Financial Instruments Research Articles

Analyzing IFRS 7 requirements for disclosure of information about financial risks in financial statements and analysis of disclosure practices. Part 2

Subject. The article considers the practice of disclosing information about financial risks in the annual consolidated financial statements of the largest companies in the world and Russia, in terms of capitalization. Objectives. The aim is to disclose information on types of financial instruments that have a significant impact on the financial activities of the organization; to reflect the nature and extent of risks faced by organization when operating in the financial market, and the impact of financial instruments on these risks. Methods. The methodological basis of the study rests on the institutional theory of contracts, the Conceptual Framework for Financial Reporting that for the first time recognized the need to reflect contractual rights and obligations in reporting as an object of accounting and analysis, which became the theoretical basis for generating information about reporting of derivatives in financial statements when analyzing risks and minimizing them when using derivatives. Results. We assumed that to sufficiently and adequately meet the requirements of IFRS 7 in terms of disclosure of information about risks inherent in a business, heads of any organization should carry out a number of events outlined in the article. Conclusions. The analysis of financial risks, their nature, and the degree of influence on the financial position of the reporting organization can significantly increase the transparency of financial statements for external stakeholders, strengthen their trust in the management of the organization and, as a result, contributes to making more balanced and responsible investment decisions.

Green Bond Policy and Corporate ESG Performance

In recent years, green bonds, as a new type of financial instrument, have gradually become an important tool for promoting corporate green transformation and improving environmental, social, and governance (ESG) performance. Based on data from A-share listed companies from 2010 to 2020, this paper empirically analyzes the impact of the 2015 green bond policy guidelines on corporate ESG ratings and its mechanisms using the difference-in-differences (DID) method. The study finds that the implementation of the green bond policy significantly improves corporate ESG ratings and indirectly promotes improvements in environmental protection, social responsibility, and governance structure by reducing financing costs. In addition, this paper reveals the heterogeneous effects of the green bond policy across different regions, types of enterprises, and industries. It finds that the policy has a more significant effect in economically developed regions and non-state-owned enterprises, while its impact is relatively weaker in the central and northeastern regions. Mechanism analysis shows that the reduction in financing costs plays an important mediating role in enhancing corporate ESG performance through the green bond policy. This paper provides empirical support for policymakers to optimize green finance policies and offers new perspectives for companies to use green bonds to improve their sustainable development capabilities.

Russia, China and the USA: perception of effects in the corporate bond market

Purpose: is to identify the dynamics of mutual influences and risks in the corporate bond markets of Russia, China, and the United States under conditions of external environmental instability.Methods: the methods of comparative and econometric analysis of daily data from 2016 to 2024 were used, including the average yields of short- and medium-term corporate and the government bonds of the Russian Federation, China and the United States, selling prices of gold, oil, exchange rates, refinancing rates. GARCH models for forecasting the volatility of the index of corporate bonds of the Russian Federation and China under the influence of internal and external factors, multidimensional quantile regression for industries of the Russian Federation are calculated.Results: six stages of changes in the dynamics of the corporate bond debt market under the influence of the market itself and external factors were highlighted. Periodization made it possible to study the impact of short-term and long-term effects of shocks on the debt market. For the Russian Federation, the volatility weight of the previous period is more than twice the weight of the long-term average volatility. For China, this ratio is even higher. The debt market of the Russian Federation is influenced by the debt markets of China and the United States, but the opposite has not been proven. Three groups of branches of the Russian economy have been formed according to the generality of reaction to external influences.Conclusions and Relevance: during crisis periods, the weight of long-term average market volatility and local factors increases, while that of external factors decreases. Understanding the interactions of internal and external factors allows investors to anticipate market fluctuations, adapt and protect capital. For the Government, this provides an opportunity to develop scientifically sound risk forecasts and use new financial instruments such as yuan bonds.

Antecedents and Consequences of Islamic Pawnshops: Literature Study

Sharia pawnshops have become one of the Islamic financial instruments that contribute significantly to providing financing solutions in accordance with sharia principles. The antecedents of the success of sharia pawnshops include the level of Islamic financial literacy, public trust in sharia services, and sharia-based product innovations that are relevant to customer needs. This study aims to analyze the antecedents and consequences of sharia pawnshops through literature studies. This study was conducted through literature analysis from various academic and practical sources to identify the main factors that influence the success of sharia pawnshops and the positive impacts they generate. The results of the analysis show that the main antecedents of the success of sharia pawnshops include the level of Islamic financial literacy, public trust, and sharia-based product innovations. This study can be concluded that sharia pawnshops have a strategic role in supporting financial inclusion and sharia-based economic empowerment.

