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Calendar Spread Hedging Mechanism for Mining Companies
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Author(s): Andrey Mishin (Vladimir State University, Russia)and Polina Kisarina (EGAR Technology, Russia)
Copyright: 2021
Pages: 12
Source title:
Impact of Disruptive Technologies on the Sharing Economy
Source Author(s)/Editor(s): Ford Lumban Gaol (Bina Nusantara University, Jakarta, Indonesia), Natalia Filimonova (Vladimir State University, Russia)and Chandan Acharya (College of Staten Island, City University of New York, USA)
DOI: 10.4018/978-1-7998-0361-4.ch001
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Abstract
This chapter attempts to answer the question of how much of its current production a mining company should hedge by forward selling by using a model that allows a company to determine the optimal (profit-maximising) hedge. The risk estimation model of company failure is based on the forward price of metals; the miner's operating costs is based on quantitative approach for mining companies. The chapter considers the transition to advanced digital, intelligent manufacturing technologies, robotic systems, the creation of systems for processing large amounts of data, machine learning, and artificial intelligence. The model calculates the present value of future income distributed as dividends in order to determine the value of the company from the perspective of the owner or investor, a multiple of the current value of the product. By simulating the work of several companies working with different levels of forward, it is possible to determine the relative profitability and survival in the market that allows one to determine the optimal hedging ratio.
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