recently, the risk of counterparty default has been increasing. The purpose of this study is to develop a portfolio-hedging model to hedge both price and default risks using exchange traded commodity futures and option contracts. Two approaches are taken to determine the optimal hedge ratios (HR) using futures and options: an analytical approach that mathematically derives closed-form mean-variance (E-V) maximizing solutions, and an empirical approach that uses stochastic optimization and Monte Carlo simulation under mean-value-at-risk (E-VaR) framework. Based on the analytical approach, we proved that utility-maximizing solutions exists. The empirical approach suggests that na?ve HR (HR of one) leads to a suboptimal result. The minimum-variance, E-V, and minimum VaR objective functions generated the same optimization results. Additionally, a copula is applied instead of a linear correlation, and resulted a higher put option HR.
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Nurmos, Ville, and Mattias Andersson. "Nordic electricity hedging : A comparison with other commodity market structures." Thesis, KTH, Tillämpad termodynamik och kylteknik, 2013. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-129188.
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This master thesis investigates and answers three fundamental questions regarding structural changes of a future market. This has been done by analysing and comparing three commodity markets with the Nordic electricity market. Examined commodity markets are LME steel billet, CME lean hogs and WTI & Brent crude oil. The report consists of a literature review with a theoretical background, CATWOE and a case analysis of each commodity market. The markets are thereafter analysed, compared and discussed regarding the research questions. It is concluded that the Nordic electricity market is in many ways comparable to other commodities, although it has some special characteristics. Key factors determining market success have been identified as (1) correlation between perceived risk and derivative risk, (2) trust for and experience of trading institutions and trading environment and (3) expectations. Based on the findings a new conceptual measure for market liquidity, Relative Market Liquidity, is introduced and discussed. The comparison in this thesis is based on the Nordic electricity market, but much of the results are applicable to other commodity markets. The thesis has been written during spring 2013 at the Royal Institute of Technology Department of Energy Technology in co-operation with Vattenfall AB.
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Havik, Jonathan, Emil Stendahl, and Andreas Soteriou. "Commodity Risk Management in The Airline Industry : A study from Europe." Thesis, Internationella Handelshögskolan, Högskolan i Jönköping, IHH, Företagsekonomi, 2016. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-30346.
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The airline industry is a major user of jet fuel and this constitutes a large component of the operating costs and is a risk coefficient for airlines. Several studies have been conducted on how oil price volatility affect stock prices and cash flows as well as how, in general, firms that uses derivatives experience lower stock returns volatility and stock s .The impact of oil price volatility on airline stock s and the impact of hedging on airline stock s have not been adequately examined, this paper fills this gap. By gathering daily frequency of oil spot prices to access the quarterly oil price volatility and stock s from 16 European airlines, we correlate quarterly oil price volatility to quarterly airline stock s as well as stock s and hedging percentages between 2010-2015, we reject the hypothesis that oil price volatility has an impact on airline stock s and that hedging reduces stock s. These findings therefore suggest that oil price volatility do not have a large impact on systematic risks or that hedging offset systematic risks. The findings are of interest to investors who want to make well informed investment decisions based on non-diversifiable equity risk since it has become popular for management recently to implement hedging policies to signal competency in risk management in order to attract investments.
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Meyer, Thomas O. "Effects of speculation and hedging in several commodity and financial futures markets /." Connect to resource, 1990. http://rave.ohiolink.edu/etdc/view.cgi?acc%5Fnum=osu1265633828.
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Moftah, Alghazali Idries Omran. "The hedging effectiveness of futures markets : evidence from commodity and stock markets." Thesis, University of Southampton, 2002. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.269586.
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Turner, Peter Alistair. "Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel." Thesis, North Dakota State University, 2014. https://hdl.handle.net/10365/27250.
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Airlines are exposed to risks in swings in the price of jet fuel. While there are many different options that they can use to hedge this risk, airlines often underutilize them. This study establishes the minimum variance hedge ratio for an airline wishing to hedge with futures, while also establishing the best cross-hedging asset. Airlines hedging with futures would create the most effective hedge by using 3-month maturity contracts of heating oil. 3- Month maturity contracts are slightly more effective as hedging tools than the next month, but beyond the 3-Month veil, increased maturity makes heating oil less effective as a cross hedging tool.Upper Great Plains Transportation Institute (UGPTI)
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Meyer, Thomas Otto. "Effects of speculation and hedging in several commodity and financial futures markets." The Ohio State University, 1990. http://rave.ohiolink.edu/etdc/view?acc_num=osu1265633828.
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Oldeweme, Daniel Johannes. "Die Bilanzierung von Commodity-Hedges nach International Financial Reporting Standards (IFRS) /." St. Gallen : [s.n.], 2008. http://aleph.unisg.ch/hsgscan/hm00240573.pdf.
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Rowsell, John. "Comparative analysis of cash margin hedging strategies with commodity futures contracts and options." Thesis, Virginia Tech, 1987. http://hdl.handle.net/10919/45914.
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The performance of futures contracts and commodity options as hedging instruments were compared in a cash margin hedging framework for a 150 sow farrow to finish hog operation in southeastern Virginia. The expected cash margin (ECM) using corn soybean meal and hog futures were calculated daily from 1975 through 1982. The performance of options and futures were compared in 530 strategies that ranged from starit routine fixed margin hedging to strategies based on forecasted variable margins.
Master of Science
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Moumouni, Zoulkiflou. "Modeling and hedging strategies for agricultural commodities." Thesis, Montpellier, 2016. http://www.theses.fr/2016MONTD047/document.