STOCK PRICE PREDICTION AND SIMULATION USING GEOMETRIC BROWNIAN MOTION-KALMAN FILTER: A COMPARISON BETWEEN KALMAN FILTER ALGORITHMS

Stocks have high-profit potential but also have high risk. Many people have ways to forecast stock prices. The Geometric Brownian Motion (GBM) method forecasts stock prices. The data used in this study are closing stock price data from July 1, 2021 to August 31, 2021 taken from Yahoo! Finance. The stocks used in this research are Bank Rakyat Indonesia (BBRI), Indofood Sukses Makmur (INDF), and Telkom Indonesia (TLKM). A strategy is carried out to improve prediction accuracy by utilising the Kalman Filter (KF). This research will compare the mean absolute percentage error (MAPE) value between GBM-KF, which was manually computed and computed using the Python library. As an example of this research, for BBRI stock, the high GBM MAPE value of 9.02% can be reduced to 3.52% with manually computed GBM-KF and 3.68% with Python library computed GBM-KF. Similarly, INDF and TLKM stocks are showing a significant reduction in MAPE values to deficient levels in some cases. The GBM-KF method employing manual computing may enhance the overall precision of stock price forecasting. Future research may enhance this study by using the GBM-KF model on alternative financial instruments, integrating supplementary market data, or evaluating its efficacy under extreme market conditions.

BINARY OPTION PRICING USING LATTICE METHOD

One way to minimize risks due to uncertainty in stock price movements is by using derivative products, one of which is an option. Binary options, a type of exotic option, provide a fixed payout if certain conditions are met at maturity, but are difficult to solve analytically. In this study, we utilize binomial and trinomial lattice methods, specifically the Cox-Ross-Rubinstein Binomial, Hull-White Trinomial, and Kamrad-Ritchken Trinomial models, to determine the price of binary options. Results indicate that all three methods converge towards the exact solution, demonstrating their applicability for pricing binary options, with the Kamrad-Ritchken Trinomial method showing superior accuracy due to the lowest mean relative error. Additionally, we analyze factors influencing binary option prices, including initial price, strike price, maturity time, volatility, and risk-free interest rate. The study’s originality lies in the comparative analysis of these methods under the same market conditions. However, limitations include model assumptions and potential data variability that may affect generalizability. Future research could extend these methods to various stock data or other financial instruments to test robustness. This research provides insights into optimal lattice method selection for practitioners in binary option pricing.

A Nonstationary Daily and Hourly Analysis of the Extreme Rainfall Frequency Considering Climate Teleconnection in Coastal Cities of the United States

The nonstationarity of extreme precipitation is now well established in the presence of climate change and low-frequency variability. Consequently, the implications for urban flooding, for which there are not long flooding records, need to be understood better. The vulnerability is especially high in coastal cities, where the flat terrain and impervious cover present an additional challenge. In this paper, we estimate the time-varying probability distributions for hourly and daily extreme precipitation using the Generalized Additive Model for Location Scale and Shape (GAMLSS), employing different climate indices, such as Atlantic Multi-Decadal Oscillation (AMO), the El Niño 3.4 SST Index (ENSO), Pacific Decadal Oscillation (PDO), the Western Hemisphere Warm Pool (WHWP) and other covariates. Applications to selected coastal cities in the USA are considered. Overall, the AMO, PDO and WHWP are the dominant factors influencing the extreme rainfall. The nonstationary model outperforms the stationary model in 92% of cases during the fitting period. However, in terms of its predictive performance over the next 5 years, the ST model achieves a higher log-likelihood in 86% of cases. The implications for the time-varying design rainfall in coastal areas are considered, whether this corresponds to a structural design or the duration of a contract for a financial instrument for risk securitization. The opportunity to use these time-varying probabilistic models for adaptive flood risk management in a coastal city context is discussed.

