Abstract
A compensation fund is an effective mechanism for ensuring the protection of individual investors’ investments on the stock market, which confirms the experience of different countries both with the developed stock market and with the emerging markets (USA, UK, France, Czech Republic, Bulgaria, Ireland, Malta).The formation of a steady interest of individual investors in stock market instruments is stimulated by the implementation of a mechanism for guaranteeing such investments. The stock market of Ukraine faces the problem of attracting additional financing, while individual investors have fairly large amounts of monetary resources that are not involved in the transactions with financial instruments due to the high level of distrust caused by the crisis phenomena on both the global and the national financial markets. The creation of the Ukrainian compensation fund for investment protection involves the development and implementation of a nationwide system for protecting the property interests of investors on the stock market, which requires compensatory payments to the clients of all professional market participants as a result of certain risks.The main condition for effective functioning of the compensation fund of the stock market is determined by its size, which must meet the following conditions of optimality: to ensure the minimum level of the fund’s risks, to take into account the amounts of contributions for the current period, the amount of maintenance costs and to fulfil the requirements for the financial stability of the fund. A modified Markowitz portfolio model was used to build the model.The building of the target function and constraints was carried out by using the Statistica software toolkit. The target function and constraints were presented as polynomials of the third degree and calculated with the help of the multiple nonlinear regression. As a result of calculations, an optimization model was developed for determining the size of the compensation fund taking into account these conditions.The model’s testing was carried out by using the examples of the Deposit Guarantee Fund (DGF) and compensation funds of the United States, Great Britain, France, Czech Republic, Bulgaria, Ireland and Malta. As a result of calculations we determined the size of the compensation fund, which guarantees a minimum level of the fund’s risk taking into account the amount of contributions for the current period, the amount of maintenance costs and requirements to the financial stability of the fund.
Highlights
INTRODUCTIONAccording to Chernadchuk, Sukhonos, and Shkolnyk (2017), modern world financial architecture mainly involves the formation of financial systems according to two models, namely bank-based and marketbased, which is a prerequisite for the historically driven development of financial regulation
According to Chernadchuk, Sukhonos, and Shkolnyk (2017), modern world financial architecture mainly involves the formation of financial systems according to two models, namely bank-based and marketbased, which is a prerequisite for the historically driven development of financial regulation.Ukraine has a number of criteria according to which the country’s financial system can be defined as a bank-centered one, but taking into account the National Bank of Ukraine’s policy on the banking system purgation, a significant part of depositors lost their savings, which led to a decrease in trust and outflow of depositors from banks
The problems of deposit insurance and its impact on the financial stability of the country and the region as a whole are becoming more widespread in the researches from different countries and different regions
Summary
According to Chernadchuk, Sukhonos, and Shkolnyk (2017), modern world financial architecture mainly involves the formation of financial systems according to two models, namely bank-based and marketbased, which is a prerequisite for the historically driven development of financial regulation. In Ukraine, unlike the Slovak Republic, proposal for investment and financial products is extremely limited, which leads to an increase in risks of depositors who are able to save their funds only in deposits In such a situation, stock market could be a possible alternative to the funds distribution for both the population and enterprises, provided that there would be a certain compensatory mechanism that would protect depositors’ interests through the protection of professional stock market participants’ interests, to both in the banking system of Ukraine and in most banking systems of other countries. The creation of the Ukrainian compensation fund for investment protection involves the development and implementation of a nationwide system for protecting the property interests of investors on the stock market, which requires compensatory payments to the clients of all professional market participants as a result of certain risks [1].
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