Thesis (M.Sc.)--York University, 2006. Graduate Programme in Mathematics and Statistics. / Typescript. Includes bibliographical references (leaves 92-94). Also available on the Internet. MODE OF ACCESS via web browser by entering the following URL: http://gateway.proquest.com/openurl?url_ver=Z39.88-2004&res_dat=xri:pqdiss&rft_val_fmt=info:ofi/fmt:kev:mtx:dissertation&rft_dat=xri:pqdiss:MR29633

Thesis (M.S.)--Worcester Polytechnic Institute. / Keywords: Credit Default Swap; Hazard rate approach; Merton model; Credit Risk. Includes bibliographical references (p. 46-48).

The lack of specific tax legislation and practice dealing with the taxation of derivatives in South Africa necessitates the construction of a framework for the taxation of derivatives: the subject of this dissertation. The lack of sophistication within the Income Tax Act, No. 58 of 1962 and the lack of clarity provided by the South African Revenue Service with regard to derivatives, specifically in a hedging context, is expected to be overcome to a large degree by virtue of the contents of this dissertation. The dissertation considers the meaning of a derivative and a hedge in a tax context and culminates in the drafting of suggested definitions of a derivative and a hedge to be housed within our tax legislation. The definitions have been constructed from key themes and features extracted from various comparative studies. Given the changes in accounting methodologies and practice of derivative transactions, it is considered that the need, from a tax perspective, is to move closer to the accounting treatment of gains and losses on derivative transactions. The analysis in this dissertation favours this approach in the instance specifically where derivatives are transacted as a hedge of an underlying capital transaction. The purposes for which derivatives are used are finally considered specifically in the context of the common law doctrine of substance over form. The subjective test of the taxpayer’s mindset plays a major part in balancing the legal form of a transaction and its legal substance. It is hoped that a fresh view on the taxation of derivatives and the construction of this framework provides users of tax legislation with a concise pathway to the tax effect and consequences of their application. / Prof. D Coetsee

In 1985, Merrill Lynch introduced Liquid Yield Option Notes, or LYONS into the exotic derivative corporate capital market. Based on a plain vanilla bond, its features were changed to accommodate risk protection for issuers and holders. The hybrid bond is both callable and puttable, it is convertible into common stock, and issued as a zero coupon discount bond. The put and call options are intended to reduce short-term interest rate risk corporations and holders are exposed to. Smith and Smithson (1990) propose that LYONs were introduced to reduce underinvestment, asset substitution, and claim dilution. If LYONs were designed to reduce agency costs and align stockholder/bondholder interests several factors can be associated with these securities according to Nash {1994). Identifying firms likely to issue these securities can be found by examining several financial ratios including, debt to equity, leverage, standard deviation of earnings, and debt rating. It is important to know what type of firm is issuing these securities and if stated objectives align with the empirical evidence embedded in the contractual elements. Few studies have been done in the areas of exotic derivative options but as the amount of capital raised through LYONs approaches $50 billion, it is important for investors to become familiar with this instrument, as many institutional investors for pension funds, and other mutual accounts buy into these instruments. Updating the work of Nash (1994) to include issues of LYONs after 1993 to present will test the indicators defined by his contracting-cost explanation for the existence of LYONs. Further knowledge can be gained by assessing more recent issues. Analyzing how recent interest rate, and federal government regulation of the exotic derivative securities market provides insight into future derived offerings and objectives. This thesis will describe the environment and provide insight into the motivations for bond issuers and holders. My intent is to make an assumption about the outcome versus stated objectives. With a sample set of 20 contracts randomly selected from years 1985-2002, I examine several variables within the contracts and the corporations issuing them. Factors such as yield, maturity, face value, conversion premium, and industry are used to analyze the contracts. Factors such as debt to equity, leverage, standard deviation of earnings, are used to determine a correlation in the likelihood of issuing LYONs. Trading history is examined to determine which risk is best protected against by the attached put and call options, and whether corporations or investors are typically realizing the benefits.

Thesis (M.B.A.)--University of Hong Kong, 1998. / Includes bibliographical references (leaf 40-41).

published_or_final_version / Economics and Finance / Doctoral / Doctor of Philosophy

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Thesis (Ph. D.)--University of Washington, 2006. / Vita. Includes bibliographical references (leaves 144-151).