COUNTERVAILING RISK MANAGEMENT IN THE FOREST SECTOR THROUGH EXCHANGE-TRADED INSTRUMENTS: CONDINIONS AND DEVELOPMENT PROSPECTS

2020 ◽  
Vol 16 (4) ◽  
pp. 61-67
Author(s):  
MARINA BULGAKOVA ◽  
Keyword(s):  
Risk Management ◽  
Interest Rates ◽  
Net Present Value ◽  
Weighted Average ◽  
Global Scale ◽  
Comparative Characteristic ◽  
Forest Sector ◽  
Economic Management ◽  
Forward Contracts ◽  
On Line

For the world community, 2020 marked the beginning of change on a global scale. Pulmonary disease epidemic, which spread at a lightning speed throughout the globe, not only exposed the negative aspects of globalization, multicultural society and single economic plateaus, but also provided opportunities for the formation of new trends in economic management. In isolation, positive dynamics were observed in areas with on-line trade opportunities, and negative in traditional energy markets. In this regard, the author carried out a comprehensive analysis of the financial instruments used on the exchange, which made it possible to form a comparative characteristic of hedging, option, futures, derivative and forward. The relationship between the values of wood and the forest area on which it grows has been established and presented by the inequality system. Methods of compounding and discounting are considered in detail, on the basis of which a mechanism for determining the net present value of the cost of growing forest plantations as a capital benefit is proposed. The author gives a calculation of the costs of growing ordinary pine seedlings, and a comparison of the weighted average interest rate on deposits (in rubles) and average inflation, made it possible to prove the investment attractiveness of forestry not only for private business, but also for the state. The study provides an overview of the practices of leading «forest» States on interest rates applied to forest investment. In the conclusion of the article, the author concludes that compensatory risk management in the forest industry is possible using the hedging mechanism of measures by concluding forward contracts for the cultivation of seedlings of a certain tree species.

scholarly journals Commercial Real Estate at the ZLB

2018 ◽  
Vol 13 (1) ◽  
pp. 32-53
Author(s):  
Bjørnar Karlsen Kivedal ◽  
Trond Arne Borgersen
Keyword(s):  
Interest Rate ◽  
Real Estate ◽  
Interest Rates ◽  
Systemic Risk ◽  
Net Present Value ◽  
Weighted Average ◽  
Commercial Real Estate ◽  
Federal Funds Rate ◽  
Evaluation Models ◽  
The Difference

This paper analyses the implications of a low interest rate environment (the zero lower bound – ZLB) for the demand of commercial real estate. The main intention of the paper is to track any asymmetry between evaluation models at ZLB relative to more “normal” interest rate levels. First we apply a conventional net-present value (NPV) approach, where the weighted average cost of capital (WACC) and the capital asset pricing model (CAPM) are used for evaluation. Considering the invariance level of systemic risk we find WACC to be an alternative to CAPM for offensive and defensive investments when interest rates are “normal”. However, at the ZLB, WACC is an alternative for investments that carry the same risk as the market and beta-values are close to one. Second, we simulate our models using US data to see how the WACC shortcut performs across different interest rate levels, and especially at ZLB, in this economy. We see differences between the period preceding the financial crisis and the period after 2010, even though the Federal Funds rate is close to zero in both periods. We relate this to the difference in systemic risk between the two periods, and show how the result in the latter period is quite equal across evaluation models.

scholarly journals Futures and forward contract as a route of hedging the risk

2015 ◽  
Vol 5 (4) ◽  
pp. 68-78 ◽  
Author(s):  
Misbahul Islam ◽  
Jayanta Chakraborti
Keyword(s):  
Risk Management ◽  
Financial Markets ◽  
Exchange Rates ◽  
Interest Rates ◽  
Financial Risk ◽  
Fold Increase ◽  
Forward Contracts ◽  
Advantages And Disadvantages ◽  
Corporate World ◽  
Forward Contract