Competing frames of STI policy: uncovering ‘fragmented cohesion’ in reorganization of public research funding

Abstract Despite variation across Science, Technology, and Innovation (STI) policies, project-based public research funding allocation models, characterized by a complexity of policy objectives, are becoming increasingly prevalent. This article examines the emergence of such a development within a specific context through a case study on the policy process leading to the establishment of Finland’s Strategic Research funding instrument. Drawing on the policy proposal, organizational responses, and interviews, it explores five frames for and against the proposal and its development into a decision. Based on the empirical analysis, I propose the notion of ‘fragmented cohesion’ to characterize how several stakeholder organizations employed framing as an argumentative tool to valorize the proposal’s objectives, while selectively justifying and opposing the proposed methods of achieving them. I argue that this dynamic increased the likelihood of policymakers embracing one-size-fits-all models across diverse sectors, as originally outlined, rather than case-by-case consideration.

Examining the Impact of Capital Structure on the Profitability of the Saudi Banking Sector: A Panel Least Squares (PLS) Approach

This study examines the influence of capital structure and other financial variables on the profitability of Saudi Arabia's banking sector during the period 2010 to 2021. The author used a panel least squares (PLS) model, utilizing 96 observations derived from eight banks. Debt to Asset Ratio (DAR), Debt to Equity Ratio (DER), Financial Leverage (FL), Net Income (NI), Interest Expended to Interest Earned (IEIE), and Interest Income to Total Fund (IITF) are some of the independent variables that affect Rate of Return on Assets (ROA). The findings reveal that DAR positively impacts profitability and reflects effective debt utilization within assets, while DER negatively affects profitability due to the risks of excessive reliance on equity-financed debt. FL also has a strong positive influence, emphasizing the importance of leverage, and NI, though marginally impactful, contributes positively. IEIE shows a slight positive effect, indicating the need for efficient cost management, whereas IITF exhibits a negative but insignificant relationship, suggesting inefficiencies in interest income during the period. The model explains 83.1% of the variation in ROA, emphasizing the collective relevance of these factors. The study underscores the importance of balanced debt and equity management, efficient use of financial instruments, and cost optimization to enhance profitability and sustain financial stability in Saudi banks.

Assessing Financial Performance of Tech Enterprises Blending Machine Learning Techniques

In this study, the objective is developing a holistic research model for evaluating Tech business performance by blending machine learning techniques with well-known financial instruments such as Dupont Analysis. Systematic literature review of high-quality journals has helped formed the backbone of this research work. The dependent variable are Return on Equity and Return on Assets. The technique used will be a Machine Learning model using financial data from esteemed databases such as Eikon Refinitiv. The objective is to develop a predictive model utilizing machine learning approach that can analyse and visualize financial performance of tech companies from similar domains using Cluster Analysis. The design of our research model would be such that it is more practical in scope. The proposed model would be put forth as a decision support system for investors wishing to understand the companies better before investing.

A simulation analysis of returns-risk portfolio optimization models

Portfolio optimization is the process of choosing the best investment decision across a set of financial instruments or assets. Investors seek to maximize their (expected) returns, but higher expected return usually means taking on more risk. So, investors are faced with a tradeoff between risk and expected return. This problem can be approached in several ways, including: maximize a portfolio’s expected return for a given risk, minimize a portfolio’s risk for a given expected return, or apply a fractional model with a returns over risk ratio that keeps both expected returns and risk flexible simultaneously. The objective of this paper is to compare these modeling strategies through real world financial data as well as simulation of returns using the Moving Average-Integrated Generalized Autoregressive Conditional Heteroskedastic (MA-IGARCH) model. Our results find that the ratio model provides a more balanced portfolio and provides more stable results than the other two approaches.

The Role of Gold ETFs in Market Stability, Price Discovery, and Economic Dynamics during Crises

