Restricted Export Flexibility and Risk Management with Options and Forward Contracts

This paper examines the interaction between operational and financial hedg-ing in the context of a risk averse competitive exporting firm under exchange rate uncertainty. The firm is export-flexible in that it makes its export deci-sion after observing the realized spot exchange rate. However, export-flexibility is limited by certain minimum sales requirements due to long-term consider-ations. This creates a piecewise linear exchange rate exposure. If the firm is allowed to use customized derivatives contracts, its optimal hedge position can be replicated by selling currency forward contracts and call options. If the firm is restricted to use forward contracts as the sole hedging instrument, optimal output is unambiguously smaller. Introducing currency call options thus stim-ulates production. An extension analyzes more general types of exchange rate exposure. This paper examines the interaction between operational and financial hedg-ing in the context of a risk averse competitive exporting firm under exchange rate uncertainty. The firm is export-flexible in that it makes its export deci-sion after observing the realized spot exchange rate. However, export-flexibility is limited by certain minimum sales requirements due to long-term consider-ations. This creates a piecewise linear exchange rate exposure. If the firm is allowed to use customized derivatives contracts, its optimal hedge position can be replicated by selling currency forward contracts and call options. If the firm is restricted to use forward contracts as the sole hedging instrument, optimal output is unambiguously smaller. Introducing currency call options thus stim-ulates production. An extension analyzes more general types of exchange rate exposure.postprin

The impact of inflation risk on forward trading and production

This paper examines the behavior of a competitive firm that faces joint price and inflation risk. Given that the price risk is negatively correlated with the inflation risk in the sense of expectation dependence, we show that the firm optimally opts for an over-hedge (under-hedge) if the firm’s coefficient of relative risk aversion is everywhere no greater (no smaller) than unity. We show further that banning the firm from forward trading may induce the firm to produce more or less, depending on whether the price risk premium is positive or negative, respectively. While the price risk premium is unambiguously negative in the absence of the inflation risk, it is not the case when the inflation risk prevails. In contrast to the conventional wisdom, forward hedging needs not always promote production should firms take inflation seriously.info:eu-repo/semantics/publishedVersio

Pseudorehearsal in value function approximation

Catastrophic forgetting is of special importance in reinforcement learning, as the data distribution is generally non-stationary over time. We study and compare several pseudorehearsal approaches for Q-learning with function approximation in a pole balancing task. We have found that pseudorehearsal seems to assist learning even in such very simple problems, given proper initialization of the rehearsal parameters

Using geographically weighted regression to explore the spatially heterogeneous spread of bovine tuberculosis in England and Wales

An understanding of the factors that affect the spread of endemic bovine tuberculosis (bTB) is critical for the development of measures to stop and reverse this spread. Analyses of spatial data need to account for the inherent spatial heterogeneity within the data, or else spatial autocorrelation can lead to an overestimate of the significance of variables. This study used three methods of analysis—least-squares linear regression with a spatial autocorrelation term, geographically weighted regression (GWR) and boosted regression tree (BRT) analysis—to identify the factors that influence the spread of endemic bTB at a local level in England and Wales. The linear regression and GWR methods demonstrated the importance of accounting for spatial differences in risk factors for bTB, and showed some consistency in the identification of certain factors related to flooding, disease history and the presence of multiple genotypes of bTB. This is the first attempt to explore the factors associated with the spread of endemic bTB in England and Wales using GWR. This technique improves on least-squares linear regression approaches by identifying regional differences in the factors associated with bTB spread. However, interpretation of these complex regional differences is difficult and the approach does not lend itself to predictive models which are likely to be of more value to policy makers. Methods such as BRT may be more suited to such a task. Here we have demonstrated that GWR and BRT can produce comparable outputs

On the PATHGROUPS approach to rapid small phylogeny

We present a data structure enabling rapid heuristic solution to the ancestral genome reconstruction problem for given phylogenies under genomic rearrangement metrics. The efficiency of the greedy algorithm is due to fast updating of the structure during run time and a simple priority scheme for choosing the next step. Since accuracy deteriorates for sets of highly divergent genomes, we investigate strategies for improving accuracy and expanding the range of data sets where accurate reconstructions can be expected. This includes a more refined priority system, and a two-step look-ahead, as well as iterative local improvements based on a the median version of the problem, incorporating simulated annealing. We apply this to a set of yeast genomes to corroborate a recent gene sequence-based phylogeny

