The promotion of Local Economic Development (LED) increasingly involves the allocation of grant finance for project implementation. This finance is often provided on condition that the grant recipient commits a certain level of co-funding to the project. These co-funding requirements are essentially a risk-sharing mechanism used to avert the agency problems, namely adverse selection and moral hazard, which occur in the relationship between the funding programme and the grant beneficiaries. The purpose of this study is to examine whether these requirements are effective at achieving this aim and to determine their impact on the LED outcomes of various types of projects. This is undertaken through the comparative analysis of projects funded through the Gijima KwaZulu-Natal Local Competitiveness Fund Implementation Programme (LCFI), which provided grant funding for projects implemented by the private sector, Non-Governmental Organisations (NGOs) and local government. The findings indicate that co-funding has a positive impact on internally co-funded private sector projects and in this scenario is necessary to achieve optimal outcomes. Inversely, co-funding has a detrimental impact on projects implemented by non-profit groups in that it requires the attraction of funding from additional organisations whose finance conditions may not align to those of the principal donor. Finally, co-funding is ineffective when provided by government for the implementation of community projects due to the lack of risk it assumes. These findings have implications for the design of LED grant programmes and support the assertion that grant programme should be designed to efficiently reflect the objectives and risk preferences of the institutions they support. / Thesis (M.Dev.Studies)-University of KwaZulu-Natal, Durban, 2012.

A guaranteed minimum income benefit (GMIB) is a long-dated option that can be embedded in a deferred variable annuity. The GMIB is attractive because, for policyholders who plan to annuitize, it offers protection against poor market performance during the accumulation phase, and adverse interest rate experience at annuitization. The GMIB also provides an upside equity guarantee that resembles the benefit provided by a lookback option. We price the GMIB, and determine the fair fee rate that should be charged. Due to the long dated nature of the option, conventional hedging methods, such as delta hedging, will only be partially successful. Therefore, we are motivated to find alternative hedging methods which are practicable for long-dated options. First, we measure the effectiveness of static hedging strategies for the GMIB. Static hedging portfolios are constructed based on minimizing the Conditional Tail Expectation of the hedging loss distribution, or minimizing the mean squared hedging loss. Next, we measure the performance of semi-static hedging strategies for the GMIB. We present a practical method for testing semi-static strategies applied to long term options, which employs nested Monte Carlo simulations and standard optimization methods. The semi-static strategies involve periodically rebalancing the hedging portfolio at certain time intervals during the accumulation phase, such that, at the option maturity date, the hedging portfolio payoff is equal to or exceeds the option value, subject to an acceptable level of risk. While we focus on the GMIB as a case study, the methods we utilize are extendable to other types of long-dated options with similar features.

Originally presented as the author's doctoral Thesis (Universität, St. Gallen, 2006). / Includes bibliographical references.

Originally presented as the author's doctoral Thesis (Universität, St. Gallen, 2006). / Includes bibliographical references.

Credit risk mitigation that can be applied by commercial banks in assessing the lending decision /credit risk when advances and equity investments are considered for BEE classified companies. / A research report presented to the Graduate School of Business Leadership, University of South Africa / The previous political dispensation limited black people’s participation in the South African economy. Poor credit records, lack of training, resulting in skills and capacity gaps further limited entry into the lending market. These aspects are considered the main limitations in obtaining finance for the Small, Medium and Micro Enterprises (SMMEs). This research report focuses on how credit risk can be mitigated by commercial banks in lending to Black Economic Empowerment (BEE) companies in the medium to large market. Exploratory research was conducted using various methods to achieve methodological triangulation. These methods consisted of a literature review, interviewing experts in the field and case studies. A qualitative research approach was followed. It was found that the lack of own contribution and security were still prevalent in the medium to large market, but the quality of management (little training and skills) was deemed not to be a limitation as suitable credit risk mitigants were identified. No credit risk mitigants were identified to mitigate poor credit records. It is postulated that by adopting and applying the identified credit risk mitigants, commercial banks can increase their success rate in lending to BEE companies. It will further assist in the transformation of black people and compliance with the Financial Services Charter. It is recommended that a similar study be conducted in the agriculture, hunting, forestry and fishing industry. The reasons why BEE companies applications are declined could also be investigated. Further studies could also explore other external factors such as economical, legal and social that could have an influence on the funding of BEE companies.

The objective of the study is to establish a perspective of risk management by doing an assessment of current risk management practices, especially in the aftermath of the 2008/2009 global financial crisis. Risk management, as a component of corporate governance, was analysed by addressing the following: - The nature of value-creating assets in business; - The primary challenges for risk management over the next three years; - The changing approaches towards risk management; - The role of legislation and external stakeholders; - The role of risk management in strategic planning; - The cost of risk management; and - The benefits of improved risk management capabilities. A survey was conducted in the form of a questionnaire in order to obtain primary information from business owners on the current role of risk management in their organisations as well as their view on the role of risk management going forward. Businesses operating in the Port Elizabeth and surrounding area with an existing relationship with Absa Business Banking Services participated in the study. Quantitative techniques were used to analyse the data that were obtained from the sample group. The study revealed that the role of risk management in enterprises is evolving into an integrated, enterprise wide risk management function that can be utilised as a source of competitive advantage, from both a funding perspective for Banks and a business perspective for business owners. Capitalising on risk management as a competitive advantage will ultimately lead to long term sustainability and profitability of South African business enterprises and the South African Banking system.