In the present highly uncertain business scenario, the importance of risk management is much greater than ever before. Variations in the prices of agricultural and non-agricultural commodities are induced, over time, by demand-supply dynamics. The last two decades have witnessed many-fold increase in the volume of international trade and business due to the wave of globalization and liberalization sweeping across the world. This has led to rapid and unpredictable variations in financial assets prices, interest rates and exchange rates, and subsequently, to exposing the corporate world to an unwieldy financial risk. As a result, financial markets have experienced rapid variations in interest and exchange rates, stock market prices thus exposing the corporate world to a state of growing financial risk. The emergence of derivatives market is an ingenious feat of financial engineering that provides an effective and less costly solution to the problem of risk that is embedded in the price unpredictability of the underlying asset. Derivatives provide an effective solution to the problem of risk caused by uncertainty and volatility in underlying assets. These are the financial instruments that are linked to a specific financial instrument or indicator or commodity and through which specific risks can be traded in financial markets in their own right. In actual practice there are various different types of derivatives but this paper emphasizes on the two most important types of derivatives i.e. futures and forward contracts. These two are the most commonly used types of derivatives in financial markets. We can hedge the risk of price variations in stocks, bonds, commodities, currencies, interest rates, market indices etc. This study is about the futures and forward contracts. This paper presents various types of futures and forward contract and what advantages and disadvantages these two important types of derivatives have? It also includes that how futures and forward contacts can be used as hedging tools of risk management.

scholarly journals Risk Management for Bonds with Embedded Options

Mathematics ◽  
2020 ◽  
Vol 8 (5) ◽  
pp. 790
Author(s):  
Antonio Díaz ◽  
Marta Tolentino
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Interest Rates ◽  
Interest Rate Risk ◽  
Interest Rate Models ◽  
Management Measures ◽  
Interest Rate Risk Management ◽  
Embedded Options ◽  
The Interest Rate ◽  
Interest Rate Change

This paper examines the behavior of the interest rate risk management measures for bonds with embedded options and studies factors it depends on. The contingent option exercise implies that both the pricing and the risk management of bonds requires modelling future interest rates. We use the Ho and Lee (HL) and Black, Derman, and Toy (BDT) consistent interest rate models. In addition, specific interest rate measures that consider the contingent cash-flow structure of these coupon-bearing bonds must be computed. In our empirical analysis, we obtained evidence that effective duration and effective convexity depend primarily on the level of the forward interest rate and volatility. In addition, the higher the interest rate change and the lower the volatility, the greater the differences in pricing of these bonds when using the HL or BDT models.

scholarly journals Decision Making for Project Appraisal in Uncertain Environments: A Fuzzy-Possibilistic Approach of the Expanded NPV Method

Symmetry ◽  
2020 ◽  
Vol 13 (1) ◽  
pp. 27
Author(s):  
Konstantinos A. Chrysafis ◽  
Basil K. Papadopoulos
Keyword(s):  
Net Present Value ◽  
Fuzzy Numbers ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Present Value ◽  
Major Drawback ◽  
Project Appraisal ◽  
Equity Cost ◽  
Set Up ◽  
Intelligent Methods

The major drawback of the classic approaches for project appraisal is the lack of the possibility to handle change requests during the project’s life cycle. This fact incorporates the concept of uncertainty in the estimation of this investment’s worth. To resolve this issue, the authors use fuzzy numbers, possibilistic moments of fuzzy numbers and the hybrid (fuzzy statistic) fuzzy estimators’ method in order to introduce a fuzzy possibilistic version of the expanded net present value method (FPeNPV). This approach consists of two factors: the fuzzy possibilistic NPV and the fuzzy option premium. For the estimation of the fuzzy NPV, some basic assumptions are taken into consideration: (1) the opportunity cost of capital, used as the present value interest factor calculated through the weighted average cost of capital (WACC), (2) the equity cost, determined through the possibilistic set-up of the capital asset pricing model CAPM, and (3) the inflation factor, also included in the estimation of the NPV. The fuzzy estimators’ method is used for the computation of the fuzzy option premium. An algorithm of nine major steps leads to the computation of the FPeNPV. This gives the administration the opportunity to adapt to potential changes in the company’s internal and external environments. In this way, the symmetry between the planning and execution phase of a project can be reinstated. The results validate the statement that fuzzy and intelligent methods remain valuable tools to express uncertainty in various scientific areas. Finally, an illustrative example aims at a thorough comprehension of this new approach of the expanded NPV method.

