Lactic Acid And Fatigue Health And Social Care Essay

Lactic Acid And Fatigue Health And Social Care Essay A large portion of the population, including athletes and coaches in this current era still believes that the limitations of exercise performance is due to lactic acid build up causing fatigue. It is a stubborn myth that stood through the test of time. This is a relatively  old school of thought  that has its roots in the work of Fletcher K [1]. Lactic acid was regarded as an end metabolite of glycolysis and elevates as an exercise intensify where oxygen availability decreases[2]. It was Brooks GA that started the Lactate revolution. He presented the lactate shuttle hypothesis in his work in 1986[3]. It was due to this hypothesis that scientists, even in present day, question the mechanisms of lactate or lactic acid in the body and its involvement in fatigue. This report will delve into studies within the recent decade, touching on conflicting ideas pertaining to lactic acid and its involvement in fatigue. I will further break down lactic acid into its biochemical components, lactate and hydrogen ion, and discuss studies which have contradicting beliefs on these components implication with fatigue. Finally, I will highlight on recent articles that has even challenged the underlying mechanism behind fatigue. Lactic Acid as a whole? Lactic acid was considered a metabolic waste. It is a by-product of glycolysis in the conversion of glucose to pyruvate. It was blamed for the burning sensation felt during and after performing a high intensity exercise which would then finally cause fatigue. However, the idea of lactic acid causing muscle fatigue has been challenged since the 1980s. For example, human deficient in the enzyme myophosphorylase showed faster muscle fatigue eventhough they are incapable of breaking down glycogen and accumulate lactic acid[4]. Studies on single muscle fibres showed constant rate of fatigue eventhough its pH was intentionally lowered[5]. It is seen today that many studies have challenged one anothers idea. It is important to consider all options before finally cementing a theory. Firstly, it would be unfair to blame lactic acid as a whole when it literally does not exist in this neutral construct[6, 7]. It expresses as hydrogen ions (H+) and lactate ions in the body [7, 8]. Several studies have and should continue separating these 2 entities and experimented on them separately to find its link with fatigue as either one, both or none of them could be the cause of fatigue. So is lactate the real culprit? It was long written in literature that lactate is known as a metabolic waste product. However, lactate is far from being a useless product. There has been growing number of evidence of the beneficial properties of lactate and this has tested the universality of the hypothesis linking muscular fatigue with lactate production. Lactate, being produced when glucose breaks down to pyruvate [9], allows continuation of glycolysis by generating the NAD+ needed in glycolysis[10] thus preserving exercise performance and delaying fatigue. With the presence of oxygen, lactate can be converted to pyruvate which could be converted to glucose. This process is called Cori cycle[11]. It can then be utilized or stored as glycogen, according to the bodys need at that point of time[11]. This makes lactate a good source of energy. Lactate could be cleared by oxidation in the muscle fibre it was produced. Oxidation of that particular lactate could also happen in other muscle fibres as the lactate is being transported. Those lactate not oxidized will diffuse into the blood veins and transported to the liver[12].Lactate is favoured by the brain and used extensively as a source of fuel[13]. Lactate was known to contribute to fatigue. Many studies nowadays shows otherwise, in fact, it has been studied that lactate may delay the onset of acidosis mainly via H+ reduction. In this review[14] and study by Robergs R.A[15] (supported by S.E Allen[16]), H+ were found to be carried out from cells by transporters and also be consumed by lactate. However, this statement has been challenged by Lindinger M.I., stating that Roberg ignored that lactate is an anion. Its increase would therefore reduce Na anions and thus increase H+ to maintain electroneutrality[7]. Although Lindinger might be correct, there are more studies supporting the opposite notion. A solid ground breaking revolution should occur when lactate is being administered to athletes via energy drinks, however many are still in the dark in recognizing lactates true potential. A study showed that lactate is utilized more efficiently with a greater extent compared to glucose or fructose and also enhances high intensity performance[17]. To further add value to lactate, it is found that performance decrement has no correlation with lactate production[18]. It is clear from the whole list of resources in literature that lactate is not a bad metabolic waste product and is actually beneficial in more ways than one, especially in delaying the onset of fatigue. Therefore, accusing lactic acid to be the culprit of fatigue would indirectly blame lactate, which is not acceptable when it is a beneficial component in exercise performance. So