scholarly journals Oil market financialisation and Russian Government budget hedging

2018 ◽  
pp. 10-14
Author(s):  
V. V. Bushuev ◽  
I. V. Bushuev ◽  
D. P. Zamyatina
Keyword(s):  
Financial Markets ◽  
Price Volatility ◽  
Government Budget ◽  
Russian Government ◽  
Hedging Strategy ◽  
Budget Planning ◽  
Risk Hedging ◽  
Oil Market ◽  
Spread Option ◽  
Oil Pricing

Market financialisation radically changes the process of oil pricing and results in increase of price volatility. Normal contango situation in financial markets is favorable for government risk hedging. Optimal hedging strategy depends on derivatives’ market conditions, but the recommended contract is put/spread option. Budget hedging may be beneficial for Government as it permits to include oil price in the process of budget planning more accurately.

scholarly journals COVID-19 pandemic and the crude oil market risk: hedging options with non-energy financial innovations

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Afees A. Salisu ◽  
Kingsley Obiora
Keyword(s):  
Crude Oil ◽  
Structural Breaks ◽  
Exchange Traded Funds ◽  
Modeling Framework ◽  
Risk Hedging ◽  
Financial Innovations ◽  
Oil Market ◽  
Price Series ◽  
Hedging Effectiveness ◽  
Multivariate Volatility

AbstractThis study examines the hedging effectiveness of financial innovations against crude oil investment risks, both before and during the COVID-19 pandemic. We focus on the non-energy exchange traded funds (ETFs) as proxies for financial innovations given the potential positive correlation between energy variants and crude oil proxies. We employ a multivariate volatility modeling framework that accounts for important statistical features of the non-energy ETFs and oil price series in the computation of optimal weights and optimal hedging ratios. Results show evidence of hedging effectiveness for the financial innovations against oil market risks, with higher hedging performance observed during the pandemic. Overall, we show that sectoral financial innovations provide resilient investment options. Therefore, we propose that including the ETFs in an investment portfolio containing oil could improve risk-adjusted returns, especially in similar financial crisis as witnessed during the pandemic. In essence, our results are useful for investors in the global oil market seeking to maximize risk-adjusted returns when making investment decisions. Moreover, by exploring the role of structural breaks in the multivariate volatility framework, our attempts at establishing robustness for the results reveal that ignoring the same may lead to wrong conclusions about the hedging effectiveness.

Market reaction to the Karachi stock exchange floor imposition

2015 ◽  
Vol 4 (2) ◽  
pp. 275-291 ◽  
Author(s):  
Saqib Sharif
Keyword(s):  
Financial Markets ◽  
Market Reaction ◽  
Stock Exchange ◽  
Price Volatility ◽  
Price Limits ◽  
Content Type ◽  
Market Intervention ◽  
Price Floor ◽  
Price Freeze ◽  
Regulatory Intervention

Purpose – The purpose of this paper is to investigate the market reaction to the decision made by the management of the Karachi Stock Exchange (KSE) to impose a price floor that resulted in trading curbs in 2008. The paper analyzes if regulatory intervention helped in restoring investor confidence. Design/methodology/approach – The paper examines the effect of enforcement of a price floor and trading curbs by splitting the time period studied into two periods: pre-floor and post-floor period. The parametric t-statistics and non-parametric Mann-Whitney test are used to compare the abnormal returns (ARs), abnormal trading volume, bid-ask spread, Amihud illiquidity ratio, and price volatility between the two periods. Event study was conducted to observe the behavior of market returns surrounding market-wide price floor. Finally, multivariate regression analysis was also applied by controlling for factors that might influence valuation, liquidity, and volatility. The standard errors have been corrected for cross-sectional clustering due to market-wide restrictions. Findings – The study found an adverse impact of price freeze and trading curb in the KSE, following the relaxation of floor (resumption of active trading). First, the price of securities (or ARs) significantly declined following the relaxation of the price freeze. Second, the market liquidity deteriorated following the relaxation of the price floor. Third, the price volatility increased in the post-floor period. It seems that the decision made by the KSE’s board to implement lower cap on prices for an extended period was ineffective. Practical implications – Market intervention by regulators to bring calm in the financial markets have negative consequences across the globe. The results presented in this paper suggest that implementing price floor brought inefficiency in the market and prevented firms from raising capital to finance their future investments. The author believe this study will add to the knowledge base of regulatory intervention and its impact on the performance of financial markets. Originality/value – There is no empirical evidence on the impact of price limits on volatility in emerging markets. The author selected Pakistan as a case study, where we particularly focus upon impact of the enforcement of a price floor around the peak of Global Financial Crisis (or market intervention) in Pakistan. This study also documents the effect of trading curb on liquidity and volatility in an emerging market, given that a majority of research on trading halt/price limits is based on developed markets.

scholarly journals ТНЕ WORLD OIL MARKET: THE SEARCH FOR BALANCE IN THE NEW "OIL" REALITY