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Sur les marchés agricoles, les producteurs encourent les risques de prix et de production ainsi que d'autres types de risques liés aux aléas de production. Ces risques impactent l'activité du producteur et pourraient diminuer ses revenus. La mondialisation des marchés, en particulier ceux des matières premières agricoles, permet de développer une stratégie de couverture en utilisant des instruments comme les contrats à terme. Cependant, la situation selon laquelle une position basée seulement sur un contrat futures devrait couvrir tous les risques, entraîne un marché incomplet. Le producteur en recherche de meilleure stratégie de couverture pour ajouter un contrat d'assurance ou d'option pour garantir davantage ses revenus, surtout lorsque les rendements des cultures prévus diminuent. Nous étudions, ici les stratégies de couverture dans le cadre statique, ainsi que dans le cadre de temps continu. Avant, nous analysons le comportement des prix des matières premières agricoles en utilisant diverses approches statistiques afin de suggérer la modélisation des prix adéquate aux données. La stratégie de couverture statique comprend également le processus de retournement de positions qui pourrait entraîner d'autres risques supplémentaires en raison de l'écart entre les nouveaux contrats à terme et des contrats à terme à proximité ainsi que la couverture inter-culture. Nous proposons une stratégie de couverture qui combine des contrats futures et d'assurance. Comme la prise de décisions dans le cadre statique ne tient pas compte des mouvements quotidiens de prix le long de l'horizon de couverture, la stratégie de couverture optimale en temps continu combine des positions en contrat à terme et options tout en prenant en compte les sauts et la saisonnalité dans la dynamique des prixIn agricultural markets, producers incur price and production risks as well as other risks related to production contingencies. These risks impact the producer activity and could decrease his income. The globalization of markets, particularly those of agricultural commodities, provides hedging instruments including futures contracts which will serve to develop a hedging strategy. However, the situation whereby a single futures contract-based positions could offset many risks leads to incomplete market. Especially, an producer looking for better hedging strategy could also include insurance, option contract or mutual funds to further guarantee his income, specially when crop yields are lower than expected.vspace{0.25cm}We investigate the hedging strategies in static framework as well as in continuous time framework. Prior, we analyze the behavior of agricultural prices using various statistical approaches and suggest appropriate price modeling for data at hands. The static hedging strategy also accounts for rollover process which gives raise to additional risks due to spread between new futures and nearby futures and inter-crop hedging. We particularly address hedging strategy that combines futures and insurance contracts. Since decisions making in static framework does not include price changes along the hedging horizon, optimal hedging strategy in continuous time framework will take into account jumps and seasonality by combining futures and option contracts
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Ni, Jian, and 倪剑. "Commodity procurement risk management using futures contracts: a dynamic financial hedging approach withmultistage rebalancing." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2011. http://hub.hku.hk/bib/B46587949.
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Sayle, James Hughes. "Optimal hedging strategies for early-planted soybeans in the South." Master's thesis, Mississippi State : Mississippi State University, 2007. http://library.msstate.edu/etd/show.asp?etd=etd-06192007-141148.
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Kubík, Ján. "Investície podniku automobilového priemyslu do kovov ako strategických surovín." Master's thesis, Vysoké učení technické v Brně. Fakulta podnikatelská, 2020. http://www.nusl.cz/ntk/nusl-433261.
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This diploma thesis deals with the fundamental analysis of selected metals as commodities, for use in the production of batteries for electric vehicles, to hedge against changes in the price of physical raw materials. Selected metals are analyzed based on the fundamental parameters, historical price development and the current situation on the commodity market. Based on these fundamental data, a recommendation is formulated for the method of hedging the prices of selected commodities.
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Johnson, Larry A. "A comparison of optimum grain hedging strategies using commodity options and futures contracts: an application of portfolio theory." Diss., Virginia Polytechnic Institute and State University, 1986. http://hdl.handle.net/10919/49803.
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Ruff, Craig Knox. "A theoretical and empirical analysis of the usage levels of futures contracts." Diss., Virginia Polytechnic Institute and State University, 1987. http://hdl.handle.net/10919/49883.
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The use of futures contracts has grown enormously in recent years. From 1979 to 1985 the number of futures contracts traded literally doubled. Most of the growth can be attributed to the development of recent contract innovations. Trading in financial futures, alone, increased sixteen fold over this period. This remarkable rise in futures usage and the importance of innovation highlights the constant struggle by exchanges to develop and initiate successful contracts. However, there is no known process for actually identifying potentially successful contracts. lt is this general question of what leads to a successful contract that forms the initiative behind this work.
Formally, this study is a theoretical and empirical analysis of futures usage. The purpose of the theoretical section is to develop a model of contract usage that leads to a set of testable hypotheses about the determinants of contract use. Usage is defined in this study as being measured by the number of contracts in existence at a certain time. The theoretical work is general in the sense that it is not directed at behavior in one specific contract; but rather, it rests on the belief that certain underlying fundamental economic factors will affect, in general, usage in all futures contracts. The theoretical model is based upon firm behavior in an uncertain world with the firm having the ability to enter a portfolio of futures contracts.
The purpose of the empirical section is to provide support for the theoretical section by determining, through time series analysis, which fundamental variables affect futures usage and how these effects are transmitted. The exogenous variables center upon the variance-covariance matrix of actual price series, transactions costs, and production levels.
The empirical results yield strong support for the theoretical section developed in this work and the overall portfolio approach. Additionally, the results draw into question the importance of several variables which have classically been considered essential in determining usage. While the results strongly support the model and the portfolio perspective, they did not suggest a specific set of variables that uniquely determine contract usage across a wide set of different contracts.Ph. D.
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McCarron, Sean. "Reducing exchange rate risk and exposure: The value of foreign exchange currency hedging strategies." CSUSB ScholarWorks, 2004. https://scholarworks.lib.csusb.edu/etd-project/2534.
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The topic researched for this project will be foreigh exchange hedging; the available forms, the uses, the procedures, and the value. This project will expand beyond the typical research and examine the value of hedging through the use of different foreign exchang currency trading strategies to small multinationational corporations.
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Borocco, Etienne. "The heterogeneity of information and beliefs among operators in the commodity markets." Thesis, Paris Sciences et Lettres (ComUE), 2019. http://www.theses.fr/2019PSLED072.
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Le projet de thèse consiste à étudier l’hétérogénéité de l’information et des croyances parmi les opérateurs sur les marchés de matières premières pour s’attaquer aux puzzles de la volatilité et de la prime de risque sur ces marchés. La première étape a été d’introduire l’asymétrie d’information dans un modèle de stockage. Il en est ressorti que le marché est efficient et que l’on peut distinguer un effet informationnel aléatoire d’un effet physique déterministe. La deuxième étape est d’estimer empiriquement les paramètres d’une version modifiée du modèle théorique évoqué plus haut. L’hypothèse de rationalité économique est relâchée. Sont introduit des "chartistes" qui suivent les cours. Le but de ce papier est d’estimer leur influence sur la formation des prix. Le marché choisi pour l’étude empirique est le marché du gaz naturel américain Henry hub. La troisième étape est un modèle où agents rationnels et agents à rationalité limitée cohabitent dans un marché de matières premières. Ce dernier chapitre montre comment des traders suivant la tendance sur le marché à terme peuvent déstabiliser le marché physiqueThis Ph.D. project aims to study the heterogeneity of information and beliefs among speculators on commodity markets to tackle the issues of the risk premium and volatility puzzles. The first step was to introduce information asymmetry in a storage model. The output is an efficient market where it is possible to distinguish a random informational effect from a deterministic physical effect. The second step is to estimate empirically the parameters of a modified version of the theoretical model above. The rationality hypothesis is relaxed."Chartists," who are trend-followers, are introduced. The goal of this paper is to estimate their influence on asset pricing. The chosen market for the empirical study is the Henry Hub natural gas market. The third step is a model where rational agents and bounded-rational agents interact together in a commodity market. This last chapter shows how trend-followers in the futures market can destabilize the spot market
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Andersson, Henrik. "Valuation and hedging of long-term asset-linked contracts." Doctoral thesis, Stockholm : Economic Research Institute, Stockholm School of Economics (EFI), 2003. http://www.hhs.se/efi/summary/613.htm.
