• Environmental and Resource Economics Review
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• v.16 no.4
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• pp.855-872
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• 2007

This study suggests an imported coal procurement model that simultaneously considers the risk factors of coal price, ocean freight rate and foreign exchange rate. In addition, it quantitatively analyses the superiority of this model compared to the previous one m terms of procurement cost saving and stabilization. According to the empirical results, a separate hedging could stabilize the procurement cost flow, but this is not the end of story. That is, a complex hedging would reduce the standard deviations of cost flow. Thus, one could improve hedging effects by fully considering the inherent variance-covariance relationship among coal price, ocean freight rate and foreign exchange.

• Environmental and Resource Economics Review
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• v.18 no.1
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• pp.139-158
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• 2009

With the sample of Middle East crude oil imported to South Korea, this study empirically analyzes the effectiveness of the risk management strategies using derivatives such as futures and options. Assuming the hedging period of one to twelve months, it considers a spot purchasing strategy, 1 : 1 futures hedge strategy, OLS-based minimum-variance futures hedge strategy, buying call option strategy, and collar transaction strategy. According to the ex-ante result, using the derivatives of futures or options makes lower the procurement costs when the crude oil prices is increasing. With the hedging period less than or equal to six months, the hedging strategy using futures turns out to be superior in terms of procurement cost reduction and hedging effectiveness improvement. In contrast, the hedging strategies of buying call option and collar transaction would generate better results when the hedging program last over six months.

• The Southeast Asian review
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• v.27 no.3
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• pp.93-135
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• 2017

Due to their geographic proximity to Beijing, the Southeast Asian states under the fallout of the China's growing power are struggling to seek the art of diplomacy to promote their national interests. This study explores why Cambodia previously taking a pro-US strategy after the end of the Cold War has switched to a pro-China one in the context of the rise of G-2 system, the ASEAN regionalism, the country's national interest and Hun Sen's regime legitimation. Theoretically, this study takes a realist constructivist approach and tries to find how realist interests and norms have affected the Hun Sen's regime legitimation. The relationship between China and Cambodia has been deepened by mutual economic interdependence and increasingly stronger Chinese power. Especially, the Chinese massive economic aids and investment have enormously supported the regime legitimation of Hun Sen. On the other hand, The US value diplomacy promoting democracy and human rights has undermined the Hun Sen's legitimacy and strained the two nations' relationship. However, the Hun Sen's pro-China strategy is not to check and balance against US strategic interests and not to recognize the Chinese hegemonic position in Southeast Asia. It is a hedging against the US value diplomacy while maximizing economic and other gains from China. ASEAN has been playing a coordinating role to limit the scope of power politics among big powers and to mitigate its ramifications. Yet, since the US and Chinese interests are so keenly criss-crossing, Cambodia may continue to react to the G-2 system through bilateral relations with them.

• The Korean Journal of Financial Management
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• v.27 no.2
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• pp.63-84
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• 2010

We investigate whether FX hedging materially increases firm value by testing the valuation effect of Foreign Exchange Risk Insurance in Korea, using our sample of 84 listed firms with 617 observations between 2000 and 2008, Employing Tobin's Q as a proxy of firm value and foreign exchange risk insurance as a proxy of hedging instrument, we find a positive relation between firm value and the use of foreign exchange risk insurance. The hedging premium is statistically significant and is on average 7.4% of sample firm value. We also find our empirical results consistent with the preceding evidence that firm uses the hedging instrument in order to alleviate economic frictions and then hedging causes an increase in firm value.

• Korea and Global Affairs
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• v.3 no.1
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• pp.39-76
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• 2019

This paper is to analyze the trend and implications of the publication of China's defense and security white papers. To this end the paper is composed of 5 chapters titled instruction; publication details and composition of China's defense and security white paper; the gist of the white paper on national defense and security during the Chinese president Xi Jinping era; the implications of Chinese white paper on national defense and security during the Chinese president Xi Jinping era; and conclusion. The Chinese Ministry of National Defense had published seven books every two years since 1998 to 2010. In 1995, the ministry published a white paper titled 'China's arms control and disarmament' for the first time. In 2013, it published a white paper titled 'The Diversified Employment of China's Armed Forces' and 'China's Military Strategy' in 2015. All have the common characteristic of being a propaganda policy reflecting China's strategic calculations. It seems that China has began to publish defense white papers in a proactive manner, due to the following factors: (1)pressure on China to demand military transparency from neighboring countries such as the United States; (2)the erosion of the 'China threat.' and (3)confidence in the achievement of China's military modernization. The 'active defensive strategy' and the 'strong defense strategy' of Si Jinping are implied in the words "China's dream is a dream of a powerful country and dream of a strong nation is essential to construct a strong nation." His these strategies have raised security concerns for neighboring countries. We need to maintain and reinforce strong ROK-US security cooperation, and hedging strategies to harmoniously promote ROK-China economic cooperation.

