The international business and finance literature documents a so-called exchange rate exposure puzzle. The exchange rate exposure puzzle refers to the apparent lack of empirical support for theories posited in the finance literature which predict that in the advent of an increasingly globalising world economy, nonfinancial firms should report high levels of foreign exchange risk exposure. The majority of the studies are based on the developed market context and the emerging markets of the ASEAN region. However, there is scant literature in the context of the emerging markets of the African continent. Considering that the estimation of foreign exchange risk exposure is based on the application of asset pricing models, and the fact that emerging markets are generally found to be partially segmented, the so-called exchange rate exposure puzzle cannot be generalised to the emerging markets of Africa. The general aim of the study was to examine the level of foreign exchange exposure of nonfinancial firms in South Africa, hedging behaviour and their effect on corporate value, taking into account idiosyncratic factors. Foreign exchange risk exposure were estimated at more than 40% for all for proxy currencies on the basis of the standard augmented market model. However, after controlling for idiosyncratic factors exposure levels were found to range between 6.5% and 12%. These results indicate the importance of controlling for the effects of idiosyncratic factors in the estimation of foreign exchange risk exposure in the context of emerging markets. Furthermore, the study found exposure levels to be time-varying with respect to the trade-weighted exchange rate. An indirect test of asymmetric exposure revealed results that are similar to those estimated on the basis of a more direct test in the form of a Nonlinear ARDL model and these were found to be higher than those estimated on the basis of the standard model. iii The study established that South African nonfinancial firms are likely to hedge using foreign currency derivatives when they have foreign sales, have lower interest coverage, have access to capital markets, are highly liquid, have higher gearing, and whose management have equity stakes in the firm. In contrast, South African nonfinancial firms were found to be more likely to hedge using foreign currency denominated debt when they are small in size, have foreign sales, are highly leveraged, have less growth opportunities, are highly liquidy. The magnitude of the marginal effects show that foreign sales is the single most important determinant of the decision to hedge using foreign currency denominated debt. In contrast, managerial incentives play no role in the decision to hedge using foreign currency denominated debt. Corporate currency risk management using foreign currency derivatives and foreign currency denominated debt was found to have no beneficial effects on corporate value. However, foreign currency denominated debt use was found to be much more effective than the use of foreign currency derivatives. The study identified the need for South African firms to adopt a more strategic approach in the management of economic foreign exchange risk exposure.

Maize production remains low in Eswatini. The small country is still unable to meet the local demand through local production. Maize is Eswatini’s staple food but the country has not yet reached self-sufficiency. This deficiency or shortfall in local maize production has been a persistent problem since the country’s independence. To fight this shortfall and reach self-sufficiency, the National Maize Corporation (NMC) was formed in 1985. The main purpose of the NMC is to keep the local demand satisfied. The NMC, as the only importer of white maize into Eswatini, does this by importing the deficit demand from South Africa. Stability of the local white maize price is also one of the responsibilities of the NMC. This study’s overarching aim was to determine whether or not a significant relationship exists between the maize prices as quoted on SAFEX and the local maize price in Eswatini. This is done to see if the importer of maize in Eswatini, the NMC, can hedge the price risk on SAFEX. The study also maps the Eswatini imported and local maize value-chain through the current price discovery mechanism. Secondary data offered by the NMC and data from the Ministry of Agriculture in Eswatini and educational journals were used in the study. Econometric time series methods were used along with monthly data from 2008 to 2019. Two hypotheses were tested during the study. The first hypothesis tested for the existence of a significant relationship between maize prices as quoted on SAFEX and the local maize price in Eswatini. The second hypothesis follows the first, determining whether or not hedging on SAFEX could be used as a tool to minimise price risk on the domestic price market in Eswatini. The study confirms that a long-run relationship exists between the South African maize market and the Eswatini maize market. The study showed that a 1% increase in the South African price led to a 0.67% increase in the local Eswatini prices. This indicates a slow rate shift in prices. Short-run dynamics indicated a 12.5% adjustment to equilibrium per term, which is a slow adjustment as a result of market conditions in Eswatini. The study also revealed asymmetry in price transmission and that the Eswatini prices only respond to positive changes (price increase) in the South African prices. This reveals that the two markets are poorly integrated. Due to the significant relationship between the two markets, it can be acknowledged that SAFEX could be used to hedge price risk by Eswatini through the NMC. Through mapping down the maize value-chain, the study discovered that the Eswatini maize market is not a liberalised one and value addition to maize through the chain is minimal. The relationship between the two maize markets, as well as the maize market of Eswatini, could still improve if means to liberate the market were to be exercised by the NMC and local government. This study can serve as the basis for understanding how risk management tools could be used by the Eswatini maize market and how the market could be improved or liberalised. / Dissertation (MSc Agric (Agricultural Economics))--University of Pretoria, 2021. / African Research Consortium (AERC) / Collaborative Master of Science Programme in Agricultural and Applied Economics (CMAAE) / Bill and Melinda Gates Foundation / Agricultural Economics, Extension and Rural Development / MSc Agric (Agricultural Economics) / Unrestricted

