Investment Guarantee Research Articles

Efficient simulation and valuation of equity-indexed annuities under a two-factor G2++ model

Equity-indexed annuities (EIAs) with investment guarantees are pension products sensitive to changes in the interest rate environment. A flexible and common choice for modelling this risk factor is a Hull–White model in its G2++ variant. We investigate the valuation of EIAs in this model setting and extend the literature by introducing a more efficient framework for Monte-Carlo simulation. In addition, we build on previous work by adapting an approach based on scenario matrices to a two-factor G2++ model. This method does not rely on simulations or on Fourier transformations. In numerical studies, we demonstrate its fast convergence and the limitations of techniques relying on the independence of annual returns and the central limit theorem.

New National Capital City (IKN) in Legal Polemic

The urgency of moving the national capital is a necessity that has been present since the beginning of the Indonesian Government. Problems occurs when the Indonesia development focusing on Jakarta as capital city. The process of moving the National Capital City (IKN) is going through a stage of development that has begun since the last few years, the rapid construction of this IKN must have the legal basis needed in the certainty of the process of moving this capital city. Legal certainty is an urgency for the initial steps and certainty from investors related to funding and the process. The purposes of this study is to analyse the problems in IKN from legal polemic. As an foundation of the development of IKN, the problem of IKN can be a prominent step to resolve the sustainability of the New Capital City of Indonesia. The method of this study using the normative yudical which using literature materials or mere secondary data. The transfer of IKN is a process in accelerating the Indonesian economy more evenly, the legal basis for the formation of the new capital city is very important in the foundation of development and investment guarantees. The making process, principles, the fast time, academic manuscripts, articles that do not reflect the environment and customs, economic alignment, benefits for the Indonesian community and community participation, even criticism on social media are the critism of this law. Through the UU IKN no 3 2022, it has contained, vision, mission and basic principles, performance indicators and passed the regulation, UU no 3 about IKN is the foundation for a moving, until the whole national capital really moves and becomes a step for equitable distribution of the Indonesian economy.
 Keywords: New Capital City, Capital City, Legal Polemic, IKN

Investment attractiveness of Ukraine in conditions of prolonged war

The article indicates the impact of investments on the economy of Ukraine and investigates the investment potential in the conditions of a protracted war and the investment attractiveness of Ukraine in the conditions of a prolonged war. The important mechanism for stimulating investment activity, namely state support of the authorities in the form of compensation of a part of the interest rate and provision of state guarantees for loans is considered. Negative factors that significantly affected the process of attracting investments in the development of the economy, namely the development of the country and its economy in the conditions of war, are also presented; lack of protection and state guarantee mechanisms for foreign investments. Nevertheless, the main problems that concern investors when investing in the military economy have been revealed. The article describes why Ukraine remains attractive for investment in the face of a full-scale invasion and its potential in the face of a protracted war. It indicates how to ensure the stable development of investment attractiveness. The platform for potential foreign investors is mentioned, which collects more than 500 investment projects and opportunities in 10 sectors of the economy that have significant investment potential, namely: the defense industry, metallurgy and metal processing, energy, natural resources, agricultural sector, transport infrastructure, manufacturing, woodworking and furniture manufacturing, pharmaceuticals, advanced technologies. It also indicates which sector suffered the least losses from the war and retained 95% of contract volumes. This paper describes what is necessary to ensure the stable development of investment attractiveness. It is stated that Ukraine should reform its economy and improve the business environment by improving the legal system, fighting corruption, ensuring intellectual property rights and promoting entrepreneurship and innovation. Possible ways to attract investments in the conditions of a long-term war are indicated. It analyzes how Ukrainians invest during the war and which investment strategy they choose. It is noted that the agreement with the G7 and the EU on investment guarantees provides for the receipt of long-term and economically beneficial loans from international financial organizations, such as the World Bank, the European Bank for Reconstruction and Development, and the European Investment Bank.

