• THE INTERNATIONAL COMMERCE & LAW REVIEW
• /
• 제55권
• /
• pp.185-208
• /
• 2012

Before and after the Capital Market Integration Act in 2007 is implemented in South Korea, many of small-and mid sized exporting companies in South Korea has been bankrupted or filed for lawsuit claiming mis-selling(KIKO) by the banks. The basic economic structure of KIKO in Korea are part of a business model based on the use or misuse of exotic derivatives whose results are anything but imaginary. 571 mid sized exporting companies have been damaged about $28 billion. KIKO is a currency option product that sells foreign currencies at higher foreign exchange rate when the rate moves within a certain range, but sells foreign currencies at two or three times lower rate than the market price when the rate exceeds the designated upper limit. KIKO, Therefore, is hard to know whether the non financial firms intended to hedge against further strengthening of their currency or merely to speculate. It is also hard to know how thoroughly they understood the risk-return profile of these transactions. It is similarly hard to ascertain whether the derivatives dealers offering these transactions were meeting the demands of their clients or taking advantage of them. These exotic derivatives were inappropriate for either hedging or speculating, and no knowledgeable investor would be likely to enter into these contracts intentionally.

• Environmental and Resource Economics Review
• /
• 제15권2호
• /
• pp.319-353
• /
• 2006

This paper shows how weather derivatives can be used to hedge against the price risk and volume risk of purchasing relatively large amounts of electricity. Our specific approach to designing new contracts for electricity is to focus on the return over a summer season rather than on the daily levels of demand and price. It is shown that correct market signals can be preserved in a contract and the associated financial risk can be offset by weather options. The advantage of combining a forward contract with a weather derivative is that the high prices on hot days or when the temperature is high reflect the underlying high cost of producing power when the load is high and that the combined contract with a weather derivative substantially reduces the volatility of the return.

• Journal of Distribution Research
• /
• 제7권2호
• /
• pp.1-19
• /
• 2003

This study intends to explore the relationship between export motivating factors and export channel-structure. Two proactive motivating factors (market-opportunity development and productivity improvement) and one reactive motivating factor (business-risk hedge) were extracted from the survey data collected from Korean exporting firms. The data show that the two proactive motives enhance the likelihood of using the export channels that allow strong controls over export-marketing activities. This study also finds that these proactive motives tend to increase the amount of relationship investment in an export distribution channel.

• Journal of the Korean Mathematical Society
• /
• 제41권3호
• /
• pp.513-533
• /
• 2004

We present the pricing and hedging method for options with general payoffs in the presence of transaction costs. The convexity of the payoff function-gamma of the options- is an important issue under transaction costs. When the payoff function is convex, Leland-style pricing and hedging method still works. However, if the payoff function is of general form, additional assumptions on the size of transaction costs or of the hedging interval are needed. We do not assume that the payoff is convex as in Leland 〔11〕 and the value of the Leland number is less (bigger) than 1 as in Hoggard et al. 〔10〕, Avellaneda and Paras 〔1〕. We focus on generally recognized asymmetry between the option sellers and buyers. We decompose an option with general payoff into difference of two options each of which has a convex payoff. This method is consistent with a scheme of separating out the seller's and buyer's position of an option. In this paper, we first present a simple linear valuation method of general payoff options, and also propose in the last section more efficient hedging scheme which costs less to hedge options.

• Journal of the Ergonomics Society of Korea
• /
• 제17권1호
• /
• pp.47-54
• /
• 1998

Product design and development is very important process in enterprise activities. Reducing development time and reflecting consumer's needs is required to product design and development for increasing benefit and decreasing cost. Human sensibility ergonomics is one of the important technology of R&D in product development. However, the subjective method of human sensibility ergonomics has several problems to analyze and to Quantify experimental data and objective method of human sensibility ergonomics is still in process on study. In this research, new analyzing method is proposed for the subjective human sensibility ergonomics applied with fuzzy set theory. What is the useful theory for controlling uncertain type of information like human mind? This approach is more effective method for analyzing consumer's needs for product design and development process. At collecting needs, certainty scale is added for adapting hedge of fuzzy function. Using a kind of union operator, synthesize each item to analyze identification of each item with fuzzy hamming distance. Identification of analysis is classified with the relational weight using Relationship Chart Method, and is drawn the relationship diagram for clustering each item. A case study with sample test is conducted and demonstrated with this suggested method for more effective way.

