Variety Of Financial Instruments Research Articles

A Study on the Impact of Behavioral Biases on the Investment Pattern of Indian Retail Investors with A Reference to Millennial Generation

The development of a nation’s economy is significantly influenced by the capital market, which aids in wealth accumulation and capital raising. Today’s generation has a variety of financial instruments, which has given individual investors access to a wide range of investment opportunities. Behavioral finance is one the emerging topic in field of finance, it helps in understanding psychological behaviour of investors. This study focuses on understanding these behaviour and their impact on investment decision. A special reference is given to millennial generation as they are the maximum contributors of total retail investors. The objective of this study is to understand the investment pattern of these millennial retail investors and how they are affected by various behavioral biases. The study is analytical in nature. Research design used in this study is exploratory. The primary data is collected through a structured questionnaire from 100 millennial retail investors of Indian stock market. The collected data is analysed using different statistical tools. The findings of this study reveals millennial retail investors’ purpose of investment, factors considered before investing, amount of experience, area of investment, average return and impact of investment biases.

Mergers and Acquisition and Financial Performance of Commercial Banks in Kenya

Commercial banks’ managers and shareholders are always adopting mergers and acquisitions aiming to improve their financial performance, economies, efficiency as well as their liquidity position. However, this doesn’t always turn out to be so since different performances has been experienced by the firms that have undergone mergers and acquisitions in the banking sector. While some studies indicate that mergers and acquisitions have adverse effect, others indicate that it doesn’t have an effect while others have documented that it positively improves performance. In the recent years commercial banks have undergone mergers and acquisitions whereby in the last 20 years a total of 10 acquisitions and 13 mergers have taken place but the performance of these banks remains mixed. Therefore, there was a need to interrogate whether commercial banks’ financial performance is affected by mergers and acquisitions given that the effect is mixed. The study’s specific objectives included establishing the influence of organizational operating synergy, firm size and risk diversification as mergers and acquisitions effects on Kenyan commercial banks’ financial performance. The theories that provided a theoretical justification as well as interrogation of the key study variables are; the Synergistic Mergers Theory, the Agency Cost Theory (ACT) and Resource Based Theory. A causal research design was adopted where a census was conducted on the entire population of the last 20 years’ 10 acquisitions and 13 mergers. This study used both primary and secondary data, which was analyzed with SPSS to generate inferential and descriptive statistics and frequencies. The results of regression and correlation analysis were presented in tables and figures. The study found that organizational operating synergy, bank size, and risk diversification all had a positive and significant impact on the financial performance of Kenyan commercial banks. According to the study, operation synergy had a significant impact on bank financial performance due to lower operating expenses, increased market share, consolidation of operations, and synergies within the banking industry. An increase in bank size will result in effective gains that will be passed on to customers in the form of high deposit rates, lower lending rates, and lower interest rates. However, increasing the size of the bank beyond certain limits indicates a decline in the scale, leading to inefficiency. The diversification of a bank's operations varies depending on the bank. Diversification of risk is a risk-reduction technique that involves allocating investments across a variety of financial instruments. When banks diversify their risk, they reduce the amount of risk they are exposed to in order to maximize their returns. According to the study, Kenyan commercial banks should critically evaluate the merging institutions' overall business and operational compatibility and focus on capturing long-term operational synergies. There is a need for bank policies that place a higher priority on determining and monitoring their loan portfolio, customer deposits, and asset quality. The banks should invest in a broad range of assets such as bonds, stocks, real estate etc so as to reduce the volatility and risk to their portfolio by holding investments that have a low correlation to one another.