it must be Acidosis! It is clear among literature that acidosis has been under the limelight for causing fatigue. The lowering of pH in the muscle has been accused of causing the burning sensation and the decreasing muscle efficiency that comes with fatigue[19]. In 2003 a review by L. B. Gladden [20] states that RH Fitts [21]has evidence of a whole list of experiments suggesting that acidosis can have negative detrimental effects on muscle function by 1-reducing the transition of the cross-bridge from the low- to the high-force state, 2-inhibiting maximal shortening velocity, 3-inhibiting myofibrillar ATPase, 4-inhibiting glycolytic rate, 5-reducing crossbridge activation by competitively inhibiting Ca2+  binding to troponin C, and 6-reducing Ca2+  re-uptake by inhibiting the sarcoplasmic ATPase (leading to subsequent reduction of Ca2+  release). This may sound contradicting as there are resources saying that acidosis do not cause fatigue. However, it is important to know that the experiments explained by RH Fitts[21], are done in vitro and when the experiments are redone at temperature closer to those experienced physiologically, the said negative effect of acidosis diminishes[20]. In the recent years, experiments have been showing that acidosis has been far from being the cause of fatigue. Neilsen explained that muscle contraction causes acidosis, loss of intracellular K+ and extracellular K+ build up[22]. High extracellular K+  leads to loss of contraction force therefore fatigue[23]. It was found that acidification nullify the effects of the extracellular K+ that are linked with fatigue[22]. This is further supported by other studies[24-26] on the fact that acidosis has protective capabilities against muscle fatigue. Gathering all the resources, it would be safe and logical to say that since acidosis delays fatigue, alkalosis (the opposite of acidosis) should have an opposite effect thus cause fatigue faster. However, this was proven wrong in many studies [27-30]. Taking time to look at the whole picture of the studies, studies regarding alkalosis were done as a whole body model experiment (in vivo). Looking back, the experiments done on acidosis were not done as a whole-body experiment. Instead, it was done on single muscle fibre in in vitro situations. Studies from the past showed that acidosis can contribute to fatigue in intact human body or animal [31-33]. To integrate the studies from isolated muscle model with accordance to whole-body exercise, Cairns hypothesised that acidosis may improve performance in isolated muscle, high blood plasma acidosis may cause a reduction in central nervous systems drive to the muscle thus causing fatigue[6]. Another limitation that may affect experiments is that fast twitch muscles are more susceptible to acidosis[6] therefore experiments on a single muscle fibre as seen in a lot of studies regarding acidosis, might not give an accurate holistic overview of the reaction of a whole muscular body. Also H+ might interact with other unknown cellular changes in the body therefore slightly discrediting isolated muscle fibre experiments with comparison to whole body experiments. Overall, acidosis has been thought to be the main contributor to fatigue. However, recent studies in the last decade have been trying to contest the statement. In my opinion, it is rather early to disregard acidosis as the cause of fatigue, as in vitro studies are only suggestive. Future studies should take into account acidosis as a whole body experiment (in vivo) where hormonal and other physiological interactions are possible. If there are claims of acidosis not causing fatigue, then what does cause fatigue? So in substitution of the uprising hypothesis that elevated H+ is not the main cause of fatigue, there have been many competitors to claim its place. Supported by a study, Westerblad have been claiming that inorganic phosphate has the main role in fatigue[34]. Inorganic phosphate increases as muscle is being contracted and creatine phosphate is being broken down. However, a book by Fitts[21] challenged Westerblads idea, highlighting several limitations concerning the inorganic phosphate hypothesis. He stated that the studies did not assess the holistic combination of the resultant effect of an elevated inorganic phosphate with low pH and low calcium ion release. Also the effects of acidosis on peak power were not evaluated. Even Westerblad agreed that the study was done on a single muscle fibre and the result might be different when done with a whole model. He pointed out that studying on a single muscle fibre provides the most direct physiological responds when questioning the cellular mechanisms of fatigue. Also, claiming that the The differences that inevitably must exist appear to be mainly of a quantitative nature[34]. I believe that it is still early to refute the idea of acidosis not causing to fatigue. In the case of studies on inorganic phosphate, its role in fatigue is still in an early stage and should not be dismissed as of yet. Several questions have yet to be answered. However, creatine phosphate is after all only involved in the first 10 seconds of an intense exercise therefore queries of its role extending within these 10 seconds are