2016 ◽  
pp. 115-124
Author(s):  
T. A. Malova ◽  
V. I. Sisoeva
Keyword(s):  
Price Volatility ◽  
Future Market ◽  
Oil Market ◽  
The World ◽  
Competitive Relations ◽  
The Face ◽  
The Usa ◽  
Analysis Of Dynamics ◽  
State Of Research ◽  
The Impact

The article provides an analysis of change of the world oil market in the face of new "oil" reality. Factors of formation of new "oil" reality in the global world defined. Scientific background and current state of research of the problem are described. It is shownthat in the Russian and foreign literature the considerable attention is paid to the analysis of dynamics of the quantitative variables characterizing fluctuations and shocks in the oil market. At the same time the search for balance in the new "oil" reality are not considerably investigated yet. The proposed approach allows toreveal the substance of the transformation of the world oil market, to assess the changes in the oil market with the development of rhenium in terms of efficiency and functioning of the mechanism, the prospects of price volatility in the oil market. The main directions of transformation of the oil market are follows. Development of a subject basis of the oil market due to changes of a role of the main market players whose structure includes the USA, Saudi Arabia, Russia now. The impact of regulatory factors complex in the oil market towards equilibrium, which include activity of OPEC, supply of shale oil, future market,activity of the uniform regulator and national regulators. Transformation of the oil market in the direction of perfection of the competitive relations, achievement of optimum market balance as a result of coordination and interaction of interests of participants of the global oil market.

scholarly journals Oil Market Shocks and Financial Instability in Asian Countries

2021 ◽  
Author(s):  
Fakhri Hasanov
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Oil Prices ◽  
Financial Instability ◽  
Asian Countries ◽  
Fair Share ◽  
Economic Variables ◽  
Oil Market ◽  
Market Shocks ◽  
The Relationship

There is no commodity whose interlinkages with the macroeconomy have been studied as extensively as oil, starting with Hamilton’s (1983) seminal study. Thousands of subsequent studies have examined the relationship between oil prices and various economic variables, including the stock market. This strand of the literature began with the pioneering work of Kling (1985). Since then, other financial markets, such as banking, have also received a fair share of analysis.

scholarly journals Is this time really different? Flight-to-safety and the COVID-19 crisis

PLoS ONE ◽  
2021 ◽  
Vol 16 (5) ◽  
pp. e0251752
Author(s):  
Celina Löwen ◽  
Bilal Kchouri ◽  
Thorsten Lehnert
Keyword(s):  
Financial Crises ◽  
Price Volatility ◽  
Equity Market ◽  
Gold Price ◽  
Sharp Drop ◽  
Market Participants ◽  
Oil Market ◽  
Causality Tests ◽  
Safety Effect ◽  
The One

During periods of market stress, risk-averse investors reallocate their investments from stocks to gold in a bid to hedge risks. Market participants interpret the induced gold price increase as an indication of safe-haven purchases and a signal of increased uncertainty in the general economic and financial conditions, thereby causing higher gold price volatility. The aim of this paper is to analyze whether this flight to safety effect can be observed during the COVID-19 crisis, which is considered to be a one-of-a-kind crisis and obviously of different origin compared to previous (financial) crises. By examining the interactions between the (option-implied) volatilities of the stock market (VIX) and of the gold (GVZ) and oil (OVX) markets, the main findings indicate that there is a granger causality in general between the equity market and the gold as well as the oil market. During the COVID-19 crisis, a stronger influence of the equity market on the oil market can be observed. Based on symmetric causality tests that are typically employed in the literature, this cannot be observed for the gold market. However, once we control for asymmetric causal interactions, we find that positive shocks in VIX cause positive shocks in GVZ. Hence, the typical flight to safety effect, similar to the one observed during other (financial) crises can also be identified for the COVID-19 crisis. The causality between the equity and oil market is triggered by political factors as well as the economic impact of the crisis which induces a sharp drop in demand for oil.

scholarly journals Strategies for Improvement of Government Budget Absorption of Bogor City

2020 ◽  
Vol 8 (2) ◽  
pp. 207
Author(s):  
Gustawan Rachman ◽  
Ma’mun Sarma ◽  
Dwi Rachmina
Keyword(s):  
Government Regulation ◽  
Work Conditions ◽  
Government Budget ◽  
Analytic Hierarchy ◽  
Budget Planning ◽  
The Government ◽  
Hierarchy Process ◽  
External Intervention ◽  
Budget Expenditure

This study aims to analyze for factors that cause delays in the absorption of the Bogor City Government's expenditure budget so that a strategy can be formulated to improve the performance of this budget absorption. Searching for variables forming the causal factors is done by direct observation and library data search. Exploratory Factor Analysis (EFA) is used to look for underlying factors extracted from the factors forming variables. The search for alternative strategies to improve performance of budget absorption was carried out using the Analytic Hierarchy Process (AHP). The EFA analysis found five main factors causing delays in the absorption of budget expenditure, namely factor in budget planning activities, factor in government regulation and bureaucracy, factor of work conditions, factor influencing financial activities and disbursement of the Government budget, and human resources of the state civil apparatus (ASN). AHP analysis shows that of the five leading sectors of the Regional Apparatus that play a role as key leaders in improving the performance of budget absorption is Sekretariat Daerah. The main obstacle in improving budget absorption is internal and external intervention. The main strategy to correct delays in spending is to improve quality of budget planning and procurement of service goods.

