Dissertations / Theses: 'Rate hedging'

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Jangenstål, Lovisa. "Hedging Interest Rate Swaps." Thesis, KTH, Matematisk statistik, 2015. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-169390.

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This thesis investigates hedging strategies for a book of interest rate swaps of the currencies EUR and SEK. The aim is to minimize the variance of the portfolio and keep the transaction costs down. The analysis is performed using historical simulation for two different cases. First, with the real changes of the forward rate curve and the discount curve. Then, with principal component analysis to reduce the dimension of the changes in the curves. These methods are compared with a method using the principal component variance to randomize new principal components.
Den här uppsatsen undersöker hedgingstrategier för en portfölj bestående av ränteswapar i valutorna EUR och SEK. Syftet är att minimera portföljens varians och samtidigt minimera transaktionskostnaderna. Analysen genomförs med historisk simulering för två olika fall. Först med de verkliga förändringarna i forward- och diskonteringskurvorna. Sedan med hjälp av principalkomponentanalys för att reducera dimensionen av förändringarna i kurvorna. Dessa metoder jämförs med en metod som använder principalkomponenternas varians för att slumpa ut nya principalkomponenter.

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Wanga, Godwill George. "Hedging Exchange Rate Risks." ScholarWorks, 2017. https://scholarworks.waldenu.edu/dissertations/3373.

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Risks associated with fluctuating exchange rates affect investment cost and investor profitability. Approximately 50% of firms in emerging markets have significant exposure to fluctuating exchange rates. Grounded in principal-agent theory (PAT), the purpose of this case study was to explore hedging strategies to mitigate risks of fluctuating exchange rates. The population comprised a census sampling of 12 bank hedgers (risk managers and controllers) in Dar es Salaam in Tanzania, East Africa. Data collection involved semistructured interviews, casual observations of the work environment, and analysis of reports including risk management, internal control, and compliance policies. Data were analyzed by coding and grouping narrative segments and significant statements into themes of participants' experience in hedging exchange rate risks. Method triangulation and member checking were used to increase the trustworthiness of interpretations. Four themes emerged directly related to the PAT conceptual framework: training and skills development, management of hedging strategies and contracts, corporate governance, and benefits to management and the organization through effective compensation programs. A focus on training and skill development helped develop appropriate exchange rate hedging strategies and corporate governance improved compliance with laws, regulations, and policies. The benefits of effective hedging strategies include a reduction in cost and increase in profitability. The findings may help improve the soundness of professional hedging practices, which will increase the stability of the Tanzanian banking system.

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Ziervogel, Graham. "Hedging performance of interest-rate models." Master's thesis, University of Cape Town, 2016. http://hdl.handle.net/11427/20482.

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This dissertation is a hedging back-study which assesses the effectiveness of interest- rate modelling and the hedging of interest-rate derivatives. Caps that trade in the Johannesburg swap market are hedged using two short-rate models, namely the Hull and White (1990) one-factor model and the subsequent Hull and White (1994) two-factor extension. This is achieved by using the equivalent Gaussian additive-factor models (G1++ and G2++) outlined by Brigo and Mercurio (2007). The hedges are constructed using different combinations of theoretical zero-coupon bonds. A flexible factor hedging method is proposed by the author and the bucket hedging technique detailed by Driessen, Klaasen and Melenberg (2003) is tested. The results obtained support the claims made by Gupta and Subrahmanyam (2005), Fan, Gupta and Ritchken (2007) and others in the literature that multi-factor models outperform one-factor models in hedging interest-rate derivatives. It is also shown that the choice of hedge instruments can significantly influence hedge performance. Notably, a larger set of hedge instruments and the use of hedge instruments with the same maturity as the derivative improve hedging accuracy. However, no evidence to support the finding of Driessen et al. (2003) that a larger set of hedge instruments can remove the need for a multi-factor model is found.

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Vocke, Carsten. "Hedging with multi-factor interest rate models /." [St. Gallen] : [s.n.], 2005. http://www.gbv.de/dms/zbw/503121223.pdf.

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Suppakitjarak, Nathridee. "International portfolio diversification and hedging exchange rate risk." Thesis, University of Birmingham, 1998. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.668332.

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Bhamani, Feroz. "Hedging Interest-Rate Options Using Principal Components Analysis." Master's thesis, University of Cape Town, 2018. http://hdl.handle.net/11427/29250.

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It is often a goal of the risk management of a portfolio of interest rate sensitive instruments to minimize the impact of movements in market rates on the value of the portfolio. This can be done by considering the sensitivity of the portfolio to each of the market rates that are used to bootstrap a yield curve. However, this is likely to lead to an excessive amount of trading due to an investment in a large number of hedging securities. As an alternative, we consider using principal components analysis (PCA) to condense most of the variability in the market rates into a much smaller number of risk factors, called the principal components. One can then construct a hedging portfolio so as to make the portfolio immune to shocks in these principal components, and hence to the most common movements in the yield curve. We compare the effectiveness of these two hedging strategies for hedging a portfolio of interest-rate options, both in the absence and presence of transaction costs. We also consider the additional feature of being able to update each hedging methodology on a daily basis and rebalance the hedge portfolios accordingly.

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Strom, Christopher Solon. "Pricing and hedging in an incomplete interest rate market." Thesis, University College London (University of London), 2008. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.506807.

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This thesis explores pricing models for interest rate markets. The model used to ':describe the short rate is based on the discontinuous shot noise process. As a consequence the market is incomplete, meaning that not all securities contingent on the short rate can be replicated perfectly with a dynamically adjusted portfolio of a bond and cash. This framework is still consistent with the absence of arbitrage as evidenced by the existence of an equivalent martingale measure. This measure is not unique, however, due to the incompleteness of the market. Two approaches to pricing contingent claims are pursued. The first, risk-neutral pricing, evaluates the expected value of the pay-off at expiration under an equivalent martingale measure. A parameterized class of martingales, based on the Esscher transform, allows for the definition of a flexible set of equivalent martingale measures and results in a formula for the conditional joint Laplace transform of the short rate and its time-integral. The pricing formula for a discount bond follows trivially from these results. A method for pricing a European call option is also proposed, requiring numerical inversion of the aforementioned Laplace transform. The second approach, mean-variance hedging, addresses the incompleteness of the market. A contingent claim is priced by forming a portfolio of a bond and cash. The portfolio is dynamically updated to .mimic the pay-off of the claim at expiration. The replicating portfolio is restricted to be self-financing and predictable. This approach leads to a closed-form pricing formula for a discount bond and formulae for European call and put options, requiring the numerical Laplace inversion methods mentioned above. All this is in the context of a discrete-time model that includes as a special case a discrete-time version of the shot noise process.

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Kamgaing, Moyo Clinsort. "Optimal hedging under price, quantity and exchange rate uncertainty." Thesis, Massachusetts Institute of Technology, 1986. http://hdl.handle.net/1721.1/37696.

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Thesis (M.S.)--Massachusetts Institute of Technology, Sloan School of Management, 1986.
MICROFICHE COPY AVAILABLE IN ARCHIVES AND DEWEY
Bibliography: leaf 46.
by Moyo Clinsort Kamgaing.
M.S.

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Thomas, Michael Patrick. "Long term extrapolation and hedging of the South African yield curve." Diss., Pretoria : [s.n.], 2009. http://upetd.up.ac.za/thesis/available/etd-06172009-085254.

