Academic literature on the topic 'Hedging tools'

The objectives of the thesis are to describe financial derivatives in a theoretical way and the situations in which they can be applied. How multinational corporations can take advantage of them in different kind of activities. Thesis consist of three chapters. In first chapter there are considered opportunities and threats for a domestic company to expand its activities abroad. It includes the consideration of which necessary activities must be taken prior to the expansion and which most important analysis must be carried out. Finally there is presented the way of dealing with a risk of currency fluctuations and the analysis of exposures that a multinational corporation must face. The second chapter includes a theoretical description and pricing of various types of financial derivatives. It is divided into section of options, futures with forward and swaps. All derivatives type is considered as a tool for hedging and speculations. There are also presented possible outcomes of using derivatives in situations when a market is not in equilibrium and arbitrage possibilities exist. In the third chapter a practical case of a multinational corporation is used as an expample of Lufthansa Group. There are investigated the types of exposures for running a business that this multinational faces and which types of derivatives are used to deal with them. It is analyzed the value of financial derivatives in that corporation, the internal policy to use them, the prerequisites to apply them and the effect of financial derivatives on a company's profitability and financial position.

Thesis (S.M. in Real Estate Development)--Massachusetts Institute of Technology, Dept. of Architecture, 2007.<br>This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections.<br>Includes bibliographical references (p. 75-76).<br>By isolating credit as a distinct asset class, credit derivatives provide new vehicles for synthetically trading and transferring credit exposure of commercial real estate without buying or selling the physical assets. Recent developments of CMBS index-based synthetics, namely the CMBX, have allowed systematic market exposure to a basket of CMBS credit default swaps. The creation of these credit derivatives indices has enabled market participants to trade rating-specific risk, hedge against market-wide credit risk, and express a macro view within the CMBS sector. This thesis identifies the key underlying source of credit default risk as the commercial real estate market itself, and explores the concept of a CMBS default risk synthetic that is based on transaction-based commercial property price index movements. Such indices would allow investors to more precisely target and hedge the particular risk in their CMBS portfolios that is exposed to specific commercial real estate markets tracked by the indices. The thesis proposes a methodology for the new synthetic product to approximately replicate the credit loss behavior of specific rated tranches of a CMBS. This thesis utilizes Monte Carlo simulation to test the hedging performance of the proposed property price index-based synthetic, considering both cash flow correlation and hedge ratio analyses. The results reveal that the effectiveness of the hedge varies depending on the investor's horizon or degree of temporal precision the investor seeks in the hedge, as well as the target tranche rating. The hedge ratio is very dynamic throughout the life of the synthetic, suggesting that the investor buying the synthetic for hedging purposes would need to rebalance his position accordingly.<br>(cont.) The author believe that the possibility of utilizing commercial property price indices to structure equity index-based credit derivatives, as demonstrated by methodologies in this thesis, will enhance investment and risk management strategies for CMBS investors, facilitating access to the breadth and depth of existing real estate equity indices. Further pioneering efforts in the development of credit derivatives will be a catalyst for a tremendous growth in the CMBS market.<br>by Juthatham Bo Chirathivat.<br>S.M.in Real Estate Development

碩士<br>中國文化大學<br>財務金融學系<br>104<br>Subject to the increase of the liberalization of financial markets, the performance of the business is significantly related to the market risk. Therefore, the company usually utilized high financial leverage of derivatives to hedge the risk. When the company chose different hedging instruments to faced a variety of exchange rate risk, therefore we employ the Multinomial Logistic-AHP to analyze the impact of various derivatives. Hence, the research summarized by the literature relevant factors affecting managers selected exchange rate hedging instruments, furthermore, using Multinomial Logistic Model and and further integrate AHP. Using Experts’ Questionnaires can test multi-level selection and hedging effect of different hedging instruments in order to calculate the hedging instruments and the multi-level factors of weights to understand the gap between the empirical results and practical operation. Finally, the Multinomial Logistic-AHP Model will sorted the weights to analyze. The research findings can be a basis reference for investors in decision-making.

