Financial Derivatives Research Articles

Reflective Study of a Biographical Journey and Critical Analysis of Contributions to Problematic Valuation of Financial Derivatives (2Nd PhD Manuscript)

Reflective Study of a Biographical Journey and Critical Analysis of Contributions to Problematic Valuation of Financial Derivatives (2Nd PhD Manuscript)

Pricing research on CSI 300 stock index options based on B-S model and GARCH model

The development of the financial market has always been accompanied by a variety of risks, and with the continuous improvement of the financial market and the increase of investor demand, the society's demand for risk avoidance tools is also increasing, and CSI 300 stock index options as a new type of financial derivatives can largely make up for the vacancy of China's options market, in risk control and price discovery can play a huge role. Therefore, it is very important to study its functions and predict the price. This paper uses the option pricing model B-S model as the pricing basis and combines the GARCH model to analyze the volatility of the CSI 300 Index yield, so as to complete the construction of the pricing model and predict the future trend of option prices and analyze the effectiveness of model pricing. Finally, according to the empirical results, some suggestions are provided on the accurate pricing of options, so as to promote the healthy development of the options market.

Numerical methods for backward stochastic differential equations: A survey

Backward Stochastic Differential Equations (BSDEs) have been widely employed in various areas of social and natural sciences, such as the pricing and hedging of financial derivatives, stochastic optimal control problems, optimal stopping problems and gene expression. Most BSDEs cannot be solved analytically and thus numerical methods must be applied to approximate their solutions. There have been a variety of numerical methods proposed over the past few decades as well as many more currently being developed. For the most part, they exist in a complex and scattered manner with each requiring a variety of assumptions and conditions. The aim of the present work is thus to systematically survey various numerical methods for BSDEs, and in particular, compare and categorize them, for further developments and improvements. To achieve this goal, we focus primarily on the core features of each method based on an extensive collection of 333 references: the main assumptions, the numerical algorithm itself, key convergence properties and advantages and disadvantages, to provide an up-to-date coverage of numerical methods for BSDEs, with insightful summaries of each and a useful comparison and categorization.

Introduction to Financial Derivatives

Introduction to Financial Derivatives

The Impact of Financial Derivatives on Bank Lending: Evidence From European Union Commercial Banks From 2013-2017

The Impact of Financial Derivatives on Bank Lending: Evidence From European Union Commercial Banks From 2013-2017

Fixed Income and Debt Instruments: Annuities, Bonds, Cashflows and Mortgages

This is the first in a sequence of articles on finance using the Wolfram language. While this essay covers fixed-income instruments, future essays will cover financial derivatives, time series analysis, machine learning in finance, financial visualization and data services.

Learning Pricing Maps for Financial Derivatives with Deep Operator Networks

Learning Pricing Maps for Financial Derivatives with Deep Operator Networks

The Study on the Impact of Financial Derivatives Business on the Profitability of Listed Commercial Banks in China

The Study on the Impact of Financial Derivatives Business on the Profitability of Listed Commercial Banks in China

Hedging and financial sustainability of commercial banks in kenya

Hedging is a precursor for realization of financial sustainability. This is because the nucleus of commercial banks is intertwined with risks that should be off-set. This study sought to determine the effect of hedging on financial sustainability of commercial banks in Kenya.The study adopted a positivism research philosophy and an expost facto research design. Target population was 43 commercial banks. The study adopted panel data and the pooled, fixed effects or random effects models were adopted in the study. The study sought to find-out which model was the most appropriate to explain the effect of hedging on financial sustainability. Findings revealed that the fixed-effect model was the most appropriate model that was adopted to explain the effect of hedging onfinancial sustainability. The findings were as follows; options ( β = .0118, p < 0.05), forwards (β = .6116, p < 0.05), swaps (β = .0114, p < 0.05) and futures (β = .5555, p < 0.05). The study concluded that hedging has a significant effect on financial sustainability of commercial banks. Financial derivatives such as options, forwards, swaps and futures helps commercial banks to hedge against risk. Hedging is the most optimal approach for off-setting risk so as to achieve financial sustainability. The fixed-effect model is the most appropriate model to explain the effect of hedging on financial sustainability. The study recommended that all financial institutions should practice hedging so as to off-set risk and be able to realize financial sustainability. Options, forwards, swaps and futures are the financial derivatives that should be adopted by commercial banks to hedge against risk.