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Spitz, David Evan. "Optimization models for foreign exchange rate hedging using currency options." Thesis, Massachusetts Institute of Technology, 1989. http://hdl.handle.net/1721.1/33479.

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Edwards, Paul. "Quantile hedging interest rate derivatives using the Libor market model." Thesis, Imperial College London, 2005. http://hdl.handle.net/10044/1/11361.

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Kanas, Angelos. "Exchange rate economic exposure and hedging : the significance of currency options." Thesis, Aston University, 1993. http://publications.aston.ac.uk/10870/.

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This thesis focuses on the theoretical examination of the exchange rate economic (operating) exposure within the context of the theory of the firm, and proposes some hedging solutions using currency options. The examination of economic exposure is based on such parameters as firms' objectives, industry structure and production cost efficiency. In particular, it examines an hypothetical exporting firm with costs in domestic currency, which faces competition from foreign firms in overseas markets and has a market share expansion objective. Within this framework, the hypothesis is established that economic exposure, portrayed in a diagram connecting export prices and real exchange rates, is asymmetric (i.e. the negative effects depreciation are higher than the positive effects of a currency depreciation). In this case, export business can be seen as a real option, given by exporting firms to overseas customer. Different scenarios about the asymmetry hypothesis can be derived for different assumptions about the determinants of economic exposure. Having established the asymmetry hypothesis, the hedging against this exposure is analysed. The hypothesis is established, that a currency call option should be used in hedging against asymmetric economic exposure. Further, some advanced currency options stategies are discussed, and their use in hedging several scenarios of exposure is indicated, establishing the hypothesis that, the optimal options strategy is a function of the determinants of exposure. Some extensions on the theoretical analysis are examined. These include the hedging of multicurrency exposure using options, and the exposure of a purely domestic firm facing import competition. The empirical work addresses two issues: the empirical validity of the asymmetry hypothesis and the examination of the hedging effectiveness of currency options.

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Ren, Yu. "Pricing, hedging and testing risky assets in financial markets." Thesis, Kingston, Ont. : [s.n.], 2008. http://hdl.handle.net/1974/1238.

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Chen, Jian. "Three essays on mortgage backed securities hedging interest rate and credit risks /." College Park, Md. : University of Maryland, 2003. http://hdl.handle.net/1903/338.

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Thesis (Ph. D.) -- University of Maryland, College Park, 2003.
Thesis research directed by: Business and Management. Title from t.p. of PDF. Includes bibliographical references. Published by UMI Dissertation Services, Ann Arbor, Mich. Also available in paper.

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Rahman, Mohammad N. "Examining exchange rate exposure, hedging and executive compensation in US manufacturing Industry." ScholarWorks@UNO, 2013. http://scholarworks.uno.edu/td/1664.

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In essay one, my primary objective is to see the sensitivity of foreign exchange rate risk on firm performance in US manufacturing industry and examine if the hedging help reduce the foreign exchange rate risk. I am particularly interested in manufacturing industry because of the nature of business operation of manufacturing firms. Manufacturing firms in US are not only exposed to foreign exchange fluctuation from sales and revenue but also are exposed to foreign exchange rate risk for procurement, placement and investment. I find that the firms with extreme foreign exchange rate risk exposure exhibit lower daily return and firms with very low foreign exchange rate risk exhibit higher daily return using the portfolio approach. I also find that the firms that hedge has lower foreign exchange rate exposure compared to firms that don’t hedge. The coefficient for hedge is negative and statistically significant. In essay two, I investigate the effect of executive compensation on exchange rate risk in US manufacturing industry. There is a large theoretical and empirical interest on executive compensation using agency framework that investigates the conflict of interest between shareholders and corporate executives. That interest has been largely aligned with the use of managerial performance dependent on observable measures of firm performance. Since US manufacturing firm is largely exposed to foreign exchange transactions by design, I investigate if the value of in-the-money unexercised vested executive stock option has any impact on foreign exchange rate exposure. I investigate if the value of in-the-money unexercised unvested executive stock option has any impact on executive stock option. Using pooled OLS, fixed effect panel data and random effect panel data, I find that in all 3 model value of in-the-money unexercised vested executive stock option has negative coefficient and is statistically significant. At the same time in all 3 models the value of in-the-money unexercised unvested executive stock option is positive and is statistically significant.

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Brodin, Therese, and Frida Harrysson. "Interest rate swap eller inte? : En studie om de största svenska företagens användning av interest rate swaps." Thesis, Södertörns högskola, Institutionen för samhällsvetenskaper, 2015. http://urn.kb.se/resolve?urn=urn:nbn:se:sh:diva-27845.

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Syfte: Syftet är att undersöka svenska storföretags användande av derivatet ränteswap (svensk benämning för interest rate swap) för år 2012 och 2013 samt att undersöka skillnader utifrån tidigare funna bakomliggande faktorer mellan företag som använder olika typer av ränteswaps och företag som inte använder ränteswap. Metod: Studien tillämpade en empirisk totalundersökning gällande de icke-finansiella företagen noterade på Nasdaq OMX Stockholm Large Cap för slutet på år 2012 respektive år 2013. Utifrån företagens årsredovisningar kategoriserades företagen i fyra grupper baserat på företagets användande av ränteswap. Fem tidigare funna bakomliggande faktorer för användandet av ränteswap sammanställdes genomsnittligt per kategori och jämfördes därefter kategorierna emellan. Resultat: Av de största noterade börsföretagen använde 29 av 40 stycken företag ränteswap år 2012 och 29 av 42 företag år 2013. Företag som använde rörlig ränteswap var signifikant större än de företag som inte använde ränteswap för år 2012 och 2013. År 2013 hade de företag som använde fast och båda typer av ränteswaps högre andel kortfristiga lån i jämförelse med de företag som inte använde ränteswap. Uppmätta skillnader kategorierna emellan för de resterande tre undersökta faktorerna; andel långfristiga lån, löptiden på företagens lån liksom företagens förväntade obeståndskostnader var inte signifikanta vilket innebar att de uppmätta skillnaderna inte kunde hänföras till svenska storföretag. Slutsatser: Över två tredjedelar av de undersökta företagen använde ränteswap. Storleken för företag som använde ränteswap var en urskiljande faktor i jämförelse med företag som inte använde ränteswap. För svenska storföretags andel kortfristiga lån för ett av de undersökta åren talar det mesta för att företag som använde ränteswap hade högre andel kortfristiga lån än företag som inte använde ränteswap. Skillnader i andel långfristiga lån, löptid på lån liksom förväntade obeståndskostnader kategorierna emellan kunde inte hänföras till svenska storföretag och därmed inte ses som urskiljande faktorer för användande av ränteswap.
Purpose: The purpose is to investigate the largest Swedish companies utilization of interest rate swap (afterwards referred to as IRS), as well as variations in the underlying factors between companies who use IRS and companies who do not. Methodology: The study applied an empirical investigation about the non-financial companies noted on Nasdaq OMX Stockholm Large Cap for the end of year 2012 and year 2013. By their annual reports, companies where divided into four categories based on their usage of IRS. Five earlier factors for the use of IRS were compiled per category and were then compared between the categories. Findings: 29 out of the 40 largest listed companies used IRS 2012, and 29 out of 42 companies 2013. The companies who used variable IRS were significantly larger than the ones who didn't use IRS. Companies who used fixed, and both types of IRS year 2013, had a higher proportion of short-term loans compared to the companies which didn't use IRS. Measured differences between the categories for the remaining three factors; proportion of long-term loans, duration on the companies loans as well as their expected distress costs was not significant which implicates that the measured differences could not be assigned to Swedish corporations. Conclusions: Over two thirds of the investigated companies used IRS. The size of the companies that used IRS was a factor which differed between companies who used IRS and the companies that didn't. The proportion of short-term loans showed a significant disparity for one of the investigated years indicated that the companies who used IRS have a larger proportion of short-term loans than the ones who don't. Differences in the proportion of long-term loans, duration on loans and expected distress costs between the categories could not be assigned to Swedish corporations.

