Cost-Effective Portfolio Hedging: A Dividend-funded Derivative Approach

This paper examines the effectiveness of using dividend yield to fund hedging protection for an S&P500 equity portfolio. We construct a hedged portfolio that consists of the S&P500 index but uses the dividend yield to purchase put option protection for hedging risk. We then compare the risk and return of the hedged S&P500 portfolio to that of an unhedged S&P500 portfolio. The trade-off reduced returns compared to the overall risk reduction are also measured. Results indicate that this risk-management strategy could be appealing to a large contingency of investors seeking down-side protection at a modest cost that is self-funded from dividends.

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IMPLEMENTASI DAN FORMULASI STRATEGI MANAJEMEN RISIKO PADA UNIT USAHA SAPI PERAH DAN PRODUKSI SUSU KUD SARWA MUKTI

Jurnal Soshum Insentif ◽

10.36787/jsi.v4i1.514 ◽

2021 ◽

Vol 4 (1) ◽

pp. 79-88

Author(s):

Sugiyanto Sugiyanto ◽

Dewi Puspita Arum ◽

Anggi Andriani Rahayu

Keyword(s):

Risk Management ◽

Risk Reduction ◽

Management Strategy ◽

Risk Level ◽

Risk Management Strategy ◽

Risk Avoidance ◽

Moderate Risk ◽

Risk Transfer ◽

Business Entities ◽

The Impact

Abstract - Cooperatives as business entities cannot be separated from various risks that must be present, uncertainty is difficult to predict and can cause losses. Risk management needs to be implemented to see the impact, in order the organization goals can be achived. Risk management has not been implemented in many cooperative business entities. The purpose of this research is to identify, map and formulate risk management strategies in Dairy Cattle and Milk Production Business. The research method used is a case study. The results of this study identified 17 possible events of risk. The 13 risks are categorized as "moderate" risk, 3 risks in the "high" category, and 1 risk in the "extreme" category. When viewed from the results of the risk mapping in the risk matrix, it shows that the business risks are in the yellow and red areas. Risk management strategy at a moderate risk level is risk reduction). At high risk, the risk management strategy is carried out with risk avoidance. And at extreme risk, the handling strategies implemented include risk transfer and risk avoidance. Abstrak- Koperasi sebagai badan usaha tidak lepas dari berbagai risiko yang harus dihadapi, ketidakpastian sulit diprediksi dan dapat menimbulkan kerugian. Manajemen risiko perlu diimplementasikan untuk mengetahui dampaknya, agar tujuan organisasi dapat dicapai. Manajemen risiko belum banyak diimplementasikan pada badan usah koperasi. Tujuan dari penelitian ini adalah untuk mengidentifikasi, memetakan dan memformulasikan strategi manajemen risiko pada Usaha Sapi Perah dan Produksi Susu Koperasi. Metode penelitian yang digunakan adalah studi kasus. Hasil penelitian ini teridentifikasi sebanyak 17 kejadian yang kemungkinannya menjadi risiko. 13 risiko tersebut termasuk risiko dalam kategori "moderat", 3 risiko dalam kategori "tinggi", dan 1 risiko dalam kategori "ekstrim". Jika dilihat dari hasil pemetaan risiko dalam matrik risiko bahwa risiko usaha ini berada di area kuning dan merah. Strategi manajemen risiko pada tingkatan risiko moderat diformulasikan strategi manajemen risiko dengan pengurangan risiko (risk reduction). Pada risiko tinggi, strategi manajemen risiko dilakukan dengan penghindaran risiko. Dan pada risiko ekstrim, strategi penanganan yang dilakukan meliputi Risk Transfer (mengalihkan risiko) dan Risk Avoidance (penghindaran risiko)

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A Decision Making Methodology for Cost Effectively Managing Pipeline Risk

Volume 4: Pipelining in Northern and Offshore Environments; Strain-Based Design; Risk and Reliability; Standards and Regulations ◽

10.1115/ipc2012-90430 ◽

2012 ◽

Author(s):

Chris Blackwell ◽

Edgar Ivan Cote ◽

Colin Gagne

Keyword(s):

Risk Management ◽

Management Strategy ◽

Cost Benefit ◽

Cost Effective ◽

Time Interval ◽

Operating Pressure ◽

Maintenance Strategy ◽

Risk Management Strategy ◽

Damage Mechanisms ◽

The Subject

To aid with making risk-based pipeline management decisions, a methodology is required to evaluate the cost-benefit of various pipeline operation strategies as a function of time. This methodology should provide consideration to evaluating an existing asset with active damage mechanisms and imperfections in various states of severity. In this paper, the subject of the methodology is a typical transmission pipeline with the following properties: • Transports refined liquid products; • Mid-size diameter (NPS 8 to NPS 16); • Telescoping wall thickness based on proximity to pump stations (4 to 6 mm); • High pressure (9930 kPa); • Approximately 50 years of operating history; and • Approximately 500 km long. The objective of this analysis is to determine the best operation strategy for the subject pipeline in terms of cost-effective risk management. The methodology considered four different risk management strategies: • Operate and Maintain (O&M) at 100% of Maximum Operating Pressure (MOP): ○ A maintenance strategy involving in-line inspection and defect repair based on a function of probability and consequence of failure while operating at 100% of MOP. • Operate and Maintain (O&M) at 50% of Maximum Operating Pressure (MOP): ○ Similar to the previous strategy except an additional form of mitigation is applied by reducing the operating pressure of the pipeline to 50% of MOP. • Inspect, Repair and Re-coat (IRR): ○ A maintenance strategy involving complete excavation of the entire pipeline, inspection and repair of any defects, re-coat and burial. • Pipeline Replacement: ○ A maintenance strategy where the existing asset is abandoned and replaced with a new pipeline. To complete the analysis, two predictive models to determine probability of failure (POF) and consequence of failure (COF) were created using quantitative and semi-quantitative approaches. Consideration was given to both time dependent imperfections and time independent damage mechanisms. The effects of each risk management strategy were projected in both models over a timeline of 20 years. The results were aligned to a risk matrix with defined risk thresholds to aid in determining the acceptability of each risk management strategy. To evaluate the effectiveness of each risk management strategy, a cost-benefit ratio was used. This ratio was defined as the predicted risk reduction through the implementation of each strategy over the costs required for execution. Maximizing this ratio would represent the optimal strategy at any given point in time. Completing the analysis showed that over the short term the O&M strategy was the most cost-effective methodology to mitigate risk. However, as a pipeline ages and repairs become more frequent, the replacement strategy becomes more favorable. The analysis predicted a time interval where if the subject pipeline is to be operated beyond this point in time then replacement as soon as possible is the best strategy to employ. This time interval is different between pipelines and heavily dependent on the rate and severity of damage. The results in this paper illustrate an example and utilizing the methodology discussed will produce different results on a case-by-case basis.

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