碩士<br>國立高雄應用科技大學<br>金融系金融資訊碩士班<br>104<br>In response to constant innovation and development for warrants, it is first issued in July 2011 in Taiwan for callable bull/bear contracts. It is essential for securities dealers that they should adopt which hedging strategies and which hedging tools to avoid the risks. In general, securities dealers use stocks as hedging tools. Comparing with stocks, this study investigates the efficiency of using Exchange Traded Funds (ETF). There are three advantages of using ETF: (1) The underlying stock may be limited by liquidity problems, resulting in trading failure with the underlying stock. ETF is nearly no problems of liquidity. (2) The underlying stock may be affected by external influences, resulting in the price-limit. ETF is a stock portfolio and thus the price-limit is rarely found. (3) Stock transaction tax is 3 ‰, whereas ETF transaction tax is 1 ‰. Hence, this paper derives the solution of ETF hedging strategy model, and compares the transaction cost and performance of hedging strategies of warrants and callable bull contracts. Four hedging strategy models are used: (1) Delta. (2) Market move discipline. (3) Lag discipline. (4) Delta-Gamma. The empirical results show that, for warrants and callable bull contracts, average transaction cost of using ETF hedging is lower than stock hedging in market move discipline. Furthermore, average performance of using ETF hedging is better than stock hedging portfolio in daily and three days of delta hedging, market move discipline, 3% and 5% of lag discipline, daily and five days of delta-gamma hedging. And, better average performance of using ETF hedging does mainly come from lower transaction costs.

碩士<br>國立中央大學<br>財務金融學系碩士在職專班<br>98<br>The currency hedging related studies in Taiwan merely focus on parts of the variables rather than all of them together. Scenarios in this empirical study are designed for USD/TWD hedging with different hedging positions, strategies, tools and period lengths. Hedging positions for simulation include ‘Naïve Hedge’ and ‘Optimal Ratio Hedge’. Strategies consist of ‘Periodic Hedge’, ‘Advantaged Selective Hedge’ and ‘Neutral Selective Hedge’. Tools contain ‘Forward Contract’ and ‘Option’. And period lengths cover ‘1 Week’, ‘1 Month’, ‘2 Month’, ‘3 Month’ and ‘6 Month’. G-K Option Pricing Model are applied with transaction cost so that all the different scenarios can be compared at a neutral and consistent basis. The result shows that: First, hedging by option is superior to forward. Second, the best length of currency hedging is one to three months. Third, periodically hedging by option with minimum variance ratio can get the best hedging effectiveness in most scenarios except while TWD depreciates sharply or fluctuates in a narrow band.

碩士<br>國立臺灣大學<br>財務金融學研究所<br>97<br>In the middle of 2007, since Bear Stearns hedge funds suspended redemption, the credit market turmoil prevailed. With Bears Stearns being taken over and Lehman Brothers ending in bankruptcy, credit default swap spreads spiked to historical high level. A lifer’s credit position had suffered huge loss if it held sub prime related investments or collateralized debt obligation (CDO). A manager can hedge its loss by using credit default swap to hedge the loss in default. However, regulatory or credit line limitations may prompt he/she to use other hedge tools. A negative relationship exists in a firm’s share price and credit spread. With the fall in equity buffer, the credit spread reflecting credit risk is likely to widen as well. Therefore, our study utilizes share short selling as a method to hedge against credit risk. By using a regression, a hedge ratio is determined by the return of share short-selling and long credit default swap position. Then, the hedge results are determined by dynamically rebalancing the hedge position. In order to achieve better hedge results, adjustments are made to the hedge ratio using the return’s correlation and standard deviation. We conclude by suggesting life insurance companies shall utilize the market opportunities to form a credit reserve for future potential credit loss.

碩士<br>中國文化大學<br>財務金融學系<br>103<br>In response to the trend of the rapid international financial integration, it is a common practice for Taiwan’s enterprises to operate financial derivatives for hedging. However, most of the previous literature focuses on foreign exchange risk, while sel-dom discusses the interest risk of high level of correlation with operating costs. Hence, this study will discuss about vertical integration and virtual integration business models of Taiwan semiconductor industry choosing hedging tools when facing interest risk. There are four steps in my research. First, through literature review to sum up the in-fluence on the factor of choosing hedging instruments for interest rate by managers and using analytical hierarchy process (AHP) to build the framework of two-business mod-el. To continue, using Multinomial Logistic to empirical the hedging products to in-fluence by the factor. Moreover, integrated Multinomial Logistic and AHP to select the optimum hedging product when facing interest risk in Taiwan semiconductor industry. Finally, comparing two empirical results of two-business model and finding the differ-ence. It is expected that the findings of this research can provide a mode of Multinomial Logistic-AHP application procedures in academic. In practical, providing a complete evaluation tools for relevant enterprises and investors with a reference in making deci-sions for using financial products for hedging purposes.