questionable. Other than phosphates, there have been a large number of studies[22, 23] claiming potassium ions to be the main cause of fatigue. In this particular study by Cairns[35], he states We hypothesize that during high-intensity exercise a rundown of the transsarcolemmal K+  gradient is the dominant cellular process around which interactions with other ions and metabolites occur, thereby contributing to fatigue. The raised extracellular K+ causes a sarcolemmal depolarization, therefore disrupting the excitability of the muscle thus resulting in fatigue[35]. This is however contradictory to a previous study being done on rats[36]. In the study, it suggests that extracellular K+ is overhyped in previous studies on isolated muscles and that it is of less importance for fatigue. Overall, it is still hard to cement a theory as long as insufficient studies are done on whole intact animal models. This is however, being a case of isolated muscle studies versus in vivo studies. In my opinion applying Occams razor, acidosis should stay as the cause of fatigue unless proven otherwise with solid in vivo studies. Conclusion So to go back to the age old question, does lactic acid cause fatigue? It is important to remember that lactic acid disassociates to lactate and H+ ions, each with its own characteristics and interactions with the body therefore it needs to be addressed separately. Taking lactic acid as a whole and blaming it would be unjust and inaccurate. As of recent time, it will take time and effort to disprove acidosis as the cause of fatigue as many studies were done in vitro and results only suggest possible mechanism in the human body. I do however believe that there is no one main mechanism causing fatigue, it is however a collective effort of different mechanisms, few of which are possibly phosphate and extracellular K+, that contribute to fatigue. As of now, lactate is a good byproduct and acidosis still remains the main cause of fatigue.

Free Essays: The Weak Gods of Iliad, Odyssey and Epic of Gilgamesh :: comparison compare contrast essays

The Weak Gods of The Iliad, Odyssey and Gilgamesh    The Oxford English Dictionary defines god as Ã’1. A being conceived as the perfect, omnipotent, omniscient ruler and originator of the universe, the principal object of faith and worship in monotheist religions. 2. A being of supernatural powers, believed in and worshipped by a people.Ó The first definition reflects Modern AmericaÕs connotation of the word god. The latter recalls the Ancient Greco-Sumerian ideal of a being greater than man. While both definitions are equally valid in literature, many perceive the word only in the first view. However, the Iliad, the Odyssey, and the Epic of Gilgamesh portray gods with limits and weaknesses. The contemporary Christian god is able to demand things of his followers, readily expecting wholehearted and unquestioning obedience. This was not the case with his ancient counterparts.    Rather than exacting demands upon their followers, occasionally the ancient gods were limited to requests. Often they were refused. In the Odyssey, the goddesses Circe and Calypso both expected lifelong commitments from the mighty Odysseus. Both promised great things to the hero, including godhood. Odysseus was able to refuse both goddesses. Human obstinacy beat out the whims of goddesses. If the Protestant god were to make sexual demands upon his followers, more than likely, he would not be refused. One could argue, though, that Odysseus did give in to the goddesses by bedding them. Always though, his focus eventually shifted to returning home and reuniting with his mortal wife. Homer portrayed a man who refused immortal beauty for true love: Ã’She is mortal after all, and you are immortal and ageless. But even so, what I want and all my days I pine for is to go back to my house and see my day of homecoming. And if some god batters me far out on the wide blue water, I will endure it, keeping a stubborn spirit within me, for I have already suffered much (93-94).Ó Thus, the mortal Odysseus was able to deny the temptations of the goddesses multiple times. In the Epic of Gilgamesh, another goddessÕ whims are put down. Ishtar, goddess of war and love becomes attracted to the mighty but mortal Gilgamesh. But rather than jumping right into the sack with

A Comparison between Nathaniel Hawthorne’s Scarlet Letter and Arthur Miller’s Crucible

Both the Scarlet Letter and the Crucible describe the hysteria generated by the highly restrictive and stifling Puritanical society. I. The Scarlet Letter portrays the situation of a woman and man who have committed adultery and shows the consequences that they have to endure. 1. Hester Prynne wears a symbolical scarlet letter which is the mark of social opprobrium; because she confronts society openly, her spirit is freed from prejudice and she is able to perceive the truth about the society she lives in. 2. Arthur Dimmesdale is blinded by the corruption of the society and cannot see himself and his deed in a true light. Because he is not able to admit his sin and live in honesty he is destroyed by his own inner tumult and by the power of the social condemnation. II. The Crucible also describes a society in which witchcraft is used as a screen to cover the thirst of a Puritanical society for cruelty and revenge. 