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Wang, Yuanfang. "Alternative measures of volatility in agricultural futures markets." Connect to this title online, 2005. http://rave.ohiolink.edu/etdc/view?acc%5Fnum=osu1111610770.
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Thesis (Ph. D.)--Ohio State University, 2005.Title from first page of PDF file. Document formatted into pages; contains ix, 121 p.; also includes graphics (some col.) Includes bibliographical references (p. 114-121). Available online via OhioLINK's ETD Center
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Izadi, Selma. "Two Essays in Finance and Economics: “Investment Opportunities in Commodity and Stock Markets for G7 Countries” And “Global and Local Factors Affecting Sovereign Yield Spreads”." ScholarWorks@UNO, 2015. http://scholarworks.uno.edu/td/2087.
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In chapter 1, I investigate the return links and dynamic conditional correlations between the equity and commodity returns for G7 countries from 2000:01 to 2014:10. The commodity futures include BCOM Index which contains the futures and spot price of 22 commodities, Brent and Crude oil futures, gold and silver futures, Wheat, Corn and Soybean futures and CRB index. The finding indicates that during the full sample period GOLD, WHEAT and CORN have the smallest dynamic conditional correlations with all the Equity indexes. In addition, the correlations between the GOLD/Equity pairs are negative during the financial crisis. This fact indicates the benefit of hedging the stock portfolios with gold futures while we have stress in the financial markets.
The results from hedging effectiveness suggest that all the commodity/stock portfolios provide better diversification benefits than the stock portfolios. In average, including CRB, BCOM and GOLD futures to the stock portfolios have the highest hedging effectiveness ratios.
Chapter 2 investigates the impact of global and local variables on the Sovereign bond spreads for 22 developed countries in North America, Europe and Pacific Rim Regions, using monthly data from January 2010 to March 2015.
There are a few main findings of this chaper. First, the global factors are considerably more important in déterminant the sovereign bond spreads for all the regions. Second, for the bond spread of each region over its local government bond, the countries’ domestic fundamentals are found to be more influential determinants of the spreads, compared to the spread over US government bond as a safe haven government bond. Third, the bond spreads in the Eurozone area is less influenced by the global factors compared to the other regions. Fourth, the sovereign bond spreads of all regions are positively related to the US corporate high yield spreads as a proxy of market sentiment and the log of VIX index as measurement for the investor risk aversion. The coefficient of the log of VIX index shows the strong power of the stock market implied volatility on determining the yield spreads in the fixed income market.
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Nguyen, Thi Nhung. "Les techniques des produits dérivés et leurs champs d'application au café du vietnam." Thesis, Bordeaux, 2015. http://www.theses.fr/2015BORD0333/document.
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La thèse a pour but principal de trouver des solutions permettant l’amélioration de l’efficacité de la couverture des risques chez les intervenants vietnamiens du café à travers la négociation sur les bourses de marchandises. Comme toute matière première faisant l’objet d’un échange international important et sujette à une financiarisation de ses marchés, le café connait des fluctuations de prix considérables qui ne sont pas sans conséquence sur la rentabilité et la pérennité des entités productrices, mais également sur les recettes d’exportation des principaux pays producteurs. La question de la gestion du risque de prix et implicitement, celle portant sur la pertinence de l’usage des produits dérivés comme outil de « hedging », sont en effet centrales.Pour tenter d’appréhender dans quelle mesure les produits dérivés sont applicables au cas des producteurs de café vietnamiens, cette thèse s’est attachée en premier lieu à mieux comprendre comment s’organise le circuit de commercialisation du café au Vietnam et à déterminer si l’intervention accrue des intermédiaires (négociants, commerçants industriels) -avant que le produit transformé n’arrive entre les mains du consommateur- fait sens. Chacun de ces différents intervenants est exposé à un nombre important de risques, ayant un impact direct ou indirect sur le prix auquel sera vendue commercialement la matière physique. Les producteurs sont naturellement exposés au risque de baisse des prix, tandis que les intermédiaires, qu’ils soient transformateurs ou « simples » négociants sont exposés au risque d’une réduction de leur marge d’intermédiation. Ils achètent en effet le produit pour le revendre mais la simultanéité des opérations est rare. L’ampleur du risque de prix auquel ils sont assujettis est, de ce point de vue, le plus souvent considérable par rapport à sa marge commerciale. Cette thèse a essayé en cela de déterminer quelles étaient les solutions les plus appropriées pour les producteurs vietnamiens afin de se protéger à court terme contre une évolution défavorable des prix. Ceci nous a amené à considérer la pertinence du recours aux marchés à terme nationaux du café, comme celle de l’utilisation des produits dérivés offerts sur les places boursières internationales.Pour les produits d’exportation et notamment le café, des marchés internationaux de type « Futures » (ou organisés) comme celui de Londres qui traite le café Robusta ou du Chicago Mercantile Exchange – CME, coexistent en effet avec des bourses de marchandises ou des marchés à terme, de type « Forward » n’ayant pas le périmètre des précédents, en Inde, en Chine mais également au Vietnam. Le recours à l’un ou l’autre de ces marchés ne procède pas d’une analyse évidente, chacun ayant leurs avantages et leurs contraintes propres. Nous appuyant sur la littérature existant sur l’utilité des marchés à terme commerciaux et financiers, nous évaluons ainsi leurs intérêts respectifs pour l’économie vietnamienne. On ne saurait de ce point de vue réduire la fonction des marchés organisés de matières premières à la seule fonction de gestion des risques, tant leurs rôles dans la diffusion de l’information et la mise en oeuvre de stratégies de stockage peut, dans certains cas, être incontournables. Sur la base de cette évaluation, cette thèse a également pour ambition de proposer quelques voies d’amélioration de la gestion du risque de prix et les politiques de stockage au sein de la filière caféicole vietnamienneThe main objective of the thesis is to find solutions to improve the effectiveness of risk management for Vietnamese coffee stakeholders through trading on commodity exchanges. Like any agriculture products being subject to an important international exchange, coffee is known as a price significantly fluctuated product, which impacts not only the profitability and sustainability of producing entities, but also the export value of the major producing countries. The issue of management of