This research focused on derivative instruments which are financial securities whose values are derived from the values of underlying assets, such as shares, bonds, currencies or interest rates. Derivatives are predominantly used to manage risks in portfolios (hedging) and trading (speculation). Derivatives have been used for centuries and have developed into one of the largest global financial markets. The most common derivative instruments available to investors are options, futures, swaps and contracts for difference, as they are fairly easy to understand and apply. During the 2008/2009 global financial crisis derivatives, especially credit derivatives, made headlines and although they did not cause the crisis, they accelerated it. Furthermore, the 2008/2009 financial crisis also increased the negative sentiments many investors have towards derivatives. As a result of the crisis the growth in the global derivatives market came to a halt for the first time in decades. In light of the above, the primary objective of this study was to gain a deeper understanding of derivatives trading in emerging markets, especially in the South African context, as these financial securities are very useful portfolio management tools. The aim of this study was to describe the current state of the South African derivatives market; to investigate the role that derivative instruments played in the 2008/2009 global financial crisis; and to identify the variables influencing investors’ decisions whether or not to include derivatives in their portfolios. Given the nature of the problem stated a qualitative or phenomenological research paradigm was adopted. This paradigm was deemed suitable given the exploratory nature of the research. Primary and secondary data for this study were obtained through semi-structured personal interviews with 21 experts in the South African financial services industry and through an extensive literature review, respectively. A research instrument, based on the literature review was developed to facilitate the interviewing process. The results of the empirical investigation show that although the majority of respondents use derivative instruments in managing their portfolios, the South African derivatives market is still in its development phase. Many investors do not use derivatives frequently as they lack knowledge about derivative instruments, receive uncompetitive prices, are restricted by rules and regulations as well as investment mandates. Fourteen variables were identified as having a possible impact on investors' decisions whether or not to use derivatives in their portfolios. The five variables identified in the empirical investigation as being the most important, were the level of information available and the transparency of price determination; investor’s knowledge of different derivative instruments; investor’s level of risk tolerance; the level of liquidity in the market; and investor's knowledge and familiarity with financial markets. The findings of this study suggest that financial institutions, selling and trading derivative instruments, should concentrate on these five variables to make derivatives more attractive investment alternatives for investors. In order for South African investors to consider derivatives as suitable investments more often, it is strongly recommended to educate investors better about these products and decrease the negative sentiments investors have towards derivatives. This should be done by showing and explaining to investors that derivatives are useful hedging and portfolio management tools. It is necessary to state the dangers and benefits of derivatives, as well as the features differentiating them. Financial institutions trading derivative instruments, local education facilities (e.g. universities) and financial markets related organisations should educate investors by providing various educational tools, such as online courses, booklets, seminars or presentations about derivative products on offer. Furthermore, it is highly recommended to make derivative markets more transparent through adequate and appropriate regulations. In that, investors are better protected from counterparty risks and trade in a safer environment due to clearing houses.

We present a tree algorithm, called the willow tree, for financial derivative pricing. The setup of the tree uses a fixed number of spatial nodes at each time step. The transition probabilities are determine by solving linear programming problems. The willow tree method is radically superior in numerical performance when compared to the binomial tree method. / Science, Faculty of / Mathematics, Department of / Graduate

The development and introduction of financial derivatives have great impact on modern finance. Option pricing theory has become a powerful tool to value and to understand these innovations. It is also an indispensable tool to calculate hedge ratios for risk measurement and management. On the one hand, the introduction of new financial derivatives has been blamed for making financial market more volatile and risky as evidenced in the financial markets of the USA and Japan, especially during the expiration of index futures and index options, On the other hand, the applicability of new pricing models to hedging strategies is essential in monitoring and managing option positions. This study tries to give some answers on first: whether the expiration of financial derivatives increases the volatility of the Hong Kong stock market; second: whether we can better hedge by straightly applying more elaborated option valuation models replacing the standard Black-Scholes model, which market participants commonly employed for hedging option positions. Part I of this article addresses the first question while Part II studies the second question. / Yung Hei Ming. / Source: Dissertation Abstracts International, Volume: 62-09, Section: A, page: 3138. / Supervisor: Zhang Hua. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2001. / Includes bibliographical references. / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest Information and Learning Company, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstracts in English and Chinese. / School code: 1307.