THE CURRENT TRENDS AND FACTORS IN THE DEVELOPMENT OF MORTGAGE HOUSING LENDING IN RUSSIA

2020 ◽  
Vol 6 (4) ◽  
pp. 320-333
Author(s):  
Natalia A. BABURINA ◽  
Alexey G. KUTSEV ◽  
Daria D. Mukhametzianova ◽  
Lilia A. Kharitonova
Keyword(s):  
Regression Analysis ◽  
Dynamic Analysis ◽  
Interest Rates ◽  
Residential Buildings ◽  
Weighted Average ◽  
Real Estate Market ◽  
Mortgage Lending ◽  
Russian Scientific ◽  
Statistical Dynamic ◽  
Lending Institutions

The presented work contributes to the development of the studies evaluating the key determinants of mortgage housing lending development in Russia. Despite a relatively well-developed body of research in the field of mortgage housing lending, devoted to revealing the essence, functional purpose, and implementation mechanism, the works, aimed at identifying the factors influencing its development in the current economic environment in Russia, are under-represented in the Russian scientific field. This study aims to assess the dynamics of mortgage housing lending in the contemporary economic conditions and to identify the determinants of its defining. The research methodology is based on the use of statistical dynamic analysis and correlation-regression analysis. The work is based on the application of methods of statistical dynamic analysis and correlation-regression analysis. Assessment of the dynamics has shown the general trend towards an increase in the volume of mortgage housing loans. However, some periods have been noted to have a negative dynamic primary related to the negative external environment and stagnation of the economy, due to the COVID-19 pandemic. Additionally, this article presents the assessment of the qualitative indicators characterizing the level of penetration and the degree of aggressiveness of lending institutions’ policies on housing mortgage lending. The authors have built a panel data model that has allowed identifying the key determinants of the development of residential mortgage lending in Russia. The results have revealed that the state of the mortgage lending sector in Russia is influenced by such factors, as the commissioning of residential buildings, the cost in the primary real estate market, weighted average interest rates, and the unemployment rate.

scholarly journals A Scorecard to Detect Financial Leverage Profitability

2018 ◽  
Vol 13 (3) ◽  
pp. 244
Author(s):  
Laura Broccardo ◽  
Luisa Tibiletti ◽  
Pertti Vilpas
Keyword(s):  
Net Present Value ◽  
Economic Value ◽  
Weighted Average ◽  
Cost Of Debt ◽  
Corporate Management ◽  
External Financing ◽  
Present Value ◽  
Financial Decisions ◽  
Proposed Model ◽  
The Cost

This study investigates how balancing internal and external financing sources can create economic value. We set a financial scorecard, consisting of the Cost of Debt (COD), Return on Investment (ROI), and the Cost of Equity (COE). We show that COE should be a cap for COD and a floor for ROI in order to increase the Net Present Value at Weighted Average Cost of Capital and the Adjusted Present Value of the levered investment. However, leverage should be carefully monitored if COD and ROI go off the grid. Situations where leverage has the opposite effect on value creation and the Equity Internal Rate of Return are also discussed. Illustrative examples are given. The proposed model aims to help corporate management in financial decisions.

Multi-Scale Virtual Reality of Sintering

2007 ◽  
Vol 534-536 ◽  
pp. 573-576
Author(s):  
Eugene Olevsky
Keyword(s):  
Global Scale ◽  
Initial State ◽  
Model Framework ◽  
Time Step ◽  
Computational Framework ◽  
Multi Scale ◽  
Scale Modeling ◽  
History Of ◽  
On Line ◽  
Damage Criteria

The directions of further developments in the modeling of sintering are pointed out, including multi-scale modeling of sintering, on-line sintering damage criteria, particle agglomeration, sintering with phase transformations. A true multi-scale approach is applied for the development of a new meso-macro methodology for modeling of sintering. The developed macroscopic level computational framework envelopes the mesoscopic simulators. No closed forms of constitutive relationships are assumed for the parameters of the material. When a time-step of the calculations is finished for one macroscopic element, the mesostructures of the next element are restored from the initial state according to the history of loading. The model framework is able to predict the final dimensions of the sintered specimen on a global scale and identify the granular structure in any localized area for prediction of the material properties.