DEVELOPMENT OF EXCHANGE TRADING: CURRENT STATE AND PROSPECTS

The article analyzes the main trends in the development of global and domestic stock exchange trade. The development trends of the international stock market are considered and characterized. The current state and structure of global exchange trading in commodity and financial derivatives in 2013-2022 is analyzed. An analysis of the structure of the world exchange trade was carried out, in particular its following groups: stock indices, securities, interest rates, currency, energy resources, agricultural products, precious metals. The structure of the world stock market was studied by geographical regions. . The volume of trade activity in various regions was studied in 2013, 2021-2022. It was found that the largest percentage share of world trade activity during the last decade was occupied by the Asia-Pacific region. The main factors affecting the current state of development of stock trading in the world are systematized. The dynamics of exchanges in Ukraine during 1995-2022 were considered. The number and structure of exchanges by specialization were analyzed. The main problems of the development of the domestic exchange trade are summarized. The main problems of the development of domestic exchange trading are the imperfection of regulatory regulation and the inconsistency of the legislative framework, the low level of liquidity of exchange operations on commodity exchanges, the presence of non-exchange goods at auctions, the absence of trading in futures and options, the absence of an exchange culture. The directions of the development of exchange trade in the domestic economy have been determined. The key prospects for the development of domestic exchange trading are the establishment of effective development of exchange trading in agricultural products, the development of the market for renewable energy sources, the participation of Ukrainian producers in bidding on world exchanges, the creation of a favorable legislative space, the implementation of state programs to stimulate participation in exchange trading, preventing the increase in the number of exchanges on the commodity market. market, educational activities.

The Influence of Financial Derivatives on the Financial Risk of the Company

The Influence of Financial Derivatives on the Financial Risk of the Company

The Impact of Financial Derivatives on the Enterprise Value of Chinese Listed Companies: Moderating Effects of Managerial Characteristics

Corporate managers are the central figures of corporate activity who can control the strategic direction of companies. The company’s use of financial derivatives can avoid risks and has an important impact on the value of the company. This study examines A-share listed firms in Shanghai over the period 2011–2020, uses an OLS panel and a moderating effects model, and investigates the impact of financial derivatives on firm value from the perspective of managers’ characteristics. We find that financial derivatives can significantly increase the enterprise value of Chinese listed companies, while exchange rate derivatives have a stronger impact on enterprise value. We also find that the higher the proportion of managers who hold shares and have a financial background, the better the effect of firms using financial derivatives. These research results are of great significance to the application of financial derivatives and provide companies with risk management decisions after COVID-19.

Legal Understanding of Management Decisions in Hydrocarbons Cross-Border Marine Shipping: Digital Hedging Technologies