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Görgin, Robert, and Sergejs Gogolis. "Implementation of IAS 36 by Swedish Banks : Interest Rate Swaps in Hedging Applications." Thesis, Jönköping University, JIBS, Business Administration, 2005. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-119.

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In 2005, all groups listed on European stock exchanges are required to prepare their consolidated financial statements according to International Financial Reporting Standards (IFRS). IFRS are different from local regulations across Europe in many aspects, and observers expect the transition process thorny and resource-draining for the companies that undertake it.

The study explores transition difficulties by Swedish bank groups on the way of implementing IAS 39, Financial Instruments: Recognition and Measurement. Deemed the most controversial and challenging standard for adoption by the financial sector, it indeed poses new demandson classification, recognition and measurment of financial instruments, and sets out new hedge accounting rules, previously unseen in Swedish practice. Additionaly, the structure of bank's balance sheets makes IAS 39 also the central one among all other standards in terms of numbers of balance sheet items it impacts.

The study uses qualitative method to explore whether transition to IAS 39 is likely to improve transparency in reporting derivatives. Focus is on use of interest rate swaps as hedging instruments in mitigation of interest rate risk.

It is concluded that differences between two reporting frameworks have been well understood by the banks early in the implementation process. A negative feature of the standard is increased volatility in earnings as a result of more wide-spread reliance on fair value measurement method. This accounting volatility impedes comparability of performance results, as well as conceals true efficiency of economic hedge relationships. To some degree, the volatility can be minimized by the application of hedge accounting. However, a bank must methodically follow a set of rigourous if hegde accounting is to be adopted. Fair value is a more straightforward alternative to hedge accounting , but it brings in additional concerns, and has not yet been endorsed in the EU.

It is additionally argued that recognition of all derivatives on BS and measurement at fair value are two important features of IAS 39 that indeed increases reporting transparency by minimizing risk of undisclosed hidden losses.

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Görgin, Robert, and Sergejs Gogolis. "Implementation of IAS 39 by Swedish Banks : Interest Rate Swaps in Hedging Applications." Thesis, Jönköping University, IHH, Företagsekonomi, 2005. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-119.

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In 2005, all groups listed on European stock exchanges are required to prepare their consolidated financial statements according to International Financial Reporting Standards (IFRS). IFRS are different from local regulations across Europe in many aspects, and observers expect the transition process thorny and resource-draining for the companies that undertake it. The study explores transition difficulties by Swedish bank groups on the way of implementing IAS 39, Financial Instruments: Recognition and Measurement. Deemed the most controversial and challenging standard for adoption by the financial sector, it indeed poses new demandson classification, recognition and measurment of financial instruments, and sets out new hedge accounting rules, previously unseen in Swedish practice. Additionaly, the structure of bank's balance sheets makes IAS 39 also the central one among all other standards in terms of numbers of balance sheet items it impacts. The study uses qualitative method to explore whether transition to IAS 39 is likely to improve transparency in reporting derivatives. Focus is on use of interest rate swaps as hedging instruments in mitigation of interest rate risk. It is concluded that differences between two reporting frameworks have been well understood by the banks early in the implementation process. A negative feature of the standard is increased volatility in earnings as a result of more wide-spread reliance on fair value measurement method. This accounting volatility impedes comparability of performance results, as well as conceals true efficiency of economic hedge relationships. To some degree, the volatility can be minimized by the application of hedge accounting. However, a bank must methodically follow a set of rigourous if hegde accounting is to be adopted. Fair value is a more straightforward alternative to hedge accounting , but it brings in additional concerns, and has not yet been endorsed in the EU. It is additionally argued that recognition of all derivatives on BS and measurement at fair value are two important features of IAS 39 that indeed increases reporting transparency by minimizing risk of undisclosed hidden losses.

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Lehner, Zachary M. "Determinants of exchange rate hedging an empirical analysis of U.S. small-cap industrial firms." Honors in the Major Thesis, University of Central Florida, 2011. http://digital.library.ucf.edu/cdm/ref/collection/ETH/id/459.

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Using a sample of 141 U.S. small-cap industrial firms, I examine the firm characteristics that influence its use of foreign exchange derivatives to hedge exchange rate risk. Companies in the industrial sector produce goods and services that are used for the production of another final product. The performance of this sector is closely correlated to the level of demand from the final consumer. I find firm size, the amount of foreign sales, and firm liquidity influence the firm's decision to use foreign exchange derivatives to hedge exchange rate risk. For those firms that hedge exchange rate risk using derivatives, a second test examines the firm characteristics that influence the extent of its hedging activities. I find the extent of hedging is influenced by the amount of foreign sales, the amount of foreign assets, and the number of foreign subsidiaries the firm operates. A final test examines whether certain firm characteristics influence its decision to use options as part of its hedging operations. I find no evidence that the firm characteristics examined herein influence that decision.
B.S.B.A.
Bachelors
Business Administration
Finance

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Chimanga, Taurai. "Interest Rate Derivatives : An analysis of interest rate hybrid products." Thesis, Stockholms universitet, Matematiska institutionen, 2011. http://urn.kb.se/resolve?urn=urn:nbn:se:su:diva-56450.

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The globilisation phenomena is causing an increasing interaction between different markets and sectors. This has led to the evolution of derivative instruments from ”single asset” instruments to complex derivatives that have underlying assets from different markets, sectors and sub-sectors. These are the so-called hybrid products that have multi-assets as underlying instruments. This article focuses on interest rate hybrid products. In this article an analysis of the application of stochastic interest rate models and stochastic volatility models in pricing and hedging interest rate hybrid products will be explored.

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McCarron, Sean. "Reducing exchange rate risk and exposure: The value of foreign exchange currency hedging strategies." CSUSB ScholarWorks, 2004. https://scholarworks.lib.csusb.edu/etd-project/2534.

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The topic researched for this project will be foreigh exchange hedging; the available forms, the uses, the procedures, and the value. This project will expand beyond the typical research and examine the value of hedging through the use of different foreign exchang currency trading strategies to small multinationational corporations.

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van, de Wiel Wimjan, and Bock Felix Kristopher. "Real Estate Financing and Interest Rate Hedging : A quantitative real estate investment case study." Thesis, Internationella Handelshögskolan, Högskolan i Jönköping, IHH, Företagsekonomi, 2017. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-36235.

