Hedging performance of interest-rate models

This dissertation is a hedging back-study which assesses the effectiveness of interest- rate modelling and the hedging of interest-rate derivatives. Caps that trade in the Johannesburg swap market are hedged using two short-rate models, namely the Hull and White (1990) one-factor model and the subsequent Hull and White (1994) two-factor extension. This is achieved by using the equivalent Gaussian additive-factor models (G1++ and G2++) outlined by Brigo and Mercurio (2007). The hedges are constructed using different combinations of theoretical zero-coupon bonds. A flexible factor hedging method is proposed by the author and the bucket hedging technique detailed by Driessen, Klaasen and Melenberg (2003) is tested. The results obtained support the claims made by Gupta and Subrahmanyam (2005), Fan, Gupta and Ritchken (2007) and others in the literature that multi-factor models outperform one-factor models in hedging interest-rate derivatives. It is also shown that the choice of hedge instruments can significantly influence hedge performance. Notably, a larger set of hedge instruments and the use of hedge instruments with the same maturity as the derivative improve hedging accuracy. However, no evidence to support the finding of Driessen et al. (2003) that a larger set of hedge instruments can remove the need for a multi-factor model is found

How Were Phytoplankton Affected by the Deepwater Horizon Oil Spill?

A literature review demonstrates that crude oil spills can affect phytoplankton, favoring the growth of some while inhibiting the growth of others. Subsequently, the phytoplankton assemblage can change as a result of exposure to crude oil. Studies of phytoplankton responses to the Macondo (Deepwater Horizon) oil spill indicate that the phytoplankton may have been stimulated by the oil spill, although the presence of low-salinity water in the region makes it difficult to discount the importance of riverine-borne nutrients as a factor. A few studies suggest that the oil spill was toxic to some phytoplankton species, whereas others indicate that the degree of tolerance to the oil or to dispersants differs among species. These results generally comply with findings of previous studies, but a lack of published field data analyses prevents further assessment of the impacts of the Deepwater Horizon oil spill on phytoplankton population dynamics in the northern Gulf of Mexico

The Gulf of Mexico ecosystem, six years after the Macondo oil well blowout

The Gulf of Mexico ecosystem is a hotspot for biological diversity and supports a number of industries, from tourism to fishery production to oil and gas exploration, that serve as the economic backbone of Gulf coast states. The Gulf is a natural hydrocarbon basin, rich with stores of oil and gas that lie in reservoirs deep beneath the seafloor. The natural seepage of hydrocarbons across the Gulf system is extensive and, thus, the system׳s biological components experience ephemeral, if not, frequent, hydrocarbon exposure. In contrast to natural seepage, which is diffuse and variable over space and time, the 2010 Macondo oil well blowout, represented an intense, focused hydrocarbon infusion to the Gulf׳s deepwaters. The Macondo blowout drove rapid shifts in microbial populations and activity, revealed unexpected phenomena, such as deepwater hydrocarbon plumes and marine “oil snow” sedimentation, and impacted the Gulf׳s pelagic and benthic ecosystems. Understanding the distribution and fate of Macondo oil was limited to some degree by an insufficient ability to predict the physical movement of water in the Gulf. In other words, the available physical oceanographic models lacked critical components. In the past six years, much has been learned about the physical oceanography of the Gulf, providing transformative knowledge that will improve the ability to predict the movement of water and the hydrocarbons they carry in future blowout scenarios. Similarly, much has been learned about the processing and fate of Macondo hydrocarbons. Here, we provide an overview of the distribution, fate and impacts of Macondo hydrocarbons and offer suggestions for future research to push the field of oil spill response research forward