The international financial environment has become riskier due to the recent developments in product offerings and failure of regulation to keep abreast with these changes. The Global Financial Crisis exposed inadequacies of regulation, thus consensus on the need for comprehensive and uniform regulation was made by G-20 member states. Imposing exchange trading, clearing, reporting and capital requirements on the derivatives market are some of the ways of dealing with the problems caused by lax regulatory oversight. In this study, through the comparative analysis of derivatives regulation in South Africa, Brazil, India and Turkey, it was established that emerging countries are taking active steps to implement the G-20 agreement. Uniformity in the core rules was noted, with differences in the supportive legislation. Country specific rules which support the macroeconomic factors that are faced by these countries and the infrastructure available for regulatory execution are used amongst countries. The study concluded that current regulation in emerging countries is accommodative and regulatory differences are in line with economic factors in each country.

by Ng Hon Sun, Stephen & Poon Ming Him. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1995. / Includes bibliographical references (leaves 50-52). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iv / LIST OF TABLES --- p.v / LIST OF FIGURES --- p.v / ACKNOWLEDGEMENT --- p.vi / Chapter I. --- INTRODUCTION --- p.1 / Chapter II. --- CHARACTERISTICS OF WARRANTS AND THE NATURE OF HK WARRANT MARKET --- p.5 / Chapter II (i) --- Warrants Versus Call Options --- p.5 / Chapter II (ii) --- Historical Development of Warrants in Hong Kong --- p.6 / Chapter II (iii) --- Equity Warrants --- p.7 / Chapter II (iv) --- Derivative Warrants --- p.8 / Chapter II (v) --- The Risks of Derivative Warrants --- p.10 / High Inherent Risks --- p.10 / Complex Exercise Conditions and Conversion Adjustments --- p.10 / Chapter II (vi) --- Regulatory Environment of Derivative Warrants --- p.12 / Chapter III. --- LITERATURE REVIEW --- p.14 / Chapter IV. --- DATA AND METHODOLOGY EMPLOYED --- p.19 / Chapter IV (i) --- Date Employed --- p.19 / Chapter IV (ii) --- Methodology Employed --- p.24 / Chapter V. --- EMPIRICAL RESULTS AND INTERPRETATION --- p.28 / Chapter V (i) --- Market Trend Before and After Listing --- p.37 / Chapter V (ii) --- Trading Volume --- p.38 / Chapter V (iv) --- Volatility --- p.39 / Chapter VI. --- CONCLUSIONS --- p.44 / APPENDIXES --- p.46 / APPENDIX A STOCKS SELECTED FOR STUDY --- p.46 / APPENDIX B CONSTITUENT STOCKS OF HANG SENG INDEX --- p.47 / APPENDIX C HANG SENG INDEX 1993-1994 --- p.48 / APPENDIX D HANG SENG INDEX RETURN AND SELECTED STOCK UNADJUSTED MEAN RETURN --- p.49 / REFERENCES --- p.50 / LIST OF TABLES / TABLE 1 DERIVATIVE STOCK WARRANTS LISTING IN 1993 -1 994 --- p.21 / TABLE 2 COMPARISON OF PRE- AND POST- LISTING RETURNS --- p.28 / TABLE 3 EXCESS MARKET RATE OF RETURN AND CUMULATIVE EXCESS MARKET RATE OF RETURN --- p.32 / TABLE 4 MARKET MODEL RATE OF RETURN AND CUMULATIVE MARKET MODEL RATE OF RETURN --- p.33 / TABLE 5 β'S CALCULATED ON THE UNDERLYING STOCK --- p.33 / TABLE 6 MARKET TREND BEFORE AND AFTER LISTING OF DERIVATIVE WARRANTS --- p.37 / TABLE 7 EFFECTS OF DERIVATIVE WARRANT LISTING ON RISK CHARACTERISTICS OF UNDERLYING STOCKS --- p.41 / LIST OF FIGURES / FIGURE 1 SUMMARY OF THE REGULATIONS ON DERIVATIVE WARRANTS --- p.13 / FIGURE 2 WARRANT LISTINGS DISTRIBUTION MAP --- p.23 / FIGURE 3 CUMULATIVE RETURN % (ADJUSTED AND UNADJUSTED) --- p.31 / FIGURE 4 IMPACT OF LISTING ON VARIANCE --- p.40