Price risk management using forward contracts: the case of farmers in Pakistan

2018 ◽  
Vol 9 (3) ◽  
pp. 241 ◽  
Author(s):  
Shahab E. Saqib ◽  
John K.M. Kuwornu ◽  
Ubaid Ali ◽  
Sanaullah Panezai ◽  
Irfan Ahmad Rana
Keyword(s):  
Risk Management ◽  
Price Risk ◽  
Forward Contracts ◽  
Price Risk Management

scholarly journals Organizational and economic features of the functioning of small enterprises of the forest sector of economics and the causes of strengthening the deformation of enterprise activity

2018 ◽  
Vol 80 (2) ◽  
pp. 490-496
Author(s):  
E. A. Kolesnichenko ◽  
Yu. M. Sokolinskaya
Keyword(s):  
Small Business ◽  
Small Businesses ◽  
Forest Sector ◽  
Careful Study ◽  
Economic Policies ◽  
Economic Management ◽  
Strategic Resources ◽  
The World ◽  
Reducing Costs ◽  
Regional Budgets

In modern Russian conditions of economic management, it is important to analyze deformations in the development of small business in those sectors of the economy that are strategically important for the development of the economy of the whole country. So, for Russia strategic resources, determining the vector of development of its economy, among others are forestry. This is due to the fact that Russia is the world's largest country with forest resources. It ranks first in the world in terms of forest area and the volume of timber reserves. In addition, the development of entrepreneurship in forestry, including small business, is the most problematic in the current economic conditions. Due to the specific scope and the lack of financial capacity of small businesses in this sector demonstrates the lack of effectiveness in its development, which is reflected in the increase in arrears to the budgets of all levels, increasing the size of the shadow work and others. The results of the survey of small business leaders revealed that businesses can to lead a part of the activity into the shadow, first of all, with the goal of reducing costs. According to the estimates of the World Wide Fund for Nature, the extent of deforestation in the informal sector in Russia is more than 30%, and in the surplus regions up to 59-70%. According to expert estimates, federal and regional budgets are losing every year in this connection from 1 to 1.5 billion rubles. forest payments. The reasons for the deforming activities in small business are inadequate state, legal and economic policies and the lack of effective measures to support small business. This necessitates a more careful study of the implemented instruments of state support for small business in the forest sector of the economy, taking into account the currently existing factors of business deformation.

scholarly journals Financial Analysis of Water Management Practices in Cranberry Production in Quebec, Canada

2021 ◽  
Vol 10 (4) ◽  
pp. 13
Author(s):  
Ana-Maria Bogdan ◽  
Suren Kulshreshtha ◽  
Jean Caron
Keyword(s):  
Real Time ◽  
Management Practices ◽  
Net Present Value ◽  
Financial Analysis ◽  
Global Scale ◽  
Sensitivity Analyses ◽  
Economic Returns ◽  
Bottom Line ◽  
Agricultural Producers ◽  
Climate Change Effects

At a global scale, Canada is the second largest cranberry producer, with Quebec being the largest producing region within Canada. Efficient water use in agricultural production has long been a topic of outmost importance to agricultural producers, and governing bodies. The immediacy of climate change effects sped up the need to find solutions that conserve water. One such promising technology is irrigation using real-time tensiometers, which provides rapidly critical irrigation needs information to producers. Adoption of improved technologies by farmers is dependent on the effect it has on the farms’ bottom line. In this study, we examine the financial performance of real-time tensiometer based irrigation, and compare it to evaporation needs based irrigation (baseline), in the context of a Quebec-based cranberry farm. Our findings show that irrigating using real-time tensiometers technology generated higher economic returns. With a net present value of $96,847, this technology increased returns by nearly 53% compared to the baseline technology. Subsequent sensitivity analyses confirmed the robustness of these findings, even when changing important farming parameters.

Sign in / Sign up

Export Citation Format

Share Document