Faculty of Science; School of Computational and Applied Maths; MSC Thesis / The assumption of constant volatility as an input parameter into the Black-Scholes option pricing formula is deemed primitive and highly erroneous when one considers the terminal distribution of the log-returns of the underlying process. To account for the `fat tails' of the distribution, we consider both local and stochastic volatility option pricing models. Each class of models, the former being a special case of the latter, gives rise to a parametrization of the skew, which may or may not re°ect the correct dynamics of the skew. We investigate a select few from each class and derive the results presented in the corresponding papers. We select one from each class, namely the implied trinomial tree (Derman, Kani & Chriss 1996) and the SABR model (Hagan, Kumar, Lesniewski & Woodward 2002), and calibrate to the implied skew for SAFEX futures. We also obtain prices for both vanilla and exotic equity index options and compare the two approaches.

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

<p>Secure Access For Everyone (SAFE), is an integrated system for managing trust</p><p>using a logic-based declarative language. Logical trust systems authorize each</p><p>request by constructing a proof from a context---a set of authenticated logic</p><p>statements representing credentials and policies issued by various principals</p><p>in a networked system. A key barrier to practical use of logical trust systems</p><p>is the problem of managing proof contexts: identifying, validating, and</p><p>assembling the credentials and policies that are relevant to each trust</p><p>decision. </p><p>SAFE addresses this challenge by (i) proposing a distributed authenticated data</p><p>repository for storing the credentials and policies; (ii) introducing a</p><p>programmable credential discovery and assembly layer that generates the</p><p>appropriate tailored context for a given request. The authenticated data</p><p>repository is built upon a scalable key-value store with its contents named by</p><p>secure identifiers and certified by the issuing principal. The SAFE language</p><p>provides scripting primitives to generate and organize logic sets representing</p><p>credentials and policies, materialize the logic sets as certificates, and link</p><p>them to reflect delegation patterns in the application. The authorizer fetches</p><p>the logic sets on demand, then validates and caches them locally for further</p><p>use. Upon each request, the authorizer constructs the tailored proof context</p><p>and provides it to the SAFE inference for certified validation.</p><p>Delegation-driven credential linking with certified data distribution provides</p><p>flexible and dynamic policy control enabling security and trust infrastructure</p><p>to be agile, while addressing the perennial problems related to today's</p><p>certificate infrastructure: automated credential discovery, scalable</p><p>revocation, and issuing credentials without relying on centralized authority.</p><p>We envision SAFE as a new foundation for building secure network systems. We</p><p>used SAFE to build secure services based on case studies drawn from practice:</p><p>(i) a secure name service resolver similar to DNS that resolves a name across</p><p>multi-domain federated systems; (ii) a secure proxy shim to delegate access</p><p>control decisions in a key-value store; (iii) an authorization module for a</p><p>networked infrastructure-as-a-service system with a federated trust structure</p><p>(NSF GENI initiative); and (iv) a secure cooperative data analytics service</p><p>that adheres to individual secrecy constraints while disclosing the data. We</p><p>present empirical evaluation based on these case studies and demonstrate that</p><p>SAFE supports a wide range of applications with low overhead.</p> / Dissertation

It is widely believed among South African agricultural market participants that the United States' corn price, as represented by the Chicago Board of Trade-listed corn contract, is causal to the price of white and yellow maize traded on the South African Futures Exchange. Although a strong correlation exists between these markets, the corn contract is far from causal to the South African maize price, as indicated by Auret and Schmitt (2008). Similarly, South African market participants believe that volatility generated in the United States corn market spills over to the South African market. Given the perceived volatility spill-over from the corn market to the maize market, market participants might inadvertently include a higher volatility component in an option price in the South African maize market than is necessary. This study sought to quantify the amount of volatility spill-over to the South African white and yellow maize market from the United States corn contract. This task was accomplished by applying an Exponential Generalised Auto Regressive Conditional Heteroscedasticity model, within an aggregate shock framework, to the data. The findings indicated that the volatility spill-over from the United States corn market to the South African maize market is not statistically significant. This result suggests that volatility in the South African market is locally driven; hence, it should not be necessary for a South African listed option contract to carry an international volatility component in its price. It was also found that the returns data of the South African maize market is asymmetrically skewed, indicating that bad news will have a greater effect on the price of maize compared with good news. / Thesis (MCom (Risk Management))--North-West University, Potchefstroom Campus, 2013.