Gold has been considered one of the most reliable safe-haven assets and a tool for value storage, possessing qualities such as rarity, hardness, and resistance to adverse impacts from economic processes. Under conditions of economic stability, when demand for gold is insignificant, interest rates can be used to bring the price of gold under control; therefore, investors would rather take positions in interest-bearing securities. Most global disruptions, especially the financial crisis in 2008, the 2011 US Debt, and the COVID-19 pandemic, further heightened uncertainty and volatility in gold prices. The increased volatility stoked concerns over the stability and reputation of gold as an investment. In fact, it was in the year 2003 that gold exchange-traded funds started to turn gold as a physical commodity into a more available, liquid, and diversified financial instrument. Gold ETFs track physical gold, mining operations, or leverage-based products, which provide access to investors for "paper gold" without problems related to custody, insurance, or safety. In times of higher inflation or currency devaluation, gold ETFs hedge both a loss of purchasing power and overall market risk. Indeed, the empirical data show that the surge of investors into gold ETFs during the two systemic crises of the 2008 financial collapse and the COVID-19 pandemic led to increased demand, and hence prices for this commodity. While, at any given time, market-fragmenting gold ETFs foster stabilization through immediate liquidity provided to support price discovery, over increasing demand on that part is depressing economic activities: with high gold prices soaring to reflect hikes in the cost of borrowings, interest rates kill off investments, consumption, and growth. What results is a complex equilibrium since while gold ETFs protect an investor from turbulence in general, the reverse is a case that contributes to instability during widespread economic adversity. Policymakers and regulators should attach great importance to the interconnections among the performance of the gold ETFs, trends in the stability of a market, and economic outlook. If there is transparent regulation, decent trading systems might help in promoting confidence in using these instruments. Gold ETFs have become key methods of risk and portfolio diversification management besides facilitating investors over times of potential financial crisis. Their impact necessitates continued vigilance and additional oversight. Leveraging off the 2008 financial collapse, the COVID-19 pandemic, and a set of historical case studies, this paper uses empirical evidence related to changes in the price of gold and investor behavior in order to study the emergence and multidimensional role that gold ETFs have played so far within modern financial markets. The present study will be important as it explores their impact on price stability, the diversification of risk, and the greater implications for economic growth and suppression. This paper, therefore, contributes to the nuances surrounding gold's status as a safe-haven asset and potential trade-offs between using gold ETFs as tools for hedging and portfolio management.

Financial and legal provision of investment activities under EU legislation

This article is devoted to the study of the financial and legal provision of investment activities under EU legislation. The author analyzes the legal mechanisms, financial instruments, and institutional foundations that facilitate investment attraction and the creation of a favorable investment climate in the EU. Particular attention is paid to the study of the EU institutional system, which ensures the management, financing, and implementation of investment projects, promotes the attraction and effective use of investments. The role of the European Investment Bank (EIB) as the main financial institution of the EU, which provides financing for strategic projects in various sectors of the economy, including infrastructure, energy, innovation, and support for small and medium-sized enterprises (SMEs), is analyzed. The article examines the key provisions of the main EU legal acts regulating investment activities, in particular the Treaty on the Functioning of the European Union. It is noted that EU legislation aims to ensure legal certainty, transparency, and predictability for investment process participants, which helps to reduce investment risks. The author focuses on the financial instruments used to provision investment activities, in particular on EU programs, funds, projects, and initiatives. It is indicated that these instruments contribute to stimulating private investment through the use of co-financing mechanisms and the provision of guarantees. The article also provides an overview of the legal challenges and problems that arise in the process of implementing EU financial and legal norms in Member States. In particular, the issues of harmonizing national legislation with EU legal standards, adhering to the principles of sustainable development, and ensuring financial stability are highlighted. As a result of the study, it is concluded that effective financial and legal provision of investment activities in the EU depends on a balanced regulatory approach that takes into account both the interests of investors and the strategic goals of the EU, as well as on systematic financial and military support for Ukraine in the defense against armed aggression of the russian federation. The author proposes a number of recommendations for improving the financial and legal regulation of investment activities in order to further develop the European single market and increase its competitiveness at the global level.

The essence of private and public placement of cryptoassets for raising capital in comparison with securities: the approach of the European Union and Ukraine