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Background: The expansive monetary policy of the European Central Bank has been leading to all-time-low interest rates and to a strong move into real estate investment. Low interest rates can work in favor of the investor (due to low interest rate expenditures), but increasing interest rates can jeopardize real estate investments. Since changes in interest rates are unpredictable, an investor needs to deal with this volatility. The capital market offers several financial instruments (so-called “derivatives”) to overcome the above-mentioned obstacle. There is no “one-size-fits-all” strategy. The investor needs to decide which financing structure to combine with which form of derivative. Purpose: The investigation not only explains and shows how real estate financing and hedging strategies on a given project in Germany can work but also explains why it is crucial to link these segments. To achieve this purpose, the return on equity and return cash flows at risk are numerically estimated. The evaluative purpose will be served by using the above-mentioned ratios and cash flows to derive recommendations of action. In doing so, this study will illustrate the importance of hedging, particularly for real estate investors and investors in general. Method: Interest rates on a monthly basis for the period of June 1990 until March 2017 from Thomson Reuters Eikon and real life data from a German real estate investor and a German financial institution were collected. Thereafter, these numbers were used as a basis to perform interest rate and cash flow simulations (Monte Carlo). The simulations were used to determine superior financing and hedging strategies for the investor. Conclusion: The results of this study highlight the benefits from leveraged financing and the necessity of interest rate risk management (hedging) to obtain stabilized future cash flows and reduce volatility caused by fluctuating interest rates. Fixed rate loans offer protection against rising interest rates, but lack flexibility. Floating loans offer more flexibility but are riskier due to the unhedged interest rate exposure.

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Martinez, Deisell. "A New Paradigm to Reduce Nursing Rate Impact on Health Service Organizations (HSOs) Through Hedging." Scholarly Repository, 2010. http://scholarlyrepository.miami.edu/oa_dissertations/647.

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Nursing costs account for over 50% of Health Service Organizations budgetary expenses. In a financially contracting Healthcare market that is amidst the focus of current National and International economic concerns and political agenda, here a counter-intuitive method to minimize exposure to rising nursing costs. Healthcares conundrum is marked by rising nursing costs, growing patient population, rising uninsured rates and decreasing insurance reimbursements. Participants traditionally focus on nurse staffing to minimize costs, but in its inextricable link to scheduling, budgets are often inaccurately projected as compared to actual staffing quantities and costs; this is largely due to front-line staffing policies and unpredictable nursing rates. This paper presents a nationwide experimental and empirical study of ten healthcare participants in a cross market Hedging application in Nursing Services as an approach to reduce exposure to rising nursing costs based on nursing rate volatility notwithstanding nursing quantity needs and day-to-day staffing decisions, and considering Options as a primary hedging approach to reduce budget disparity and yield nursing expense savings. Nursing monthly costs and demand were collected for all participants over varying range of time periods. A correlation analysis indicated that total nursing costs are highly correlated to nursing rate change, differing across participant types. Additionally, the data was analyzed for asset and options applicability, as well as tested for appropriateness of the Black-Scholes model for options pricing. The analysis concluded that nursing service qualifies as an underlying asset for options as a hedging technique and may be priced using the Black-Scholes model. The approach was tested on one of the participants, and indicated a savings of over 11% in nursing expenses and a decrease in budget disparity of approximately 14%. Hypothetical application across the non-tested participants alludes that the implementation results are likely to be sustainable across participant with dissimilar demographics.

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Lutembeka, Shedrack. "Hedging Interest Rate Derivatives (Evidence from Swaptions) in a Negative Interest Rate Environment: : A comparative analysis of Lognormal and Normal Model." Thesis, Mälardalens högskola, Akademin för utbildning, kultur och kommunikation, 2017. http://urn.kb.se/resolve?urn=urn:nbn:se:mdh:diva-34697.

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This thesis is about hedging interest rate derivatives in a negative interest rate environment. The main focus is on doing a comparative analysis on how risk varies between Lognormal and Normal models. This because Lognormal models do not work in the negative interest rate since they do not allow negative values, hence there is a need of using Normal models. The use of different models will yield identical price but different hedges. In order to study this we looked at the case of Swaptions and Swaps as an example of interest rate derivatives. To study risk in these two models we employed the method of risk matrices to measure and report risk. We created various risk matrices for both Black model and Normal Black model which included the price matrices, Delta and Vega matrices to study how Swaptions and Swaps with different maturities are sensitive to changes in different parameters. We also plotted how Delta and Vega vary between the two models.

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Fodor, Daniel. "Theoretical incentives vs. perceived motives for using interest rate derivatives in Swedish corporations." Thesis, KTH, Industriell ekonomi och organisation (Inst.), 2015. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-161227.

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The purpose of this research is to highlight if contemporary practices for using interest rate derivatives in large non-financial Swedish corporations are consistent with theoretical incentives for using such derivative instruments. Most theoretical incentives were developed before the financial crisis of 2007-08. The introduction of new regulations, accounting practices and pricing methods has changed the prices of derivatives and the administrative burden related to hedging. Traditional academic literature commonly gives eight incentives for why corporations use interest rate derivatives (described further in the thesis). Following surveys and interviews with 13 relevant corporate professionals, the study finds that three of the theoretical incentives strongly motivate corporate managers’ use of interest rate derivatives. Four other theoretical incentives are found to partially explain motives for corporate managers’ hedging practices, whilst one of the theoretical incentives is found to be an irrelevant motive for corporate managers in practice. In addition to the tested incentives, the study finds that Swedish corporations which occasionally raise capital in non-functional currencies actively use cross-currency swaps to convert outstanding non-functional debt currency to the company’s functional currency. The practice is commonly recognised amongst industry professionals but not widely cited in academia. Compared to 10-15 years ago, treasury functions in Swedish corporations are found to require more knowledge in accounting and administration and less market savvy. During this period, the number of dealers in Swedish corporate treasury departments has been reduced significantly, as corporations have effectively outsourced part of their market operations to banks.
Denna uppsats undersöker om verkliga motiv och praxis för användning av räntederivat i svenska storföretag är förenliga med teoretiska incitament för räntederivatanvändning som ofta förekommer i akademisk litteratur. De flesta teoretiska förklaringsmodeller för företags användning av räntederivat utvecklades och beskrevs innan den globala finanskrisen 2007-08. Efter krisen har värderingen av räntederivat samt det administrativa arbetet kring instrumenten förändrats till följd av implementering av nya finansiella regler, bokföringsregler och prissättningsmetoder. Akademisk litteratur beskriver generellt åtta teoretiska incitament om varför företag använder räntederivat (vilka finns sammanfattade i detta arbete). För att verifiera teoretiska grunder och medvetenhet kring dessa teorier genomfördes en enkätundersökning samt djupintervjuer med totalt 13 beslutsfattare inom räntederivat i svenska storföretag. Studiens resultat ger starkt stöd till att tre av de teoretiska incitamenten i hög grad överensstämmer med verkliga motiv för användning av räntederivat, samt att fyra incitament delvis kunde förklara verkliga motiv, medan stöd saknades för ett teoretiskt incitament. Utöver de åtta testade incitamenten visar studiens resultat att det finns ett ytterligare motiv för användning av räntederivat: räntevalutaswappar används av flera svenska storföretag som emitterar obligationer i utländsk valuta för att konvertera pengar till företagets funktionella valuta. Förfarandet är känt inom industrin men understuderat i akademisk litteratur. Studien visar att kunskap inom bokföring och administration relaterat till finansiella derivat har blivit allt viktigare för svenska storföretags internbanker, medan vikten av att ha en aktiv marknadssyn minskat, jämfört mot 10-15 år sedan. Över denna tidsperiod har antalet handlare i storföretagens internbanker minskat kraftigt, då flera av funktionerna i praktiken har outsourcats till banker.