ЗАЛУЧЕННЯ ІНВЕСТИЦІЙ НА ЗАСАДАХ ДЕРЖАВНО-ПРИВАТНОГО ПАРТНЕРСТВА В УМОВАХ ПОВОЄННОЇ РОЗБУДОВИ НАЦІОНАЛЬНОГО ГОСПОДАРСТВА: ПЕРЕДУМОВИ ТА ІНСТРУМЕНТАРІЙ

The prerequisites for the implementation of the public-private partnership mechanism in the domestic economy are revealed, with an emphasis on the processes of national economy recovery in the post-war period. The importance and functional role of public-private partnership in building effective investment attraction strategies is argued, with the hypothetical assumption of their promotion of rapid modernization and development of key sectors of the national economy. The public-private partnership in various socio-economic and political environments was analyzed and it was established that it should be considered an adaptive system that uses a mechanism of its implementation adequate to the situation. It has been established that in many countries of the world, public-private partnership is currently recognized as an important socio-economic concept, which, moreover, with the change of socio-economic and political parameters in the world space, acquires new forms of its application, in particular methods of financing the development of infrastructure or providing higher quality and volume of various types of public services. The existing state of domestic legislative regulation of public-private partnership is summarized and the appropriate stages of its implementation in the processes of post-war recovery of the Ukrainian economy are given. Separate directions for creating a favorable investment climate in the post-war period are argued, which relate to the provisions of the legal framework and institutional infrastructure, investment guarantee criteria. It is substantiated that they are critically important for reducing risks for domestic and foreign investors, a factor in increasing the attractiveness of public-private partnership projects. It has been established that the Strategy for the implementation of public-private partnership in the process of socio-economic recovery of Ukraine should primarily be based on the rational planning of the stages of recovery work both for infrastructure projects important for the national economy, as well as the provision of public services and stimulation of economic growth, the application of regulatory mechanisms aimed at ensuring transparency, accountability and fair distribution of risks between public and private participants.

Research on China's Overseas Investment Expropriation Insurance ——Based on MIGA's Experience and Enlightenment

With the promotion of the "Belt and Road" initiative, the scale of China's overseas FDI has been growing exponentially, and the exposure of Chinese enterprises to overseas investment to political risks has also been on the increase. It is common for major capital-exporting countries in the world to safeguard themselves against overseas investment risks by creating an overseas insurance system for such investments. Amongst them, the Multilateral Investment Guarantee Agency (MIGA) is a representative insurance system, which is also a modality that China can learn from. At this moment, the China National Export and Credit Insurance Corporation (Sinosure) is the exclusive domestic commercial enterprise that covers overseas capital investment insurances in China. There are still some deficiencies in the scope of coverage, insurance premium regulations and underwriting conditions in the field of insurance. This essay investigates the issues of collection on insurance for Sinosure 's overseas ventures, learns from MIGA's insurance system, and puts forward suggestions for improvement.

The Effects of Trademark Registration for MSMEs

Introduction: Trademark rights are exclusive rights granted by the state to trademark owners who are registered for a certain period by using the brand themselves or by giving permission to other parties to use it. Based on Article 3 of Act No. 20 of 2016 Regarding Trademarks and Geographical Indications, it states that trademark rights are obtained after the Brand is registered. Thus, registration is a requirement to obtain legal protection in the field of Trademarks in the field of IPR. The presence of MSMEs in improving the national trade must be supported by the application of laws that function to protect and provide investment guarantees as wide as possible. Purposes of the Research: In the Maluku province, based on data owned by the Maluku Province Cooperatives and MSME Office, many MSMEs have used brands on their business products, but only a few have registered their brands. Factors that influence MSMEs not to register their trademarks are the lack of knowledge and information about the importance of trademark registration. Even though seen from the prospects for MSME businesses in the Maluku province, it is very promising to be able to compete in national and international trade markets.Methods of the Research: The research method used in this study is normative juridical with the nature of the research, namely analytical descriptive. The problem approach used is a statutory and conceptual approach. The analysis of legal materials used is a literature analysis supported by additional data obtained in the field.Results of the Research: Efforts to create IPR-based development strategies is a new challenge for the government to make as a reality. The government's role is very important in spurring and activating MSMEs business actors in managing and implementing marketing strategies that can increase selling power and healthy competitiveness. Registration of trademarks in order to obtain intellectual property rights protection must be a top priority in creating intellectual property-based development. Counseling and outreach regarding the importance of legal registration of marks must be carried out from now on. Not only that, but the process of assisting MSMEs in the registration process must also be carried out, so that the counseling and legal outreach that has been carried out produces results. The advantage that can be obtained by MSMEs if their trademark is registered is the legal protection provided by the state to them, so that there will be no open gaps for other business actors to take advantage of said trademarks.