price risk and implicitly, which relates to the appropriateness of the derivatives usage as hedging tools are central in fact.In order to understand how derivatives are applicable in the circumstances of Vietnamese coffee producers, the thesis focused primarily on studying about how to organize the coffee supply chain in Vietnam and foreseeing whether more intervention from intermediaries (traders, industrial shopkeepers) – before the product arrives the consumer – causes any effects. Each participant may face many risks, which has a direct or indirect impact on the product sale price. Producers are exposed to the risk of falling prices while intermediaries (processors or “simple” traders) are exposed to the risk of reducing their intermediation margin. In fact, they buy the product to resell but the two activities (selling and buying) are not done in a simultaneous way. From this point of view, the risk level to which they are exposed is usually significant in comparison with their commercial margin. The thesis tried to define which the most appropriate solutions should be taken by Vietnamese coffee producers in order to protect themselves against short-term unfavorable prices. This led us to consider the relevance of domestic as well as international coffee futures markets.For exporting products like coffee, there are two types of market which coexist: The Future Market (or organized market) - such as ICE Europe in London which deals Robusta coffee, ICE Futures U.S with Arabica coffee, CME and CBOT, the oldest and most active commodity exchange in the United States, and the Forward Market which is in India, China and Vietnam. There’s no better market since each type has its advantages and disadvantages. However, based on the previous research of commodity and finance exchange, we could estimate its respective interests for the Vietnamese economy leading to the possibility of optimizing only to the risk management function. Therefore, its roles in information dissemination and the implementation of storage policies may be unavoidable in some cases. According to this evaluation, the thesis also aims to propose some methods of improving the price risk management and storage policies in the Vietnamese coffee sector
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Pecha, Martin. "Obchodování s komoditami." Master's thesis, Vysoká škola ekonomická v Praze, 2011. http://www.nusl.cz/ntk/nusl-113597.
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The goal of this diploma thesis is to analyze the gold market and provide readers with the necessary information and context having an impact on the price of gold. The thesis consists of three chapters. First one deals in general with the commodity market and introduces the readers to commodity exchange issues such as trading commodities in commodity exchanges, motives of commodity trading as well as the specific characteristics of commodities. Second one concerns the detailed analysis of commodity investment tools that investors might use when they feel like getting an exposure to price movements of commodities. The last chapter gears towards an analysis of the gold market in today's super globalized world and depicts what fundamental factors have an impact on the price of gold. At last, I shall summarize existing pieces of knowledge and cast light on further gold price movements.
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Cheng, Yu-Ju, and 鄭郁儒. "Cross Hedging with Commodity Futures in China." Thesis, 2011. http://ndltd.ncl.edu.tw/handle/42576684723308609356.
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碩士淡江大學
財務金融學系碩士班
99
This study primarily examines the cross-hedging performance with the most actively traded contract, soybean oil futures on Dalian Commodity Exchange. Unlike previous studies, we constructed two market indices for agribusiness companies listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange as proxy for stock market performance. Based on the bivariate GARCH-type framework, important evidences are illustrated in our empirical results and it provides global traders with worthwhile implications for optimal utilization of futures contracts. To improve the weakness of symmetric GARGH model, we employ the GJR-GARCH model to capture the asymmetric effect in volatility of financial variables. Owing to the implementation of the split share structure reform in 2005, more tradable shares on stock market might lead to a substantial increase in liquidity. Further, since the existence of the cycle in agricultural crop production, the hedge period length and hedging frequency serve a vital role in agricultural futures hedging. Our finding offers insightful suggestion for domestic individuals and institutional shareholders who suffer from the price fluctuation in agricultural market.
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Liu, Kang, and 劉鋼. "Inshore Commodity Hedging under Floating Exchange Rate." Thesis, 1994. http://ndltd.ncl.edu.tw/handle/93647957191556554039.
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Chen, Shao, and 陳劭. "Dynamic Investment and Hedging Strategies of Commodity Markets." Thesis, 2015. http://ndltd.ncl.edu.tw/handle/05320889978557854997.
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碩士東吳大學
資訊管理學系
104
The strategy of both investment and hedging in commodity futures markets have been explained by many scholars using various models in the past few decades.. For example: GARCH and stochastic volatility (SV, stochastic volatility) and others. Among this, GARCH and SV models are used to capture the constantly changing regarding fluctuate smoothing . However, the estimated value of such futures hedge ratio refers to parts per unit holders under the spot that must be held by correspondence, which essentially belongs to a static point of view. if we had to consider the sequence between the difference in futrues price and spot price simultaneously , it is more appropriated to apply dynamic models for processing. The goal of the study is to find out the approach for getting profit by surveying the historical price of futures in dynamic investment and hedging strategy . As we know, this study had been explained by GJR-GARCH, GARCH and stochastic volatility and other model as well, however under assumption of stochastic volatility models, the current period of volatility is random, it can't not only be observed but be predicted by previous informations , therefore the index is not able to be found by Method of Maximum Likelihood. This paper presents a dynamic model of the AR-Copula-GARCH model and consider the results of trading hours at different points in different GARCH family (GJR-GARCH, Skew-GARCH, EGARCH) and Copula (multivariate t and multivariate normal distribution -Copula -Copula) setting comparing various dynamic and static models of hedging performance. The study shows that Copula-GARCH model is a decent model for hedging in commodity market, likewise at different trading moment , dynamic model also performs better than static model in average.
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Fernandes, Diana Raquel Tavares. "Estratégias de cobertura das flutuações da cotação do cobre: O caso da Multinacional Coficab." Master's thesis, 2021. http://hdl.handle.net/10316/94515.