К ВОПРОСУ О ФОРМИРОВАНИИ НАВЫКОВ ФИНАНСОВО ГРАМОТНОГО ПОВЕДЕНИЯ МОЛОДЕЖИ

The modern reality, characterized by rapid changes, economic instability, and growing competition in almost all spheres of human activity, directly affects the strategies of economic behavior of the population, the choice of which is reflected in its level and quality of life. In this regard, there is an urgent question of the formation and development of skills in managing one’s funds to make economically competent decisions when interacting with participants in financial and economic relations. The aim of this study is to identify the necessary skills for the implementation of financial literacy strategies by young people as an active and promising audience in terms of using a variety of financial instruments. This article presents a theoretical discourse, as well as the results of an expert survey, which allow us to identify the classification of the most relevant and important skills necessary to solve the designated problem, among which we can distinguish hard, soft, and meta-skills. The author considers financial literacy (technical and intellectual) to be among the hard skills; among the soft skills, the most in-demand in the field of personal finance management, are emotional intelligence, self-discipline, responsibility, continuous self-education, effective thinking, and information hygiene. Meta-skills are represented by self-knowledge and awareness of oneself and what a person translates outside. Certain conclusions and provisions of the article can serve as starting points for improving the development programs of the institutional and educational environment to form financially competent strategies.

THE IMBALANCES AND DISPRPORTIONS OF THE WORLD AND DOMESTIC SECURITY MARKETS

The modern structure of the world security market and peculiarities of domestic market development are investigated. The stock market imbalance was identified and clearly demonstrated. Imbalances in the development of securities markets in different regions of the world are manifested, both in market capitalization and in transaction volumes, in the nature of transactions, in the variety of financial instruments, etc. The assessment of the structure of the world market made it possible to identify regional peculiarities of the stock markets. Current trends in the development of leading stock exchanges are analyzed. There is a tendency to increase operations with financial derivatives and increase the value of international transactions The dynamics and structure of the Ukrainian stock market have been analyzed and a number of its features have been identified: insignificant volumes of securities transactions, predominance of government debt securities in the market structure, insignificant use of derivatives both for hedging and for speculative purposes. The problem of exit and stay of Ukrainian issuers and traders on international stock exchanges is investigated. It is a complicated listing process, requires significant investment and high standards. The signs of disproportionality and imbalance of world and domestic stock markets, which have different origin and causes, are revealed.

Behavioral Factors in Equity Allocation Decisions: A Large-Scale Experimental Study With Context

ABSTRACTTraditional models of rational behavior struggle to explain how individuals allocate their money over a variety of financial instruments, including annuities, the stock market, and risk-free bonds. This study uses a large and diverse data set from an investment experiment that is rich in context and captures some important features of actual financial decision making. The focus of the article is to build on the literature documenting behavioral explanations for investment choices by studying the equity allocation decision across different financial tools. The authors find evidence that risk aversion, inertia, and excessive extrapolation are associated with investment behavior even when it is clear that return rates are independent across decision-making periods. Further, subjects have an asymmetric response to positive versus negative returns. In addition to having a novel experimental design, the authors also examine behavior before and after the recent financial crisis. The authors find that the financial crisis indirectly affects the first-stage annuity take-up rate in the experiments vis-à-vis a higher average level of risk aversion after the start of the crisis.

Empirical Studies on China's Write-Down Bonds

The world economy continues to develop, prosperity and crisis coexist. The global financial crisis and the European debt crisis brought unstable factors to the world economy, and the security of global financial system was challenged. To cope with the crisis in the future, worldwide financial regulators urged the banks to establish emergency capital mechanism and enhance the ability to remove risks. Thus, the concept of contingent capital emerged as the times require, a variety of financial instruments with the quality of contingent capital were developed one after another. In 2013, the China Banking Regulatory Commission (CBRC) applied ideas of contingent capital in China. The CBRC added the “write down” or “convert to stocks” items into the secondary capital instruments, opened a new chapter of the issuance of write-down bonds in China. In this paper, we employ the data of China’s commercial banks and write-down bonds, empirically studied the influencing factors of the write-down bonds’ issuance and the effects of write-down bonds on commercial banks. The results show that the size of banks and Tier 1 capital adequacy ratio are the most significant influencing factors. The size is proportional to the absolute quantity of issued write-down bonds, inversely proportional to its relative quantity, and Tier 1 capital adequacy ratio is on the contrary. Also, we find that the quantity of issued write-down bonds is proportional to issuing bank’s Tier 1 capital adequacy ratio, inversely proportional to its Tier 2 capital ratio and so on. We systematically studied the relationships between the write-down bonds and the capital, assets of commercial banks in China.

