Cheung, Kwan Hung Edwin. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2010. / Includes bibliographical references (leaves 39-40). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- The Levy Process --- p.4 / Chapter 2.1 --- Levy-Khintchine representation --- p.5 / Chapter 2.2 --- Variance Gamma process --- p.6 / Chapter 3 --- Minimum-Variance Static Hedge with Index futures --- p.8 / Chapter 3.1 --- Capital Asset Pricing Model with static hedge --- p.10 / Chapter 3.2 --- Continuous CAPM under Levy process --- p.11 / Chapter 4 --- Option pricing under Levy process --- p.15 / Chapter 4.1 --- Option pricing under the fast Fourier transform --- p.16 / Chapter 4.2 --- The modified fast Fourier transform on call option price --- p.19 / Chapter 5 --- Empirical Results --- p.23 / Chapter 5.1 --- Proposed model for empirical studies --- p.25 / Chapter 5.2 --- Calibration Procedure and Estimates of Betas --- p.26 / Chapter 5.3 --- Hedging performance of Betas --- p.32 / Chapter 6 --- Conclusion --- p.37 / Bibliography --- p.39

by Wong Man Kit, Andy, Yu Miu Ki. / Thesis (M.B.A.)--Chinese University of Hong Kong, 2000. / Includes bibliographical references (leaves 53-54). / ABSTRACT --- p.ii / ACKNOWLEDGEMENT --- p.iii / TABLE OF CONTENTS --- p.iv / Chapter / Chapter I. --- INTRODUCTION --- p.1 / Credit Risk --- p.2 / Operational risk --- p.3 / Liquidity risk --- p.3 / Legal risk --- p.3 / Market Risk --- p.3 / Model risk --- p.4 / Chapter II. --- LITERATURE REVIEW --- p.5 / Value at Risk (VaR) --- p.5 / Minimum Variance --- p.7 / Dollar equivalence --- p.8 / Statistical Hedging --- p.8 / Risk and Return in an Imperfect Hedge --- p.8 / Expected return and standard deviation in a hedged position --- p.9 / Risk and Return in an actual hedge --- p.11 / Optimal Hedge Ratio --- p.13 / Deriving Optimal Hedge Ratio h* --- p.15 / Computing the minimum risk hedge ratio by regression --- p.16 / Basis Risk --- p.18 / Sources of Basis Risk --- p.19 / Variation in the equilibrium price relationship between cash and futures --- p.19 / "Random ""noise"" in the price process" --- p.19 / Mismatch between cash position and the underlying for the future --- p.20 / Hedging Effectiveness --- p.21 / Chapter III. --- DATA AND METHODOLOGY --- p.25 / Data --- p.25 / Data Collection --- p.25 / Data Selection --- p.25 / Data Manipulation --- p.26 / Methodology --- p.27 / Part I: The Selection of the Portfolios --- p.27 / Part II: The Determination of the Hedge Ratio --- p.28 / Part III: Hedged vs. Unhedged --- p.29 / Part IV: Data Analysis & Comparison --- p.31 / Chapter IV. --- FINDINGS --- p.35 / High volatility of Hong Kong market --- p.35 / Manipulation of institutional investors --- p.36 / Hong Kong financial market are less mature --- p.36 / Less efficient information flow --- p.37 / Less Sophisticated Investors --- p.38 / Results and Discussion --- p.39 / Empirical Results --- p.40 / Explanation for the differences --- p.42 / Limitations --- p.47 / Learning Period --- p.47 / Cross Hedging --- p.47 / Mismatch between the futures and the underlying index --- p.48 / Missing Stock Data in the S&P500 --- p.49 / Chapter V. --- CONCLUSION --- p.50 / Tradeoff between risk and return --- p.50 / Hedge Effectiveness --- p.51 / BIBLIOGRAPHY --- p.53

The first essay, "Market Integration and Side by Side Trading of Derivative and Cash Instruments" inquires into the microstructure of integrated trading of derivative and cash instruments and proposes a spatial differentiation model as a framework for analysis. The model illustrates that when broker-dealers can execute cash and derivative transactions proximately they can increase their returns by serving a larger proportion of investors who hold diverse portfolios thereby helping investors to economize on transactions costs. The model predicts that transactions involving a cash and derivative will be effected through an integrated system. The second essay, "Stock Index Futures Trading and Stock Market Volatility," reviews theoretical models and empirical evidence on the relationships between the level of futures trading and volatility. An empirical investigation is conducted by examining the relationship between the daily trading value of the S&P 500 stock index futures contract and the traded value of New York Stock Exchange stocks and considers whether there is higher price volatility in the stock markets when the level of trading in the futures markets is high relative to trading in the cash market. No evidence, theoretical or empirical, is found to support the notion that futures trading leads to greater volatility in the underlying cash market. The third essay, "Liquidation and Delivery Under Conditions of Manipulation models how strategic traders would respond to manipulation given an option to liquidate or deliver on the contract. A perfect Bayesian equilibrium concept is used in which traders must decide whether to liquidate or deliver given the realization of the first period equilibrium futures price. If detected by floor brokers who competitively bid prices to their expected value, the manipulator will cause prices to move against him, raising the equilibrium price when he puts in orders to buy and lowering the price when he seeks to selL Revelation of manipulation through prices also alters the behavior of other traders. An analysis of reactions in a simplified extensive form game indicates that detection of manipulation allows other market participants to stategically adjust their plans regarding liquidation and avoid incurring losses to the manipulator. / Ph. D.

This thesis is among the first market microstructure studies of an index futures market with designated market makers in the academic literature. The purpose of this thesis is to investigate intraday patterns of key variables, the relative size of the components of the quoted bid-ask spread, and the order decisions of uninformed traders, in a continuous dealer market for index futures with market makers. Overall, our findings aim to contribute to a better understanding of the roles of market makers and public customers in price formation. Intraday patterns of financial market variables such as trade price, volume, trade size, quoted spreads, depth, and volatility separately for designated market makers and public customers are examined. The lack of relevant and appropriate data in futures markets, as evidenced by Hasbrouck (2003) and Kurov (2005), has inhibited the growth of market microstructure in futures markets. Individual orders, quotes, trader identification, and transactions from June 2003 to December 2004, for FTSEurofirst 80 and 100 index futures are used in the study. Inclusion of the parties to order execution distinguishes this data set from most other futures microstructure sources. As this thesis is the first known academic study of the extant market microstructure of the FTSEurofirst index futures, the institutional aspects of the trading process for the FTSEurofirst index futures are also explored. An alternative method for estimating three cost components as a proportion of the bid-ask spread is developed. A framework is developed for the order decision process of an uninformed trader for the first time in a futures market with market makers. The results of this thesis may have implications for other financial markets and the field of market microstructure.

Choy Siu Kai. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2005. / Includes bibliographical references (leaves 35-37). / Abstracts in English and Chinese. / Chapter Chapter 1 --- Introduction --- p.1-2 / Chapter Chapter 2 --- Literature Review --- p.3-9 / Chapter Chapter 3 --- An Overview of Hong Kong Security Market and Data Description --- p.10-18 / Chapter Chapter 4 --- Methodology --- p.19-24 / Chapter Chapter 5 --- Futures and Mini Futures Results --- p.25-28 / Chapter Chapter 6 --- Index and Futures Contracts Results --- p.29-32 / Chapter Chapter 7 --- Conclusion --- p.33-34 / References --- p.35-37 / Appendix --- p.38-40 / Tables --- p.41-52 / Graphs --- p.53-57