• Environmental and Resource Economics Review
• /
• 제13권3호
• /
• pp.417-440
• /
• 2004

For the behavior of the wholesale spot price, a regime switching model with time-varying transition probabilities was estimated using the data from the PJM (Pennsylvania-New Jersey-Maryland) market. By including the temperature as an explanatory variable in the transition probability equations, the threshold effect of changing regime is clearly enhanced. And hence the predictability of the price spikes was improved. This means that the model showed a very clear threshold effect, with a low probability of switching for low loads and low temperatures and a high probability for high loads and high temperatures. And temperature showed a clearer threshold effect than load does. This implies that weather-related contracts may help to hedge against the risk in the cost of buying electricity during a summer.

• The Journal of Asian Finance, Economics and Business
• /
• 제7권5호
• /
• pp.31-40
• /
• 2020

This study investigates whether other comprehensive income (OCI) reported in the statement of comprehensive income (one of the main financial statements after the adoption of K-IFRS) predicts a firm's future performance. Using the quarterly data of Korean listed companies, we examine the association between OCI estimates and future earnings. First of all, we find that OCI is positively associated with earnings in both 1- and 2-quarter ahead, supporting the predictive value of OCI. When we break down OCI into its individual components, our results suggest that the net unrealized gains/losses on available-for-sale (AFS) investment securities are positively associated with future earnings, while the other components (e.g., net unrealized gains/losses on valuation of cash flow hedge derivatives) present insignificant results. In addition, we investigate whether the reliability in OCI estimates enhances the predictive value of OCI to predict future performance. We find that the predictive ability of OCI, in particular the net unrealized gains/losses on available-for-sale (AFS) investment securities, becomes more pronounced when firms are audited by the Big 4 audit firms. Overall, our study suggests that information content embedded in OCI can provide decision-useful information that is helpful for the prediction of future firm performance.

• Environmental and Resource Economics Review
• /
• 제19권4호
• /
• pp.753-769
• /
• 2010

This study empirically analyzes the comparative advantages between separate hedging and complex hedging in terms of hedging effectiveness when there exist multiple risks of LNG price and exchange rate. According to the empirical ex-ante analysis, the mean of procurement costs could be reduced through hedging regardless of hedging type. In addition, the standard deviation of procurement costs could also be reduced by way of hedging, implying that a hedging should contribute to the stabilization of revenue flows. More importantly, complex hedging could be more effective for some hedging periods than separate hedging in terms of revenue stabilization. Therefore, one could verify that the hedging effects improve by making use of the variance-covariance relationship existing between commodity price and exchange rate.

• Proceedings of the Korean Institute Of Construction Engineering and Management
• /
• 한국건설관리학회 2008년도 정기학술발표대회 논문집
• /
• pp.901-904
• /
• 2008

The purpose of this study is to identify the risk factors, analyze the risk factors and make a risk check list of survey in road construction. Generally. the risk management is consisted of 3 steps: risk identification, Risk analysis, Risk hedge. This study is focused on the identification of risk and analysis of risk. To identify the risk factors of survey, we used the specifications of road construction, law of survey, and check list of road construction. This study provides the risk check list of survey for road construction. This research was undertaken to analyze risk factors being determine by the FGI(Focus Group Interview) method with survey specialists.

• Journal of Korean Society of Industrial and Systems Engineering
• /
• 제37권4호
• /
• pp.202-211
• /
• 2014

Pairs trading is a type of arbitrage investment strategy that buys an underpriced security and simultaneously sells an overpriced security. Since the 1980s, investors have recognized pairs trading as a promising arbitrage strategy that pursues absolute returns rather than relative profits. Thus, individual and institutional traders, as well as hedge fund traders in the financial markets, have an interest in developing a pairs trading strategy. This study proposes pairs trading rules (PTRs) created from a price ratio between securities (i.e., stock index futures) using rough set analysis. The price ratio involves calculating the closing price of one security and dividing it by the closing price of another security and generating Buy or Sell signals according to whether the ratio is increasing or decreasing. In this empirical study, we generate PTRs through rough set analysis applied to various technical indicators derived from the price ratio between KOSPI 200 and S&P 500 index futures. The proposed trading rules for pairs trading indicate high profits in the futures market.