• Journal of Korea Water Resources Association
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• v.35 no.5
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• pp.501-510
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• 2002

During drought or impending drought period, the reservoir operation method is required to incorporate demand-management policy rule. The objective of this study is focused to the development of demand reduction rule by incorporating hedging-effect for a single reservoir system. To improve the performance measure of the objective function and constraints, we could incorporate three risk performance criteria proposed by Hashimoto et al. (1982) by mixed-integer programming and also incorporate successive linear programming to overcome nonlinear hedging term from the previous study(Shih et al., 1994). To verify this model, this hedging rule was applied to the Daechung multi-purpose dam. As a result, we could evaluate optimal hedging parameters and monthly trigger volumes.

• 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.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.13 no.3
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• pp.1091-1098
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• 2012

From the perspective of risk management, financial organization that have issued ELW require an efficient hedging methodology due to recently increased trade volume of ELW. This study presents an ELW hedging methodology using artificial neural network(ANN) to minimize hedging costs. The performance of the presented methodology in this study is examined by analysis utilizing the prices and volatilities of underlying assets, risk free interest rates, and maturities and computational experiments show that the proposed method is superior to existing dynamic delta hedging(DDH) technique in terms of hedging costs ranged from 25% to 250%.

• The Korean Journal of Financial Management
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• v.26 no.3
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• pp.227-246
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• 2009

This study examines the dynamic hedging performances of the Black-Scholes model and Heston model when stock prices drift with stochastic volatilities. Using Monte Carlo simulations, stock prices consistent with Heston's(1993) stochastic volatility option pricing model are generated. In this circumstance, option traders are assumed to use the Black- Scholes model and Heston model to implement dynamic hedging strategies for the options written. The results of simulation indicate that the hedging performance of a mis-specified Black-Scholes model is almost as good as that of a fully specified Heston model. The implication of these results is that the efficacy of the dynamic hedging performances on evaluating the specifications of alternative option models can be limited.

• The Korean Journal of Financial Management
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• v.26 no.2
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• pp.155-180
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• 2009

This study is to estimate and compare hedging effectiveness in emerging currency and advanced currency futures markets. Emerging currency futures includes Korea won, Mexico peso, and Brazil real and advanced currency futures is Europe euro, British pound, and Japan yen. Hedging effectiveness is measured by comparing hedging performance of the naive hedge model, OLS model, error correction model and constant condintional correlation bivariate GARCH(1, 1) hedge model based on rolling windows. Analysis data is used daily spot and futures rates from January, 2, 2001 to March. 10, 2006. The empirical results are summarized as follows : First, irrespective of hedging period and model, hedging using Korea won/dollar futures reduces spot rate's volatility risk by 97%. Second, Korea won/dollar futures market produces the best hedging performance in emerging and advanced currency futures markets, i.e. Mexico peso, Brazil real, Europe euro, British pound, and Japan yen. Third, there are no difference of hedging effectiveness among hedging models.

• The Journal of the Korea Contents Association
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• v.14 no.11
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• pp.905-914
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• 2014

In this study, we examine hedging effectiveness of KODEX200 ETF and KOSPI200 futures with respect to KOSPI200 spot or KODEX200 ETF using naive, the risk-minimization models and the VECM. The sample period covers from January 5. 2010 to October 31. 2013. Daily prices of the KOSPI200 spot, KOSPI200 futures and KODEX200 were used in this study. The results are summarized ans follows. First, this study show that there is cointegration relationship among KOSPI200 spot, futures and KODEX200 ETF market. Second, there is no significant difference in hedging performance among the models. Finally, hedged position of KOSPI200 cash(unhedged position)-KODEX200 ETF(hedge vehicle) or KODEX200 ETF-KOSPI200 futures seems to improve hedging performance compared to KOSPI200 cash-KOSPI200 futures. This implies that the portfolio managers may be encouraged to use the former than the latter.