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Mun, Kyung-Chun. "Bank hedging in futures markets: an integrated approach to exchange and interest rate risk management." Diss., Virginia Tech, 1991. http://hdl.handle.net/10919/39770.

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Holilal, Amiel. "Choice of one factor interest rate term structure models for pricing and hedging Bermudan swaptions." Master's thesis, University of Cape Town, 2011. http://hdl.handle.net/11427/12619.

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Includes bibliographical references
This paper revisits pricing and hedging differences presented by Z. Guan, et. al., 2008 from a South African context. The Asset Liabilities Management (ALM) departments in large financial institutions are plagued by a number of problems. Among them is the choice of interest rate model for managing the risks associated with mortgage (home loan) repay-ments. This paper will address these problems by comparing various one-factor models, including Hull-White, Black-Karasinski and CIR models for the pricing and hedging of long-term Bermudan Swaptions which resembles mortgage loans in banks' books.

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Eaby, Jamie L. "A study of the use of hedging by bankrupt firms." Honors in the Major Thesis, University of Central Florida, 2000. http://digital.library.ucf.edu/cdm/ref/collection/ETH/id/189.

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This item is only available in print in the UCF Libraries. If this is your Honors Thesis, you can help us make it available online for use by researchers around the world by following the instructions on the distribution consent form at http://library.ucf.edu/Systems/DigitalInitiatives/DigitalCollections/InternetDistributionConsentAgreementForm.pdf You may also contact the project coordinator, Kerri Bottorff, at kerri.bottorff@ucf.edu for more information.
Bachelors
Business Administration
Finance

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Lindquist, Max. "The properties of interest rate swaps : An investigation of the price setting of illiquid interest rates swaps and the perfect hedging portfolios." Thesis, KTH, Matematisk statistik, 2012. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-103176.

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The main purpose of this thesis is to analyze the properties of various types of simple interest rates swaps, investigate how they depend on the swap rates of the liquid instruments on the market and the OIS-rates, and analyze how an illiquid instrument should be priced and hedged. The price setting tool used by the Fixed Income division at SEB Merchant Banking has been analyzed, and simulations of the hedging portfolios have been done over a time span of one year. The conclusions have been that it is impossible to hedge against the convex OIS rate dependence of the analyzed swaps and that, thought it might seem like a good idea, a dynamic hedge will lead to a much worse outcome than a static hedge

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Lagerstam, Catharina. "Hedging of contracts, anticipated positions and tender offers : a study of corporate foreign exchange rate risk and/or price risk." Doctoral thesis, Stockholm : Economic Research Institute, Stockholm School of Economics [Ekonomiska forskningsinstitutet vid Handelshögsk.] (EFI), 1990. http://www.hhs.se/efi/summary/306.htm.

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Whitehead, Peter Malcolm Scot. "On the choice and implementation of models for the pricing and hedging of interest rate contingent claims." Thesis, Imperial College London, 1999. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.325338.

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Oldřich, Tomáš. "Návrh metodických nástrojů řízení kurzových rizik." Master's thesis, Vysoké učení technické v Brně. Fakulta podnikatelská, 2007. http://www.nusl.cz/ntk/nusl-221582.

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Master’s thesis deals with analysis of specific business transactions, where company exchange-rate risks happen. On the basis of findings, the thesis includes the proposals of treasury instruments for exchange-rate loss minimalization.

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Herůfek, Michal. "Zajištění měny proti kursovým rizikům." Master's thesis, Vysoké učení technické v Brně. Fakulta podnikatelská, 2009. http://www.nusl.cz/ntk/nusl-222294.

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Diplomová práce analyzuje a doporučuje vhodné nástroje pro zajištění proti kurzovému riziku. Obsahuje teoretické poznatky z oblasti podnikových financí a zajištění kurzového rizika, analýzu mezinárodní firmy a návrh vhodného finančního nástroje pro zajištění kurzu měny.

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Arabi, Alireza, and Maziar Saei. "Simple foreign currency option Hedge strategies A comparison of Option contracts versus Forward contracts." Thesis, Mälardalens högskola, Akademin för hållbar samhälls- och teknikutveckling, 2010. http://urn.kb.se/resolve?urn=urn:nbn:se:mdh:diva-9977.

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The use of currency options has been grown widely during the latest years. This paper tries to answer whether hedge strategies using currency options are superior to forward exchange contracts or not.

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Cho, Young-Hye. "Time-varying betas and market microstructures in option markets /." Diss., Connect to a 24 p. preview or request complete full text in PDF format. Access restricted to UC campuses, 2000. http://wwwlib.umi.com/cr/ucsd/fullcit?p9981964.

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Cherrat, Hamza. "Eléments de Gestion Actif Passif : La gestion du Risque de couverture des marges de taux d'intérêt des dépôts à vue." Thesis, Cergy-Pontoise, 2019. http://www.theses.fr/2019CERG1021.

