A Study on Retail Structured Product Market and Financial Regulation in Korea

2016 ◽  
Vol 24 (3) ◽  
pp. 505-524
Author(s):  
Young Ho Eom ◽  
Woon Wook Jang ◽  
Seunghyun Kim
Keyword(s):  
Product Market ◽  
Superior Performance ◽  
Current Status ◽  
Individual Investors ◽  
Regulatory Policies ◽  
Financial Derivative ◽  
Covered Call ◽  
Zero Sum ◽  
Covered Call Strategies ◽  
Derivative Products

This study looks at the characteristics and current status of retail structured product market of Korea and tries to explain, in particular, issues related to issue price, cost of hedging, and overpricing. We also analyzed the perspective of the government and the related regulatory policies. We examined various performance measures for portfolios composed of the KOSPI200 Covered Call Index and other assets in order to change the viewpoint of the authorities that the trading of structured products, such as ELS (equity-linked securities) and DLS (debt-linked securities), is in fact not a zero-sum game between the issuers and investors. The empirical results show that the KOSPI200 Covered Call Index has a superior performance compared to the KOSPI200 Index and the others. In addition, from the perspective of certainty equivalent excess returns, the KOSPI200 Covered Call Index also displays the possibility of improving the utility level of risk-averse retail investors. However, it is difficult in reality for individual investors to construct efficient portfolios that employ covered call strategies using options. Hence, individual investors can form optimal portfolios that benefit indirectly from such covered call strategies via investment in financial derivative products issued by securities firms that are able to more easily utilize investment strategies that incorporate options to form optimum portfolios. This means that both the issuer and investor can profit from these financial derivative products and, therefore, it is not a zero-sum game.

Are covered calls the right option for Australian investors?

2018 ◽  
Vol 35 (2) ◽  
pp. 222-243
Author(s):  
Scott J. Niblock ◽  
Elisabeth Sinnewe
Keyword(s):  
Performance Measures ◽  
Asset Allocation ◽  
Market Volatility ◽  
Risk Exposure ◽  
Content Type ◽  
Fund Managers ◽  
Option Strategies ◽  
Covered Call ◽  
The Right ◽  
Covered Call Strategies

Purpose The purpose of this paper is to examine whether superior risk-adjusted returns can be generated using monthly covered call option strategies in large capitalized Australian equity portfolios and across varying market volatility conditions. Design/methodology/approach The authors construct monthly in-the-money (ITM) and out-of-the-money (OTM) S&P/ASX 20 covered call portfolios from 2010 to 2015 and use standard and alternative performance measures. An assessment of variable levels of market volatility on risk-adjusted return performance is also carried out using the spread between implied and realized volatility indexes. Findings The results of this paper show that covered call writing produces similar nominal returns at lower risk when compared against the standalone buy-and-hold portfolio. Both standard and alternative performance measures (with the exception of the upside potential ratio) demonstrate that covered call portfolios produce superior risk-adjusted returns, particularly when written deeper OTM. The 36-month rolling regressions also reveal that deeper OTM portfolios deliver greater risk-adjusted returns in the majority of the sub-periods investigated. This paper also establishes that volatility spread variation may be a driver of performance for covered call writing in Australia. Originality/value The authors suggest that deeper OTM covered call strategies based on large capitalized portfolios create value for investors/fund managers in the Australian stock market and can be executed in volatile market conditions. Such strategies are particularly useful for those seeking market neutral asset allocation and less risk exposure in volatile market environments.

Covered Call Strategies: One Fact and Eight Myths

2014 ◽  
Vol 70 (6) ◽  
pp. 23-31 ◽  
Author(s):  
Roni Israelov ◽  
Lars N. Nielsen
Keyword(s):  
Covered Call ◽  
Covered Call Strategies

Optimization of covered call strategies

2016 ◽  
Vol 11 (7) ◽  
pp. 1303-1317 ◽  
Author(s):  
Mauricio Diaz ◽  
Roy H. Kwon
Keyword(s):  
Covered Call ◽  
Covered Call Strategies

A survey of reverse mergers in the Chinese stock market

2019 ◽  
Vol 9 (1) ◽  
pp. 5-21
Author(s):  
Qingquan Xin ◽  
Ruitao Li ◽  
Sonia Wong
Keyword(s):  
Stock Market ◽  
Stock Price ◽  
Regulatory System ◽  
Superior Performance ◽  
Chinese Stock Market ◽  
Regulatory Oversight ◽  
Content Type ◽  
Reverse Mergers ◽  
Regulatory Policies ◽  
Asset Quality

Purpose The purpose of this paper is to provide an introduction to the reverse mergers (RMs) conducted in the Chinese stock market by summarizing the regulatory system, surveying the literature on RMs and analyzing the major characteristics of 161 RM cases. Design/methodology/approach This paper introduces the characteristics and evolution of the regulatory framework governing RM activity in China. Then the paper reviews relevant academic studies on the RMs in China and other countries. Finally, the paper identifies and discusses the major characteristics of 161 RM cases in the Chinese stock market from 2006 to 2016. Findings Private companies that go public via RMs in China not only have superior asset quality but also demonstrate good accounting and stock price performance after listing, and these results are unlike those of studies on the quality of RMs in other countries. Research limitations/implications This paper is based on a survey of 161 RM cases in China’s stock market, with the major characteristics of the RMs being identified and analyzed. The limitations of previous studies and suggestions for further research are discussed. Originality/value This paper suggests that the relative superior performance of RMs in the Chinese stock market is caused by the interplay of market forces and regulatory oversight. The Chinese regulator’s pragmatic and flexible approach plays an important role in formulating regulatory policies that respond to the changing macroeconomic environment and financial markets.