The paper examines one of the areas of law application that is methodologically based on an individualized approach to the norms of law with their subsequent broad interpretation in relation to specific legal situations. Similarly, the vector of rule-making is determined in relation to the transportation of crude oil and its refined products entirely by sea. The work not only reflects the basic doctrines of legal understanding, but also presents an assessment of their law enforcement potential, the ability to influence the formation of sectoral, intersectoral institutions of law. The author examines financial intermediation and hedging that performs the same dealer functions, but with much lower costs than classical banking institutions. Implementation of the institution of a derivative credit instrument in law enforcement practice is of particular interest to the author. The paper considers such a phenomenon as confrontation between natural and positive law in the context of entrepreneurial activity. Transportation of petroleum products’ tenders is considered as a compensated use of property. The positivist legal understanding is seen by the author as no less important. The paper explains to what extent it can serve as a basis for making management decisions concerning market risks, risks of changes in portfolios of financial instruments, risks of probable losses.Transactions with a digital asset quite reasonably belong to the field of hedging, if there is a causal relationship between the types of the underlying asset and the hedging strategy, using digital examples. Connecting factors to the law of the payment currency, terms and amounts of payments are considered both in line with hedging strategies and utilitarially in the context of making a record of the rights’ transfer. The author draws a conclusion concerning the purpose of short and long positions of net assets hedged against margin trading limits if the security of an oil transportation transaction is found to be insufficient. Merchants receive borrowed capital secured by their own assets.Management solutions ensure the sequence of identification of all relevant risks, facilitate attracting exclusively licensed counterparties for the formation of loan coverage, regularly replenishing the reserves of liquid funds when conducting transactions with virtual currencies and other impersonal (in personal terms) assets. With management decisions being considered as one of the measures of value, hedging is similar to a loan agreement, since they have a common goal — to gain mandatory tranche for the derivative financial instruments that invariably maintain a high level of liquidity and volatility.

Product Development and Application of Chinese Traditional Art Derivatives in the Context of New Media

The relevance of the study lies in the fact that relying on the development of the modern media environment, the traditional culture of China can re-enter the vision and life of people against the background of a new era, and the excellent intangible cultural legacy will be continuously transmitted from generation to generation. Therefore, it is important to delve into the traditional techniques and artistic characteristics of products to properly use the unique elements and symbols of art derivatives, boldly combining them with the cultural background and features of the current era that are being introduced into people's daily lives. The purpose of the study is to analyse the role and importance of combinations of art derivatives in cultural and creative products and to consider their subsequent development in the environment of new media. The following techniques were used to achieve the purpose of the study: deduction, descriptive, and comparative methods. The results determined that by involving Chinese traditional art derivatives, it is possible to develop more diverse, innovative products in the context of modern mass media that consider the aesthetics and functionality of the product and allow satisfying aesthetic emotions and vital needs of modern people. Derivative arts follow from the concept of financial derivatives and refer to many extended services and products designed and manufactured in accordance with culture. Taking cultural elements as a creative basis, a profit-making model that uses its potential resources develops peripheral creations and then brings them to market for sale. The high added characteristics of cultural derivatives play a role in improving the cultural taste and cultural image of the country, acting as a true embodiment of the external appearance and inner spirit, historical and realistic culture. The practical importance lies in the use of the results and conclusions of the study in the development of products that include the traditions and legacy of the Chinese people.

Use of derivative financial instruments for hedging currency risks when exporting veterinary, biological-chemical, building materials

Use of derivative financial instruments for hedging currency risks when exporting veterinary, biological-chemical, building materials

Problematic aspects of derivative financial instruments’ legal regulation

The development of fully functioning capital markets is an extremely important task at the current stage of development of the Ukrainian economy. With the adoption of the Law of Ukraine «On Capital Markets and Organized Commodity Markets», the issue of comprehensive regulation of the functioning of modern financial instruments would seem to have been resolved. However, the analysis of the current legislation regulating derivative financial instruments shows a number of problematic aspects of their legal regulation. It hasbeenestablished that legal regulation of the market of derivative financial instruments, despite the amendments in the legislation, still contains significant gaps, which generally have a negative effect on the regulation of these financial instruments, create obstacles for the formation of trust by investors, which makes them unattractive for investment. Their fragmented legislative regulation is based on contradictory approaches both to the definition of the categorical apparatus and to the types of derivative financial instruments. The outlined problem negatively affects the active development of the derivative instruments market and creates conditions for abuse by emitters of derivative financial instruments.
 The authorshaveindicated that there is a sufficient number of works at the theoretical and legal level, the subjectmatterof which was the study of derivative financial instruments, but the issue of legal regulation of derivative instruments is gaining significant relevance in regard to: changes in the capital market situation; update of existing and introduction of new financial instruments; development of the market of derivative financial instruments that allow us to hedge risks associated with changes in exchange rates or interest rates by means of concluding various types of fixed-termagreements with derivative securities and derivatives. The spread of the use of derivative financial instruments in Ukraine is the key prerequisite for the effective implementation of the process of integration of Ukrainian financial market into the world economy and international financial markets.