This diploma thesis deals with the fundamental analysis of selected metals as commodities, for use in the production of batteries for electric vehicles, to hedge against changes in the price of physical raw materials. Selected metals are analyzed based on the fundamental parameters, historical price development and the current situation on the commodity market. Based on these fundamental data, a recommendation is formulated for the method of hedging the prices of selected commodities.

The topic of the thesis is the application of financial derivaties in business practice. The thesis is aimed at hedging interest risk of a company. The first part includes a division and a charakterization of financial derivaties. The second part specifies definite application of financial derivaties in a company.

This diploma thesis is focused on issues of economic diplomacy of ASEAN countries, depending on the conflict in the South China Sea. The first part describes the development of this conflict and explains possible interactions between ASEAN countries and China through the concepts of balancing, bandwagoning and hedging. It arouses the theoretical assumptions of the reactions of the states to the deteriorating security situation in the South China Sea. The practical analytical part is dedicated to the exploration of economic relations between China and ASEAN countries quantitatively through the use of statistical data as well as qualitatively. Finally, the main results are interpreted and the conclusions drawn.

This thesis empirically evaluates a geometric Brownian motion and a stochastic volatility model for modeling futures prices and hedging Asian call options on the electricity spot price. Estimation of parameters for the models is done based on historical futures prices of futures contracts with a one month delivery period using nonlinear regression and Maximum Likelihood techniques. The models are tested on 2014 data and tracking error for each model is presented. The tracking error is investigated through the median value, the spread between minimum and maximum value along with value at risk at a 95% level. In addition, a third model for modeling spot and futures prices is presented theoretically. It is an exponential additive model with the advantage that it models the future price process from the spot price, instead of modeling the future price process immediately. This bypasses the issue of no information about the future price process during the delivery period, when there is no prices of the futures contracts. The aim of this thesis is to compare the simpler geometric Brownian motion to the more complex stochastic volatility model. It is found that the stochastic volatility model performs better when tested on out-of-sample data. The geometric Brownian motion tends to underestimate the electricity prices, despite that 2014 had low pricest compared to the other years in the data sample. In addition, the approximation of the distribution of the future price process under the geometric Brownian motion model gave a bad fit and led to difficulties when estimating the parameters. The stochastic volatility model produced more stable results and gave a better fit for the distribution.

In this dissertation, the price of variance swaps under stochastic volatility models based on the work done by Barndorff-Nielsen and Shepard (2001) and Heston (1993) is discussed. The choice of these models is as a result of properties they possess which position them as an improvement to the traditional Black-Scholes (1973) model. Furthermore, the popularity of these models in literature makes them particularly attractive. A lot of work has been done in the area of pricing variance swaps since their inception in the late 1990’s. The growth in the number of variance contracts written came as a result of investors’ increasing need to be hedged against exposure to future variance fluctuations. The task at the core of this dissertation is to derive closed or semi-closed form expressions of the fair price of variance swaps under the two stochastic models. Although various researchers have shown that stochastic models produce close to market results, it is more desirable to obtain the fair price of variance derivatives using models under which no assumptions about the dynamics of the underlying asset are made. This is the work of a useful analytical formula derived by Demeterfi, Derman, Kamal and Zou (1999) in which the price of variance swaps is hedged through a finite portfolio of European call and put options of different strike prices. This scheme is practically explored in an example. Lastly, conclusions on pricing using each of the methodologies are given. / Dissertation (MSc)--University of Pretoria, 2019. / Mathematics and Applied Mathematics / MSc (Financial Engineering) / Unrestricted