The crypto-asset industry is a dynamic field that is developing faster than legislators can adopt the relevant regulations to control it. Today, there are many areas of the crypto-asset sphere where they can already be used, but due to the lack of regulation, their application falls into a gray zone. It is clear that in technological sectors that are developing quite rapidly, in the case of developing laws, a situation may arise where, by the time they are adopted, they may already seem outdated, since there will be a fundamental change in the way we work with these sectors. However, in any case, the lack of regulation creates obstacles to finance, in particular, the crypto-industry, since customers willing to invest do not have a clear understanding of the protection of their invested assets. In particular, crypto-projects often face the need for financing for further development. One of the assets that they can offer potential buyers is their cryptoasset, which in the future will become one of or even the main element of their product. Therefore, in fact, a cryptoasset in this role can act as a financial instrument for attracting capital. This configuration is very similar to the placement of securities, through which joint-stock companies can also raise capital for their further purposes. Nevertheless, if the regulation of the entire procedure for the issuance and subsequent placement of securities is established in almost all states, then the following procedure for cryptoassets is currently practically absent. However, in order to develop appropriate provisions for the placement of cryptoassets, an understanding of the essence of this phenomenon is required. Since it is as close as possible to the placement of securities, it is worth examining the regulatory acts of those states that have already taken (or tried to take) appropriate steps in comparison with securities. It is examined in the article the essence of the concept of placement of crypto-assets comparing to securities in the European Union as the first state that took a step towards enshrining this phenomenon in its own legislation to open up opportunities for raising capital through the sale of crypto-assets. The relevant law of Ukraine, which has never entered into force, which also provides for appropriate provisions for the placement of cryptoassets, is also examined. At the same time, in the article it is also distinguished the concepts of public and private placement in the legislation of the specified states as two ways of raising capital by selling crypto assets. As a result, it is concluded in the article that states that wish to promote the development of the domestic crypto-industry, when adopting a profile law or, at least, enshrining it in other legislative acts, should introduce the concept of placement of crypto-assets, as well as develop its detailed regulation, including by dividing it into public and private placement. At the same time, this procedure can mainly be based on the procedure for placing securities, but taking into account the technical nature of the crypto assets themselves.

Hybrid Kontrak Perbankan Syariah di Indonesia: Analisis Pendekatan Rasionalisme

Contemporary Islamic economics requires innovation in contract implementation to address modern challenges. This research examines the fundamental reasoning and philosophical aspects of combined contracts (hybrid) through a descriptive-analytical approach, considering both normative and doctrinal aspects of Islamic law. The study reveals that hybrid contracts are the result of juristic reasoning (ijtihad) aimed at creating adaptive financial instruments while maintaining compliance with Shariah principles. The development of these hybrid formats is conducted rationally to maximize benefits for Islamic business practitioners. Several forms of hybrid contracts that have evolved include Mudharabah Musytarakah (partnership and profit-sharing), Musyarakah Mutanaqisah (asset ownership financing), al-Musyarakah al-Muntahiyah bi al-Tamlik (gradual partnership), and al-Ijarah al-Muntahiyah bi al-Tamlik/IMBT (lease with ownership option).

РАЗВИТИЕ РЫНКА ФИНАНСОВЫХ ИНСТРУМЕНТОВ ДЛЯ ЧАСТНЫХ ИНВЕСТОРОВ В СОВРЕМЕННЫХ УСЛОВИЯХ

The problem of proper investment of funds by investors in various forms of financial instruments (financial instruments made of precious metals, gold bars, investment coins, impersonal metal accounts, etc.; banking financial instruments; securities (stocks, bonds, etc.) is extremely important and relevant in modern conditions. At the moment, there are a number of factors that significantly escalate the situation in the investment services market. Firstly, the emergence of new and little-studied financial instruments in the investment services market. Secondly, in modern realities, a private investor, especially an individual, is not adequately protected by financial control authorities from all kinds of organizations that, using the low financial literacy of the population, impose fraudulent schemes on them, which leads to the loss of funds by gullible investors. In connection with all of the above, today there is an urgent need to develop the most profitable and reliable financial instruments, and improve the financial literacy of all types of investors, both individuals and legal entities.

ОСНОВНЫЕ НАПРАВЛЕНИЯ РАЗВИТИЯ РЫНКА ФИНАНСОВЫХ ИНСТРУМЕНТОВ ДЛЯ ЧАСТНЫХ ИНВЕСТОРОВ В РОССИИ В УСЛОВИЯХ СОВРЕМЕННЫХ ВЫЗОВОВ

Currently, there is a wide range of financial instruments in the Russian Federation. Today, private investors, especially individuals, face the difficult task of choosing the most acceptable financial instruments, from their point of view, naturally, taking into account modern conditions under which financial instruments would be as reliable as possible, that is, the probability of losing invested funds would be minimal, in addition, they would have high liquidity, that is that is, if necessary, they could be easily sold or bought, as well as with a yield that at least guaranteed the safety of funds from inflation, and if possible multiplied them. Hence, it is necessary to analyze the main financial instruments operating in the Russian Federation in terms of their liquidity, reliability and profitability, taking into account modern challenges and realities.