Mak Nga-sze. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2005. / Includes bibliographical references (leaves 45-46). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 1.1 --- Purpose --- p.2 / Chapter 1.2 --- Flow of the study --- p.3 / Chapter 2 --- Review of Equity Linked Securities --- p.5 / Chapter 2.1 --- Backgrond of Equity Linked Securities in Hong Kong --- p.5 / Chapter 2.2 --- Differences of trading between listed and non-listed ELIs --- p.7 / Chapter 2.3 --- Non-listed ELIs --- p.9 / Chapter 2.3.1 --- Definition --- p.9 / Chapter 2.3.2 --- Variables specification --- p.11 / Chapter 2.3.3 --- Payoff possibilities --- p.13 / Chapter 3 --- Data --- p.17 / Chapter 3.1 --- Data sources --- p.17 / Chapter 3.2 --- Data treatment --- p.18 / Chapter 4 --- Methodology --- p.21 / Chapter 4.1 --- Volatility --- p.23 / Chapter 4.2 --- Implied volatility by CRR binomial Tree --- p.24 / Chapter 4.3 --- Historical volatility --- p.26 / Chapter 5 --- Estimation of Empirical Data --- p.28 / Chapter 5.1 --- Statistical results of the issuer's profit margin --- p.29 / Chapter 5.2 --- Empirical analysis of the profit margin trends --- p.31 / Chapter 5.2.1 --- Factor 1: Volatility --- p.34 / Chapter 5.2.2 --- Factor 2: Trading volume --- p.34 / Chapter 6 --- Conclusion --- p.37 / Chapter 6.1 --- Conclusion --- p.37 / Chapter 6.2 --- Extensions --- p.38 / Appendix --- p.40 / Chapter .1 --- "Tables of non-listed ELIs in Hong Kong, updated to January 31,2005" --- p.40 / Chapter .2 --- "Stock options in HKEx, lastest to June 2004" --- p.43 / Chapter .3 --- Histograms of the issuer's profit margins --- p.44 / References --- p.45

Lau, Kai Shing. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1997. / Includes bibliographical references (leaves 74-78). / INTRODUCTION --- p.2 / COVERED WARRANTS AND STOCK OPTIONS: A BRIEF BACKGROUND --- p.6 / Chapter a) --- covered warrants --- p.6 / Chapter b) --- Stock Options --- p.10 / Chapter c) --- covered warrants and stock options： a comparison --- p.14 / Chapter d) --- pricing difference between covered warrants and stock options --- p.18 / LITERATURE REVIEW --- p.20 / Chapter a) --- Introduction --- p.20 / Chapter b) --- theory on issuing of stock options --- p.21 / Chapter c) --- the introduction of stock options --- p.26 / Chapter i) --- Stock Options in United States --- p.26 / Chapter ii) --- Stock Options in United Kingdom --- p.28 / Chapter iii) --- Stock Options in Canada --- p.28 / Chapter iv) --- Options in Asia --- p.29 / Chapter d) --- Return Volatility and Trading Volume --- p.31 / Chapter i) --- Introduction --- p.31 / Chapter ii) --- Mixture of Distribution Hypothesis --- p.32 / Chapter iii) --- Classical Model of the Mixture of Distributions Hypothesis --- p.35 / Chapter iv) --- Recent Empirical Model of the Mixture of Distribution Hypothesis --- p.37 / DATA --- p.40 / METHODOLOGY --- p.43 / Chapter a) --- introduction --- p.43 / Chapter b) --- informational efficiency in the cash market --- p.45 / Chapter i) --- Model for Information Arrival and Price Adjustment --- p.46 / Chapter ii) --- Results --- p.48 / Chapter iii) --- An Overall Effect on the Cash market --- p.55 / Chapter c) --- information Cost and Trading Cost in Covered Warrants Market --- p.57 / Chapter i) --- Introduction --- p.57 / Chapter ii) --- Spread function for Covered Warrants --- p.62 / Chapter iii) --- Results --- p.63 / Chapter iv) --- Adjustments for Moneyness --- p.67 / CONCLUSION --- p.70 / REFERENCES --- p.74

No description available.