1. Abigail Williams and the other girls fling accusations at innocent people in the society, delighted by the power they acquire in this way. This shows the way in which the outward show of justice and goodness are used to cover sin and evil. There is a profound reversal of values in the Puritanical world. 3. John Proctor refuses to lie and live in falsehood and is among the few characters who try to uproot prejudice and reveal the truth to the society. After he and other two innocent people are executed, the society seems to realize its blindness and the injustice that hid beyond the witches’ trials. Both Nathaniel Hawthorne’s Scarlet Letter and Arthur Miller’s Crucible are studies of religious superstition which caused a mass delirium in the seventeenth century Puritanical America. The witchcraft trials that took place at that time are an instance of the contagious effect that superstition had on society. Both the Scarlet Letter and the Crucible portray, at the same time, the society that made possible a number of crimes to be committed in the name of religion and good and several individuals that struggle with prejudice and mass superstition. The Puritanical society of the seventeenth century America attempted to stifle human passion and to numb imagination. The society’s severe condemnation of sin and of any sign of liberal thought placed a great constraint on the individual. In this suffocating environment, passion became a crime and superstition and prejudice rose rapidly. However, there was only a pretense at holiness and purity in the Puritanical society. In order to dissimulate their own passions, people began looking for sin in the other members of community. Inebriated by what they saw as their holy mission, which required them to purge the community of evil, the people of Salem began sacrificing other members of the society to satisfy their desire for punishment and revenge. Arthur Dimmesdale in the Scarlet Letter and John Proctor in the Crucible are similar in many ways. As it shall be shown however, Dimmesdale is tormented by his sin while Proctor, although he condemns himself for his mistake, sees the rampant spread of prejudice in Salem and understands that the sins of those that pretend holiness are much greater. Both of the stories therefore deal with mass delirium and show man to be prone on corrupting even religion and the principles of good and justice. Interestingly, both of the works are centered on the idea of adultery. Arthur Dimmesdale, a priest, commits adultery with Hester Prynne and has to live with this spot on his conscience while preaching holiness to others. John Proctor, an ordinary man living in Salem, has an adulterous relationship with Abigail Williams, the reverend Parris’s niece. In both cases, the adultery sets the scene for the social delirium that feeds on the suspicion of sin and evil inside the community. In the Scarlet Letter, Hester Prynne gives birth to a little girl while her husband is missing from the village. While Hester’s sin is easily discovered by the eager society, Dimmesdale’s adultery remains hidden. This is symbolized by the letter â€Å"A†, the scarlet letter, that Hester has to wear over her chest for the rest of her life. Accusations of witchcraft soon arise as well, and the adulterous woman is fiercely banished from society. She ends up living on the outskirts of the town, where she raises Pearl on her own. The little girl is almost taken from her by the people of the town, but she manages to keep her with the help of Dimmesdale. Hester has openly admitted her sin and while she stubbornly displays her shame in front of the other people but Dimmesdale has to keep his true nature hidden. This is not only the result of circumstances however. Hester’s mind and her spirit allow her to be free. She believes in life and the possibility of good and happiness beyond sin. For Dimmesdale however, his sin is also the end and it foreshadows his death. His spirit cannot feel free anymore: as a Christian he knows that it is impossible to erase his past and leave his sin behind. All through the book, Dimmesdale struggles with an unmovable reality. He knows he is guilty and also knows that his sin cannot be redeemed through earthly penance, yet he still searches for a ray of light to illuminate him and guide him towards salvation. The permanent pretense and act he has to put in front of the community is what eventually crushes his spirit. He knows that he cannot transform himself so as to escape knowledge of his sin. Ultimately, Dimmesdale cannot think of acquiring a new identity and leaving the town, as Hester urges him to. Symbolically, he refuses to give up his name and thus escape the opprobrium of the community: â€Å"Give up this name of Arthur Dimmesdale, and make thyself another, and a high one, such as thou canst wear without fear or shame† (Hawthorne, 1980, p. 242). Because of the weight of social conventions and demands, a name is attached to the individual but does not necessarily speak of a person’s character. Dimmesdale’s dilemma is that, as a believer and an essentially good man, he is torn apart by the knowledge that he is a sinner and