Impact of Financial Market uncertainty and Financial Crises on Dynamic Stock—Foreign Exchange Market Correlations: A New Perspective

This study explores how uncertainties in domestic financial markets, including stocks, bonds, and exchange rates, as well as global crises like the subprime mortgage and European sovereign debt crises, affect the dynamic correlation between the Australian stock market index (ASX 300) and foreign exchange rates. Using quantile regression estimation and analyzing high-frequency data from 1999 to 2021, we uncover distinct relationships influenced by currency-specific uncertainties. Our findings reveal that Australian stock market concerns impact co-movements with financial instruments, showing different effects on the correlations with the Euro, British Pound, US Dollar, Japanese Yen, and Chinese Yuan. Surprisingly, uncertainties in the Australian bond market have a negative impact on co-movement with the Euro and British Pound but a positive impact with the US Dollar, Japanese Yen, and Chinese Yuan. Additionally, we observe that volatility in the Australian currency’s exchange rate with various currencies positively influences dynamic co-movements. However, the strength of this connection varies based on the volatility of the Australian dollar against the Japanese Yen. Global financial crises, especially the subprime mortgage crisis, significantly impact dynamic co-movements, supporting both Flow and Stock-oriented theories. In summary, our research sheds light on the diverse impacts of domestic financial market uncertainties on co-movement, providing valuable insights for portfolio managers and foreign investors aiming to understand the intricate relationship between the Australian stock market and exchange rates. JEL Classification: C32, F31, G01, G15

International investment as a factor of recovery and development of the post-war economy of Ukraine

Introduction: The relevance of the topic of studying international investment in the context of Ukraine's post-war reconstruction is due to the need for rapid economic recovery and sustainable development of our country in the context of global economic instability. Methods: Two types of research methods were used to achieve the main goal: general scientific and unique scientific methods. General scientific methods include analysis, synthesis, explanation and generalisation. Results: As a result of the study, the structure and dynamics of international investment in Ukraine's economy are examined. It is noted that the war in Ukraine has led to significant changes in the direction of international investment, with a decrease in investments in the agricultural sector and a reorientation towards public administration, defence and industry. These changes reflect the need to adapt investment strategies to new conditions and challenges. It is important to continue developing digital technologies and innovative industries, as they have significant potential for long-term economic growth. Conlcusions: The study concludes that international investment is a critical factor in recovering and developing Ukraine's post-war economy. They not only provide additional resources for the implementation of infrastructure and economic projects, but also facilitate technology transfer and the introduction of best management practices. New financial instruments, such as green bonds, will play a unique role in attracting international investments to the sustainable recovery of Ukraine. Ukraine needs to develop the green bond market to diversify investors and attract green investors.

Financial freedom of Filipinos in personal finance management

This study investigates the financial freedom of Filipinos through the lens of personal finance management, focusing on cash management, debt management, risk management, and wealth management. Utilizing data from 150 respondents across ten prominent corporations listed on the Philippine Stock Exchange Index, the research adopts a descriptive methodology and linear regression analysis to evaluate the impact of these financial dimensions on achieving financial independence. Findings reveal pervasive financial literacy challenges among Filipinos, rooted in cultural tendencies like the "come-what-may" attitude and a reliance on traditional saving methods. These behaviors often hinder effective budgeting, savings, and investment practices, resulting in low levels of emergency fund preparedness and high debt reliance. The study highlights the role of structured financial planning in enhancing wealth accumulation and mitigating financial stress, advocating for the adoption of comprehensive strategies that align with individual goals and risk tolerance. Furthermore, the research underscores the critical need for tailored financial education programs to foster a culture of financial discipline, particularly among working parents and young professionals. By addressing gaps in financial literacy and promoting awareness of modern financial instruments, the study aims to empower individuals to achieve sustainable financial well-being. This thesis contributes to the discourse on personal finance in the Philippines, offering actionable insights for policymakers, educators, and individuals. It emphasizes the transformative potential of financial literacy as a catalyst for economic stability and growth within households and the broader community.