• International Commerce and Information Review
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• v.6 no.3
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• pp.101-119
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• 2004

Since the early 1980's there has been explosive growth in the trading of financial derivatives, particularly in the OTC(over-the-counter) derivatives market. While the market has exploded in term; of growth, much of this activity is still conducted over the phone or fax. Currently, over 2,083 trillion Korean Wons are spent during 2003 by the OTC derivatives industry. XML provides an excellent framework for representing these highly structured products. FpML is the emerging XML-based tool for enabling e-Business in the OTC derivatives market. This paper discusses the application of FpML in building electronic platform designed to promote efficiencies for this market and propose the framework for STP(Straight Transaction Processing) system for OTC derivatives processing which can solve the problems with manual operations.

• The Journal of Information Systems
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• v.20 no.1
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• pp.107-126
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• 2011

Model-based decision support system (DSS) has acted as a crucial role in strengthening the business competitiveness by providing a way of modeling and solving real-world decision problems in a quantitative and scientific manner. It is even more important for trading OTC derivatives, which requires extensive financial-engineering expertise while actively reacting to the continuously changing financial market. This paper proposes a flexible model-based DSS architecture that can support user-friendly interface for executing and analyzing the models and can adapt to the changes of financial market seamlessly. For user-friendliness, we implement the user-interfaces (UIs) using Microsoft Excel, a very widely used spreadsheet program for its great generality and extensibility. Users can utilize the analysis results of DSS or reprocess them for their special needs through the UIs in the form of familiar spreadsheets easily. For adaptiveness to the markets, the proposed architecture is constructed based on the object-oriented concepts, which enables such changes as release of a new financial product can be updated into the system without any delay at the lowest cost. We investigate the practical benefits and limitations of the proposed architecture by a case study on the construction of Model-based Trading Support System (MTSS), performed by a commercial bank in Korea.

• Journal of Venture Innovation
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• v.1 no.1
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• pp.83-98
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• 2018

This paper makes a theoretical approach to the differences between transaction tax and capital gains tax when the financial instruments are traded and imposed taxes in K-OTC market, a newly emerging off-board market. Since it is difficult to reduce risk to the level which investors would like to pursue - depending on the taxation methods of portfolio-composed financial instruments - when it comes to forming a synthetic bond to hedge risk, this paper also seeks for effective taxation methods to make this applicable. First of all, to thoroughly review the taxation balance of synthetic bonds, this paper analyzed the effects of the transaction tax and capital gains tax imposed upon synthetic bonds according to the changes in final stock price and strike price in K-OTC market, and analyzed after-tax profit differences among them depending on whether income tax deduction took place or not. As a result of the research upon the tax gap in transaction tax and capital gains tax according to the changes of final stock prices, it was shown that imposing transaction tax is more likely to be effective for some level of risk hedging with replicating portfolio considering taxation policies and financial markets, since the effect of the transaction tax has a much lower tax gap than that of capital gains tax. In addition, in relation to whether income tax deduction was permitted or not, it was proved that the effect of the transaction tax and the capital gains tax vary depending on the variation in the strike price. Above all, it was shown that if the strike price is lower than the stock price, the transaction tax will be less affected by the existence of income tax deduction than the capital gains tax, while both will be equally affected by the existence of income tax deduction if the strike price is higher than the stock price. Further study would be to demonstrate the validation of this in the K-OTC market with actual financial instruments and, also, to seek for a more systematic hedging method by using a ratio analysis approach to the calculation of the option transaction tax