By SuperUser on
6/18/2009 11:07 AM
Should a perfectly healthy person buy healthcare coverage if they don't even expect a financial return from it net of premiums? YES it makes perfect sense.
The expectation for this healthy person should not be to get a financial return from the insurance net of the premium paid. Rather, this person is taking this as a precaution from an unexpected financial burden that would be difficult to recover from. In this particular illustration it makes perfect sense for the healthy person to be content with his current financial position and also be willing to pay a ‘premium’ for financial stability beyond what he/she expects to receive from his health coverage over time. Similarly there is a significant misconception in what hedging is meant to do, even though the ideas are similar.
The small businesses that employ 50% of Americans, and produce 50% of US GDP should have access to form of fuel coverage as a financial precaution, just as healthy individuals should buy health-insurance as a precaution.
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By SuperUser on
6/10/2009 3:55 PM
Oil prices hit a 2009 year high today at $71.33 a barrel on the NYMEX. There are still great uncertainties in the world that could drive prices higher.
Although the national average for gas is still about $2.70 per gallon, $3 per gallon gas in this down economy will feel to many like $4 gas of last summer when times were much better.
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By SuperUser on
5/15/2009 6:33 PM
One area in consumer finance where more detailed risk management is being considered is housing. The recent housing crises has brought more attention to Yale Professor Robert J. Schiller. He co-created a housing index, the Case-Schiller Index, that tracks housing prices across several regions in the US.
Although there have not been services offered to consumers yet that are based off of this index, if the Case-Schiller futures become liquid, expect to see products that help consumers offset the effects of lower housing prices.
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By SuperUser on
5/14/2009 2:06 PM
This study takes a look at the airline industry as a whole, and whether hedging increases these firms values. They conclude the hedging does increase firm value. This is partially because investment opportunities in the airline industry correspond with high fuel costs.
Does hedging affect firm value? Evidence from the US airline industry.
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By SuperUser on
5/14/2009 1:38 PM
What makes gas prices move? Are gas prices higher in the summer? We get general questions like these frequently, and want to provide you with the answers.
Several factors include crude oil prices and refining costs affect your price at the pump. According to the EIA, gas prices rise with the higher summer travel. You can see more of their answers here.
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By SuperUser on
5/14/2009 1:25 PM
While Petrofix provides a service that helps customers when gas prices go up, one way to save money when gas prices rise is not to use as much gas. Fueleconomy.gov provides a few tips to help you use less gas.
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By SuperUser on
5/14/2009 10:41 AM
This paper takes a closer look at Southwest Airlines fuel management programs. One issue that they faced that many firms have is that they have a difficult time passing on higher fuel costs to their customers. The authors look at some of the financial instruments that Southwest Airlines uses in their fuel management programs. "Does Fuel Hedging Make Economic Sense? The Case of the US Airline Industry - David A. Carter, Daniel A. Rogers, and Betty J. Simkins
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By SuperUser on
5/14/2009 10:30 AM
Original WSJ story about Southwest Airlines capping their fuel costs. Southwest Airlines uses something similar to insurance to cap their fuel costs, and still get market rates if prices fall. They can gain market share when fuel prices are high and their competitors are financially distressed. If fuel prices fall Southwest Airlines is not in a significantly worse position than their competitors as they can net the benefit of lower market fuel prices with the relatively small premium paid for their insurance-like Petrofix plans.
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