• Korea Trade Review
• /
• v.47 no.4
• /
• pp.177-195
• /
• 2022

This study analyzed the volatility spillover effect between international non-ferrous metal futures markets using the BEKK-GARCH model. Statistical data are futures price data of copper (CU), aluminum (AL), nickel (NI), tin (SN) from Shanghai Futures Exchange (SHFE) and London Metal Exchange (LME) from April 1, 2015 to December 31, 2021. Combining the research results, first, in the case of copper, aluminum, and nickel, it was found that there was a two-way volatility spillover effect between the Shanghai and London markets, and the international influence of the London market was greater. Second, in the case of the tin, it was found that the Shanghai market has a volatility spillover effect on the London market from stage I, and it is strengthened in stage II. Third, in the case of nickel, it was found that there was a two-way volatility spillover effect in the first stage, but in the second stage, the London market had a unidirectional volatility spillover effect with respect to the Shanghai market. This study confirmed that China's influence in the international non-ferrous metal futures market is gradually increasing. In addition, it suggested that international investors can engage in arbitrage and hedging using China's non-ferrous metal futures market.

• East Asian Economic Review
• /
• v.27 no.3
• /
• pp.213-242
• /
• 2023

This paper investigates whether the price of cryptocurrency is determined by the US dollar index, the price of investment assets such gold and oil, and the implied volatility of the KOSPI. Overall, the returns on cryptocurrencies are best predicted by the trading volume of the cryptocurrency both in-sample and out-of-sample. The estimates of gold and the dollar index are negative in the return prediction, though they are not significant. The dollar index, gold, and the cryptocurrencies seem to share characteristics which hedging instruments have in common. When investors take notice of the imminent market risks, they increase the demand for one of these assets and thereby increase the returns on the asset. The most notable result in the out-of-sample predictability is the predictability of the returns on value-weighted portfolio by gold. The empirical results show that the restricted model fails to encompass the unrestricted model. Therefore, the unrestricted model is significant in improving out-of-sample predictability of the portfolio returns using gold. From the empirical analyses, we can conclude that in-sample predictability cannot guarantee out-of-sample predictability and vice versa. This may shed light on the disparate results between in-sample and out-of-sample predictability in a large body of previous literature.

• The Korean Journal of Financial Management
• /
• v.20 no.2
• /
• pp.127-150
• /
• 2003

This study analyzes how capital market comovement can affect investors' decision making. We first analyze time-varying correlation coefficient between stock indices of U.S.A. and Korea. and then, using our empirical results, attempt to draw implications on investors' behavior. We find that the tendency of comovement between Korea and U.S.A. equity returns has considerably increased after the financial crisis of late 1997. Through the analysis of investors' behavior, we find that foreign investors, contrary to ITC's (Investment Trust Company) and individual investors, buy more shares in Korean markets as American stock prices go up. Foreign investors employ dynamic hedging strategy and give more weight on global economic factors than domestic ones. Our empirical results as a whole imply that investment behavior of foreign investors is most closely related to comovement of U.S.A. and Korea capital markets.

• The Journal of the Korea Contents Association
• /
• v.13 no.12
• /
• pp.369-378
• /
• 2013

The Korean Won-Dollar exchange markets showed radical price movements in the late 1990s and 2008. Therefore it provides good sources for studying volatility phenomena. Using the GARCH option models, I analysed how the prices of foreign exchange options react volatilities in the foreign exchange spot prices. For this I compared the explanatory power of three option models(Black and Scholes, Duan, Heston and Nandi), using the Won-Dollar OTC option markets data from 2006 to 2013. I estimated the parameters using MLE and calculated the mean square pricing errors. According to the my empirical studies, the pricing errors of Duan, Black and Scholes models are 0.1%. And the pricing errors of the Heston and Nandi model is greatest among the three models. So I would like to recommend using Duan or Black and Scholes model for hedging the foreign exchange risks. Finally, the historical average of spot volatilities is about 14%, so trading the options around 5% may lead to serious losses to sellers.

• Environmental and Resource Economics Review
• /
• v.21 no.3
• /
• pp.465-491
• /
• 2012

Climate change, a result of increasing global warming, has been receiving more public attention due to its serious impact upon many industries. In this study we consider sustainable- (Green-) Growth and Green-Finance, and in particular temperature derivatives, as appropriately active responses to the world's significant climate change trends. We characterize the daily average temperatures in Seoul, South Korea with their seasonal properties and cycles of error terms. We form forecasting models and perform Monte Carlo simulations, and find that the risk-neutral values for CDD call-options and HDD put-options have risen since 1960s, which implies that the trend of temperature increase can be quantified in the financial markets. Contrary to the existing models, the Vasicek model with the explicit consideration of cycles in the error terms suggests that the significant option-values for the CDD call -options above certain exercise prices, implying that there is the possibility of explicit hedging against the considerable and stable increase in temperature.

• Journal of Convergence for Information Technology
• /
• v.9 no.12
• /
• pp.133-140
• /
• 2019

This study examines the reason of a staggering trade deficit on the Korean agro-food industry. To achieve the goal of the study, this study suggests the policy implication for enlargement a trade deficit with foreign exchange rate. Despite the majority of grain importer does realize that there is a huge affection for price volatility on the business result, they are more likely to take flat pricing through the physical market to avoid risk of price volatility with exchange rate. Also the analysis of external and internal environments around the Korean agro-food export & import are conducted, particularly with the analysis of trade volume and food price affecting the export & import. Results from a survey show that the common factor to the effective use of overseas agricultural and foreign currency futures trading for grain traders in Korea.