I takt med den alltmer ökade globaliseringen och svenska företag som intar internationella marknader har även riskerna för valutaexponeringar ökat. Företag som har in- och utgående transaktioner i utländsk valuta utsätts för transaktionsexponeringar då växelkurserna kan fluktuera i ogynnsam riktning mellan tidpunkten avtalet ingås tills att det ska regleras. Detta har lett till ett ökat behov av att använda sig av olika typer av valutaderivat för att skydda sig mot dessa fluktuationer. Däremot kan användningen av derivat leda till en valutakursvinst- eller förlust, då den låsta kursen kan vara högre eller lägre än den faktiska kursen.    Denna studie undersöker huruvida det lönar sig för svenska internationella företag att använda sig av valutaderivat i form av valutaterminer, det vill säga att terminssäkringen genererar en valutakursvinst. Vidare undersöker studien om det finns stadier i det makroekonomiska klimatet där behovet av att valutasäkra är större, för att på så vis kunna ge vägledning till de företag med begränsade kunskaper kring ämnet. De makrofaktorer som har inkluderats i studien är Sveriges BNP, inflation och konjunkturcykel. Då riskexponeringen mot olika typer av valutor skiljer sig åt har även transaktionsspecifika egenskaper inkluderats i studien för att på så vis undersöka huruvida olika typer av transaktioner har ett större behov av att säkras än andra. Vår intention med studien är således att bidra med kunskap till svenska internationella företag kring när och hur en valutasäkring anses nödvändig för att undvika förluster i framtida kassaflöden på grund av valutakursförluster. Då tidigare forskning kring vilka faktorer som påverkar effektiviteten hos derivaten kan anses som bristfällig anser vi att studiens resultat öppnar upp för ytterligare forskning kring ämnet.    Valutaterminerna testades i samband med historisk data på växelkurser och makrofaktorer under åren 2002-2022. Sammanlagt testades 729 transaktioner vilket inkluderade terminer på valutorna euro, brittiska pund och US dollar, med löptiderna tre, sex och 12 månader. Studiens empiriska resultat indikerar att det generellt sett lönar sig för svenska företag att använda sig av valutaterminer på utgående transaktioner i utländsk valuta och att sannolikheten för att terminerna visar sig lönsamma har ett visst samband med i vilket stadie konjunkturen befinner sig i. Vidare fann studiens resultat att behovet av valutasäkringar mot valutorna euro och brittiska pund är större än mot US dollar.    Studiens resultat bidrar med en inblick i hur företagens makromiljö påverkar effektiviteten hos valutaderivaten. Eftersom makromiljön är något som påverkar företagens förutsättningar på kort och lång sikt är det av vikt att ha insikt kring vilka faktorer som påverkar vad, så att företagen kan agera utefter det. Tidigare forskning har primärt fokuserat på företagsspecifika faktorer kring användandet av valutaderivat, varpå vi anser att vår studie öppnar upp för en ny infallsvinkel till forskningsområdet.

This thesis investigates the use of commodity exchange traded funds (ETFs) as a price risk management tool for agriculture producers. The effectiveness of ETFs in hedging price risk will be determined by calculating optimal hedge ratios. This thesis will investigate the southeastern producer’s ability to hedge their price risk for corn, soybeans, live cattle and diesel fuel. Hedge ratios will be calculated using ordinary least squares (OLS), error correction model (ECM), and generalized autoregressive conditional heteroscedasticity (GARCH) regression models. A utility maximization framework will be used to determine how transaction costs and risk aversion effect the optimal hedge ratio. The main finding is that ETFs provide producers with a reliable tool when hedging their output and input price risk. The presence of transaction costs decrease the effectiveness of an ETF hedge.

Crop revenue insurance is an exception in the insurance industry offering a guarantee subsuming a highly systematic risk- price variability. This study examines whether crop insurance companies could use put and call options to hedge the price risk present in corn revenue insurance. The behavioral model used to examine hedging optimization behavior of a crop producer with crop insurance by Coble, Heifner, and Zuniga (2002) is modified to examine optimal hedge ratio of a company selling revenue insurance. The crop insurance summary of business from 1985-2015 for corn revenue policies was simulated. Corn futures prices were collected from the Commodity Research Bureau databases. Results show that net return from call and put options can hedge indemnities paid by corn RP and RP-HPE resulting from the price variability in some scenario. This suggests hedging the price risk of corn revenue insurance through options could be a viable practice for crop insurers.