It is widely believed among South African agricultural market participants that the United States' corn price, as represented by the Chicago Board of Trade-listed corn contract, is causal to the price of white and yellow maize traded on the South African Futures Exchange. Although a strong correlation exists between these markets, the corn contract is far from causal to the South African maize price, as indicated by Auret and Schmitt (2008). Similarly, South African market participants believe that volatility generated in the United States corn market spills over to the South African market. Given the perceived volatility spill-over from the corn market to the maize market, market participants might inadvertently include a higher volatility component in an option price in the South African maize market than is necessary. This study sought to quantify the amount of volatility spill-over to the South African white and yellow maize market from the United States corn contract. This task was accomplished by applying an Exponential Generalised Auto Regressive Conditional Heteroscedasticity model, within an aggregate shock framework, to the data. The findings indicated that the volatility spill-over from the United States corn market to the South African maize market is not statistically significant. This result suggests that volatility in the South African market is locally driven; hence, it should not be necessary for a South African listed option contract to carry an international volatility component in its price. It was also found that the returns data of the South African maize market is asymmetrically skewed, indicating that bad news will have a greater effect on the price of maize compared with good news. / Thesis (MCom (Risk Management))--North-West University, Potchefstroom Campus, 2013.

The South African white maize market is considered to be significantly more volatile than any other agricultural product traded on the South African Futures Exchange (SAFEX). This accentuates the need to effectively manage price risk, by means of hedging, to ensure a more profitable and sustainable maize production sector (Geyser, 2013:39; Jordaan, Grové, Jooste, A. & Jooste, Z.G., 2007:320). However, hedging at lower price levels might result in significant variation margins or costly buy–outs in order to fulfil the contract obligations. This challenge is addressed in this study by making use of technical analysis, focusing on the development of a practical and applicable composite technical indicator with the purpose of improving the timing of price risk management decisions identified by individual technical indicators. This may ultimately assist a producer in achieving a higher average hedge level compared to popular individual technical indicators. The process of constructing a composite indicator was commenced by examining the prevailing tendency of the market. By making use of the Directional Movement Index (DMI), as identified in the literature study, the market was found to continually shift between trending prices (prices moving either upwards or downwards) and prices trading sideways. Consequently, implementing only a leading (statistically more suitable for trading markets) or lagging (statistically more suitable for trending markets) technical indicator may generate false sell signals, as demonstrated by the application of these technical indicators in the white maize market. This substantiated the motivation for compiling a composite indicator that takes both leading and lagging indicators into account to more accurately identify hedging opportunities. The composite indicator made use of the Relative Strength Index (RSI) and Stochastic oscillator as leading indicators, and the Exponential Moving Average (EMA) and Moving Average Convergence Divergence (MACD) as lagging indicators. The results validated the applicability of such a composite indicator, as the composite indicator outperformed the individual technical indicators in the white maize market. The composite indicator achieved the highest average hedge level, the lowest average sell signals generated over the entire period, as well as the highest average hedge level as a percentage of the maximum price over the entire period. Hence, the composite indicator recognised hedging opportunities more accurately compared to individual technical indicators, which ultimately led to higher achieved hedging levels. / MCom. (Risk management), North-West University, Potchefstroom Campus, 2014