he can no longer perform truly good deeds. This is also why he is incapable of leaving the place as Hester had urged him: Dimmesdale is tied to the community because of his sin. He cannot escape thus the space that torments him and keeps him imprisoned. By contrast, Hester, who wears the scarlet letter as the symbol of sin and social rejection, has a passport to freedom. Because she is marginalized by the Puritanical society of Boston, she is able to enjoy a spiritual freedom that the other women cannot even imagine: â€Å"The scarlet letter was her passport into regions where other women dared not tread† (Hawthorne, 1980, p. 300). On the other hand, Dimmesdale cannot free his mind and think beyond the conventional social standards and laws: â€Å"The minister †¦ had never gone through an experience calculated to lead him beyond the scope of generally received laws†¦Ã¢â‚¬  (Hawthorne, 1980, p. 300). The Scarlet Letter studies therefore the inner corruption and falsehood of the Puritanical society in America. The two main characters, who are united through their sin, reveal two different attitudes when confronted with the force of mass superstition and prejudice. Hester, who wears the burning scarlet letter on her chest, is able to free her mind. She is sees that the society is corrupt and that her sin is not a tremendous one. On the other, Arthur Dimmesdale has to wear the mark of his sin secretly. The symbolic scarlet letter is burning in his soul and the shame eventually destroys him. The letter that the two lovers wear is a symbol of the action of social force in an agitated time. It represents the thirst of the Puritanical society for exposing and cruelly condemning sin. Arthur Miller’s Crucible portrays the same Puritanical society in America in an even more revealing way. The title is very significant: on the one hand, the crucible is an allusion to the witches’ melting pot, the cauldron they use in order to prepare the spells; on the other hand, the crucible is a symbol for the Puritanical hysteria that was itself a melting pot where innocent people were sacrificed to satisfy social prejudice, prudishness and revenge. Miller depicts the development of the witchcraft hysteria with great artistry. Significantly, the social delirium is caused by Abigail Williams, a selfish and passionate young woman who cannot accept the fact that John Proctor rejects her. As the protagonists in the Scarlet Letter, Abigail Williams and Proctor have committed adultery. However, Proctor is very different from Dimmesdale. While he regrets his deed, he maintains his sobriety and reason in the midst of the Puritanical hysteria. He is a believer and he also loves his wife, and therefore discontinues the relationship with Abigail. When the young girl is caught in the forest with a gathering of women and people begin to suspect witchcraft, she saves herself and blames Tituba for having â€Å"compacted with the devil†. The hysteria begins as the girls who were caught dancing in the woods declare having been lured by witches. This generates a complicated web of accusations and subsequent trials. People are condemned with no visible proof when the girls state they have been lured by dark spirits. Under the outward show of purity, the society judges and condemns the innocent with no other proof than the persuasive acting skills of young girls who faint, scream and fall ill in the presence of those who are supposedly evil. In the end, all the people who had managed to maintain their rational thinking and their sanity during these proceedings are condemned. John Proctor and his wife are also waiting to be hanged, along with other honest people who perceive the intricate web of lying and deception and refuse to bend to it. Their spirits reject the demands of the society to betray the other people in order to satisfy their thirst for revenge: â€Å"You must understand sir, that a person is either with this court or must be counted against it, there be no road between. This is a sharp time now, a precise time – we live no longer in the dusky afternoon when evil mixed itself with good and befuddled the world. Now, by God’s grace, the shining sun is up†¦Ã¢â‚¬ (Miller, 2003, p. 93 ) As the judge describes it, the Puritanical society attempted to destroy evil completely and maintain only the good. Interestingly, when John Proctor is faced with a similar dilemma to that of Dimmesdale, he reacts in the same way. The court tempts John Proctor to sign a declaration of guilt and to continue his life with his pregnant wife. The temptation is even greater as the two have just forgiven each other and rediscovered their love and their desire to live. Ultimately however, Proctor cannot sign his name to a lie: â€Å"Because it is my name! Because I cannot have another in my life! Because I lie and sign myself to lies! Because I am not worth the dust on the feet of them that hang! † (Miller, 2003, p. 167). Like Dimmesdale, he cannot adopt a false position in society in order to save himself and therefore chooses death over falsehood. Both the Scarlet Letter and the Crucible reveal the inner workings of the stifling Puritanical world. Attempting to destroy evil completely, the Puritanical world actually destroys justice and honesty.

