Includes bibliographical references (leaves 90-96). / An essential part of an economy of developing and less developed nations lies in the establishment of a set of financial markets. In these financial markets companies are able to determine their capital structure by making rational decisions on whether to look internally or externally for financing. The study analysed the capital structures with a view of determining the extent of the applicability of capital structure theories to listed companies that are operating under a hyper inflation. The aim of the study was to verify the theoretical findings and predictions about determinants of capital structure. There is extensive literature on capital structure theories and their validity, Miller and Modigliani (1958), Ross (1977), Myers (1984 and 1977), Myers and Majluf (1984), and others, which have focused on why firms opt for certain capital structures. These studies have been conducted in stable macro economic environments of developed, developing, and least developed countries. There has been no in-depth study on the choices of capital structure that has been done in an unstable economy that is characterised by hyper inflation, such as Zimbabwe. As a step to understanding the rational and choices of capital structure in a hyperinflationary environment, a sample of eight companies listed on Zimbabwe Stock Exchange, which has a total of seventy five listed companies, was selected. Size, tangibility, profitability, and non-tax debt shield were the determinants of capital structure that were used. Debt to equity ratio was also used to analyse the companies, sectors they fall in and an overall analysis. The objective of the research was to test the validity and applicability of the conventional capital structure theories in the Zimbabwean environment between 1998 and 2006. In the literature review, the research presents an overview of four main capital structure theories namely; trade-off, signalling, pecking order and agency theory. The research critically examined capital structures of eight listed companies in Zimbabwe that have been operating under hyper inflation. The comparison of capital structures of companies in different sectors was done to determine if there was any link between the choice of a particular capital structure mix and the sector the company was operating in. The impact of interest rates was also taken into account in the research to determine the effect under the same environment. Zimbabwe has experienced very high levels of inflation from 2000 with recent official statistics indicating inflation to be 100,580.2% as of end of January 2008. This figure is widely perceived as understated as the basket of good used in the calculation is based on government controlled prices. According to the IMF the real inflation figure taking into account the "black market" prices is estimated at 150,000%. This presentation will not delve into the debate of the definition of hyperinflation but the evidence points out a hyperinflationary environment by all accounts. To conduct the research, inflation adjusted financial reports dating from 1998 to 2006 of eight listed companies on the Zimbabwe Stock Exchange were analysed.

Includes bibliographical references

Word processed copy. Includes bibliographical references (leaves 115-123).

The objective of this study is to analyse the impact of the change from Basel II to Basel III on the profitability of the South African banking sector. South African banks are regulated in accordance with the Basel Accords and, as such, this study reviews the literature on bank regulation and specifically the evolution of the Basel Accords. The 2008 global financial crisis exposed certain flaws in the global regulatory framework and paved the way for the introduction of Basel III, of which South Africa commenced implementation on 1 January 2013. As mentioned, the review of banking regulation literature will specifically focus on the changes from Basel II to Basel III, with a further focus on two of the key changes introduced by Basel III: the capital requirement amendments and the new liquidity ratios. The study examines the top five banks in South Africa, as these make up 91.1% of the industry's banking assets (as of December 2012). The top five banks are used to create a representative bank of the South African banking sector and an accounting model is performed using a DuPont analysis in order to measure profitability. With respect to the Basel III capital changes, the results show that a 2% increase in capital by increasing the equity-to-asset ratio and all else held equal will result in a decrease of 0.29% in return on equity (ROE) for the South African banking sector. With respect to the Basel III liquidity measures, a 25 basis decrease in maturity transformation, all else held equal, will translate into a 3.38% decrease in ROE. The study contributes to the recent literature on Basel III and profitability. The results will also benefit the South African banking industry and regulators when assessing the profitability impact of the new Basel regulations.

Includes bibliographical references. / Derivatives have a long history which could be traced as far as in the biblical times, around 1700 B.C when Jacob was granted the right to marry Laban’s daughter, in counterparty of seven years of work, an agreement often presented as one of the first option contract in the human history. However, the use of derivatives really expanded over the last three decades. According to the Bank of International Settlement (BIS), the outstanding notional amount of the global over-the-counter (OTC) derivative market reached USD 708 trillion in June 2011. Derivative markets have a significant role to play in the development of African financial markets. Indeed, through the mechanisms of price discovery and risk transfer; derivative instruments introduce greater market efficiency and provide market participants the opportunity to hedge their exposure to various financial risks. The development of a derivative strong market in Africa presents a compelling case given the nature of several African economies, predominantly composed of primary commodity producers, open small economies inherently vulnerable to commodity price, foreign exchange volatility, and interest rate risks.

Includes bibliographical references. / We focus on the implementation details for Lévy processes and their extension to stochastic volatility models for pricing European vanilla options and exotic options. We calibrated five models to European options on the S&P500 and used the calibrated models to price a cliquet option using Monte Carlo simulation. We provide the algorithms required to value the options when using Lévy processes. We found that these models were able to closely reproduce the market option prices for many strikes and maturities. We also found that the models we studied produced different prices for the cliquet option even though all the models produced the same prices for vanilla options. This highlighted a feature of model uncertainty when valuing a cliquet option. Further research is required to develop tools to understand and manage this model uncertainty. We make a recommendation on how to proceed with this research by studying the cliquet option’s sensitivity to the model parameters.