• Proceedings of the Korea Water Resources Association Conference
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• 2021.06a
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• pp.206-206
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• 2021

The necessity for appropriate management of water resources infrastructures such as reservoirs, levees, and dikes is increasing due to unexpected hydro-climate irregularities and rising water demands. To meet this need, past studies have focused on advancing theoretical optimization algorithms such as nonlinear programming, dynamic programming (DP), and genetic programming. Yet, the optimally derived theoretical solutions are limited to be directly implemented in making release decisions in the real-world systems for a variety of reasons. This study first aims to comparatively analyze the two prominent optimization methods, DP and evolutionary multi-objective direct policy search (EMODPS), under historical inflow series using K-fold cross validation. A total of six optimization models are formed each with a specific formulation. Then, one of the optimization models was coupled with the actual zone-based hedging rule that has been adopted in practice. The proposed methodology was applied to Boryeong Dam located in South Korea with conflicting objectives between supply and demand. As a result, the EMODPS models demonstrated a better performance than the DP models in terms of proximity to the ideal. Moreover, the incorporation of the real-world policy with the optimal solutions improved in all indices in terms of the supply side, while widening the range of the trade-off between frequency and magnitude measured in the sides of demand. The results from this study once again highlight the necessity of closing the gap between the theoretical solutions with the real-world implementable policies.

• The Korean Journal of Financial Management
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• v.21 no.1
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• pp.231-253
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• 2004

We examine hedge strategies that use Won-dollar futures to hedge the price risk of the Won-dollar exchange rate. We employ the naive hedge model, minimum variance hedge model and bivariate ECT-ARCH(1) model as hedge instruments, and analyze their hedge performances. The sample period covers from January 2, 2001 to December 31, 2002 with sub-samples such as daily, weekly, bi-weekly prices of the Won-dollar futures and cash. The important findings may be summarized as follows. First, there is no significant difference in hedge ratio between the risk minimum variance model and bivariate ECT-ARCH(1) model that controls for the cointegration relationship of the Won-dollar futures and cash. Second, hedge performance of the naive model and minimum variance model with constant hedge ratios is not far behind that of bivariate ECT-ARCH(1) model with time-varying hedge ratios. This results imply that investors are encouraged to use the minimum variance hedge model to hedge Won-dollar exchange rate with Won-dollar futures. Third, hedge performance and effectiveness of each model is also analyzed with respect to hedge period appear to be greater over long than over the short period. This evidence supports the hypothesis that futures prices would have more time to respond to the greater cash price changes over the longer holding period, leading to an improved hedge performance.

• Journal of the Korean Society for Aeronautical & Space Sciences
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• v.41 no.5
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• pp.342-349
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• 2013

A damage imposed on an unmanned aerial vehicle changes the flight dynamic characteristics, and makes difficult for a conventional controller based on undamaged dynamics to stabilize the vehicle with damage. This paper presents a neural network based adaptive control method that guarantees stable control performance for an unmanned aerial vehicle even with damage on the main wing. Additionally, Pseudo Control Hedging (PCH) is combined to prevent control performance degradation by actuator characteristics. Asymmetric dynamic equations for an aircraft are chosen to describe motions of a vehicle with damage. Aerodynamic data from wind tunnel test for an undamaged model and a damaged model are used for numerical validation of the proposed control method. The numerical simulation has shown that the proposed control method has robust control performance in the presence of wing damage.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.5
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• pp.639-648
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• 2021

The study aims to examine the role of financial risk management in predicting the financial performance of commercial banks in Pakistan over the period of 2006-2017. For this purpose, risk management is measured through credit risk, interest rate risk, and liquidity risk, while financial performance is measured through ROA, ROE, and ROI. For this purpose, the dynamic panel model and two step GMM panel estimators are used to test the hypothesis empirically. The annual secondary data has been taken from the published financial reports of commercial banks of Pakistan. The results show that financial risk management significantly decreases the financial performance of commercial banks in Pakistan. Overall, the results are conclusive across the alternative measures of financial risk management in predicting the financial performance of the banking sector in Pakistan. The study suggested that managers should adopt risk management and risk hedging strategies to manage commercial banks' financial risks in Pakistan. They should hold extra cash while using the trade credit facilities. Previous studies mostly used a static model, but this study used a dynamic panel model. This study is among the first that focused on the various factors affecting the banks' performance in Pakistan.