The Possibility of the Adoption of Iraqi Banks for Financial Engineering

Financial engineering is an appropriate tool to find innovative solutions and new financial tools that banks need to maintain a variety of financial instruments and products to manage their financial and investment structure and hedge their risks.
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 *بحث مستل من رسالة ماجستير للباحث الثاني وباشراف الباحث الأول
 The current study seeks to study the possibility of adopting financial engineering by the Iraqi private banks, by presenting the experience of the the Kurdistan international bank for Investment and development in the field of financial engineering.
 The study used a number of quantitative methods to analyze the historical data of the Kurdistan international bank for Investment and development for the period (2008 - 2015) to identify the areas of financial engineering adopted by the Bank.
 The main conclusions of the study are that Kurdistan international bank for Investment and development adopts a lot of traditional financial engineering tools in solving solutions to the problems of the financing structure and devising solutions to the problems of the investment structure. It also adopts financial engineering in the fields of risk management, which indicates the possibility of adopting financial engineering in an environment Kurdistan Region of Iraq in particular and Iraq in general.
 The study presented a number of proposals, the most important is that the Kurdistan international bank for Investment and development should look for more opportunities to create new financing and investment tools.

Model01: Quantifying the Risk of Incremental Model Changes

DV01, the dollar value impact of a 1 basis point change in a yield curve is one of the most basic and widely used measures of market risk. Similar quantities and sensitivities have been defined for other parameters or “risk drivers” for a given, fixed model. In this present work we provide a meaningful and intuitive notion of Model01, which attempts to capture the analogue of a “1 basis point” bump in the space of models, beyond simple parametric changes. Importantly, our technique successfully calibrates each of these bumped models to the same set of liquid reference contracts. This turns out to be fundamental for a proper assessment of Model01 among exotic portfolios, and allows a meaningful comparison of the Model01 dollar value against the total reference price of a portfolio. Using the same procedure, it is possible to compute Model01 for single trades or portfolios of multiple trades, across different asset types and underliers, due to the flexibility of Weighted Monte Carlo techniques, on which it relies. The literature on quantification of model risk is limited. We will highlight the main features of R. Cont on model uncertainty and P. Glasserman and X. Xu on model risk, and compare Model01 against these approaches. The contributions from the present effort are manifold. We put forward the Hellinger distance as a more intuitive and genuine metric in the space of probability distributions, in contrast with relative entropy, which is more commonly used in the financial literature. We highlight connections between Model01 and an active area of research called information-geometry. This field applies the methods of differential geometry to the problem of statistical inference, and in particular, the problem of defining intuitive notions of distances across probability distributions. The problem at hand is strongly related, with a meaningful quantification of model uncertainty calling for a normalized measure of distances in the space of models. A fruitful connection and further explorations of these ideas should come then as no surprise. We motivate an interpretation of relative entropy as a distance squared. We employ this to analyze P. Glasserman and X. Xu techniques and cast them in rescaled units, revealing a linear dependence of their risk profiles which can be explained and proved. To the authors' best knowledge, these contributions represent novel undertakings in the financial literature, with the Hellinger distance, the interpretation of relative entropy and the introduction of information-geometry techniques being put forward in the context of model sensitivity for the first time in this present work. We apply the techniques of information geometry to shed light into relative entropy and the Hellinger distance, and reveal a natural Riemannian geometric structure in the parameter space of the alternative, bumped models used to compute Model01. The application of these concepts further enriches the interpretation of our results. Armed with these techniques, we demonstrate that Model01 intrinsically depends on the effective marginal covariance between a set of liquid instruments used for model calibration, and a portfolio of more exotic products. As the level of “exoticity'' or illiquidity of this portfolio increases, so does Model01. Model01 represents a flexible tool, potentially applicable to a wide variety of financial instruments, providing a glimpse into portfolios' model sensitivity, in a unified way.