La presente tesi si concentra sull’incertezza e sulla sua relazione con il rischio finanziario, due importanti concetti in economia e finanza. Il primo capitolo propone un approccio analitico in grado di separare gli shock connessi all’incertezza finanziaria dagli shock legati all’incertezze politiche, utilizzando un campione di paesi appartenti all’area Euro, dove la diffusione di shock da un paese all’altro (effetti di spillover) rendono l’identificazione più complessa. I risultati indicano che la BCE favorisce adottare una condotta proattiva verso gli shock di incertezza politica, e una più passiva verso gli shock di incertezza finanziaria. Il secondo capitolo discute il trade-off tra accuratezza della previsione e velocità di reazione che consente agli hedge fund di incrementare i profitti durante periodi caratterizzati da elevata incertezza. In questo capitolo si propone un metodo matematico per l’analisi di tale trade-off utilizzando un approccio Bayesiano. I risultati empirici e le simulazioni effettuate indicano che previsioni meno accurate sono associate ad aumenti di velocità. Infine, il terzo capitolo analizza alcune problematiche inerenti alla transizione ad un’economia a basso impatto ambientale, tenendo conto che la presenza di incertezza e asimmetrie informative potrebbero amplificare o limitare i pregiudizi comportamentali degli investitori. / This thesis focuses on broader or Knightian uncertainty and its relation with financial uncertainty or risk, given the overlaps existing between these two important concepts in the economics and finance literature. The first chapter adds to the existing stock of analytical methods able to disentangle financial from policy-related uncertainty shocks within a sample of Euro Area countries, where cross-border spill-overs can raise identification challenges. In terms of policy reactions, the results point to ECB having adopted a pro-active stance towards policy uncertainty shocks, but a more passive or accommodative stance towards financial uncertainty shocks. The second chapter discusses the trade-off between prediction accuracy and reaction speed that allows hedge funds to better time the market and profit during periods of turmoil and high uncertainty. It proposes a mathematical formulation of the trade-off that casts the decision-making process in a Bayesian framework. The empirical results, pointing to speed gains associated with less accurate predictions, are justified in a simulation exercise. The third chapter discusses some challenges arising from the ongoing transition to a low-carbon economy in a market context dominated by multiple uncertainty sources and information frictions that can either amplify or reduce investors’ own behavioural biases.

Purpose: The aim of this thesis is to investigate whether there is an established investment process for small Swedish service companies, and to what extent they take financial risk into account when making investment decisions.  Theory: The theoretical frame of reference derives from previous research and theories of investment classification, investment processes and risk management in connection with investments.  Method and implementation: The study is based on a qualitative approach through semi-structured interviews with six knowledge-based service companies where the respondents hold positions within company management. A supplementary quantitative method from the companies’ annual reports has been implemented. All the companies surveyed are small Swedish service companies.  Conclusion: The result shows that there is an investment process in all the companies surveyed, though it differs between them. The investments are relevant with the companies’ business strategies. All the companies surveyed take great account of financial risk in investment decisions, mainly by caring for staff in order to retain the human capital in the company. / Syfte: Studien syftar till att undersöka om det finns en fastställd investeringsprocess för småsvenska tjänsteföretag, samt hur och till vilken grad de tar hänsyn till finansiell risk vid investeringsbeslut. Teori: Den teoretiska referensramen härrör tidigare forskning och teorier om investeringsklassificering, investeringsprocesser och riskhantering i samband med investeringar. Metod och genomförande: Studien utgår utifrån ett kvalitativt tillvägagångssätt genom semistrukturerade intervjuer med sex kunskapsbaserade tjänsteföretag där respondenterna innehar positioner inom företagsledningen. En kompletterande kvantitativ datainsamlingsmetod från företagens årsredovisningar har genomförts. Samtliga undersökta företag är små svenska tjänsteföretag med huvudsäte i Stockholm. Slutsats: Studien finner att det i samtliga undersökta företag finns en investeringsprocess, men att den skiljer sig åt mellan företagen. Investeringarna går i linje med företagens verksamhetsstrategi. Samtliga undersökta företag tar stor hänsyn till finansiell risk vid investeringsbeslut, främst genom att vårda personal för att behålla humankapitalet i företaget.

This study investigates the effect of leverage on stock returns on Swedishlisted firms (Large and Mid-cap). Stock returns have been calculated, andleverage ratios have been collected through Datastream. The results contradictfundamental theories on capital structure. According to the fundamentaltheories there should be a positive relationship, but the result of this studysuggests that the relationship is negative.

This thesis gives an example of assessing the risk of a financial portfolio with international assets, where the assets may be of different classes, by the use of Monte Carlo simulation and Extreme Value Theory. The simulation uses univariate modelling, models of the assets’ returns as stochastic processes, as well as vine copulas to create dependency between the variables. For the asset returns a modified version of a discretized Merton jump diffusion model was used. The risk assessment used Extreme Value Theory to calculate Value at Risk and Expected Shortfall of the simulated portfolio. However, the resulting return distribution, and the risk assessment thereof, was not entirely satisfactory due to unreasonably large values ascertained. / Denna uppsats ger ett exempel på hur riskbedömning av finanisella portföljer med internationella tillgångar av olika tillgångsslag genom Monte Carlo simulering och extremvärdesteori. Simuleringen använder univariat modelling, modeller för tillgångarnas avkastningar som stokastiska processer, såväl som vine-copulas för att skapa ett beroende mellan tillgångarna. Tillgångarnas avkastningar modellerades med en modifierad version av en diskretiserad Merton-jump-diffusion model. Riskbedömningen använde extremvärdesteori för att beräkna Value-at-Risk och Expected-Shortfall. Dock blev den resulterande avkastningsfördelningen och riskbedömningen därav inte helt tillfredsällande på grund av att orimligt stora värden erhölls.