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Le résumé de cette thèse et d'évoquer les différentes missions de l'ALM bancaire ainsi que les risques financiers qu'elle prend en charge et rappelé certains points de réglementation, nous proposons de nous intéresser à un sujet assez caractéristique des questions soulevées par le métier d'ALM, à savoir la gestion du risque de taux d'intérêt sur les dépôts à vue dans le cadre de leurs rémunérations. Rappelons que, dans un bilan, on distingue le Banking Book, une partie consacrée au bilan des ressources et des emplois liés à la clientèle c'est-à-dire la sphère opérationnelle. En fait, comme beaucoup d'autres départements d'une banque, l'ALM a un objectif de rendement dans certaines limites de risque. Les enjeux sont relativement importants pour les établissements financiers. Par exemple, la banque de détail constitue depuis longtemps une source de revenus stable et pérenne pour les établissements et le marché attache une grande importance à leur capacité à conserver cette caractéristique. D'autre part, des postes comme les dépôts de la clientèle constituent autant de ressources de liquidité disponibles à moindres coûts et ce n'est pas un point à négliger dans le contexte particulièrement tendu depuis la crise de 2008. Le management du risque déterminé par les marges de taux d'intérêt liées aux dépôts à vue d'une banque, ce qu'on appelle l'Interest Rate Margin. Celui-ci est défini comme la différence entre le taux de marché et le taux dépôt auxquels, on multiplie un certain montant de dépôts. Nous supposons que les dépôts à vue sont liés à la fois aux taux d'intérêt et au risque commercial qui ne peut être entièrement couvert sur les marchés financiers. La dynamique des taux de marché à terme suit un modèle de marché standard et tient compte d'une certaine prime de risque associée à l'investissement dans des actifs à long terme. Les taux des dépôts en Zone US sont déterminés par le taux M2 own rate, c'est pour cette raison que la Fed s'intéresse à la grandeur M2 own rate qui se calcule comme le taux moyen des ressources de M2 pondéré par les encours. Dans le cas de la zone Euro, on parle du taux de dépôt ou de rémunération. Les taux de rémunération dépendent des taux de marché et notamment les taux Euribor 3 Mois. Nous remarquons notamment que, lorsque les taux de marché sont faibles, les taux de rémunération des dépôts le sont aussi. Les taux de dépôt ou de rémunération sont liés aux taux du marché de manière linéaire (ou non linéaire). Nous adoptons le point de vue d'un gestionnaire actif-passif qui se concentre sur le bénéfice d'exploitation net de la banque à un trimestre donné selon les règles comptables habituelles, confronté à l'inachèvement du marché et traitant des dérivés sur taux d'intérêt, nous distinguons deux types de stratégies de couverture: la couverture au sens quadratique; la couverture au sens des quantiles et de l'expected shortfall. Pour ces deux types de stratégie, nous considérons deux niveaux d'information : l'une portant uniquement sur l'information relative aux taux d'intérêt et l'autre incluant également le montant courant des dépôts à vue
The summary of this thesis and to evoke the different missions of the banking ALM as well as the financial risks it takes on and recall some regulatory points, we propose to focus on a subject quite characteristic of the issues raised by the ALM profession, namely the management of interest rate risk on sight deposits as part of their remuneration. It should be recalled that, in a balance sheet, a distinction is made between the Banking Book, a section devoted to the balance sheet of customer-related resources and uses, i.e. the operational sphere. In fact, like many other departments of a bank, the ALM has a return objective within certain risk limits. The stakes are relatively high for financial institutions. For example, retail banking has long been a stable and sustainable source of income for institutions and the market attaches great importance to their ability to maintain this characteristic. On the other hand, items such as customer deposits constitute liquidity resources available at lower costs and this is not a point to be neglected in the particularly tense context since the 2008 crisis. The management of the risk determined by the interest rate margins related to a bank's demand deposits, known as the Interest Rate Margin. This is defined as the difference between the market rate and the deposit rate at which a certain amount of deposits is multiplied. We assume that demand deposits are linked to both interest rates and commercial risk that cannot be fully hedged in the financial markets. The dynamics of forward market rates follow a standard market model and take into account a certain risk premium associated with investing in long-term assets. The deposit rates in the US zone are determined by the M2 own rate, which is why the Fed is interested in the M2 own rate, which is calculated as the average rate of M2 resources weighted by outstanding amounts. In the case of the Euro zone, we talk about the deposit or remuneration rate. The interest rates depend on market rates and in particular the Euribor 3 Month rates. In particular, we note that, when market rates are low, so are deposit rates. Deposit or remuneration rates are linked to market rates in a linear (or non-linear) way. We adopt the perspective of an asset-liability manager who focuses on the bank's net operating income in a given quarter under normal accounting rules, faced with unfinished business and dealing with interest rate derivatives, we distinguish two types of hedging strategies: quadratic hedging; quantile and expected shortfall hedging. For these two types of strategies, we consider two levels of information: one dealing only with interest rate information and the other also including the current amount of demand deposits

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Barumwete, Lyna Alami, and Feiyi Rao. "Exchange rate risk in Automobile Industry: An Empirical Study on Swedish, French and German Multinational Companies." Thesis, Umeå University, Umeå School of Business, 2008. http://urn.kb.se/resolve?urn=urn:nbn:se:umu:diva-1788.

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Recently, both company executives as well as national media have claimed that short currency exchange rate fluctuations are negatively affecting the stock returns of certain firms. However, most previous studies focusing on companies in the US and Asia have been unable to find empirical support for a statistically significant linkage between firm value and exchange rate risk. By using a quantitative method with a deductive approach,the present research investigates if currency exchange rate movements impact the stock return of European based car companies with market interests in the US. By selecting French Renault and Peugeot, German Audi and BMW and Swedish Saab and Volvo, we were able to analyze three currencies exchange rates in our study: SEK/USD, SEK/Euro and Euro/USD. In addition, we included three macroeconomic factors: GDP, stock market index and Oil price to perform a multiple regression analysis. In consistency with the earlier studies, our results indicate that for five out of the six investigated companies, short movements in the three exchange rates do not significantly affect the stock returns of the companies investigated. By analyzing the annual report of the investigated companies, we found that derivatives instruments such as currency option, foreign exchange forwards, currency futures and currency swaps were used to hedge exchange risk. This might be one of the reasons why it was difficult to capture exchange rate risk. The fact that BMW was the only company showing a significant effect could indicate that the company is not applying the accurate hedging strategy. Another reason might be that the company is more exposed to exchange risk due to its large exporting activity compared to the other investigated companies.

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Silva, Allan Jonathan da. "A new finite difference method for pricing and hedging interest rate derivatives : comparative analysis and the case of the idi option." Laboratório Nacional de Computação Científica, 2015. https://tede.lncc.br/handle/tede/208.

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Conselho Nacional de Desenvolvimento Científico e Tecnológico - CNPq
Propomos um método numérico de diferenças finitas para substituir os esquemas clássicos utilizados para solucionar EDPs em engenharia financeira. A motivação para desenvolvê-lo advém da perda de precisão na tentativa de estabilizar a solução via up-wind no termo convectivo bem como o fato de que oscilações espúrias ocorrem quando a volatilidade é baixa, o que é comumente observado nos mercados de taxas de juros. Ao contrário dos esquemas clássicos, nosso método cobre todo o espectro de volatilidade da dinâmica das taxas de juros. Nós comparamos resultados analíticos e numéricos precificando e realizando o hedge de uma variedade de contratos financeiros de renda fixa para mostrar que o método que desenvolvemos é confiável e altamente competitivo. O método se adapta bem a derivativos exóticos de taxas de juros, incluindo um derivativo dependente da trajetória denominado Opção IDI (índice brasileiro de depósito interbancário). O método dá ênfase à abordagem realística da capitalização discreta do índice em detrimento da capitalização contínua explorada frequentemente na literatura.
We propose a second order accurate numerical finite difference method to replace the classical schemes used to solving PDEs in financial engineering. The motivation for doing so stems from the accuracy loss while trying to stabilize the solution via the up-wind trick in the convective term as well as the fact that spurious oscillation solutions occur when volatilities are low. This is actually the range that we commonly observe in the interest rate markets. Unlike the classical schemes, our method covers the whole spectrum of volatilities in the interest rate dynamics. We compare the analytical and numerical results by both pricing and hedging a variety of fixed income financial contracts to show that the method we developed is reliable and highly competitive. The method adapts well to exotic interest rate derivative securities, including a path-dependent derivative named IDI (the Brazilian Interbank Deposit Rate Index) option. The method highlights the use of the realistic discretely compounding interest rate scheme, in detriment of the continuously compounding case often exploited in the literature.

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Manevski, Bojan. "Theory and Practice of Management of Foreign Exchange Exposure." Master's thesis, Vysoká škola ekonomická v Praze, 2009. http://www.nusl.cz/ntk/nusl-10837.

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This academic paper gives explanation the main points of the foreign exchange market and the FOREX risk management strategies that companies develop. Reading trough this paper we get a clear overview of the Foreign Exchange market, the main players and their function. Get a detailed picture of the Exchange rate system, its development and current status; Hedging strategies and the central roll they have in the foreign exchange risk management of companies.

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Rocha, Raquel Mafra. "Fuel hedging e o impacto cambial : uma análise sobre os custos operacionais das companhias aéreas IAG e Finnair." Master's thesis, Instituto Superior de Economia e Gestão, 2019. http://hdl.handle.net/10400.5/20107.