Generalized Autoregressive Conditional Heteroskedasticity Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1590 Downloads: 6 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Many companies, both producers and/or users of commodities can be negatively impacted by sudden price changes in their production inputs or outputs. Producers of commodities such as in the mining, oil or farming industries would sure benefit from increasing prices of their respective outputs, but face a risk of very serious losses and even bankruptcy should the opposite happens. On the other hand, within those industries and most others, some commodities are also used as production inputs and therefore would negatively impact companies may prices rise. Don’t waste time! Our writers will create an original "Generalized Autoregressive Conditional Heteroskedasticity Finance Essay" essay for you Create order In all cases, the overall price volatility in commodities is often negatively perceived and, to the extent of a companys level of exposure to commodities in its production process, can be seen as a very serious business risk. (). In order to reduce some of the risk and often with the objective of protecting their profit margins, companies will resort to hedging. The risk management strategy of hedging can be described as a way limit or offset the probability of a loss from the volatility in the price of a commodity, securities and/or currency (Hull, 2012). For the purpose of this thesis, a hedge will be defined as taking a short position in the futures market in order to cover one contract of a long position held in the spot market by the hedger. Other derivatives such as forward contracts or options are also used for hedging purposes, but futures are seen as the most dominant in commodity markets mainly because of their liquidity and transparency advantages (Geman, 2005). The exact amount of the futures contract to be purchased against that one spot position is called the hedge ratio (HR) and the HR chosen to minimize the variance (volatility) of the hedgers portfolio will be referred to as the minimum varia nce hedge ratio (MVHR). Countless research papers have been written about MVHR, its relevance and the different ways of estimating it (see, for example Johnson 1960; Ederington, 1979; Myers 199). With constant advancements in the field of Econometrics, researchers began investigating more and more complex methods to derive the MVRH, for example by incorporating time variation into the estimation of the variance-covariance matrix (see, for example .. ****************). However, no clear consensus has been reached yet on the best ways to construct a MVHR, and many of the empirical studies considering assumptions and estimated variables, concluded to somewhat contradictory results. Furthermore, many of the newer, more complicated models require cumbersome econometric models and, therefore, might not be most suitable for actual use by companies in the commercial world. This thesis aims at capturing the recent advancement made on the MVHR while considering and testing models that could be considered as (to be continued (About 1 more page)talk a bit about the commodities +++ the rest of this thesis willÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ÃƒÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ ) Framework The Spot and Futures Markets The spot market can be defined as a market where a commodity is bought or sold for immediate (or with a minimum lag) physical delivery. Not that long ago, those markets where actual physical places where buyers and sellers would meet to exchange, for example, their crops. Its important to note that all commodities are traded on spot markets. In the 18th century, some U.S. farmers started selling their own crops at the time of planting to help finance them and across the ocean, in London, metal began trading in the same fashion, leading the way to the first derivative market: the forward market (Geman, 2005). We can consider this market as an informal one where over-the-counter contracts for future delivery of commodities are exchanged by participants. The standardization of such informal markets by ways of controlling quantities, qualities, dates of deliveries and locations, led to the establishment of the Futures exchanges (Bailey, 2005; Hull, 2012). Some of the better known exchanges are, for example, the Chicago Board of Trade (CBOT) founded in 1848 (agricultural and financial futures), the Chicago Mercantile Exchange (CME) founded in 1874 (livestock and financial), the New York Mercantile Exchange (NYMEX) (precious metal and energy) and the London Metal Exchange (LME) (base metal). On these exchanges, standardized contracts are bought and sold by a variety of participants with different objectives. First we have the hedgers, whose opposite positions to their own spot exposure have for goal to reduce risk and protect their profit margins. Second we have the speculators who, taking advantage of the quasi costless characteristic of futures contracts, will use them to speculate on commodity prices. Third comes the arbitrageurs whose presence is essential to make sure the relationship between spot and future prices as well as prices on different exchanges remains true. In