The Effect of Equity Linked Securities on Financial Stability in Korea

2018 ◽  
Vol 26 (1) ◽  
pp. 85-114
Author(s):  
Sun-Joong Yoon ◽  
Jaehoon Jung
Keyword(s):  
Interest Rate ◽  
Financial Markets ◽  
Rapid Growth ◽  
Financial Stability ◽  
Stability Index ◽  
Negative Effects ◽  
Structured Products ◽  
Korean Economy ◽  
Retail Investors ◽  
The Relationship

Since the introduction of ELS (Equity-linked securities) in 2003, the structured products have become one of the most important investment vehicles to Korean retail investors. However, the rapid growth of those structured products has induced the imbalance of Korean financial markets and may have eventually damaged the financial stability of Korean economy. In this paper, we investigate how Korean securities companies issuing the structured products hedge their positions and how their activities affect the financial stability. In addition, we conduct a simple empirical analysis to examine the relationship between the issue of ELS and the financial stability using FSI (financial stability index) provided by Bank of Korea. According to the results, the balance of ELS affects the financial stability negatively and this is significant even after adjusting for the control variables such as the KOSPI index, VKOSPI, the risk-free interest rate, and CPI. More specifically, the balance rather than the amount of monthly issuance is significant to financial stability. In addition, the decrease in underlying indices reduces the early redemption, thereby damaging the financial stability. Lastly, we suggest several solutions to alleviate the negative effects.

scholarly journals Investigating the Market Interest Rate on Commercial Banks Financial Performance in Bangladesh

2021 ◽  
Vol 5 (1) ◽  
pp. 3-12
Author(s):  
Debashis Saha ◽  
Prodip Chandra Bishwas ◽  
Md. Mustofa Ahmed Sumon
Keyword(s):  
Interest Rate ◽  
Financial Performance ◽  
Commercial Banks ◽  
Financial Stability ◽  
Banking Sector ◽  
Time Series Data ◽  
Positive Impact ◽  
Series Data ◽  
Market Interest Rate ◽  
The Relationship

The banking sector is the most vital partner of development for countries' economies. It has a remarkable contribution to the country's Gross Domestic Product. This study investigates the relationship between the market interest rate and commercial banks' financial performance. As Bangladesh's banking industry is growing, it is vital to maintain a more robust profitability level for its financial stability and soundness. Banks have some determinants that have a significant impact on their performance. The convenience sampling method is used to select the targeted sample. The study includes the time series data of eight years of fifteen commercial banks listed on the Dhaka Stock Exchange in Bangladesh. Multiple variable linear regression and correlation analysis are performed to examine the relationship of market interest rate with banks' profitability with statistical software, IBM SPSS version 25, and Microsoft excel. The study explored that the market interest rate has a significant positive impact on banks' profitability. It is also found that the lending rate and interest rate spread are significantly correlated with the banks' financial performance. The study recommended that banks make their investment to make a higher profit margin to enhance their management and financial soundness efficiency.

Structured Products Markets and Implied Volatility Distortion

2014 ◽  
Vol 22 (3) ◽  
pp. 433-464
Author(s):  
Sun-Joong Yoon
Keyword(s):  
Financial Markets ◽  
Rapid Growth ◽  
Implied Volatility ◽  
Policy Implications ◽  
Over The Counter ◽  
Volatility Risk ◽  
Put Options ◽  
Structured Products ◽  
Payoff Structure ◽  
The Difference

This study verifies the existence of implied volatility distortion by the rapid growth of structured products such as Equity Linked Securities (ELS) in Korean financial markets and provides the policy implications to overcome such a distortion. The most ELS products issued in Korea have a step-down auto-callable payoff structure consisting of short position in down-and-in barrier put options and long position in digital call options. Financial companies which have issued ELS are exposed to the volatility risk, i.e. long vega position, and tend to execute the volatility transactions of short vega. For instance, the financial companies issue Equity-Linked Warrants or sell listed/over-the-counter vanilla options, both of which have short position in volatility risk. Accordingly, the demand for selling volatility is stronger than for buying volatility in the Korean financial markets. According to the empirical results, we conform that the rapid growth of the ELS products induces the pressure for lowering volatility and furthermore, the volatility spreads, defined as the difference between implied volatility and realized volatility, also decrease with respect the amount of the newly issued ELS. Lastly, to mitigate the volatility distortion effect, we suggest to list VKOSPI-related derivatives securities such as VKOSPI futures and options, which in turn balance the trading demands for selling and buying volatilities.