Ageing Population in India: Select Economic Issues

The citizens of India are enjoying a longer life and better living conditions as a result of increased life expectancy, increased standard of living as well as medical advancement. The longevity of life, if not planned well for retirement, could imply a high fiscal burden for the government on account of providing for healthcare of the elderly in the absence of proper insurance and inefficient public healthcare system. Despite the efforts by the Government to introduce new policies, the elderly lack the security needed in old age and live with a low social status with increasing reports of financial deprivation, abandonment and humiliation. Also, the need for developing financial market infrastructure for pension funds cannot be overlooked. The study recommends a number of initiatives that can be undertaken in time for the care of the elderly by the government, so that addressing financial burden can be better planned and addressed. The paper, more importantly, suggests that financial literacy and a variety of financial instruments should be considered by the government to address the issues of ageing population in India.

The financial crisis and intangible value

The concept of ‘finance’ or the ‘financial system’ can be confusing. The assumption is that the financial system consists of related markets trading in a variety of financial instruments that are ultimately of a similar nature. In the late-19th century, however, financial assets have bifurcated into broadly two classes of property titles: incorporeal assets and intangible assets. This article argues that interrelations between the two classes of assets have generated pro-cyclical trends that are not dealt with by current regulation. It argues that these pro-cyclical trends can be even more confusing in the age of globalisation.

Capital Regulation for Position Risk in Banks, Securities Firms and Insurance Companies

We examine why these regulatory differences exist and what they imply for differences in minimum capital requirements for position risk. We consider differences in the definition and measurement of regulatory capital and we quantify differences in the capital charges for position risk by reference to a model portfolio that contains a variety of financial instruments including equity, fixed income instruments, swaps, foreign exchange positions, and options - instruments that may appear in the portfolios of securities firms, banks or insurance companies. For most leading firms in the financial services industry, however, market forces, not minimum regulatory capital requirements, appear to play the dominant role in firms' capital decisions. Thus we conclude by considering measures to enhance market discipline.

Finanzierungsinstrumente für unterschiedliche Gründungs-Modelle

The practise of start up financing has developed an impressive variety of financial instruments. The article covers the interdependencies between differing start up models (e.g. start into self employment, start up of a corporation, mbo/mbi) and financing processes and financial instruments. For this purpose typical financial features of those start up models are analysed.

REGULATION OF FINANCIAL MARKETS: TOWARD A FOCUSED APPROACH

Regulation of financial markets arose in a simpler time when transactions were carried out face to face on an exchange floor or in a banker's office—when trading was localized and the variety of financial instruments was small. Today the task of regulators is much more difficult. Markets are global, trading takes place in cyberspace, and the variety of financial instruments is limitless.The initial focus, and still the central concern, of our regulatory system is to ensure full corporate disclosure and transparency of trading markets. But regulation today goes far beyond disclosure requirements. The existing tendency to expand regulation to match the expanding financial markets is likely to be inefficient, unwieldy, and too costly, given the increased complexity and global nature of financial markets. A new approach and a new regulatory mindset are needed—one in which regulators aim to identify and provide only necessary regulation rather than simply continuing to expand regulatory oversight. Such a focused approach to regulation would separate what is regulated from what is not. Those aspects of banking that are essential to the integrity of the payments system would be regulated while other aspects would not. Some securities and derivatives markets would be regulated, while others would not. And market participants would be able to choose which markets to participate in. Given an ever‐expanding financial system, such a focused approach to regulation is not only the most cost effective one—it is also likely to prove the only workable alternative to a system that is now under great pressure.

The Impact of GNMA Futures Trading on Cash Market Volatility

Excerpt] A general conclusion that can be drawn from theoretical analyses of spot market volatility when futures markets exist is best summarized by Turnovsky [1983, p. 1364] who states under their (theoretical studies) respective assumptions, the futures market almost certainly stabilizes the “spot price. This suggests that trading in futures contracts may originate when cash markets experience considerable volatility. Indeed, futures trading on a variety of financial instruments was initiated shortly after periods of historically high interest rates.