Analyzing the interest rate risk of equity-indexed annuities via scenario matrices

The financial return of equity-indexed annuities depends on an underlying fund or investment portfolio complemented by an investment guarantee. We discuss a so-called cliquet-style or ratchet-type guarantee granting a minimum annual return. Its path-dependent payoff complicates valuation and risk management, especially if interest rates are modelled stochastically. We develop a novel scenario-matrix (SM) method. In the example of a Vasicek-Black-Scholes model, we derive closed-form expressions for the value and moment-generating function of the final payoff in terms of the scenario matrix. This allows efficient evaluation of values and various risk measures, avoiding Monte-Carlo simulation or numerical Fourier inversion. In numerical tests, this procedure proves to converge quickly and outperforms the existing approaches in the literature in terms of computation time and accuracy.

Assessing the relation between financial performance and long-term bank loan interest rates for healthcare providers in the Netherlands: a panel data analysis

The Dutch health system is financed predominantly by commercial bank loans, especially after the market-oriented reform in 2006, when government investment guarantees were abandoned. Commercial capital markets were envisaged to improve efficient capital allocation and management. We analyzed the effects of commercial bank loans on interest rates, investments and allocative efficiency in the Dutch healthcare sector. We aimed to explain variation in interest rates by financial performance of healthcare providers, hypothesizing that the reform reduced interest rates for financially well-performing providers. Using financial data from publicly available annual reports, we explored the effect of financial performance on long-term loan interest rates through pooled linear regressions. Our data showed that financial reserves have steadily increased, although profitability margins have declined since 2011–2013 (depending on the sector). While nominal interest rates have generally declined since 2006, the risk surplus on healthcare loans has steadily increased. Furthermore, we observed no significant relation between the financial performance of healthcare providers and interest rates on capital loans. Maintaining additional financial reserves provided no apparent benefit to capital costs. This suggests that healthcare providers may consider whether financial reserves should be maintained at current levels or can better be used for direct investments. Moreover, healthcare policymakers should evaluate whether the increase in risk surplus combined with an apparent lack of reward for financial scrutiny is a desired outcome of the reform.

Rewarding a friend: Does the World Bank direct non-commercial risk insurance to countries that support US foreign policy interests?

ABSTRACT Many scholars have investigated the politics of World Bank Group (WBG) lending, often finding that WBG loans are distributed in ways that advance US policy interests. However, the organisation’s other major activity, promoting foreign direct investment (FDI), has received little attention. This study fills this void in the literature, with attention to the Multilateral Investment Guarantee Agency (MIGA), the youngest of the five agencies that collectively make up the WBG. MIGA provides multinational companies with insurance to protect their investments from non-commercial risks in host countries, such as the outbreak of civil war or government expropriation. Given considerable evidence that WBG loans support US interests, MIGA’s risk insurance may be similarly politicised. However, since MIGA is financially independent and prohibits political activity, we theorise that US influence operates informally through MIGA staff, who reward US-aligned countries to ‘please the principal,’ and hence ensure that the US continues to support the Agency. Empirical analysis based on over 1500 MIGA-insured investments covering 121 member countries over the 1990–2020 period shows that MIGA insurance is disproportionately rewarded to investments in host countries that support US policy interests. Our findings suggest that this politicisation is primarily staff-led.

Exploring the Applicability of the PPP in Tourist Toilets: Reflections on the Laoshan Case in China

Although public–private partnerships (PPPs) for tourism have received extensive attention, there has been limited research on their application to tourist toilets. The purpose of this study was to systematically explore the applicability of PPPs with respect to the construction and operation of tourist toilets. The study conducted field investigations and semi-structured interviews in the Qingdao Laoshan Scenic Area (LSA), where purposive sampling techniques were used to manage participant selection and expand sample sizes. It finds that first, the use of PPPs to build tourist toilets is new and has shown both development potential and challenges. Second, the use of PPPs to provide tourist toilets is not yet mature owing to management and supply inefficiencies. Third, the DBTO model in the Laoshan case offers a significant methodological value for similar PPP projects, which could be replicated and promoted more widely when certain conditions are met. This study has filled a research gap in the global toilet revolution and shows a different path from the investment guarantee system in developed Western countries and the Guilin model in China. This application of a PPP in provision of tourist toilets also broadens the knowledge base of researchers studying PPPs in the field of tourism and could lead to the development of a policy approach with respect to PPPs’ application in the toilet revolution and regional tourism development.