Special greeks of a variance-gamma driven vasicek model

Abrupt happenings in financial markets have resulted to the need to adopt Lévy processes such as a variance gamma process in modelling financial derivatives since it has the ability to capture jumps that occur in such scenario. Sensitivity analysis in such market scenarios having characteristics of Lévy processes is made easier by adopting the integration by part techniques of Malliavin calculus. Thus, we apply the tools of the Malliavin calculus to obtain the special types of the greek vega required in sensitivity analysis in an interest rate market driven by the variance gamma process.

Procedure for Separate Accounting of Interest and Exchange Rate Components of the Fair Value of a Set of Financial Instruments: IFRS

The research considers the development of the principles of separate accounting and analysis of the interest and exchange rate components of the fair value of a set of financial instruments under the International Financial Reporting Standards (IFRS). The aim of the work is to consider a practical situation with a deferred payment for financial instruments received under an agreement, while the participants of the scheme hedged economic transactions using derivative financial instruments. Here, from the standpoint of accounting and analytics, the mechanism of separation of interest and exchange rate elements, which directly affect the fair value of the forward contract, is of significant importance. It also related this to the requirements of IFRS standards. The research has developed a procedure for separate accounting of these financial components. In particular, it has worked out an algorithm for accounting and mathematical evaluation of exchange rate differences when hedging cash flows of debt instruments with currency forwards. The methodological base of the research includes dynamic situational analysis, system analysis, models of financial mathematics, analytical procedures of the modern theory of financial accounting. The theoretical and practical significance of the research lies in the development of scientific and applied tools based on accounting and process models and evaluation algorithms. The accounting can use the developed procedures, analytical and audit services of banks and corporations in preparing and analyzing financial statements under IFRS.

İslam Hukuku Açısından Opsiyon Sözleşmeleri

Option contracts are an essential financial derivatives tool as they have opened the way for investors to hedge against risks in an environment characterized by risk and uncertainty. Options also enable investors to speculate based on financial leverage. However, some view options contracts to have turned from being contracts that were initially a risk to contracts for hedging against risks. In reality, options are still associated with the same risk; they are nothing but gambling tools for trading in risks, as they are sold and bought by transferring them to those who accept the risk transfer. In light of many Arab countries’ tendency toward implementing options contracts in their financial markets, especially in Gulf countries, and their attempts to provide a legal character to their transactions, this study aims to determine the ruling regarding these contracts from the perspective of Islamic economics. The study relies on inductive and deductive approaches and deals with the concept of options, their origin and development, types, characteristics, and Islam’s perspective toward them. The study has concluded that option contracts are not permissible and that Islamic economic alternatives have been developed to hedge against price-change related risks by selling the deposit and the binding promise while not putting them up for trade.

Research On The Pricing Of Rainbow Option Based On The Geometric Brownian Motion Model: Case Of Pfizer & Walmart

Trading financial derivatives become more and more popular in the modern life. The investor wants to purchase the financial derivative to receive more benefits. However, Option is the important component in the financial derivatives. Compared with Futures, Option can let investor feel more convenance since it acts as the contract. This research analyzes the price of the Rainbow Option in the Stock market. The Stock market includes two companies which are Pfizer and Walmart. The results shows that the Rainbow Option should be priced between max of call options and the sum of the options. It can testify the theory of rainbow Options‘ price successfully. Based on this research, the investor can understand the background and process of the rainbow Options‘ working. Combine with the feature of the rainbow options, the investor can make the proper investment decision in the different situations.