Financial Derivatives Market and Storage Management

It’s known to all that under ideal condition the s to rage cost is kept in lower level when storage management be arranged by Economic Order Quantity(EOQ).Does this mean that any companies should set up their own storing system in proportion to the scale of the commodities’ producing or sell ing Furthermore, even if they manage storage in EOQ, because of different oper ation scale, geographical condition or ability borrowing money from financial ma rket, different companies pay unequal cost in storing the same commodity.In thi s paper, except for supplying commodities from our own storage system, the autho rs have analyzed other two supplying ways without whole storage system, they are forward contracts and futures contracts.The authors have discussed variable su pply cost for above different supply measures.According to the cost of each sup ply way, the managers can choose the most economical way in supplying the commod ity and predict the price of futures from storage management arranged by EOQ.Th e summary content is as follow: 1. The comparing of supply cost between forward contracts and storing system a rranged by EOQ. (1) The supply cost from forward contracts (2) The supply cost from storage system arranged by Economic Order Quantity (3) The application example for comparing cost in different supply way 2.The comparing of supply cost between futures going physical and storing syst em arranged by Economic Order Quantity. (1) The supply cost from futures going physical (2) The correlation between futures contracts and storage management arranged b y EOQ (3) The application example for comparing cost in different supply way 3.How does storing system of scale economic affect the price of forward and fu tures contracts (1) How does the price of forward and futures contracts fluctuate (2) How do we calculate the price of a commodity at future point from the cost of scale economic storing (3) How do we operate efficiently in derivatives market by using the cost of sc ale economic storing (4) The application example for analyzing the price of futures 4.The correlation among storage managementforward contracts and futures mark et.

Foreign exchange risk management by Indian IT companies:an empirical analysis

The increased volatility in the foreign exchange market in recent years has increased the foreign exchange risk faced by companies worldwide. This phenomenon holds good in the Indian context also. This paper tries to report on the foreign exchange risk-management practices among Indian IT (information technology) companies. The results are consistent with expectations that foreign exchange risks faced by Indian IT companies is very high especially in the light of the recent appreciation of the rupee against the USD and most of the companies are using all the available techniques to mitigate the risks. The evidence suggests that the forward cover is the most widely used derivative instrument in managing the risks and the respondents taking part in the survey believe that the government is failing in maintaining a stable exchange rate.

Supply chain decisions and coordination in the presence of an imperfect spot market

This study considers a supply chain consisting of a commodity supplier and a final product manufacturer with uncertain demand.In addition to purchasing from the supplier through a forward contract,the manufacturer can adjust their inventory by trading the commodity in an online spot market after observing the actual demand.However,the spot market is imperfect in that transactions cannot be certainly realized and come with additional transaction costs.Furthermore,the spot price is volatile such that overly relying on the spot market is unwise.To investigate how the spot market affects the decisions and coordination in a supply chain,we develop a game-theoretical model incorporating spot trading.We derive the optimal ordering decision in a centralized supply chain,as well as the supplier's and manufacturer's equilibrium pricing and ordering decisions in a decentralized supply chain.The impact of the imperfect spot market on the optimal decisions and profits is analyzed.This study also demonstrates how the supply chain can be coordinated in the presence of an imperfect spot market.Finally,a numerical analysis is performed to examine the analytical results.Our results indicate that the spot market can generally improve the performance of the centralized supply chain and benefit the manufacturer in the decentralized one.However,it can be detrimental to the supplier.The supply chain can be coordinated by a revenue-sharing contract,and both parties'profits can be improved.Our findings suggest that the manufacturer could take advantage of the spot market,and the supplier should attempt to integrate or coordinate the supply chain to share the benefits of spot trading.

Using electricity options to hedge against financial risks of power producers

As a consequence of competition in electricity markets,a wide variety of financial derivatives have emerged to allow market agents to hedge against risks.Electricity options and forward contracts constitute adequate instruments to manage the financial risks pertaining to price volatility or unexpected unit failures faced by power producers.A multi-stage stochastic model is described in this tutorial paper to determine the optimal forward and option contracting decisions for a risk-averse power producer.The key features of electricity options to reduce both price and availability risks are illustrated by using two examples.