On the Measurement of Hedging Effectiveness for Long-Term Investment Guarantees

Although the finance literature has devoted a lot of research into the development of advanced models for improving the pricing and hedging performance, there has been much less emphasis on approaches to measure dynamic hedging effectiveness. This article discusses a statistical framework based on regression analysis to measure the effectiveness of dynamic hedges for long-term investment guarantees. The importance of taking model risk into account is emphasized. The difficulties in reducing hedging risk to an appropriately low level lead us to propose a new perspective on hedging, and recognize it as a tool to modify the risk–reward relationship of the unhedged position.

Algorithmic Mechanism Design With Investment

We study the investment incentives created by truthful mechanisms that allocate resources using approximation algorithms. Some approximation algorithms guarantee nearly 100% of the optimal welfare in the allocation problem but guarantee nothing when accounting for investment incentives. An algorithm's allocative and investment guarantees coincide if and only if its confirming negative externalities are sufficiently small. We introduce fast approximation algorithms for the knapsack problem that have no confirming negative externalities and guarantees close to 100% for both allocation and investment.

ФІНАНСУВАННЯ РОЗВИТКУ ЕКОНОМІКИ УКРАЇНИ ЗА РАХУНОК ІНОЗЕМНИХ ІНВЕСТИЦІЙ: ПРОБЛЕМИ І ПЕРСПЕКТИВИ

The article examines the problems of attracting foreign investment to Ukraine in wartime conditions. It was shown that although the investment attractiveness of the domestic economy fell sharply during the war, its prospect of becoming a member of the European Union attracts foreign investors. Ukraine is a market with great investment opportunities. Taking into account the resource and human potential, after the war, Ukraine will be able to effectively master 70–100 billion dollars annually. The priority areas of activity for attracting investments, which have the greatest development potential in the future, have been determined: the defense-industrial complex, metallurgy and metalworking, energy, natural resources, agro-industrial complex, logistics and infrastructure, industrial production, woodworking and furniture production, pharmaceuticals, innovative technologies. The problems of attracting foreign investments to Ukraine are analyzed. State measures to improve the business climate in the country are analyzed. The possibilities of insurance of investment risks in the conditions of war and provision of guarantees by foreign financial organizations are analyzed. The investment guarantee program aimed at long-term mitigation of risks for investors, prevention or compensation of losses and facilitation of obtaining financing for the implementation of investment projects was analyzed. The program covers such risks as war, expropriation (nationalization), transfer risk and conversion risk, risk of breach of contract. It is shown that the basis of increasing investment attractiveness of Ukraine at the current stage is the fact of its acceptance as a candidate for EU membership. It was determined that the main tasks in the field of attracting foreign investments are the issue of improving the legal framework and creating a risk insurance mechanism for foreign investors. Successful implementation of FDI attraction policy requires constant cooperation between Ukraine and its European partners.

ОСОБЛИВОСТІ ПРОЕКТНОГО ФІНАНСУВАННЯ ДЛЯ ПІДПРИЄМСТВ ГОТЕЛЬНОГО І РЕСТОРАННОГО БІЗНЕСУ В УМОВАХ ЕВРОІНТЕГРАЦІЇ

The article examines project financing as a separate type of activity of credit institutions involved in the organization of financing hotel investment projects. The systematization of the world experience in the development of project financing made it possible to highlight the fundamental principles of project financing in relation to the hotel business. The principle of increased risk. Any project, the financing of which is carried out based on future cash flows, involves the distribution of risks among the maximum number of participants. The principle of adequate debt coverage. Compliance with this principle by the capital provider is based on the debt coverage ratio, which is determined by the ratio of expected revenues from project implementation to the total amount of debt. The principle of market viability of the project. The market principle requires a credit institution to conduct a detailed analysis of the market situation when concluding a credit agreement. Such market analysis is carried out in order to determine the dynamics of prices and demand for the period of operation of the hotel. The principle of limited liability of the client. According to it, the repayment of the debt occurs from the income from the implementation of the project, and the responsibility of the project initiator is determined by its own contribution. The principle of investment guarantee. A guarantee in project financing means an unconditional obligation to transfer the specified funds to the capital provider (usually a bank) in the event of a guarantee event. The purpose of this type of guarantee is to insure the debt obligations of the hotel project throughout its life cycle. The principle of debt repayment. This principle means that project financing will require unconditional repayment of funds according to the schedule. The principle of high financial leverage. This principle of project financing is based on maintaining a high ratio between own and borrowed funds. Such a scheme allows obtaining a number of advantages in the form of tax benefits, ensures the most effective use of credit instruments at each stage and contributes to the increase in the value of shares of project participants as a result of the completion of each sub-project and the commissioning of new hotels.