scholarly journals WHAT DRIVES RETAIL INVESTORS’ INVESTMENT DECISIONS? EVIDENCE FROM NO MOBILE PHONE PHOBIA (NOMOPHOBIA) AND INVESTOR FEAR OF MISSING OUT (I – FOMO)

2020 ◽  
Vol 11 (10) ◽  
pp. 2-20 ◽  
Keyword(s):  
Financial Markets ◽  
Mobile Phone ◽  
Media Studies ◽  
Investment Decisions ◽  
Partial Least Square ◽  
Behavioural Finance ◽  
Fear Of Missing Out ◽  
Retail Investors ◽  
Investor Behaviour ◽  
The Relationship

The main objective of the study is to investigate the impact of No-Mobile-Phobia (Nomophobia) on retail investors‟ investment decisions. The relationship was further analysed by incorporating the role of Investor related Fear-of-Missing-Out (I-FoMO) which is different from traditional FOMO in Indian Financial Markets. The information asymmetry is generated by the absence of a mobile phone coupled with the fear of missing important information in financial markets used for extensive investment decisions was determined by conducting a survey method. A total of 265 retail investors were used for analysing the data and to explore this new phenomenon by Partial Least Square Structural Equational Modelling (PLS-SEM) in SmartPLS version 3.3.2. Further, Importance Performance Map Analysis (IMPA) was applied to investigate the critical factors for determining investor behaviour. The results revealed that there is a tendency to exhibit overtrading by retail investors in the state of fear of no investment information and lack of convenience due to news in smartphones. The similar phenomenon was experienced where Nomophobia leads extensively to I-FoMO which mediates the relationship of No-mobiles and investor behaviour. The study provides a new dimension to the theoretical frameworks in behavioural finance where media studies and information dissemination through smartphones to understand investor behaviour. The study not only validates NMP Questionnaire in media studies but also investigates the new scale of I-FoMOin behavioural finance to understand the aspects of fear and anxiety among human behaviour in Information Systems (IS) Research.

scholarly journals THE RELATIONSHIP BETWEEN MARKET INTEREST RATE AND COMMERCIAL BANK FINANCIAL PERFORMANCE IN BANGLADESH

2021 ◽  
Vol 9 (01) ◽  
pp. 537-543
Author(s):  
Debashis Saha ◽  
◽  
Prodip Chandra Bishwas ◽  
Md. Mustofa Ahmed Sumon ◽  
◽  
...  
Keyword(s):  
Interest Rate ◽  
Financial Performance ◽  
Commercial Banks ◽  
Financial Stability ◽  
Banking Sector ◽  
Time Series Data ◽  
Positive Impact ◽  
Series Data ◽  
Market Interest Rate ◽  
The Relationship

The banking sector is the strongest partner of development for countries economy as it has a remarkable contribution to the countrys Gross Domestic Product. This study aims to find out the relationship between the market interest rate and commercial banks financial performance. As the banking industry of Bangladesh is a growing industry, therefore, it is very necessary to maintain a stronger level of profitability for the banks financial stability and soundness. Banks have some determinants that have a significant impact on their performance. The convenience sampling method is used to select the targeted sample. The study includes the time series data of eight years of fifteen commercial banks that are listed on the Dhaka Stock Exchange in Bangladesh. Multiple variable linear regression and correlation analysis are performed to find out the relationship of market interest rate with banks profitability with the help of statistical software, SPSS 25, and Microsoft excel. The study explored that the market interest rate has a significant positive impact on banks profitability. It is also found that the lending rate and interest rate spread are significantly correlated with the banks financial performance. The study recommended that banks should make their investment in a way so that they can make a higher level of profit margin that can enhance their efficiency of management as well as the financial soundness.

scholarly journals How the COVID-19 Pandemic Has Influenced Central Bank Communication on Social Media. An Analysis of Two Major Central Banks from the Anglo-Saxon economies

