Thesis (MBA)--Stellenbosch University, 1984. / The capital market is a field of very specialised financial knowledge and expertise. The latter is concentrated in relatively few people who manage vast portfolios of such assets. I was introduced to the South African capital market early in 1983. In an effort to comprehend the intricacies of my new surroundings I started to look for something to read to answer the many questions I had. Very little is written about the South African capital market, even more so for readers who are not well acquainted with this subject. This technical report endeavours to fill such a need. It surveys risk, risk management and strategy formulation pertaining to the holding of a single or portfolio of bonds. Chapter 1 is a general introduction. It surveys the growth of the capital market, the reason for such growth and briefly points out the parameters of thereof. It introduces the financial intermediaries that are responsible for the matching of demand and supply and briefly points out the difference between the money- an capital markets. Three important concepts, yield to maturity, a yield curve and the price calculation of a bond is explained and three important general shapes that the yield curve might adopt, is introduced. Chapter 2 takes account of the risk that is presently associated with the holding of a single or a portfolio of bonds. The effects of inflation, changes in the level of applicable yield to maturities and the reinvestment risk is explained and quantified given a particular scenario of ex ante contingencies. Less quantifiable elements of risk, namely, marketability, political and default risk and the role of emotions and expectations, are discussed and possible problems in this regard are pointed out. Chapter 3 turns to a more theoretical discussion of risk. It looks at the expected rate of return on a single or portfolio of bonds and reviews the method of measuring expected risk in terms of a standard deviation. Chapter 3 concludes by making the important remark that risk is an esoteric concept which is based on an expected scenario of contingencies of each investor. Central to the discussion is the formation of a scenario pertaining to the relevant variables concerning the bond investment market. Chapters 4 and 5 are dedicated to two lesser known concepts, duration and immunisation. Each bond has its own unique duration. That is the time period during which a loss of capital value will be exactly equal to the gain in interest earned on invested coupons received in the case of an upwards move in the applicable yield to maturity curve, and vice versa. Chapter 5 uses this feature to immunise a bond portfolio against loss of return. This method, however, needs considerable study before it can be used as a portfolio management tool since it is based on parallel movements of the yield to maturity curve. Chapter 6 introduces a new· feature, namely options on bonds, of the South African bond market. It defines options and explains the strategic utilization thereof in both bear and bull markets. Chapter 7 is a practical discussion of strategy formulation in the bond market. It defines strategic decision making and describes the investment process, and its dynamics in terms of strategy formulation and execution. Active and passive portfolio management and the main problem encountered in South Africa pertaining to strategy execution are briefly discussed. Two different portfolio tactics that are employed, namely, options and switching, to enhance portfolio performance (earnings) are introduced. The chapter makes mention of the present state of the art of portfolio management and concludes that portfolio managers must above all be people who can cope with, and anticipate change.

Thesis (M.Com. (Business Finance))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Economic and Business Sciences, 2017 / The writer studies the short-run determinants of bond yield volatility in South Africa (SA) by analyzing the impact that global factors –representing global funding conditions – have on the changes to the rand denominated generic 10-year government bond yield (SAGB). This is followed by a one-period forward forecast of this volatility. The explanatory variables tested in this study are as follows: net bond purchases by foreign investors, Chicago Board Options Volatility Index (VIX), JP Morgan Emerging Market Bond Index (JP EMBI) spread, the US dollar to SA rand (USDZAR) exchange rate, the SA 5 year credit default swap (CDS) rate, the 12 month interest rate expectation/9x12 forward rate agreement (FRA), dollar spot price of gold and dollar spot price of oil. The study period ranges from January 2000 to December 2015. The GARCH modelling technique is used due to its ability to capture the volatility clustering effects observed in time series return data. The writer used the Gaussian distribution as the default model, however in order to control for the skewness and fat-tails in financial market return data, the Student-T and Generalised Error distributions are also tested to see if the non-normally distributed bond returns could be better captured by alternative parametric assumptions. The results show that all the explanatory variables, with the exception of the FRA, are statistically significant in explaining volatility in the local generic 10-year government bond. / GR2018

A credit default swap is a contract that ensures protection against losses occurring due to a default event of an certain entity. It is crucial to know how default should be modelled for valuation or estimating of credit derivatives. In this dissertation, we first review the structural approach for modelling credit risk. The model is an approach for assessing the credit risk of a firm by typifying the firms equity as a European call option on its assets, with the strike price (or exercise price) being the promised debt repayment at the maturity. The model can be used to determine the probability that the firm will default (default probability) and the Credit Spread. We second concentrate on the valuation of credit derivatives, in particular the Credit Default Swap (CDS) when the hazard rate (or even of default) is modelled as the Vasicek-type model. The other objective is, by using South African credit spread data on defaultable bonds to estimate parameters on CIR and Vasicek-type Hazard rate models such as stochastic differential equation models of term structure. The parameters are estimated numerically by the Moment Method. / Thesis (M.Sc.)-University of KwaZulu-Natal, Durban, 2013.