ENSURING THE EFFICIENCY OF MANAGING THE FINANCIAL AND ECONOMIC SECURITY OF THE ENTERPRISE DURING THE CRISIS

The purpose of the article is to present effective anti-crisis management measures to bring enterprises out of the crisis situation and improve their financial and economic security. The subject of this study is the financial and economic security of an enterprise during a crisis. Methodology. Using the historical and comparative methods, the author analyzes the events of recent years and analyzes the impact of external factors on the formation of the crisis state of an enterprise. The economic and statistical method made it possible to analyze the scale of damage caused by the Russian Federation to the state of Ukraine during almost nine years of active hostilities in violation of such principles of international law as the principle of non-use of force or threat of force; the principle of sovereign equality of states; the principle of equality and self-determination of peoples; the principle of peaceful settlement of international disputes; the principle of non-interference in the internal affairs of states; the principle of peaceful cooperation; the principle of fulfilling international obligations in good faith; the principle of inviolability of borders; the principle of territorial integrity of states; the principle of universal respect and protection of human rights; and to see what level of crisis the terrorist state of the Russian Federation has spread in the largest country of the European Union, namely Ukraine. Using the philosophical dialectical method, the author analyzes the very phenomenon of crisis in the broad sense of the word and finds a way to respond to the challenges of the crisis. Results. This study assesses the benefits that have contributed to the development of economic relations with countries in Africa, Asia, and Europe. The losses suffered by the Ukrainian economic system due to the destructive processes of the crisis are analyzed. The author examines the peace formula approved by Volodymyr Zelenskyy, which provides for the implementation of measures aimed at shaping peace in the European space and correcting the mistakes made by officials of the terrorist state of the Russian Federation, which led to terrible consequences; the author analyzes the achievements of this peace formula and determines how much benefit and lives it has already brought. The practical significance lies in the definition of reorganization as one of the best anti-crisis management measures that can bring an enterprise out of a crisis. In particular, attention is drawn to the effectiveness of rehabilitation measures that can restore the solvency of an enterprise. In turn, taking into account the established practice of attracting investment capital as a means of improving the economic activity of an enterprise, the author analyzes the risks of losing property and non-property assets in the event of adverse conditions and proposes to create a mechanism for investment guarantees, which consist in preserving assets by the investor in the event of adverse market fluctuations. The scientific novelty lies in the proposal to amend the current legislation to guarantee the safety of the rehabilitation procedure to the investor by mitigating the risk of loss of invested assets in restoring the enterprise's solvency.

Leveraging Foundation Balance Sheets for Greater Impact: Piloting a Pooled Guarantee Program

A guarantee instrument is a credit enhancement tool that can enable philanthropies to unlock millions or billions of dollars for societal impact. The Community Investment Guarantee Pool, created in 2019 by a collaboration of philanthropies and allied impact investors, or guarantors, is a novel initiative that uses guarantees to leverage the balance sheets of foundations and other institutional investors for enhancing the credit of intermediaries in the affordable housing, small-business, and climate markets. As the guarantees are unfunded, foundations continue to keep their endowment invested in the conventional market.