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Relatório de Estágio do Mestrado em Economia apresentado à Faculdade de EconomiaO presente relatório surge no âmbito da realização do estágio curricular executado nas instalações da Coficab GR, entre os dias 7 de Setembro de 2020 e 3 de Janeiro de 2021.Há largos anos que a literatura estuda os mercados de commodities, os seus determinantes e ainda o impacto que estes têm em empresas que se encontram fortemente ligadas a eles. Ainda assim, foi detetado que a literatura não oferece soluções, a empresas pertencentes à Indústria Automóvel Europeia, que se queiram proteger de flutuações nos preços do cobre. Este relatório propõem-se colmatar essa falha, tomando como exemplo as estratégias adotadas pela entidade de acolhimento, a Coficab, que atua na Indústria Automóvel mundial há mais de 28 anos.Existem essencialmente dois momentos em que as empresas podem reduzir substancialmente este risco, o momento de compra da commodity e o momento de venda do produto final. Neste relatório foram expostas duas das principais estratégias que a Coficab utiliza para eliminar o risco inerente às flutuações no preço da sua principal matéria-prima, o cobre. Inicialmente foi analisado o uso de contratos forward, que tem como principal objetivo garantir um fornecimento ininterrupto de cobre, embora que nem sempre o faça ao melhor preço possível. A segunda estratégia consiste na incorporação de uma parcela variável, no cálculo do preço do produto final, que tem como objetivo refletir as flutuações do preço do cobre, no preço do produto final. Apesar de, no global, o grupo conseguir reduzir bastante o risco através da conjugação das duas estratégias, é sugerido o melhoramento da estratégia de eliminação do risco, aquando da compra da commodity. No final deste relatório é proposto o uso de barrier-options ou structured-options que permitiriam obter lucros superiores aos atuais. Mais tarde, estes lucros poderiam ser usados para compensar possíveis perdas, causadas por ineficiências resultantes da segunda estratégia.
This report was prepared as a part of the traineeship held at Coficab GR between September, 7th, 2020 and January, 3rd, 2021.For several years the literature was been studying the commodity markets, their determinants and the impact that they have on companies highly connected to these markets. Nevertheless, it has been detected that the literature does not offer solutions to companies that belong to the European Automotive Industry and that want to protect themselves from copper´s price fluctuations. This report is set out to fill this gap by sharing Coficab´s example, which has been operating in this industry for more than 28 years.There are essentially two moments in time where corporations have the possibility to reduce substantially this risk, the moment when they buy the commodity and the moment when they sell the finished product. In this report, it was analyzed two strategies that the Coficab uses to eliminate the risk of copper´s price fluctuations. First was investigated the use of forward contracts, which are mainly used to ensure an uninterrupted supply of copper but not necessarily to ensure it at the best price possible. The second strategy is accomplished by incorporating a variable factor in the price of the final product. This is made to reflect the copper´s price fluctuations in the final price presented to the customer.Globally, the group managed to reduce significantly the risk by associating those two strategies together. Despite that, it is suggested an improvement in the first strategy. By associating to forward contracts, barrier-options or structured-options the group would be able to obtain higher profits. These profits could be used as a “financial pillow” when the second strategy is not efficient.
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"Asymmetric effect of basis on hedging in Chinese metal market." 2009. http://library.cuhk.edu.hk/record=b5894202.
Full textAbstract:
Su, Yiwen.Thesis (M.Phil.)--Chinese University of Hong Kong, 2009.
Includes bibliographical references (p. 76-84).
Abstract also in Chinese.
Abstract --- p.i
Acknowledgement --- p.iii
Chapter 1 --- Introduction --- p.1
Chapter 2 --- Literature Review --- p.9
Chapter 2.1 --- Hedge Ratio Review --- p.9
Chapter 2.2 --- Estimating the Hedge Ratio --- p.13
Chapter 2.2.1 --- Static Hedge Ratio --- p.13
Chapter 2.2.2 --- "Dynamic Hedge Ratio, Multivariate GARCH Frame-work and DCC Model" --- p.14
Chapter 3 --- Futures Market Efficiency --- p.19
Chapter 3.1 --- Market Efficiency and Cointegration Test --- p.20
Chapter 4 --- Model Specifications and Hedging Strategy --- p.24
Chapter 4.1 --- Model Specifications --- p.24
Chapter 4.1.1 --- BGARCH-DCC Model --- p.25
Chapter 4.1.2 --- Symmetric BGARCH-DCC Model --- p.28
Chapter 4.1.3 --- Asymmetric BGARCH-DCC Model --- p.31
Chapter 4.2 --- Hedge Ratio --- p.33
Chapter 4.2.1 --- MV Hedge Ratio --- p.34
Chapter 4.2.2 --- Zero-VaR Hedge Ratio --- p.35
Chapter 4.3 --- Evaluation of Hedge Effectiveness --- p.38
Chapter 5 --- Data Description and Empirical Results --- p.39
Chapter 5.1 --- Preliminary Data Analysis --- p.39
Chapter 5.2 --- Estimation Results --- p.42
Chapter 5.3 --- Dynamic Hedging Performance --- p.53
Chapter 6 --- Conclusion --- p.68
Chapter A --- Equation Derivation --- p.72
Bibliography --- p.76
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Godbey, Jonathan Manley. "Hedging long-run commodity flow commitments under stochastic convenience yield." 2003. http://purl.galileo.usg.edu/uga%5Fetd/godbey%5Fjonathan%5Fm%5F200305%5Fphd.
Full text
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Yeh, Yu-Chi, and 葉毓琪. "Volatility Transmission and Hedging Strategy between Oil Price and Commodity Futures." Thesis, 2009. http://ndltd.ncl.edu.tw/handle/90861826960167431097.
Full textAbstract:
碩士中原大學
國際貿易研究所
97
The significant increase in demand from developing countries and speculations has pushed up oil price sharply from 2007 to mid-2008, which, in turn, has accelerated the development of alternative energy all over the world. Grains, which can be made into bio-fuels, inevitably became the highly-demanded goods. However, when oil price started to drop during late 2008, grain price fell as well. The phenomenon of co-movement between oil price and grain price has never happened before, and, hence, has seldomly been explored by researchers. This study applies multi-variate GARCH methods to analyze the transmission relationship among several price variables. Our results find that significant transmission effects do exist between oil price and grain price. The computed correlation coefficients between the variables also reveal that the correlation has risen apparently in recent years. With respect to hedging, we find that multi-GARCH can reduce risk in most cases. In addition, DCC-GARCH model can reduce much larger percentage of risk than BEKK-GARCH model does. Furthermore, cross hedging does not show to have better performance than direct hedging does. That is, direct hedging is good enough to reduce most of the risk.
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YANG, ZHI-CHENG, and 楊智丞. "Spillover effects and hedging strategies across international stock and commodity markets." Thesis, 2018. http://ndltd.ncl.edu.tw/handle/p2gpf2.