2021 ◽  
Vol 14 (3 (41)) ◽  
pp. 80-94
Author(s):  
Ana-Maria  VOLOC ◽  
Keyword(s):  
Social Media ◽  
Financial Stability ◽  
Central Banks ◽  
Anglo Saxon ◽  
Negative Effects ◽  
The Public ◽  
Central Bank Communication ◽  
Bidirectional Communication ◽  
The Impact ◽  
The Relationship

This study examines how central banks communicate on social media during the COVID-19 pandemic, and whether they are using these technologies to create a bidirectional communication or to increase their transparency by reaching a wider audience. The research method used for this purpose is content analysis, by investigating the information provided on the Twitter pages of two major central banks from the Anglo-Saxon economies: the Federal Reserve and the Bank of England. To be more specific, the current study is focused on the impact of the COVID-19 pandemic on the relationship between central banks and the public (if they interact with their audience by responding to comments or creating debate topics that engage the public or they just offer information about their decisions or measures to mitigate the negative effects of the pandemic on the economy), and the type of content central banks prefer (articles, online events, pictures or videos). The results show that central banks use social media and other forms of communication for the primary purpose of giving information about their efforts to ensure macroeconomic and financial stability, rather than for creating an open dialogue with the public.

scholarly journals Islamic Banks’ Financial Stability and Its Determinants: a Comparison Study With Conventional Banks in Indonesia

2018 ◽  
Vol 11 (2) ◽  
pp. 371 ◽  
Author(s):  
Zulfikar Bagus Pambuko ◽  
Nur Ichsan ◽  
MB. Hendrie Anto
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Market Share ◽  
Financial Stability ◽  
Banking Industry ◽  
Banking System ◽  
Stability Index ◽  
Islamic Banking ◽  
Bank Stability ◽  
Banking Stability

<p><em>The research aimed to analyze the stability of Islamic banking industry and its determinants in Indonesia. The same analysis was also done to the conventional banking industry as Indonesia practices dual banking systems. Using monthly data on Indonesian Banking Statistics for 2008-2013, this research implemented the Banking Stability Index (BSI) model for predicting the bank's stability. The analysis began with measuring BSI then using VECM to examine the effect of variables on BSI. </em><em>The result showed that the BSI of both banking system was exhibiting the moderate level of stability though Islamic banking is </em><em>more stable and safe way of financing</em><em> than conventional banking. The shocks of inflation, exchange rate, efficiency, income diversity, liquidity, and Industrial Production Index responded positively by Islamic Bank' stability, while interest rate and market share responded negatively. In another hand, conventional bank' stability responded positively the shock of the exchange rate, income diversity, interest rate, liquidity, and market share, while other variables responded negatively. The results of shocking variables strongly indicated that the conventional banking is more vulnerable than Islamic banking. Islamic banking looked tend to the shock resistance and less volatile. This conclusion, however, might be still questioned as the BSI was not designed specifically for Islamic banking. </em><em>Therefore, constructing an Islamic BSI (under Islamic banking characters) was important to measure the banking stability more appropriate and to develop a proper early warning system for Islamic banking industry.</em></p>

Retrospective analysis of the resilience of Russian regions as socio-economic systems

2019 ◽  
pp. 46-64 ◽  
Author(s):  
Vladimir V. Klimanov ◽  
Sofiya М. Kazakova ◽  
Anna A. Mikhaylova
Keyword(s):  
Panel Data ◽  
Economic Systems ◽  
Financial Indicators ◽  
Russian Regions ◽  
Integral Index ◽  
Negative Effects ◽  
Economic Resilience ◽  
Correlation Dependence ◽  
The Impact ◽  
The Relationship

The article examines the impact of various socio-economic and financial indicators on the resilience of Russian regions. For each region, the integral index of resilience is calculated, and its correlation dependence with the selected indicators is revealed. The study confirms the relationship between fiscal resilience and socio-economic resilience of the regions. The analysis of panel data for 75 regions from 2007 to 2016 shows that there are significant differences in the dynamics of indicators in different periods. In particular, the degree of exposure to the negative effects of the crises of 2008—2009 and 2014—2015 in non-resilient regions is higher than in resilient ones.