International Investment Protection Made in Germany? On the Domestic and Foreign Policy Dynamics behind the First BITs

Abstract The investment protection treaty concluded between Germany and Pakistan in 1959 is generally regarded as a milestone in the development of international investment law. It has entered the collective memory as the first bilateral investment treaty (BIT). In this article, we analyse archival sources to investigate why Germany and Pakistan concluded this agreement at that specific time and what makes this treaty the first of its kind. Through historical analysis, we trace the domestic and related foreign policies that led to the BIT and discuss the negotiation process. Our analysis shows that the BIT was so closely linked with the German federal investment guarantee scheme (Bundesgarantien) that it is best understood as an extension of that policy. This also helps us to specify the underlying rationale for the treaties. We further highlight the influence of the financial industry – especially of Hermann Josef Abs – on the genesis of the BIT, which was less decisive than is often suggested. We identify features of the 1959 BIT that do characterize it as a new international legal instrument, but nuance claims about its degree of innovation as well as underlying motivations, and counter considerable retrospective myth making.

‘Forum of Necessity’: Using French Law’s ‘Juge d’appui’ in Foreign-Seated Arbitrations as a Cure for Denial of Justice

This article explains how French arbitration law enables a party to turn to the French courts for arbitrations seated outside of France, when faced with the risk of denial of justice. It describes the jurisdiction and role of the French ‘juge d’appui’ (or ‘supporting judge’), in preventing a denial of justice in arbitrations that bear no connection to France. An analysis of French arbitration law and jurisprudence demonstrates that the French supporting judge is an effective solution to prevent a denial of justice when the arbitration agreement does not provide for a supporting judge. juge d’appui, judge acting in support of arbitration, supporting judge, denial of justice, defaulting party, appointment of an arbitrator, constitution of the arbitral tribunal, jurisdictional immunity, Agreement on Promotion, Protection and Guarantee of Investments among Member States of the Organisation of the Islamic Conference, OIC Treaty, Secretary General of the OIC, most favoured nation clause

The Resurgence of the Unified Arab Investment Agreement and the Organisation for Islamic Cooperation Investment Agreement

Abstract Multilateral investment treaties (MIT s) are international legal instruments whose purpose is to, inter alia, facilitate social and economic cooperation on regional and/or global scales. While there is abundant literature and decisions on MIT s generally, there has been scant analysis of such instruments executed in the Arab and Muslim-majority worlds. This book discusses two such instruments: the Unified Agreement for the Investment of Arab Capital in the Arab States and the Organisation of Islamic Cooperation Agreement for Promotion, Protection and Guarantee of Investments Among Member States. These investment agreements are among the oldest MIT s in the modern world. The UAA was approved at the 11th Arab Summit Conference held in Amman, Jordan, in November 1980. The OIC Agreement was opened for signature on June 1–5, 1981 and entered into force on February 25, 1988. It is only recently, however, that these two long-dormant treaties have acquired special significance. This book provides a comprehensive, critical review of these two treaties that remain to be fully tested and utilized.

STATE AND PROBLEMS OF ECONOMIC SECURITY OF ENTERPRISES OF THE REAL SECTOR OF UKRAINE’S ECONOMY

The purpose of the article is to analyze and generalize the current state and development trends of domestic business entities of the real sector of the national economy of Ukraine in the context of the establishment of prerequisites for their economic security. The article focuses on the relevance of the study of the current state of economic security in the real sector of the national economy of Ukraine. The analysis of production volumes and sales of products by industrial enterprises was carried out. The structure of industrial production in Ukraine is analyzed from the point of view of the economic security of domestic enterprises. The characteristics of the main indicators of the development of industrial enterprises of Ukraine in the context of ensuring their economic security are given. The key indicators of the development of industrial enterprises in the system of functioning of the national economy of Ukraine have been demonstrated. The key indicators of the volume and efficiency of the functioning of enterprises in such branches of the national economy of Ukraine as agriculture, agrarian and construction sectors, transport, warehousing, postal and courier activities, transport and communication are summarized. Conclusions are made in the context of modern trends in the development of domestic enterprises of the real sector of the national economy and their impact on the prerequisites for ensuring the economic security of economic entities. It is proved that the development of industry and the real sector of the economy of Ukraine has a controversial nature with signs of uncertainty in the direction of progress, lack of stable financial support for production, in particular products with high added value, and investment guarantee for innovative and technological modernization. Based on the results of the indicative and structural-temporal analysis, the existential challenges of the development and preservation of financial security of the priority sectors of the economy were determined. The applied value of the research results lies in the identification of problematic aspects of the state and development trends of domestic enterprises of the real sector of the national economy in the context of ensuring their economic security. The scientific novelty of the research results lies in the improvement of the methodology for identifying the conditions for ensuring the economic security of enterprises.