Full textAbstract:
碩士國立高雄應用科技大學
金融系金融資訊碩士班
106
This paper examines the spillover effects and hedging strategies among global stock prices, US$ exchange rate and four commodities. The data samples cover six financial variables, MSCI world index, US dollar Index, interest rate, gold prices, WTI oil prices, and wheat prices, from Jan. 2001 to June 2017. The dynamic spillover effects of these financial variables is estimated by applying generalized forecast error variance decomposition (GVDC), ADCC-GARCH, and DCC- GARCH models. The empirical results are as the followings. First, for the return spillovers, the markets affecting others the most is gold prices and the smallest is the bonds before the 2008-2009 global financial crisis, but the US dollar index becomes net receivers of spillovers from net information transmitters after this crisis and the smallest is WTI price. However, the net spillover effects of these six markets increase after the 2008-2009 global financial crisis. Second, the empirical results of DCC- GARCH and ADCC- GARCH models, all six variables have significant short-run dependencies and interdependences to news, but top two are the MSCI world index and gold prices. Finally, the optimal portfolio weights of two-asset portfolio and hedging ratio are also estimated being based on the empirical results, which can improve investment decisions of these financial markets.
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Huang, Yu-Kai, and 黃昱凱. "Performance Comparison in Hedging with DCC and Copula Modelsfor Commodity Futures." Thesis, 2010. http://ndltd.ncl.edu.tw/handle/22194851939129076664.
Full textAbstract:
碩士國立高雄第一科技大學
財務管理所
98
This paper investigates the hedging performance for various hedge strategies to farm commodities, soft commodities and industrial metal. There are two main hedging methods in our paper, namely the static hedging and dynamic hedging methods. After our empirical results, we find that each commodities have its appropriate methods, for example, soft commodities is appropriate for DCC model, farm commodities is applicable to OLS model, and Copula-DCC model is fit for metal commodities.
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HUANG, LIN-TUN, and 黃琳惇. "Application of Commodity Channel Index in the Timing of Hedging: Evidence from the Hedging of Offshore Mutual Funds." Thesis, 2019. http://ndltd.ncl.edu.tw/handle/uhm6ns.
Full textAbstract:
碩士國立高雄科技大學
財富與稅務管理系
107
Due to the equity market is very sensitive, many investors use the technical analysis to help them predict the stock price trends. The technical analysis can provide a way to reduce the market risk. The purpose of this paper is to apply the Commodity Channel Index (CCI) in the timing of hedging. This study empirically investigates the hedging performance of five offshore mutual funds. Five funds are listed that Franklin Biotechnology Discv A (acc) USD, UBS(Lux) Equity Fund-Biotech (USD) P-acc, Parvest Equity Russia Classic USD-Capitalisation, UBS(Lux) Equity SICAV-Russia (USD) P-acc, Fidelity Funds-Indonesia Fund A-DIST-USD. The corresponding equity markets are NASDAQ Biotechnology (NBI), RUSSIAN RTS Index (RTSI), and Jakarta Composite Index ( JCI). The currency fund is used as the hedging instrument. Using the daily and weekly data running from January 2014 until December 2018, the empirical performance of the hedging is compared for the CCI using weekly data, the CCI using daily data and the buy-and-hold strategies. The empirical results show that the CCI using weekly data to determine the hedging timing greatly outperforms the CCI using daily data to determine the hedging timing and the buy-and-hold strategies. No matter whether transaction costs are included or not.
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Zhu, Rui 1980. "Essays on corporate risk management." Thesis, 2011. http://hdl.handle.net/2152/ETD-UT-2011-08-3735.
Full textAbstract:
This dissertation addresses issues in corporate risk management. Part I examines the determinants for corporate decisions to commodity hedge and to the extent of hedging. Chapter 1 discusses prior literature, including theory and empirical evidence on corporate risk management. It provides the background to support the empirical analyses of Chapters 2, 3 and 4. Chapter 2 examines corporate decisions to commodity hedge. I find that firms are more likely to hedge when they are big, have risk management department set up and have more of their competitors hedge. Chapter 3 investigates what determines the extent of hedging conditional on hedging decisions and the cross-sectional and time series deviation of the hedge ratio. I find that firms tend to hedge less when they have younger CEOs and have more options in their compensation plan.
I also find that when determining the hedge ratio, firms with young CEOs and higher option compensation tend to respond to past commodity price growth and to deviate from industry average. Part II investigates the relationship between corporate risk management and product market competition. Chapter 4 examines the different product market performance for firms with different hedging polices after commodity price shocks. I find that unhedged firms which are ex ante financially constrained lose market share and experience a decreased profitability during and after commodity price shocks. Chapter 5 examines whether the loss of unhedged constrained firms in product market is driven by the competitors. I find that firms with financial advantages—unconstrained hedged firms—tend to increase advertising expenditures and decrease price-cost-margins during negative commodity shocks, indicating that the market share loss of constrained unhedged firms is due to increased competition in the product market. Chapter 6 examines whether corporate risk management affects the likelihood of firms exiting the market. I find that constrained unhedged firms are 6% more likely to exit the market than their unconstrained hedged rivals and the effects are stronger in concentrated industries and industries with higher leverage dispersion.text
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Lue, Chia-Hsin, and 呂嘉新. "The Asymmetric Effect of Commodity Inventory and Contents of Basis on Hedging Performance." Thesis, 2014. http://ndltd.ncl.edu.tw/handle/19154857723201077216.
Full textAbstract:
碩士淡江大學
財務金融學系碩士在職專班
102
With the flourishing global capital market and financial instruments, the choice of market participants to the securities of portfolios becomes diversified, especially on metals securities: the commodities of gold, silver, and bronze, etc. Those are often invested and led by the requirements of asset allocation. Therefore, the establishment of hedging strategies will be the issue while investors are proceeding the investment of spot commodity, which affects investment performance and certain level of risk. In this case, the ignorance of changes in the spot market inventory will be afraid to carry serious loss to hedging according to this theory. As a result, the purpose of investors’ risk avoidance will be the main leading in this theory, adopting spot commodity of gold, silver, bronze, and other spot commodity to calculate hedging performance of commodities futures, to compare hedging performance by the model brought into stock effect and basis conditions. Different from previous references, the theory also adopts Goldman Sachs Commodity Index(GSCI) as detected object. The index contains spot performance on not only precious and industrial metals commodities, but also energy and agricultural and products, which is the real diversity of investors to merchandise investment. Accordingly, studied objects and sample periods of the theory cover stock index and futures index of GSCI and metals of gold, silver, and bronze during the period of 1 Jan, 2001 to 30 Dec, 2013, and estimate the model of DCC-GARCH and GARCH. That will provide more detailed reference information to investors who undergo the structure of risk avoidance, by the concern of asymmetric effect on different stock effect and basis conditions.
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Hartwigsen, Jurre. "Trends in SAFEX trading of Western Cape wheat producers." Diss., 2013. http://hdl.handle.net/2263/33157.