Financial Intermediation and Growth: Theory and Some Cross-Country Evidence

1997 ◽  
Vol 36 (4II) ◽  
pp. 855-862
Author(s):  
Tayyeb Shabir
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
Financial Intermediation ◽  
Empirical Estimates ◽  
Financial Liberalisation ◽  
Cross Country ◽  
Level Of Significance ◽  
The Relationship ◽  
Positive Effect ◽  
Theoretical Developments

Well-functioning financial markets can have a positive effect on economic growth by facilitating savings and more efficient allocation of capital. This paper characterises some of the recent theoretical developments that analyse the relationship between financial intermediation and economic growth and presents empirical estimates based on a model of the linkage between financially intermediated investment and growth for two separate groups of countries, developing and advanced. Empirical estimates for both groups suggest that financial intermediation through the efficiency of investment leads to a higher rate of growth per capita. The relevant coefficient estimates show a higher level of significance for the developing countries. This financial liberalisation in the form of deregulation and establishment and development of stock markets can be expected to lead to enhanced economic growth.

BATOMBE: WARISAN BUDAYA BANGSA DARI NAGARI ABAI PROVINSI SUMATERA BARAT

2017 ◽  
Vol 7 (2) ◽  
pp. 159
Author(s):  
Eva Krisna
Keyword(s):  
Oral Tradition ◽  
Multidisciplinary Approach ◽  
Descriptive Analysis ◽  
Community Life ◽  
Psychological Approach ◽  
Negative Effects ◽  
Great House ◽  
Close Relationship ◽  
West Sumatra ◽  
The Relationship

“Batombe” is an oral tradition of the Nagari Abai society at Sangir Batanghari Subdistrict, South Solok District, West Sumatra Province. Batombe is exchanging rhymes (berbalas pantun) which is performed as an entertainment on the wedding party (baralek). Batombe is identical with Great House (Rumah Gadang) Nagari Abai which is a unique house because it is a long traditional custom house that has many rooms. It reaches 21 rooms. The rhymes in batombe tends to deliver a feeling of lilting so the singers often drift into the atmosphere of the show. Therefore, as part of community life, batombe often cause a negative effects for the singers soul. This paper describes various things, such as: who batombe singer is; the time to perform this activity; the relationship between batombe and Great House (Rumah Gadang) at Nagari Abai; and the negative effects caused by batombe for the singers. This paper based on the fact that in oral tradition there is a close relationship between text and the speakers and text with context (place, time and atmosphere), a multidisciplinary approach is used in this paper, such as historical, sociological, anthropological, and psychological approach. The method used is descriptive analysis method.AbstrakBatombe adalah tradisi lisan masyarakat Nagari Abai, Kecamatan Sangir Batanghari, Kabupaten Solok Selatan, Provinsi Sumatra Barat. Batombe adalah tradisi berbalas pantun yang dilakukan sebagai hiburan pada pesta pernikahan (baralek). Batombe identik dengan rumah gadang Nagari Abai yang unik, yakni rumah adat dengan ruangan yang sangat panjang hingga 21 ruangan. Pantun-pantun batombe cenderung menyampaikan perasaan yang mendayu-dayu sehingga para pedendangnya sering hanyut ke dalam suasana pertunjukan. Oleh sebab itu, sebagai bagian dari kehidupan masyarakat, seringkali batombe menyebabkan efek negatif bagi (kejiwaan) para pedendangnya. Tulisan ini mendeskripsikan berbagai hal, seperti penutur batombe, waktu untuk melakukan batombe, hubungan batombe dengan rumah gadang di Nagari Abai, dan efek negatif yang ditimbulkan batombe bagi pedendangnya. Tulisan ini bertolak dari kenyataan bahwa pada tradisi lisan terdapat hubungan erat, antara lain seperti teks dengan penutur dan teks dengan konteks (tempat, waktu, dan suasana). Pendekatan multidisipliner digunakan pada tulisan ini, yakni pendekatan historis, sosiologis, antropologis, dan psikologis. Metode yang digunakan adalah metode analisis deskriptif.

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