Simulation and hedging oil price with geometric Brownian Motion and single-step binomial price model

This paper[1] uses the Geometric Brownian Motion (GBM) to model the behaviour of crude oil price in a Monte Carlo simulation framework. The performance of the GBM method is compared with the naïve strategy using different forecast evaluation techniques. The results from the forecasting accuracy statistics suggest that the GBM outperforms the naïve model and can act as a proxy for modelling movement of oil prices. We also test the empirical viability of using a call option contract to hedge oil price declines. The results from the simulations reveal that the single-step binomial price model can be effective in hedging oil price volatility. The findings from this paper will be of interest to the government of Nigeria that views the price of oil as one of the key variables in the national budget. JEL Classification Numbers: E64; C22; Q30 Keywords: Oil price volatility; Geometric Brownian Motion; Monte Carlo Simulation; Single-Step Binomial Price Model [1] Acknowledgement: We wish to thank the two anonymous reviewers for their insightful comments and kind considerations. Memos to: Azeez Abiola Oyedele, School of Business and Enterprise, University of the West of Scotland, Paisley Campus, Paisley PA1 2BE, Scotland, Email: [email protected]

Biodiesel: Freedom from Dependence on Fossil Fuels?

In view of the depleting oil reserves and exponential rise in petroleum prices, the search for alternative sources of fuel is very timely and important. The present paper addresses the underlying issues in biodiesel production from biomaterials and sustainable production and supply of first-generation biofuels, especially the one from jatropha. The agencies and research institutions involved in the production of biofuels and the national and international efforts made in this regard are discussed here. There is also a dire need of a step towards large-scale production and supply of second-generation biofuels, although in infant stage, to strengthen the world economy in general and Indian economy in particular. However, the production of biofuels are likely to have serious socio-economic implications especially to the lesser developed societies. This needs serious attention from policy makers and public at large

Forecasting OPEC oil price: a comparison of parametric stochastic models

Most academic papers on oil price forecasting have frequently focused on the use of WTI and European Brent oil price series with little focus on other equally important international oil price benchmarks such as the OPEC Reference Basket (ORB). The ORB is a weighted average of 11-member countries crude streams weighted according to production and exports to the main markets. This paper compares the forecasting accuracy of four stochastic processes and four univariate random walk models using daily data of OPEC Reference Basket series. The study finds that the random walk univariate model outperforms the other stochastic processes. An element of uncertainty was introduced into the point estimates by deriving probability distribution that describes the possible price paths on a given day and their likelihood of occurrence. This will help decision makers, traders and analysts to have a better understanding of the possible daily prices that could occur. JEL Classification Numbers: E64; C22; Q30 Keywords: Oil Price Forecasting, Probability Distributions, and Forecast Evaluation Statistics, Brownian Motion with Mean Reversion process, GARCH Model

First report of polymelia and a rudimentary wing in a Nigerian Nera black chicken

A case of polymelia with a rudimentary wing is described in an eight-week-old Nera black chicken (Gallus domesticus). It is a rare disorder with chromosomal aberrations, which are associated with congenital limb malformations. The condition was observed during routine physical examination of a flock of 2000 poultry birds in the month of February 2008 in Ibadan, Nigeria. After physical examination, the bird was found to have two extra well-developed legs, which were shorter than the normal legs. These extra legs were also found to be non-functional. Similarly, a rudimentary wing, which was highly vestigial, was found on the left lateral side of the bird very close to the cloaca. The bird died at the age of eight weeks. This is the first reported case of polymelia with a rudimentary wing in a domestic chicken in Nigeria

The effects of prolonged oral administration of the disinfectant calcium hypochlorite in Nigerian commercial cockerels

This study was designed to investigate the effects of prolonged oral administration of calcium hypochlorite in the drinking water of commercial cockerels. It was carried out in order to ascertain probable toxicity associated with prolonged exposure to calcium hypochlorite. Thirty-two healthy birds were used; they were grouped into four groups of eight. Group 1, which served as the control, received 10 mL/kg body weight of physiological saline. Groups 2, 3 and 4 received 0.0375 g, 0.375 g and 0.75 g of calcium hypochlorite per 10 litres of drinking water for six weeks respectively. Six weeks after the administration of calcium hypochlorite, blood was collected from the jugular vein to assess liver function, lipid profiles and for markers of oxidative stress. The results revealed a significant (p < 0.05) increase in alanine aminotransferase activity in a dose-dependent manner when compared with the control. Also, there was a significant (p < 0.05) increase in aspartate aminotransferase and alkaline phosphatase activity. Similarly, there was a significant (p < 0.05) increase in total cholesterol, triglycerides, high-density lipoprotein and low-density lipoprotein levels compared with the control. There was a significant increase in malondialdehyde and hydrogen peroxide generation with a concomitant significant (p < 0.05) decrease in serum glutathione level in a dose-dependent manner when compared with the control. In this study, calcium hypochloriteinduced hepatic damage via oxidative stress and decrease in antioxidant defense system was found. Therefore, prolonged exposure of chickens to calcium hypochlorite is potentially harmful