Full textAbstract:
When the South African Futures Exchange (SAFEX) Agricultural Products Division
(APD) was formed in the early 1990s after the demise of the Marketing Boards, the
support and direct participation of producers on the exchange was core to its long
term success. A tremendous amount of energy and cost was invested by SAFEX
and brokers to educate and sign up primary producers. Most agribusinesses (excooperatives)
also had broking divisions.
This campaign was very successful and a large percentage of producers, particular
of maize and wheat, opened SAFEX accounts through brokers. It was not unusual
for many of them to open more than one account with different brokers. Collectively,
they had a very important impact on the market.
Fifteen years after the launch of the wheat contract (in 1998), this is no longer the
case. Industry sources have it that many, if not most, producers have either closed
their accounts, have an inactive account, or have scaled down their trading activities.
This leads to the hypothesis that direct participation by producers on the JSE/SAFEX
Commodity Division is declining.
The questions that arise from this observation are:
Are producers distancing themselves from SAFEX (or the other way around)? or, Has the industry matured and progressed into a new era?
This research had the objectives to:
Determine the estimated percentage of producers that directly traded on
SAFEX during the initial years and compare the data to present numbers.
Based on the outcome of the primary data collected, to determine if there is
indeed a trend.
If correct, to determine what the reasons for this could be. Has there been a
shift in hedging practices? Are brokers offering additional services which make
it unnecessary for producers to operate directly on the exchange?
Wheat producers in the Western Cape were selected as the target group for various
reasons, including the province’s geographical isolation, its importance as a wheat
production area and the importance of wheat in the gross income generated by
producers.
The survey firstly established the importance of wheat in the Western Cape grain
production areas. No doubt, income derived through wheat production is still very
important throughout the Western Cape, but in certain areas it is absolutely crucial.
Next, the survey attempted to determine how and when producers ‘price’ (sell) wheat.
The survey then aimed to establish what the most important factors are that influence
producers’ pricing strategy. Producers ranked growing conditions as the number one
factor in taking a pricing decision, followed by production costs. Furthermore,
producers do adjust their marketing strategy but there seems to be a difference of
opinion as to whether it is on their own accord or on advice of their brokers.
The survey not only depended on producer data but cross-referenced with brokers
(traders and agribusinesses). Based on overall feedback, the analysis determined
vi
that on average in the Western Cape 10 – 20% of wheat producers had SAFEX
accounts, while in selected areas it was as high as 37 – 50%.
It was also important to determine to what extent SAFEX trading activity had
decreased, if at all. This question only applied to those respondents that said they
did have a SAFEX account and their activities had decreased. The answer revealed
that 91% of respondents had stopped trading altogether.
Having now established that a fairly large number of producers had accounts on
which most had ceased their activities, the question is why. Cash flow requirements
are the single biggest reason why producers have reduced (or completely stopped)
their participation on SAFEX. The second reason was that a producer could achieve
the same benefits and more through the services offered by the grain traders and
agribusinesses, compared to trading directly on SAFEX.
It should not be forgotten that the trader could only offer these service if he or she
does a deal, back-to-back, on SAFEX. This is part of the reason why all traders and
agribusinesses have a SAFEX account.
The survey concluded with what might be singled out as one of the most important
questions (given what had been determined up to this point): Do producers believe
brokers offer all of the marketing options that could be achieved by trading direct on
SAFEX? With the benefit of already having analysed the response to the earlier
questions, the answer might have been expected. However, the response was
overwhelming: 97% of respondents said that brokers offer all of the marketing options
they were interested in.
It could therefore be said that the decline in direct SAFEX participation by Cape
wheat producers is the direct result of the all-inclusive services offered by traders and
agribusinesses. Producers sign a forward contract with their brokers while the
brokers would offset their risk on SAFEX. An element of caution, however, needs to
be expressed. Given the importance of wheat in the Western Cape, and particularly
in the Swartland, producers should not relinquish their responsibility to acquire or
maintain a minimum amount of knowledge on the functioning of SAFEX. Irrespective
of whether producers deal directly on SAFEX or through their brokers, knowledge now and in the future will hold the key to their marketing performance and should not
be replaced by using brokers.Dissertation (MSc Agric)--University of Pretoria, 2013.
gm2014
Agricultural Economics, Extension and Rural Development
unrestricted
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Gaspar, Victor J. "Hedging with options on commodity futures contracts: a safety-first versus expected utility approach." Thesis, 1994. http://hdl.handle.net/2429/5273.
Full textAbstract:
This study evaluates how a decision-maker (such as a farmer) facing
output price risk might use futures contracts and or option contracts on those
futures to hedge against any potential financial risk attributed to volatile output
prices. Two behavioral models are assumed in this study. One where the
decision-maker behaves as an expected utility maximizer and one where the
decisions made are based upon safety-first rules. The expected utility model in
this study is based on the general utility function defined in an article by Lapan,
Moschini, and Hanson (1991). The safety-first model is essentially that of Telser
(1955), but enhanced to include option contracts as an additional hedging tool.
Both decision-making processes have a single-period time horizon. At the
beginning of the period an agent enters the futures and option markets and
places a hedge. At the end of the period, the agent offsets his/her futures
position and sells the commodity in the spot market. The single-period model is
formulated such that a hedger can speculate on the futures price bias, but not
the volatility of the option price.
Results from the two competing models were derived from parameters
calculated using a forecast error method on canola data spanning a ten year
period (1981-90) obtained from the Winnipeg Commodity Exchange. Optimal
hedging results for the two models were derived under varying levels of basis
risk, futures and spot price volatilities, and risk aversion.
In general, results from the expected utility model suggest that under
increased volatility, uncertainty, or aversion to risk leads to a reduced open
speculative position when a positive futures price bias exists. Most interestingly,
unlike the comparative static results derived by Lapan, Moschini, and Hanson
suggesting that if a speculative motive exists then options are used, the results
from this study’s simulations suggest that the use of options are negligible. Results from assuming a
safety-first decision-maker indicate that options
are always used when speculating on the direction of futures price bias. When
positive futures price biases increase in size, so do the futures and options
positions. The opposite occurs when the bias is decreased or downward. Two
major conclusions can be drawn from the safety-first results. Firstly, optimal
hedging positions seem quite sensitive to “small” variations in the parameters
levels. Secondly, due to the multitude of revenue distributions available from
combining futures and option (which were unobtainable from using only futures)
there is a
possibility of very extreme outcomes even though the expected or
average outcome meets the decision-maker’s “
safety” requirements.
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Tzu-Chien, Li, and 李子建. "Cross Hedging the NT Dollar/US Dollar Exchange Rate Risk with Foreign Currency and Commodity Futures." Thesis, 1994. http://ndltd.ncl.edu.tw/handle/31171647423030219179.