Text in Afrikaans / Die doel van saaklike sekerheidstelling is om 'n saak as eksekusievoorwerp tot die beskikking van die kredietgewer te stel. Vorderingsregte as sekerheidsobjekte voldoen hieraan en moet daarom as deel van die saakbegrip beskou word. Vorderingsregte word in die praktyk as sekerheidsobjekte aangewend of by wyse van sekerheidsessies of deur middel van die registrasie van 'n notariele verband daaroor. Alhoewel die regspraak by sekerheidsessies voorkeur gee aan 'n verpandingskonstruksie, is Scott van mening dat 'n algehele sekerheidsessie nog moontlik is. Die toepassing van die verpandingskonstruksie lewer aanvaarbare resultate en voldoen meestal aan die kontrakterende partye se behoeftes. Die vereiste van publisiteit by pandreg sal egter in sekere gevalle nie vir die partye aanvaarbaar wees nie en kan algehele sekerheidsessies hier 'n oplossing bied. By notariele verbande is die bestaande posisie ingevolge waarvan 'n onderskeid gemaak word tussen liggaamlike en onliggaamlike sake as sekerheidsobjekte, onuithoudbaar en is wetgewing in die verband nodig. The aim of real security is to have objects available to a creditor for execution. Personal rights may be used for this purpose and should therefore be included in the definition of property. In practise claims (personal rights) are used as security objects by way of a security cession or through the registration of a notarial bond over the claims. Although the courts give preference to personal rights in security by way of pledge, Scott is of the opinion that these decisions do not exclude out-and-out security cessions. The results that application of the law of pledge causes, are acceptable and will mostly fulfil the need of the parties. In certain situations the requirement of publicity will however be unacceptable in which instance out-and-out security cessions may be the solution. The current position where a distinction is made between corporeal and incorporeal property as security objects, is unacceptable and legislation is needed in this regard. / Private Law / LL.M.

In South Africa, over-the-counter (OTC) bond options may be used in order to either hedge or speculate. However, since 2001, this market deteriorated significantly. The current research assessed the role of the local bond option market, reasons for the deterioration of the South African OTC bond option market, and how this bond option market could possibly be restored as a primary hedging instrument. The opinions of individuals operating in this market were obtained using a questionnaire. In the opinion of the respondents, wide bid–offer spreads, regulatory interferences and poor participation within this market caused market deterioration. The market could be restored as a hedging instrument if effective market integration exists, interbank trading regularly takes place, liquidity was enhanced, transparency increased and investor knowledge improved. Future research could focus on regulatory transformation, the types of derivatives used for hedging, and an assessment of appropriate continuous professional development interventions for investors. / Business Management / M. Com. (Business Management)

This research established the determinants of the investment choices between the RSA Government Retail Bonds and the stokvel by salaried individuals. The research carried out a comparative analysis between the two investment instruments. The main data was drawn from FinMark for the period 2011 to 2015. The research used a combination of data tables and graphs to analyse frequency (distribution) of use in each of the investment choices. The research used Pearson’s Chi square and Fishers’ t-test to determine the distribution, independence and Cramer’s V coefficient was applied to establish the correlation between the investment choices and the demographic under review. The outcome of the research indicated that more than risk or return inherent in the investment instruments under review, social, psychological and cultural disposition towards these investment instruments played a significant part in influencing the investment choices under review. Furthermore, lower educated individuals at low salary levels had the highest usage in stokvel and the highly educated at the higher level of education opted to invest in the RSA Government Retail Bonds. There was a very low usage in both the investment instruments by the ‘no formal education’ and primary education levels. Pearson’s Chi square and Fishers’ exact tests indicated that, race, education, location and salary levels can be used to explain the differences in investment choices between the RSA Government Retail Bonds and stokvel. According to these tests, age was statistically insignificant to explain the effects of the demographics under review on making investment choices. The results indicate that racial, educational, salary and location differences need to be properly factored into the policy development in so far as investment and savings are concerned. / Finance, Risk Management and Banking / M. Com. (Business Management)