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Mestrado em Contabilidade, Fiscalidade e Finanças Empresariais
A indústria aérea tem se deparado com a crescente volatilidade que tem existido no mercado do petróleo, uma vez que afeta os seus custos, tendo o combustível um peso de cerca de 30% dos custos operacionais da indústria. Esta situação leva ao uso de várias estratégias de gestão do risco do combustível por parte das companhias aéreas, com o objetivo de redução dos custos do combustível e eliminação da volatilidade dos preços de mercado. Face a situação atual nos mercados, este trabalho visa analisar os custos operacionais de duas companhias aéreas, a IAG e a Finnair. Tem o objetivo de estudar a evolução das receitas e dos custos que as organizações incorreram com as atuais estratégias de hedging do combustível e da taxa de câmbio para assim poder comparar os resultados obtidos pelas diferentes estratégias utilizadas e identificar qual das duas foi a mais eficiente. Iniciamos o estudo através de uma análise da estatística descritiva dos custos e receitas operacionais de cada empresa, recorrendo a medidas standard da aviação. Posteriormente, recorremos a regressões lineares para estudar o impacto do preço do petróleo e como o câmbio interfere no custo unitário do combustível, utilizando variáveis de controlo nas regressões.
The Aviation industry as struggled against the increased volatility that exists in the oil market, affecting its costs, with the fuel weighing 30% in the industries operational costs. This situation leads to the adoption of several risk management strategies for fuel by aviation companies with the goal of fuel cost reduction and thus mitigating the volatility in market prices. In light of current market situation, this work aims to study the operational costs of two airlines, IAG and Finnair, the goal is to check the evolution of their costs an revenues against their hedging strategies for both fuel and currency exchange and thus comparing results achieved by both airlines and find the most efficient one. The study began with a statistical analysis of operational costs and revenue for both entities using standard aviation metrics and later integrating linear regressions to study the impact of oil (price) and currency exchange rate in the cost of fuel, control variables were also used.
info:eu-repo/semantics/publishedVersion

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Lukášová, Helena. "Řízení kurzového rizika v podnicích zaměřených na export." Master's thesis, Vysoká škola ekonomická v Praze, 2011. http://www.nusl.cz/ntk/nusl-161862.

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The aim of this Diploma thesis is to describe and explain how to identify, quantify and eliminate negative effects of exchange rate fluctuation. Both internal and external methods of hedging are considered. A recommendation of an appropriate complex hedging strategy relating to a specific Czech technological company forms the second part of the thesis. This provides a guidance to practical use of the theoretical relations described in the first part.

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Figueira, Raquel de Sousa Pereira Pinho. "Hedging of product import in the oil industry : the case of currency risk." Master's thesis, Instituto Superior de Economia e Gestão, 2012. http://hdl.handle.net/10400.5/10365.

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Mestrado em Finanças
Este relatório foca um caso de cobertura de risco e um contrato específico da OZ Energia para importação de Diesel, com a exposição de propostas de cobertura desses riscos através de instrumentos financeiros. Como metodologia é utilizada uma abordagem de case-study, com o enfoque na análise de um evento de negócio real, com uma extensa apresentação dos riscos de mercado, de taxa de juro, de crédito e cambial. A análise é baseada no investimento realizado em 2011. A escolha do período de tempo é justificada pela importação de combustível por parte da empresa nesse ano, o qual não foi totalmente coberto. Assim, este trabalho procura dar respostas e soluções para um hedge perfeito da posição da empresa. Diferentes estratégias são estudadas e cenários simulados com base em dados do período entre Dez-08 e Jun-12 sob dois diferentes ângulos - custo e receita. A definição da melhor estratégia é feita através da comparação para ambas as perspectivas. São ainda realizados stress tests por forma a avaliar os resultados.
In this report we focus on an hedging case and on a particular contract used by OZ Energia for Diesel import, through the identification of hedging solutions using different financial instruments. A case-study approach is used as method, given that the report is the result of an event within a real business context, with an extensive presentation of market, interest rate, credit and currency risks. The analysis is based on the investment of 2011. The choice of time period is justified by the Diesel import made by OZ Energia over the course of that year, which was not fully hedged. Thus, this work seeks to provide answers and solutions to a perfect hedge on the firm?s position. Different strategies are studied and scenarios are simulated based on data for the period between Dec-08 and Jun-12 under two different angles - cost and revenue. The definition of the best strategy is done by comparing them for both perspectives. Stress tests are also performed in order to assess the results.

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43

譚丹琪. "Hedging interest rate risk with interest rate futures." Thesis, 1992. http://ndltd.ncl.edu.tw/handle/44141351315523049026.

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Cachola, Marta Filipa de Almeida. "Dynamic hedging - comparing alternative hedging approaches for an interest rate derivatives portfolio." Master's thesis, 2013. http://hdl.handle.net/10362/120366.

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In this study, we compare a widely used delta-hedging strategy with a more complex delta-gamma-hedging approach when applied to an interest rate derivatives portfolio composed of interest rate swaps, caps, floors and swaptions. In order to replicate the portfolio, we use market traded futures contracts on German bunds with two different maturities, 15-and 30-years. Even though a delta-gamma-hedging should always be more accurate than a simple delta-hedging, we reveal a practical situation where that does not appear to happen. We suggest that two possible explanations for this result may be based on the instruments’ payoff nature.1

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Lee, Yi-Chuan, and 李怡娟. "Pricing and Hedging of Interest Rate Swap." Thesis, 2001. http://ndltd.ncl.edu.tw/handle/65069556549026120554.

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碩士
國立臺灣大學
財務金融學研究所
89
Interest Rate Swap (IRS) constitutes 51% of world OTC derivatives position, which is the largest portion. It is obvious that IRS is the most important interest rate risk management tool in the word, but in Taiwan the IRS only constitutes 2% of OTC derivatives trading volume. The Securities and Futures Commission (SFC) plans to license securities firms for trading IRS now. Because securities firms are major players in the bond market, the participation of securities firms will stimulate not only the liquidity of NT dollar IRS market but also that of whole interest rate-related markets. As a trader in IRS market, the participator needs to understand the pricing and risk characters of IRS. Conventions of IRS can be modified to satisfied customers’ needs. This research discusses IRS convention variations and how to pricing IRS after those modification. Because of the illiquidity of NT Dollar IRS Market, IRS quotation (All in Cost, AIC) is usually used as discount rate in IRS settlement. As we know, the IRS quotation represents the geometric mean of the whole yield curve. Using the market quotation as discount rate will induce pricing error. This research use simulation to show the effect of using AIC as discount rate instead of using true yield curve. Referring to interest rate risk of IRS, form simulation we can find that the first order risk (Dollar Duration) and second order risk (Collar Convexity) of IRS are negatively related to interest rate level and the slope of yield curve and positively related to time to maturity. At floating rate reset date, the IRS Dollar Duration and Dollar Convexity both jump down but the Dollar Duration increase between two floating rate reset dates while Dollar Convexity decrease. Having those risk factors, IRS can be hedged through constructing a risk neutral portfolio with bond or be hedged as a fix rate position and a float rate position separately.

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Tsui-fen, Chung, and 鍾翠芬. "Cross hedging using foreign interest rate futures." Thesis, 1994. http://ndltd.ncl.edu.tw/handle/90964172590306091305.