• Korea and Global Affairs
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• v.2 no.2
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• pp.89-130
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• 2018

This paper is to analyse the development of the U.S.-China relationship and pending issues and implications. To this end the paper is composed of 6 chapters titled instruction; the relationship between the US and China in the early and hostile confrontation period; the relationship of US-Chinese approach/normalization period and the relationship in the 1980s and 1990s; the relationship by mid-2010 since the opening of the G2 era; the US-China relations and major pending issues and implications in the era of Trump-Xi Jinping; and conclusion. The rapid growth of China over the past three decades has changed the existing US-centered international order and has triggered competition between the two countries. The United States and China have become the only countries that regularly hold strategic and economic dialogue, and the topic has also developed into a country that discusses not only bilateral relations but also global issues. The issues of US-China cooperation and conflicts encompass global issues as well as bilateral relations issues. For example, the South China Sea, the North Korean nuclear issue and the THAAD, the economic and financial order, and the Taiwan issue. It is not a matter of another country, but a problem that directly or indirectly leads to Korea's diplomacy, security and economy. In order to prevent 'Korea passing' in the US-China relationship, we need a hedging strategy that maintains and strengthens the strong ROK-US security cooperation and harmonious promotion of ROK-China economic cooperation.

• Environmental and Resource Economics Review
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• v.26 no.4
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• pp.499-517
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• 2017

The purpose of this article is to show profit margin hedging can be an optimal strategy in crude oil purchasing. This study theoretically analyzes profit margin hedging strategy is optimal in crude oil purchasing using expected target utility function and conducts simulations to show if the profit margin hedging is profitable. In addition, this study tests existence of mean reversion of crude oil futures prices to confirm the theory that profit margin hedging is more profitable than other strategies, such as always hedging or buying at expiration with spot price, if futures prices are mean reverting. The simulation results show that the expected utility of profit margin hedging higher than other strategies. Although we cannot find any evidence that crude oil futures prices follow mean reverting process, we can conclude that profit margin hedging can be optimal strategy in crude oil purchasing based on theoretical proof and simulation results.

• The Southeast Asian review
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• v.28 no.4
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• pp.31-76
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• 2018

This article explores why the two Southeast Asian countries, Vietnam and the Philippines, choose different strategies to cope with the Chinese threat. Despite the evident Chinese threat in the South China Sea, Vietnam has not meaningfully expanded the military cooperation with the United States, whereas the Philippines, ironically, has distanced itself with its ally, the United States. Existing studies on the topic does not offer a satisfactory explanation. We assign that two cases are examples of "underbalancing" - the failure of balancing even though there is an evident threat. Furthermore, we demonstrate the difference between cases of the Philippines and Vietnam by arguing that the number of veto players affects the outcome of foreign policy, underbalancing of two countries. The Philippines has only one veto player, the president, hence its response to external threats is incoherent. On the other hand, the number of veto players in Vietnam is more than one and those players demand negotiation among them on the matter of foreign policy. Upon analyses on two cases we argue that the former is the case of underbalancing caused by a lack of policy stability, while the latter is the case of underbalancing caused by a lack of policy responsiveness.

• Korean Management Science Review
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• v.31 no.1
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• pp.49-61
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• 2014

We investigate the hedging effectiveness of incorporating single-stock futures into the corresponding stocks. Investing in only stocks frequently causes too much risk when market volatility suddenly rises. We found that single-stock futures help reduce the variance and risk levels of the corresponding stocks invested. We use daily prices of Korean stocks and their corresponding futures for the time period from December 2009 to August 2013 to test the hedging effect. We also use system trading technique that uses automatic trading program which also has several simulation functions. Moving average strategy, Stochastic's strategy, Larry William's %R strategy have been considered for hedging strategy of the futures. Hedging effectiveness of each strategy was analyzed by percent reduction in the variance between the hedged and the unhedged variance. The results clearly showed that examined hedging strategies reduce price volatility risk compared to unhedged portfolio.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.12 no.2
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• pp.712-717
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• 2011

Option issuers generally utilize Dynamic Delta Hedging(DDH) technique to avoid the risk resulting from continuously changing option value. DDH duplicates payoff of option position by adjusting hedge position according to the delta value from Black-Scholes(BS) model in order to maintain risk neutral state. DDH, however, is not able to guarantee optimal hedging performance because of the weaknesses caused by impractical assumptions inherent in BS model. Therefore, this study presents a methodology for dynamic option hedge using artificial neural network(ANN) to enhance hedging performance and show the superiority of the proposed method using various computational experiments.