Jet Fuel Hedging

By using strategies like Fuel hedging in order to turn a variable cost into a fixed cost means that qantas can lock in a certain price for fuel (via contract) and save money if the price of fuel increases. Qantas’ future in efficiency looks to be very promising as an increase in use of E commerce, more efficient planes, and improved economies of scale all work in favour to ensure qantas’ ability to

Based on the 1988 Supreme Court case of Corn Product Refining Co. v. Commissioner (350 U.S. 46; 76 S.Ct. 20; 100 L.Ed. 29), hedging transactions were determined to be used to support business practices of certain commodities. Such hedging transactions are normal for businesses engaged in commodity sales such as coal or corn to protect against market

For interest rate hedging strategy, swaps are used to hedge. And most importantly, interest rate swaps are an agreement between two counterparties exchanging one stream of future interest payments for another. Interest rate swaps can exchange a fixed payment for a floating payment or vice versa. We can also hedge against commodity price risk where this involves purchase of a futures contract, that guarantee a particular price at a certain point in time. In this case, the price is guaranteed and no unexpected loss can occur. Also no gain based on favorable price changes can occur as well. We can also hedge against commodity price risk where this involves purchase of a futures contract, that guarantee a particular price at a certain point in time. In this case, the price is guaranteed and no unexpected loss can occur. Also no gain based on favorable price changes can occur as well. Hedging against investment risk means strategically using instruments in the market to

To mitigate the risk of future commodity price changes it is recommended that Desert Valley adopt a hedging program by purchasing forward contracts. This would allow the company to

Since we need to hedge 75% of the expected fuel consumption over 2008Q1, the amount of

Hedge-funds are essentially investment pools for wealthy individuals that are managed by the best investors in the world. These investors use various strategies in order to increase returns and minimize losses. Hedging by its definition is an investment strategy that essentially uses put options to minimize losses on an investment. By taking an offsetting position on a security, the investor can protect him or herself from a total loss on that investment. Hedging is essentially an investor’s version of car or home insurance. While insurance will not cover your total loss, it prevents you from taking a total loss on your investment. Credit default swaps are a way of using this “hedging” strategy. Credit default swaps are essentially the insurance companies of Wall Street. If a pension fund wanted to loan money to a company that did not have a AAA or AA rating, they could loan money to the company through purchasing a credit default swap. If that company defaulted on the loan then the credit insurers would pay the pension fund the remaining amount on the loan’s interest. In return, the pension fund would have to pay a percentage of the interest they collected on their loan to the credit insurers. The system worked fantastically for both sides until hedge-funds found the ability to profit off of these credit default

Commodity Price Risk Management: HSE enters into commodity price contracts in order to offset fixed or floating prices with market rates to manage exposure to fluctuations in commodity prices. HSE uses derivative commodity instruments to manage exposure to price volatility on a portion of its oil and gas production and firm commitments for the purchase or sale of crude oil and natural gas. Furthermore, HSE’s results will also be impacted by a decrease in the price of crude oil inventory. They have crude oil inventories that are feedstock, held at terminals or part of the in-process inventories at its refineries and at offshore sites. Additionally, they have natural gas inventory in storage that could have an impact on earnings based on changes in natural gas prices. These inventories are subject to a lower of cost or net realizable value test on a monthly basis.

| Competition from low cost airlinesGovernment regulationsPrice volatility in petroleum marketIncreasing security and safety concerns

In order to stay airborne, a passenger airline has to consistently generate profits. Profits come only from paying passengers, hence all stratagems must be customer oriented. In a scenario where there are many airlines competing with each other, one way of attracting passengers is to keep the cost of flying low, while providing value for money. On the other hand, expenses must tightly controlled to reach and stay at the lowest possible. Certain expenses are unavoidable; however, one variable that can be kept low through decisive planning and foresight is the cost of fuel, which, at best, can be called volatile. A good way to achieve this is by hedging fuel cost,

Fuel costs can change rapidly, making it difficult for consumers to adjust to the system. In fact, the petroleum industry is one of the

* Hedging. Hedging with the fuel market could save enough money in one year to offset the next year’s fuel supply and costs.

For the purposes of this report, I analyzed the July corn futures market from a long position in contrast to my short position in the cash market. I took out one contract with a size of 5000 bushels of corn. I tracked this market since January 16th and collected futures and cash market prices throughout that whole period. In addition, I also analyzed hedging with futures and hedging futures with options dating back to February 21st. This report shall cover all aspects of this analysis including a compare and contrast section on each of the net prices from each hedging option.

Hedging can be done in several ways, for instance engage in money market and a call/put option.

Most firms hedge at least some of their risks. Hedging can take two basic forms—namely, natural hedging and hedging by means of derivative instruments. The use of derivatives as hedges has expanded greatly in recent years.

From its definition it can be noticed that hedging is a strategy employed by companies in an effort to safeguard their economic position and to prevent the company from the losses which are associated with the unforeseen risks. Companies can hedge against risks which are associated with losses by taking control of their future purchases. The commodity prices vary in different markets and are caused or influenced by different economic factors. Some commodities are very scarce and with the increased depletion subject to the global demand in different foreign markets, the prices are set to be hiked in response to the established demand which positions the companies that use those particular commodities to have cash flow problems.