Full text
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Ramaremisa, Ndivhuwo. "Corporate risk management: a case study of SAA." Thesis, 2014. http://hdl.handle.net/10539/15577.
Full textAbstract:
Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2014.Corporate Risk management has become very important for firms who are exposed to markets risks. A firm that manages the market risks it is exposed to efficiently can ensure it remains solvent in times of extreme market volatility. This paper looks at the hedging activities of South African Airways over a 10 year period where the airline experienced significant losses due to volatility in the Rand Exchange Rate and Crude Oil prices.
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Mahlatsi, Tsatsi Jonas. "Risk management associated with tariff-linked agreements." Diss., 2004. http://hdl.handle.net/10500/1079.
Full textAbstract:
The study focuses on tariff-linked (or commodity-linked) agreements entered into between a power utility and commodity producers. The main purpose of these types of agreements is to link electricity tariff payable by commodity producers to the price of the commodity produced thereby transferring a certain level of commodity price risk to the power utility.
The study looks at risk management practices of a power utility company with a particular reference to tariff-linked agreements. Also, the study critically analyses risk hedging mechanisms put in place by the power utility. The report makes practical recommendations, where applicable, in dealing with these risks.
Risk management continuously evolve to meet the challenges of complex financial world. Despite the latest sophisticated risk management tools available commodity producers still encounter difficulties to hedge the price risk. The challenge for the power utility is the application of new risk management tools to effectively manage price risk.Business Management
M.Com. (Business Economics)
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Lo, Mei-Jung, and 羅美蓉. "The Investigation of the Commodity Hedging During the Period of the US Quantitative Easing Monetary Policy：A Case of Gold Spot Price and Gold Futures." Thesis, 2016. http://ndltd.ncl.edu.tw/handle/z9cawz.
Full textAbstract:
碩士健行科技大學
財務金融系碩士班
104
Affected by subprime mortgage crisis, US Fed in 2009 and 2010, for the introduction of a total of up to $ 2.3 trillion bailout plan, this is known as quantitative easing (QE). Results substantial funds flooded, over the market to create a relaxed environment, we will increase the risk of inflation, and gold is the best tool against inflation; in addition, excess liquidity leads to a weaker dollar, use of gold denominated in US dollars, the price more so posting gains. Therefore, if the market is expected to push the US Fed quantitative easing, this is expected to increase again the psychological make hedging demand, gold prices also followed up. This study through bivariate GARCH (1,1) model with US dollar index, gold and gold futures reward. We consider in the QE policy background, gold investors how to construct a portfolio circumvent the policy risk We also compare the effect of spot gold and gold futures hedging in order to understand these two different assets during monetary easing really can become a commodity hedging. This empirical results provide investment advice for investors interested in global asset allocation.
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HSIEH, Ming-Hui, and 謝敏惠. "Hedging the high volatility risk at price for high tech products by issuing Asian options on commodity price-Taking examples by DRAM and TFT-LCD industry." Thesis, 2005. http://ndltd.ncl.edu.tw/handle/30372952105458054402.
Full textAbstract:
碩士實踐大學
企業管理研究所
93
With Taiwan’s economy growing and the industry development, the high-tech industry is not only the important economic lifeline in Taiwan; it also has already become one of places of strategic importance in supply and production of various high-tech products all over the world. However, because the business cycle has been becoming shorter and faster and the high-tech industry competition been getting stronger, the supply and demand unbalanced situations for the high-tech industry has been frequently experiencing and thus the high-tech products has been being subject to high volatility. It implies that these high-tech corporations have been placing themselves in the great business risk. Accordingly, this study aims at presenting an approach to hedge the high volatility risk in price for high tech products by issuing Asian options on commodity price. Additionally, it could be expected that the Asian option also provide the lower hedge cost. For the buyer of Asian options on commodity price, if the average sale price can maintain higher than the strike price that generally is equivalent to production cost, the buyer (manufacturer) will give up exercising right to earn the spot profit. In the other hand, if the spot price go down and thus the average price is lower than the strike price, the buyer will exercise the right of option to compensate the loss in the spot market. Besides, the study also proposes the pricing models of the Asian option on commodity price to assess the reasonable premium. The DRAM and TFT-LCD industry is taken as the objects to conduct the empirical study and analysis in regard to appropriateness and the feasibility for Asian option on commodity price. These practicing procedures should be able to help the high-tech corporations to understand the real application value of the Asian options on commodity price.
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Geldenhuys, Susari Marthina. "Timing a hedge decision : the development of a composite technical indicator for white maize / Susari Marthina Geldenhuys." Thesis, 2013. http://hdl.handle.net/10394/11546.
Full textAbstract:
The South African white maize market is considered to be significantly more volatile than any other agricultural product traded on the South African Futures Exchange (SAFEX). This accentuates the need to effectively manage price risk, by means of hedging, to ensure a more profitable and sustainable maize production sector (Geyser, 2013:39; Jordaan, Grové, Jooste, A. & Jooste, Z.G., 2007:320). However, hedging at lower price levels might result in significant variation margins or costly buy–outs in order to fulfil the contract obligations. This challenge is addressed in this study by making use of technical analysis, focusing on the development of a practical and applicable composite technical indicator with the purpose of improving the timing of price risk management decisions identified by individual technical indicators. This may ultimately assist a producer in achieving a higher average hedge level compared to popular individual technical indicators.
The process of constructing a composite indicator was commenced by examining the prevailing tendency of the market. By making use of the Directional Movement Index (DMI), as identified in the literature study, the market was found to continually shift between trending prices (prices moving either upwards or downwards) and prices trading sideways. Consequently, implementing only a leading (statistically more suitable for trading markets) or lagging (statistically more suitable for trending markets) technical indicator may generate false sell signals, as demonstrated by the application of these technical indicators in the white maize market. This substantiated the motivation for compiling a composite indicator that takes both leading and lagging indicators into account to more accurately identify hedging opportunities. The composite indicator made use of the Relative Strength Index (RSI) and Stochastic oscillator as leading indicators, and the Exponential Moving Average (EMA) and Moving Average Convergence Divergence (MACD) as lagging indicators. The results validated the applicability of such a composite indicator, as the composite indicator outperformed the individual technical indicators in the white maize market. The composite indicator achieved the highest average hedge level, the lowest average sell signals generated over the entire period, as well as the highest average hedge level as a percentage of the maximum price over the entire period. Hence, the composite indicator recognised hedging opportunities more accurately compared to individual technical indicators, which ultimately led to higher achieved hedging levels.MCom. (Risk management), North-West University, Potchefstroom Campus, 2014