The interaction between a sexually transferred steroid hormone and a female protein regulates oogenesis in the malaria mosquito anopheles gambiae

Molecular interactions between male and female factors during mating profoundly affect the reproductive behavior and physiology of female insects. In natural populations of the malaria mosquito Anopheles gambiae, blood-fed females direct nutritional resources towards oogenesis only when inseminated. Here we show that the mating-dependent pathway of egg development in these mosquitoes is regulated by the interaction between the steroid hormone 20-hydroxy-ecdysone (20E) transferred by males during copulation and a female Mating-Induced Stimulator of Oogenesis (MISO) protein. RNAi silencing of MISO abolishes the increase in oogenesis caused by mating in blood-fed females, causes a delay in oocyte development, and impairs the function of male-transferred 20E. Co-immunoprecipitation experiments show that MISO and 20E interact in the female reproductive tract. Moreover MISO expression after mating is induced by 20E via the Ecdysone Receptor, demonstrating a close cooperation between the two factors. Male-transferred 20E therefore acts as a mating signal that females translate into an increased investment in egg development via a MISO-dependent pathway. The identification of this male–female reproductive interaction offers novel opportunities for the control of mosquito populations that transmit malaria

Cumulate causes for the low contents of sulfide-loving elements in the continental crust

Despite the economic importance of chalcophile (sulfide-loving) and siderophile (metal-loving) elements (CSEs), it is unclear how they become enriched or depleted in the continental crust, compared with the oceanic crust. This is due in part to our limited understanding of the partitioning behaviour of the CSEs. Here I compile compositional data for mid-ocean ridge basalts and subduction-related volcanic rocks. I show that the mantle-derived melts that contribute to oceanic and continental crust formation rarely avoid sulfide saturation during cooling in the crust and, on average, subduction-zone magmas fractionate sulfide at the base of the continental crust prior to ascent. Differentiation of mantle-derived melts enriches lower crustal sulfide- and silicate-bearing cumulates in some CSEs compared with the upper crust. This storage predisposes the cumulate-hosted compatible CSEs (such as Cu and Au) to be recycled back into the mantle during subduction and delamination, resulting in their low contents in the bulk continental crust and potentially contributing to the scarcity of ore deposits in the upper continental crust. By contrast, differentiation causes the upper oceanic and continental crust to become enriched in incompatible CSEs (such as W) compared with the lower oceanic and continental crust. Consequently, incompatible CSEs are predisposed to become enriched in subduction-zone magmas that contribute to continental crust formation and are less susceptible to removal from the continental crust via delamination compared with the compatible CSEs

Spatial heterogeneity of habitat suitability for Rift Valley fever occurrence in Tanzania: an ecological niche modelling approach

Despite the long history of Rift Valley fever (RVF) in Tanzania, extent of its suitable habitat in the country remains unclear. In this study we investigated potential effects of temperature, precipitation, elevation, soil type, livestock density, rainfall pattern, proximity to wild animals, protected areas and forest on the habitat suitability for RVF occurrence in Tanzania. Presence-only records of 193 RVF outbreak locations from 1930 to 2007 together with potential predictor variables were used to model and map the suitable habitats for RVF occurrence using ecological niche modelling. Ground-truthing of the model outputs was conducted by comparing the levels of RVF virus specific antibodies in cattle, sheep and goats sampled from locations in Tanzania that presented different predicted habitat suitability values. Habitat suitability values for RVF occurrence were higher in the northern and central-eastern regions of Tanzania than the rest of the regions in the country. Soil type and precipitation of the wettest quarter contributed equally to habitat suitability (32.4% each), followed by livestock density (25.9%) and rainfall pattern (9.3%). Ground-truthing of model outputs revealed that the odds of an animal being seropositive for RVFV when sampled from areas predicted to be most suitable for RVF occurrence were twice the odds of an animal sampled from areas least suitable for RVF occurrence (95% CI: 1.43, 2.76, p < 0.001). The regions in the northern and central-eastern Tanzania were more suitable for RVF occurrence than the rest of the regions in the country. The modelled suitable habitat is characterised by impermeable soils, moderate precipitation in the wettest quarter, high livestock density and a bimodal rainfall pattern. The findings of this study should provide guidance for the design of appropriate RVF surveillance, prevention and control strategies which target areas with these characteristics