Thesis (MComm)--Stellenbosch University, 2003. / AFRIKAANSE OPSOMMING: Belastingbeleidmakers in Suid-Afrika het tot 'n groot mate die belastinghantering van afgeleide instrumente verwaarloos. Die Inkomstebelastingwet, No. 58 van 1962, neem tans slegs drie soorte finansiele ooreenkomste wat as afgeleide instrumente geklassifiseer kan word, in aanmerking: termynwissel- en opsiekontrakte met betrekking tot buitelandse valuta, rentekoers ruilkontrakte gebaseer op denkbeeldige kapitaalbedrae en opsiekontrakte. Alhoewel die Kommissaris van Binnelandse Inkomste 'n aantal interne werkskomitees aangestel het om ondersoek in te stel na hierdie afdeling van die reg, is die wetgewing wat voortgespruit het as uitvloeisel van hierdie pogings broksgewys van aard deurdat dit slegs met beperkte aspekte van die belasbaarheid van 'n aantal spesifieke transaksies gehandel het. Vanweë die gebrek aan spesifieke wetgewende bepalings wat die belastingaspekte van afgeleides reguleer, moet die algemene beginsels van die Suid-Afrikaanse inkomstebelastingreg op hierdie instrumente toegepas word. Dit gee aanleiding tot onnoukeurige en teenstrydige resultate, hoofsaaklik omdat hierdie beginsels reeds lank voor die wydverspreide gebruik van afgeleides in gesofistikeerde en ingewikkelde transaksies ontwikkel het. Die belasbaarheid van transaksies waarby afgeleide instrumente betrokke is, is 'n onderwerp van toenemende praktiese belang in Suid-Afrika vanweëdie styging in die aantal transaksies in afgeleides. Die inwerkingstelling van kapitaalwinsbelasting in Suid-Afrika het nog 'n verdere dimensie aan die belasbaarheid van afgeleide instrumente toegevoeg. Indien ag geslaan word op die toename in die aantal en waarde van transaksies in afgeleide instrumente wat deur Suid-Afrikaanse belastingbetalers aangegaan word, is dit noodsaaklik dat duidelikheid rakende die belasbaarheid van hierdie transaksies so spoedig doenlik verkry word. Enige hervorming en hersiende belastingreels wat van toepassing gemaak word op hierdie instrumente moet baie buigsaam wees, aangesien verdere ontwikkelings in die finansiële instrumente-omgewing uiters dinamies is en bykans daagliks verander. Dit is voorts belangrik dat die Suid-Afrikaanse belastingstelsel tred hou met internasionale ontwikkelinge ten einde die land se handel status te versterk en te verseker dat transaksies oor grense heen nie onreëlmatige gevolge inhou nie, veral vir buitelandse teenpartye. / ENGLISH ABSTRACT: Tax policy makers in South Africa have, to a large extent, neglected the tax treatment of derivative instruments. The Income Tax Act, No. 58 of 1962, currently only takes into account three types of financial arrangements that can be classified as being derivative in nature: forward exchange and option contracts relating to foreign exchange, interest rate swaps based on notional capital amounts and option contracts. Although the Commissioner for Inland Revenue has appointed a number of internal working committees to research this area of the law, the legislation resulting from these efforts has been piecemeal in nature, dealing only with limited aspects of the taxation of a few specific transactions. Due to the lack of specific legislative provisions regulating the tax aspects of derivatives, the general principles of South African income tax law have to be applied to these instruments. This leads to imprecise and inconsistent results, primarily as a result of the development of these principles long before the widespread use of derivatives in sophisticated and complex transactions. The taxation of transactions involving derivative instruments is becoming a subject of increasing practical importance in South Africa due to the number of derivative transactions escalating in quantity. The introduction of capital gains tax in South Africa has added yet a further dimension to the taxation of derivatives. In light of the increasing volume and value of derivative transactions entered into by South African taxpayers, it is imperative that clarity regarding the taxation of these transactions be reached as soon as possible. Any reform and revised tax rules that are made applicable to these instruments, need to be very flexible, as further developments in the financial instrument environment are extremely dynamic and changing almost daily. It is furthermore important that the South African tax system keeps track with international developments to enhance the country's trading status and to ensure that cross border transactions do not have anomalous consequences, especially for foreign counter-parties.

published_or_final_version / Business Administration / Master / Master of Business Administration