Text in Afrikaans / Die doel van saaklike sekerheidstelling is om 'n saak as eksekusievoorwerp tot die beskikking van die kredietgewer te stel. Vorderingsregte as sekerheidsobjekte voldoen hieraan en moet daarom as deel van die saakbegrip beskou word. Vorderingsregte word in die praktyk as sekerheidsobjekte aangewend of by wyse van sekerheidsessies of deur middel van die registrasie van 'n notariele verband daaroor. Alhoewel die regspraak by sekerheidsessies voorkeur gee aan 'n verpandingskonstruksie, is Scott van mening dat 'n algehele sekerheidsessie nog moontlik is. Die toepassing van die verpandingskonstruksie lewer aanvaarbare resultate en voldoen meestal aan die kontrakterende partye se behoeftes. Die vereiste van publisiteit by pandreg sal egter in sekere gevalle nie vir die partye aanvaarbaar wees nie en kan algehele sekerheidsessies hier 'n oplossing bied. By notariele verbande is die bestaande posisie ingevolge waarvan 'n onderskeid gemaak word tussen liggaamlike en onliggaamlike sake as sekerheidsobjekte, onuithoudbaar en is wetgewing in die verband nodig. The aim of real security is to have objects available to a creditor for execution. Personal rights may be used for this purpose and should therefore be included in the definition of property. In practise claims (personal rights) are used as security objects by way of a security cession or through the registration of a notarial bond over the claims. Although the courts give preference to personal rights in security by way of pledge, Scott is of the opinion that these decisions do not exclude out-and-out security cessions. The results that application of the law of pledge causes, are acceptable and will mostly fulfil the need of the parties. In certain situations the requirement of publicity will however be unacceptable in which instance out-and-out security cessions may be the solution. The current position where a distinction is made between corporeal and incorporeal property as security objects, is unacceptable and legislation is needed in this regard. / Private Law / LL.M.

In South Africa, over-the-counter (OTC) bond options may be used in order to either hedge or speculate. However, since 2001, this market deteriorated significantly. The current research assessed the role of the local bond option market, reasons for the deterioration of the South African OTC bond option market, and how this bond option market could possibly be restored as a primary hedging instrument. The opinions of individuals operating in this market were obtained using a questionnaire. In the opinion of the respondents, wide bid–offer spreads, regulatory interferences and poor participation within this market caused market deterioration. The market could be restored as a hedging instrument if effective market integration exists, interbank trading regularly takes place, liquidity was enhanced, transparency increased and investor knowledge improved. Future research could focus on regulatory transformation, the types of derivatives used for hedging, and an assessment of appropriate continuous professional development interventions for investors. / Business Management / M. Com. (Business Management)

A real security right improves a creditor’s chances of recovering a debt owed to him by the debtor. In the case of an ordinary pledge, the pledgor delivers physical control of his movable property to his creditor to serve as security for the repayment of the principal debt. The increasing value and use of movable property as an object of security coupled with technological advancement have resulted in many countries calling for legal reform of real security rights over movable property. In South Africa this led to the introduction of the Security by Means of Movable Property Act 57 of 1993 which makes provision for a pledge without possession. The Act regulates only special notarial bonds and does not apply to general notarial bonds. The real security right vests in the bondholder upon registration of the bond, provided that the movable property encumbered is described in a notarial bond in a way that makes it readily recognisable. The Act has substituted delivery with registration in the Deeds Registry. Registration of the notarial bond in the Deeds Registry is questioned as to whether it complies with the publicity principle. This is because movable property can be shifted from one place to another without any knowledge on the part of the creditor due to the inaccessible and costly registration system. The third party then receives the property subject to the real security right of the creditor. The substitution of delivery with registration is the controversial feature in this study. Linked to the legal problems regarding compliance with the publicity principle, is the description and identification requirement as provided for under the Act, the exclusion of general notarial bonds from the application of the Act, and the question of whether it is appropriate to regard special notarial bonds as pledges without possession. This study questions whether the current land registry system should be used for the registration of notarial bonds and suggests that a new system designed specifically for the registration of real security rights over movables be considered. I compare the position in the Belgian legal system as regards developments in real security rights over movables to identify possible solutions and recommendations for the South African approach. / Private Law / LL. M.