The South African white maize market is considered to be significantly more volatile than any other agricultural product traded on the South African Futures Exchange (SAFEX). This accentuates the need to effectively manage price risk, by means of hedging, to ensure a more profitable and sustainable maize production sector (Geyser, 2013:39; Jordaan, Grové, Jooste, A. & Jooste, Z.G., 2007:320). However, hedging at lower price levels might result in significant variation margins or costly buy–outs in order to fulfil the contract obligations. This challenge is addressed in this study by making use of technical analysis, focusing on the development of a practical and applicable composite technical indicator with the purpose of improving the timing of price risk management decisions identified by individual technical indicators. This may ultimately assist a producer in achieving a higher average hedge level compared to popular individual technical indicators. The process of constructing a composite indicator was commenced by examining the prevailing tendency of the market. By making use of the Directional Movement Index (DMI), as identified in the literature study, the market was found to continually shift between trending prices (prices moving either upwards or downwards) and prices trading sideways. Consequently, implementing only a leading (statistically more suitable for trading markets) or lagging (statistically more suitable for trending markets) technical indicator may generate false sell signals, as demonstrated by the application of these technical indicators in the white maize market. This substantiated the motivation for compiling a composite indicator that takes both leading and lagging indicators into account to more accurately identify hedging opportunities. The composite indicator made use of the Relative Strength Index (RSI) and Stochastic oscillator as leading indicators, and the Exponential Moving Average (EMA) and Moving Average Convergence Divergence (MACD) as lagging indicators. The results validated the applicability of such a composite indicator, as the composite indicator outperformed the individual technical indicators in the white maize market. The composite indicator achieved the highest average hedge level, the lowest average sell signals generated over the entire period, as well as the highest average hedge level as a percentage of the maximum price over the entire period. Hence, the composite indicator recognised hedging opportunities more accurately compared to individual technical indicators, which ultimately led to higher achieved hedging levels. / MCom. (Risk management), North-West University, Potchefstroom Campus, 2014

Agriculture is of inestimable value to South Africa because it is a major source of job creation and plays a key role in earning foreign exchange. The most significant contribution of agriculture, and in particular maize, is its ability to provide food for the nation. For a number of decades government legislation determined prices, and as such the trade of grains on the futures exchange requires market participants to adapt to a volatile environment. The research focuses on the ability of market participants to effectively mitigate price volatility on the futures exchange through the use of derivative instruments, and the possibility of developing risk management strategies that will outperform the return offered by the market. The study shows that market participants are unable to use derivative instruments in such a way that price volatility is minimised. The findings of the study also indicate that the development of derivative risk management strategies could result in better returns than those offered by the market, mainly by exploiting trends on the futures market. / Financial Accounting / M. Comm. (Business Management)

Agriculture is of inestimable value to South Africa because it is a major source of job creation and plays a key role in earning foreign exchange. The most significant contribution of agriculture, and in particular maize, is its ability to provide food for the nation. For a number of decades government legislation determined prices, and as such the trade of grains on the futures exchange requires market participants to adapt to a volatile environment. The research focuses on the ability of market participants to effectively mitigate price volatility on the futures exchange through the use of derivative instruments, and the possibility of developing risk management strategies that will outperform the return offered by the market. The study shows that market participants are unable to use derivative instruments in such a way that price volatility is minimised. The findings of the study also indicate that the development of derivative risk management strategies could result in better returns than those offered by the market, mainly by exploiting trends on the futures market. / Financial Accounting / M. Comm. (Business Management)

The agricultural sector plays an important role in the South African economy through job creation and earning foreign exchange. The role of agricultural co-operatives increased substantially over the last few decades. The research focuses firstly on the identification of derivative instruments in the market and their applicability to mitigate financial risks co-operatives experience. Secondly, research is conducted about the extent to which co-operatives use these derivatives to hedge financial risks. The research shows that most co-operatives are exposed to financial risks through different activities. It is, however, evident that although the derivative instruments are available, not all co-operatives make use of these instruments. Recommendations for further research include the development of a risk management framework and determining the different economic factors that have an influence on the use of derivatives by South African agricultural co-operatives. / Business Management / M.Comm.