• International Area Studies Review
• /
• v.14 no.3
• /
• pp.246-263
• /
• 2010

This study examines how the long-run relations between housing price and inflation in the United Sates have changed since the year of 2000. Johansen co-integration test, estimation of long-run equilibrium equation, and Granger causality tests are conducted, based on the VECM. Data covers the period from the first quarter of 1975 to the second quarter of 2010. I adopt the recursive estimation method in which the final period of the estimation is expanded by one quarter, starting from the first quarter of 2000. The empirical results are as follows: (1) In spite of the sharp increase of housing price, the long-run relationship of house prices and inflation has been remained stable until 2007, showing that house prices are a stable inflation hedge in the long run. (2) The housing price plunge since 1997 does not seem to be related to the restore of the long-run relationship between housing prices and inflation. (3) Granger causality test results support the hypothesis that inflation granger-causes housing prices with 10% significance level, but reject the hypothesis that housing price granger-causes inflation.

• The Journal of the Convergence on Culture Technology
• /
• v.5 no.2
• /
• pp.77-82
• /
• 2019

The purpose of this study is to analyze the relationship between the controlling shareholding ratio and the business diversification of savings banks The difference in this study is the analysis of the relationship between the controlling shareholding ratio of the savings bank and the business diversification using panel data. In this study, the semi-annual financial statements for the period 2014-2018 were used on the basis of a sample of 79 saving banks. The research model is analyzed using random effects generalized linear square (GLS) model considering the autocorrelation problem. As a result of the empirical analysis, it is estimated that the relationship between the controlling shareholding ratio of the savings bank and the business diversification is significant (+). This is the result of supporting the hedging hypothesis.

• Asia-Pacific Journal of Business
• /
• v.12 no.3
• /
• pp.379-396
• /
• 2021

Purpose - The purpose of this paper is to study the rational payoff from the standpoint of foreign investors and the government when the government issues GDP-linked bonds to foreign investors. Design/methodology/approach - In this paper, the prices of 12 types of GDP-linked bond structures, which are classified according to the calculation cycle of the rate of change of linked GDP, the currency issued, and whether options are embedded, were evaluated. The Fama-French 3-factor model and the GMM-SDF model are used in the asset pricing model, and domestic and overseas investors used different basis assets. Findings - The KRW premium for US investors is estimated to be 43bp on a quarterly basis and 30bp on an annual basis, respectively, meaning that when the government issues bonds in KRW, the interest rate paid to US investors will be reduced by 30bp to 160bp (annually converted). Using the Fama-French 3 factor model, the KRW premium is the risk premium for the US market beta, meaning that if US investors do not intend to invest in US market beta, it is advantageous to receive an additional interest rate by investing in USD-denominated GDP-linked bonds. Korea's GDP- linked bond give US investors diversified investment utility, so they are willing to incorporate Korean GDP-linked bonds even if -150bp of interest is deducted from the structure issued to Korean investors. And as a result of estimating the value of the option through the GDP-linked bond with options that provides a floor for guaranteeing the principal, the value of the option linked to the annual GDP issued in dollars was the lowest. Research implications or Originality - Issuing dollar-denominated GDP-linked bonds linked to annual GDP with the option of guaranteeing the principal by the government is a way to increase investment opportunities for US investors and achieve financial stability of the government.

• Analyses & Alternatives
• /
• v.1 no.1
• /
• pp.44-64
• /
• 2017

Russia's push in the Asia-Pacific region stems from its interests that have the national, regional and global dimensions. In their turn, the aims of this policy are civilizational, geopolitical, economic and prospective, with a long-term outlook. In the course of their achievement, cooperation with Northeast Asia's countries will play one of the key roles owing to the factors of geographic proximity, Northeast Asia's economic potential, risk hedging and a growing influence Northeast Asia exerts upon the global development. A new cooperation paradigm between Russia and the states of Northeast Asia should be based upon establishing and cementing self-reproducing ties. This is the central aim of Russian initiatives in relations, with Japan, the Republic of Korea, Democratic People's Republic of Korea, Mongolia and China. However, numerous obstacles ranging from Russia's absence in the regional free trade agreements and supply-production chains of value-added production to the permanent international instability generated by Pyongyang's missile-nuclear developments hamper the practical implementation of this task. Realizing the necessity to give an additional impetus to this new cooperative paradigm, Russia has to develop directions with an apparent consolidating effect. The most promising may be the establishment of a permanent security forum based upon Northeast Asia Peace and Security Mechanism chaired by the Russian Federation. The urgency of this measure and its expected support stem from the necessity to strengthen security in Northeast Asia, a task neither the US-led hub-and-spoke system nor ASE-AN-led multilateral dialogue venues have been able to resolve. The issues addressed at the security forum must include the unification of approaches to North Korean nuclear issue and producing a document specifying actions of the claimants on the disputed maritime territories in the "direct contact" situations. At the expert level, Russia has elaborated on the idea to establish such a forum outlining the spectrum of the key directions of cooperation. With the urgency in the establishment of this dialogue venue, its agenda has to be coordinated with the agendas of the existing security systems presented by the US alliances and the ASE-AN-led multilateral negotiations. The practical implementation of this initiative will strengthen security in Northeast Asia as its challenges will be resolved in the pre-emptive way based on coordinated approaches. Therefore, Russia as the Eurasian state will be one of the role players in the advent of the Asian century.