scholarly journals A Dynamic Performance Evaluation Model for SMEs Based on Fuzzy DEMATEL and Fuzzy ANP

2019 ◽  
Vol 10 (3) ◽  
pp. 16-30 ◽  
Author(s):  
Merve Cengiz Toklu ◽  
Harun Taşkın
Keyword(s):  
Performance Evaluation ◽  
Process Management ◽  
Small And Medium Enterprises ◽  
Evaluation Model ◽  
Dynamic Performance ◽  
Performance Criteria ◽  
Current Status ◽  
Fuzzy Decision Making ◽  
Fuzzy Dematel ◽  
Regulatory Policies

Performance evaluation is a systematic way for companies to analyze their current status and progress to reach their goals. Companies constantly evaluate their processes in research and development, purchasing, production, sales and marketing departments in order to determine new ways to improve their capabilities. In this study, the authors proposed an evaluation model to evaluate the performance of small and medium enterprises (SME) which play a major role in country's economy under given high attention to “Production Process.” In the proposed model, Fuzzy Decision Making Trial and Evaluation Laboratory (F-DEMATEL) and Fuzzy Analytic Network Process (F-ANP) methods were used to calculate the weights of performance criteria. A case study has been conducted in a manufacturing SME for empirical evidence. The results from this study indicate that C5.1 (new processes on the current or new products are developed and applied expeditiously), C3.3 (products are delivered on time) and C5.3 (products are appropriate to environment, health, safety and regulatory policies) are the most important criteria for the company to which the model was applied. “C5 Process Management” and “C3 Production Planning” are declared as two important main criteria relevance to others.

Understanding the Financial Derivatives Instruments

2018 ◽  
pp. 45-59
Author(s):  
Cantürk Kayahan
Keyword(s):  
Financial Markets ◽  
Point Of View ◽  
2008 Financial Crisis ◽  
Futures Options ◽  
Financial Derivative ◽  
The 2008 Financial Crisis ◽  
And Performance ◽  
The Individual ◽  
Derivative Markets ◽  
Derivative Products

Today, core of the individual and institutional decisions are mainly finance and economics related thereby in today's world the most important success and performance indicators are financial results. Concepts which are called as change or innovation found themselves throughs derivative products in financial markets. Basically, the instruments that are known as forwards, futures, options and swaps have left their mark in last 20 years. However, after the 2008 financial crisis, these products have been labeled as toxic, complex or speculative and held solely responsible for the crisis. Whereas, first appearance of the derivative products was directed toward hedging and risk management. Therefore, objective of this study is to academically explain basic operating principles of financial derivative markets from conceptual and functioning point of view, to understand their places in world financial markets and to analyze their pricing examples. In this way, we aim to help students, academicians, and researchers make better assessment of derivative products.

Momentum and Covered Calls Almost Everywhere

2018 ◽  
Keyword(s):  
Asset Allocation ◽  
Underlying Asset ◽  
Times Series ◽  
Tactical Asset Allocation ◽  
Individual Strategy ◽  
Almost Everywhere ◽  
Risk Contribution ◽  
Asset Classes ◽  
Covered Call ◽  
Covered Call Strategies

This article examines times series momentum and covered call strategies through conventional representations across ten asset classes. The performance of the two strategies generally outperform static buy and hold investments and are classified as positive and negative autocorrelation factors. The tactical overlay of time series momentum and covered call strategies onto asset classes are considered asset transformations. The two transformed replacements of the underlying asset are incorporated into well-established risk-based allocation heuristics, such as maximum diversification and equal risk contribution. The resulting portfolios show enhanced risk-adjusted performance compared with corresponding buy and hold investments or individual strategy portfolios. The authors designate this global tactical asset allocation framework as autocorrelation factor allocation (ACFA).

Performance of Option Based Strategy Benchmark Index

2018 ◽  
Vol 26 (2) ◽  
pp. 183-216
Author(s):  
Soon Shin Kwon ◽  
Byung Jin Kang ◽  
Jay M. Chung
Keyword(s):  
Expected Utility Theory ◽  
Portfolio Performance ◽  
Investment Strategies ◽  
Index Options ◽  
Empirical Results ◽  
Investment Returns ◽  
Two Indices ◽  
Covered Call ◽  
Covered Call Strategies

This paper develops “Strategy Benchmark Index (SBI)” using KOSPI200 options data from January 2004 to March 2017, and then investigates their performances. The SBIs were constructed in the same way as those published daily by CBOE. To effectively analyze the performance of these SBIs, we classified them into four types : (1) Return enhancement SBIs (six indices), (2) Volatility trading SBIs (two indices), (3) Directional trading SBIs (two indices) and (4) Other SBIs (two indices). The return enchancement SBIs include bechmark indices tracking the performance of various covered call strategies and put writing strategies, which are generally used to increase investment returns. The volatility trading SBIs include benchmark indices tracking the performance of well-known volatility trading strategies such as butterfly spread and condor. Benchmark indices tracking the performance of various types of zero-cost collar strategies are classified into the directional trading SBIs. Our empirical results are as follows. First, the risk-adjusted performances of nine SBIs of the total twelve SBIs constructed from KOSPI200 index options has been shown to be great. Second, from a portfolio perspective, some SBIs can be helpful to improve the portfolio performance of CRRA (Constant Relative Risk Aversion) investors. These results imply that passive investment strategies with KOSPI200 index options can provide additional benefits that both equities and bonds do not provide. Third, even when we use the traditional mean-variance framework other than expected utility theory to verify the economic benefit of the SBIs, our empirical results are found to be still valid. In conclusion, our results suggest that some passive investment strategies using KOSPI200 index options would be beneficial to long term investors.

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