principal, the value of a futures contract should approximat e the spot market price plus the cost of carrying the commodity, such as interest, storage and insurance costs. If such difference came to exist, arbitrageur would take position in the markets making a risk free profit and bringing prices back in line in the process. And finally, futures, often due to their unique correlation to financial markets, are now increasingly used by portfolio managers in order to hedge their general portfolio risk (Bailey, 2005; Geman, 2005). Hedging with Futures Contracts As previously discussed, hedging is primarily done with intent of reducing risk. Four basic categories of futures exists where the underlying can be a physical commodity (such as it is the case in this thesis), a foreign currency, an asset earning interest or and index (Hull, 2012). Also, different hedging strategies exists as some hedgers want to protect only part of their exposure sometimes due to a certain risk profile or some industry standards, and others, highly risk averse participant, will choose to eliminate the price risk as much as possible, often preferring to protect their profit margins deriving from their main business activities. Throughout this thesis such an assumption will be made as the HR will be built with the intent of hedging as much as possible the exposure of a risk-averse hedger. This can be referred to as a pure risk-avoidance hedging strategy (Bailey, 2005). In practice, hedgers will use futures contracts in two ways. Companies knowing they will have to buy a certain asset in the future can choose to lock in the price of that asset and buy a long position in a related futures contract (referred to as a long hedge). Alternatively, some companies such as commodity producers will know the approximate quantity of an asset they will have to sell in the future and will want to lock in today the price of that asset (this is referred to as a short hedge). The later way will be used in this thesis to construct the hedged portfolio used in order to assess the hedge effectiveness. As only the variance reduction is considered, using either ways would give the same results. Basis Risk Although hedging aims at reducing risk, doing it right is often not as simple as just buying or selling the opposite quantity of the exposure. This is mainly due to the introduction of basis risk in the equation. Understanding it is essential to understand the reasons being the HR. Basis is defined as: Best example of Basis risk is the German Company and its oil positionÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ A Look at the Selected Commodities Optimal Hedge Ratio OHR A Review Static versus dynamic hedging OHR for Commodities OHR The Methods To perform an empirical study of the minimum variance hedging strategy, the HR needs to be estimated with the help of some statistical models. (see (19) page 8) No Hegde NaÃÆ'ƒÂ ¯ve Hedge Constant OLS Rolling window OLS EWMA OLS Simplified GARCH (1,1) Data Analysis As the aim of this thesis is to provide evidence of the best hedge ratio methodology using recent data, only the quantitative approach will be used, providing empirical results onÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦. Statisitcal MethodologyÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€šÃ‚ ¦ Introduce the reason for the 3 periods (financial crisis.. volatility effect, etc) Statistical Tests Test for Normality Test for Stationary Time Series Test for Autocorrelation Test for Heteroskedasticity Statistical Tests Results Delimitations and Assumptions The main assumption in this thesis, as it also is in most literature relating to OHRs, is that the hedger has perfect knowledge of the amount of commodities needed or produced at a future date. In reality, this is obviously rarely the case, therefore producers or users of commodities will use estimates to construct their hedging strategy (). Delimitations: This thesis do not differentiate between long and short hedgers, exclude foreign exchange risk and possible correlation, Only cover Futures (not Options and FWDs), Focus only on Commodities, No forcast tool intended Only OLS (normal + rolling window) is used, leaving aside GARCH etc Assumptions: Risk aversion, In this thesis, as it the case for most of the literature written on OHRs, only the variance is used as the measure of risk (see for example: balbalbal), therefore making the generally accepted assumption which gives equal weight to both positive and negative returns. Since Markowitz (1952), the variance became the most widely used measure of risk but this traditional approach has been criticized by some (Cotter 2005, etc) who suggested that OHR estimations could be improved if tail specific metrics such VaR, Semi-Variance and LPM were also evaluated. (is this needed because of risk aversion ) Other assumptions: The hedge period is set and sure at the time od hedging No FX is considered Empirical Findings Optimal Hedge Ratio The Results Discussion () Conclusion There is no question to the importance for companies of having a sound and tested risk management strategy. As one of the most traded derivative instruments for commodities, futures certainly play an important role in the hedging process. Appendix