Hedge funds give portfolio managers access to more tools to aid in better portfolio construction. The introduction of tools such as leveraging and shorting provided managers with the ability to augment exposures to different asset classes. The result is the ability to create portfolios with uncorrelated returns without having to invest in a plethora of asset classes thus providing better risk adjusted returns. This paper tests whether hedge funds in fact contain less exposure to individual asset classes than their long-only counterparts. In particular, the perception of uncorrelated returns has led to hedge funds being benchmarked against absolute return targets while charging performance fees higher than the typical long-only fund. If hedge fund returns are correlated with those of the asset class in which they invest, the available risk premia available in that asset class may drive returns more than manager skill. In circumstances where hedge fund returns are in fact correlated with asset class returns, then the benchmarks used to measure hedge fund performance ought to capture the perpetual risk premia of the asset classes for better performance measurement and performance fee rewards. This dissertation closely follows Hasanhodzic and Lo (2007) who sought to find the quantum of hedge fund returns attributable to asset class returns; that information was then used to create low-cost clones of typical hedge fund strategies. This dissertation also tested the strength of the relationship between hedge fund and asset class returns but used the result to build linear clones for benchmarking rather than as an alternative to hedge funds. What also distinguishes this dissertation is the jurisdiction: Hasanhodzic and Lo (2007) examined global hedge funds while this dissertation focusses on the South African hedge fund industry. The HedgeNews Africa database is the data source for South African hedge fund returns (from some 412 funds though only 160 of those are currently active). Database returns existed for the period June 1998 to June 2020. The regression assessment conducted regressed the returns of various hedge fund strategies against the returns of the relevant asset classes. The result of the regressions reveals significant coefficients relating to different asset class independent variables. The significant relationships accord with the logical association of certain hedge fund strategies with particular asset classes. For instance, equity long-short funds had a large and significant coefficient relative to equity market returns. Based on the regressions, clone benchmark portfolios were created which performed similarly to the various strategies in the ex-ante period from January 2019 to 2020. This lends credence to the idea that better benchmarks can be specified for hedge fund managers.

The study of network robustness is a critical tool in the understanding of complex interconnected systems such as the Internet, which due to digitalization, gives rise to an increasing prevalence of cyberattacks. Robustness is when a network maintains its basic functionality even under failure of some of its components, in this instance being nodes or edges. Despite the importance of the Internet in the global economic system, it is rare to find empirical analyses of the global pattern of Internet traffic data established via backbone connections, which can be defined as an interconnected network of nodes and edges between which bandwidth flows. Hence in this thesis, I use metrics based on graph properties of network models to evaluate the robustness of the backbone network, which is further supported by international cybersecurity ratings. These cybersecurity ratings are adapted from the Global Cybersecurity Index which measures countries' commitments to cybersecurity and ranks countries based on their cybersecurity strategies. Ultimately this empirical analysis follows a three-step process of firstly mapping the Internet as a network of networks, followed by analysing the various networks and country profiles, and finally assessing each regional network's robustness. By using TeleGeography and ITU data, the results show that the regions with countries which have higher cybersecurity ratings in turn have more robust networks, when compared to regions with countries which have lower cybersecurity ratings.

Cryptocurrencies are one of the most exciting financial technologies that have emerged since the global financial crisis. It has spurred on a new financial ecosystem looking to enhance the traditional financial system. Many of the economic functions such as payments, investment, trading and capital raising have made it to the cryptocurrency industry. Regulators, who have not universally agreed on how to approach regulating cryptocurrency activity, are seeking the best approaches to ensuring financial stability. This paper looks at the risk posed by cryptocurrencies and how to regulate the activities. It applies this directly to the South African context and finds that cryptocurrency activities are easily accommodated within the South African regulatory framework with a set of minor definition changes.

The purpose of this study is to examine the impact of diversification (both industrial and geographical) on the performance of non-financial South African firms listed on the Johannesburg Stock Exchange (JSE). The study goes further to examine the impact of ownership structure (managerial ownership and ownership concentration) in the context of diversification on firm performance. This is done in an effort to determine if diversification is an effective strategy in enhancing firm performance (which is measured by Tobin's Q) in South African firms. Fixed effect regression analysis is used on a sample of 164 firms during the period 2010 to 2019. For comparison purposes, the study also conducts; ordinary least squares (OLS) and random effect analyses. The study finds that industrial diversification has no significant effect on firm performance, geographical diversification reduces firm performance and overall specialized firms perform better than diversified firms do. These results support the argument that the costs of diversification surpass its benefits. The study also finds that managerial ownership reduces firm performance contradicting the agency theory. Furthermore, ownership concentration has no significant effect on performance of South African firms.