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碩士
國立臺灣大學
國際貿易學系
82
Since the revise of "Bank Law" and deregulation in 1989 @　, the fluctuationof interest rate of money market in @　Taiwan is becoming larger than in America.There is great @　demand for hedging interest rate risk; however, there @　is noinstruments for hedging interet rate risk. So @　applying the concept of cross　hedge is a good method @　to use. @　The thesis first discusses the system of interest rate @　and finds the　 representative of hedging interest rate @　risk. Second, I review theories　of hedging interest @　rate risk using financial futures. Then, based on　the @　methods of Robert W. Kolb(1982), I implement an emperical study to evaluate the effectiveness of cross hedge: using T-Bill futures and domestic forward to hedge the commercial paper interest rate risk. The data is Jan.-March 1992, July-Sep. 1992, and March- May 1993. The hedge periods are 10, 30, 90 and 180 days. The conclusions of the study include: 1. the impact of hedge periods: the longer the periods, the larger is the gains(or losses). 2. the impact of the sample periods: the trend of interest rate in these two countries is not the same , so the effectiveness of hedging interest rate risk is uncertain. 3. the impact of different trend of long and short-term interest rate: When the short-term interest rate is rising but the long-term interest rate is declining, the effectiveness of the different hedging periods in the same sample period is different.

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47

Liu, Kang, and 劉鋼. "Inshore Commodity Hedging under Floating Exchange Rate." Thesis, 1994. http://ndltd.ncl.edu.tw/handle/93647957191556554039.

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48

Chen, Chi-Tsai, and 陳其財. "Exotic Interest Rate Derivative — Average Interest Rate Cap's Pricing, Hedging and Application." Thesis, 2001. http://ndltd.ncl.edu.tw/handle/64377581315706163015.

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Abstract:

碩士
國立臺灣大學
財務金融學研究所
89
Thesis Abstract: Hedging interest rate risk has become one of the most common and important type of a financial manager’s risk management activities. In the last decade several instruments have been developed to help the manager to control these risks, such as swaps, forwards rate agreements, caps and collars. Caps in particular are used whenever the manager wants to have a ceiling on the borrowing costs and at the same time wants to profit form lower interest rates. Some firms would view their objective as hedging their average cost of funds during an accounting cycle, rather than hedging individual payment. This study describe one such hedging vehicle: a cap on the average interest rate during a period. Longstaff (1995) showed how prices for average interest rate caps can be calculated, based on the Vasicek (1977) model for interest rates. Longstaff derives analytic valuation formulas for the average rate caps, since he assumes that the final payoff depends on the short rate at the averaging points, instead of some LIBOR rate, as is common in the financial industry. In the Vasicek model, future short rates are normally distributed and hence their average is also normally distributed and option prices can be readily calculated. Three-month LIBOR rates are no longer normally distributed, since three-month bond prices are lognormally distributed in the Vasicek model. Hence, one encounters the same difficulty in pricing average rate caps as for Asian Options on currencies. One has to calculate distributions of the sum of longnormally distributed variables, for which no analytic formulas exist. Several methodologies have been proposed for Asian Currency options (eg. Levy,1992 and Vorst,1992) .In this paper we describe the equivalents of some of these methodologies for average rate caps. Furthermore, we use the Hull-White model (1990) rather than Vasicek’s model, since the Hull-White model can be fitted to the actual term structure, which is not possible for the Vasicek model.

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49

Cheng, Li-Chi, and 鄭麗琪. "Market Concentration, Hedging and Exchange Rate Pass-through." Thesis, 2012. http://ndltd.ncl.edu.tw/handle/78034010904272429666.

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Abstract:

碩士
中原大學
國際經營與貿易研究所
100
Abstract Taiwan is an export-oriented country; therefore, export and economic growth are easily disturbed by the volatility of exchange rates. Since 1986, Taiwan has released the regulation of the exchange rate of New Taiwan dollar with respect to the US dollar. In 1989, Taiwan began to adopt the managed exchange rate system, which will enlarge the impact of exchange rate volatility on export. The aim of this paper is to evaluate the degree of pass-through, as the exporters face the change in exchange rates. In performing empirical estimation, we take the top four trade partners of Taiwan as sample objects, and employ the fixed effects model and error correction model. The estimation methods we use can improve the shortcoming originated from traditional least square method. Empirical results can be summarized as follows: 1. According to the estimation results of the fixed effects model, export prices are significantly influenced by market concentration ratio, consumer price level, interest rate differentials, and exchange rates (spot rate and forward rate). The negative estimated coefficient of spot rate reveals that the appreciation of foreign currency is helpful for Taiwan’s exporters to increase their export, satisfying the expectation of theoretical model. Additionally, the higher the market concentration ratio is, the larger the export price would be. The reason may be that these four countries have high dependence on the exports from Taiwan; therefore, as the concentration ratio increases, they are unable to search other import substitution, which in turn stimulate Taiwan’s export prices. Finally, as the prices of import substitutes increase, Taiwan’s export price also rise, implying that the beach effect for Taiwan’s exporters is not clear. 2. In the error correction model of export price measured by spot rate, the adjustment coefficient is -0.045312, meaning that as the last period of export price is not in its long-term equilibrium level, it will have a downward adjustment at the speed of 4.5312% in the next period. However, in the error correction model of export price measured by forward rate, the adjustment coefficient is -0.072363, meaning that as the last period of export price is not in its long-term equilibrium level, it will have a downward adjustment at the speed of 7.2363% in the next period. Evidently, the adjustment speed of the former model is smaller than the latter one.

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50

Hao, Yen-Jui, and 郝彥瑞. "An Investigation of Forward Exchange Rate Hedging Strategy." Thesis, 2011. http://ndltd.ncl.edu.tw/handle/10328613214873790767.

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Abstract:

碩士
國立東華大學
會計與財務碩士學位學程
99
With the impact of globalization, the volatility of exchange rate has been playing an important role in companies' foreign assets investment strategies. Since foreseen risks are derived from such volatility, it has become an increasingly significant issue on how to hedge them. Our main topic of this report is to discuss the hedging strategies of forward exchange contracts, and to compare hedging performances between both stable and unstable exchange rate periods. Using the basis of US Dollars, this report utilizes different hedging strategies and parameter settings between the years of 2006 and 2010. It evaluates the hedging performances when they are exchanged into Pounds, Francs, Euros, Canadian dollars, Yens, Australian Dollars, Singapore Dollars, and New Taiwan Dollars. First, we employ the five strategies: Un-Hedge, Naive Hedge, Part Hedge, Minimum-Variance Hedge and Lower Partial Moment. Then, we hold the forward contract for the period of one-month, two-month, three-month, six-month and a year, using different lengths of historical sample data to estimate optimal hedge ratio. Furthermore, we adopt Hedging Effectiveness and Sharpe Ratio to measure hedging performances under different currencies. Our findings strongly suggest that by adopting Lower Partial Moment hedging strategy, companies can lead to higher hedging performances prior to the financial crisis, when this report takes place. However, during the financial crisis from 2007 to 2010, we propose the Minimum-Variance Hedge strategy for companies, as to Lower Partial Moment hedging strategy. The reason of our choice is that the Minimum-Variance Hedge strategy considers the overall risk, and due to dramatic fluctuations of the exchange rate, such strategy outperforms the Lower Partial Moment hedging strategy, which only takes into account of downside risk. Moreover, our findings indicate that we are able to attain higher hedging performances if we expanding the length of time of our historical sample data.

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