Price volatility, hedging and variable risk premium in the crude oil market

OPEC Review ◽  
2006 ◽  
Vol 30 (2) ◽  
pp. 55-70 ◽  
Author(s):  
Ahmad R. Jalali-Naini ◽  
Maryam Kazemi Manesh
Keyword(s):  
Crude Oil ◽  
Risk Premium ◽  
Price Volatility ◽  
Oil Market

scholarly journals From illiquid financial instrument to market distress – selected institutional circumstances of the credit crisis

Equilibrium ◽  
2009 ◽  
Vol 2 (1) ◽  
pp. 29-38 ◽  
Author(s):  
Anna Krześniak
Keyword(s):  
Financial Markets ◽  
Financial Stability ◽  
Critical Role ◽  
Financial System ◽  
Liquidity Risk ◽  
Price Volatility ◽  
Counterparty Risk ◽  
Credit Crisis ◽  
Financial Instrument ◽  
Underlying Mechanisms

The recently observed credit crunch is yet another market disruption confirming the critical role of liquidity in the financial system. It is however the first time that illiquidity of a single financial instrument has led to illiquidity of a significant part of the financial system. Although the credit crisis had limited effect on the Polish economy, thorough understanding of the underlying mechanisms is necessary to properly monitor the financial stability in the future, as the Polish financial system gets more integrated into the global one. The article discusses selected mechanisms of the crisis and concentrates on the characteristics of the financial markets that led to the sudden spill-over of the turbulence in the global financial markets. The paper highlights the two types of risk, which were underestimated in the past, but played a major role in instigating and magnifying the recent crisis. The first one is the liquidity risk, which may undermine the reliability of the mark-to-market valuation and produce extreme price volatility once the confidence in such valuations is eroded. The second one is the counterparty risk which results from concentration of market turnover in the period of rapidly growing volumes of derivatives traded in the market. The article leads to the conclusion that the lack of transparency and liquidity on the credit risk markets triggered the severe financial crisis in the global financial market. The analysis of the liquidity risk and the counterparty risk illustrates that some institutions became crucial for the functioning not only domestic but also global markets.

scholarly journals How does gold and oil price volatility affect Turkish financial markets?

2020 ◽  
Vol 9 (4) ◽  
pp. 262-270
Author(s):  
Hakan Öner ◽  
Hande Kılıç Satıcı
Keyword(s):  
Exchange Rate ◽  
Financial Markets ◽  
Interest Rates ◽  
Price Volatility ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Volatility ◽  
Causality Relationship ◽  
Us Dollar ◽  
Turkish Lira

Gold and oil price volatilities are thought to have an impact on financial markets. The main aim of this study is to examine the effects of changes in gold and oil prices on Turkish financial markets. For this purpose, the effects of gold and oil price volatilities on nominal US dollar/Turkish lira exchange rate, Borsa Istanbul 100 Index and Turkey 10-year bond interest rates are used to represent Turkish financial markets are analysed by Granger Casuality Test. The study comprises daily data over the period of June 1, 2010 - April 30, 2017. According to the results of the analysis, there is no causality relationship from gold and oil prices to Turkish financial markets. On the other hand, it is concluded that there is a one-way causality relationship from BIST100 index to Turkey 10-year bond interest rate and two-way causality relationship between BIST 100 index and nominal US dollar/Turkish lira exchange rate.

scholarly journals Global Financial Derivatives Market Development and Trading on the Example of Ukraine

2020 ◽  
Vol 74 ◽  
pp. 05001
Author(s):  
George Abuselidze ◽  
Nadiia Reznik ◽  
Anna Slobodianyk ◽  
Victoria Prokhorova
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Market Economy ◽  
Financial Stability ◽  
Global Scale ◽  
Financial Derivatives ◽  
Market Development ◽  
Price Risk ◽  
Risk Hedging ◽  
Current State

Stock market of financial derivatives in Ukraine still develops. There is important to find the way how to use world experience for the domestic implementation. First of all there is a need to improve of legislative base to ensure economic and financial stability. The next way of integration process for domestic stock market of financial derivatives is stock consolidation. Before implementation of foreign experience on the stock market of Ukraine it is important to take into account of all risks which are connected with this process. This research shows appropriate steps for integration of Ukrainian stock market of financial derivatives into global scale. The article identifies the economic essence of derivatives and their types within market economy. Key trends in global derivatives trading are highlighted. Current state and organizational measures of derivatives market development in Ukraine are discussed. Price risk has become the main feature of contemporary commodity and financial markets. Globalization of world commodity and financial markets leads to rapid changes and uncertain business conditions. Under current circumstances, derivatives market provides efficient ways for price risk hedging within market economy. That is why it is important to take into consideration the contemporary state and perspectives of derivatives market in Ukraine.

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