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Derivative Securities on Romanian Capital Market

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Author Info

  • Ramona Maria GOGONCEA

    ()
    (The Bucharest Academy of Economic Studies, Romania)

  • Maria CARACOTA DIMITRIU

    ()
    (The Bucharest Academy of Economic Studies, Romania)

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    Abstract

    This study aimed to investigate whether the world wide agreed models of valuation of derivates may be properly applied to the Romanian capital market, obtaining reliable results for decision makers. The most common valuation models take into account market data such as, interest and exchange rates, volatilities and the price of the underlying instrument. The procedures for valuation must clearly define the nature of the market data to be taken into consideration (for example the zero-coupon curve for the valuation of swaps) and the independent reference base to be used (Reuters at a given time, bid/offer or mid price, broker). In order to be able to obtain the results, I based my study on a self-developed software which can calculate the price and characteristics for different types of derivatives securities once the primary data are filled in. I compared the results obatined usig the valuation models with the actual prices on the Romanian capital market. I expected that the results obtained to be more accurate as the parameters used in the calculation models properly reflect market data as at that date being as widely as possible.. These assumptions were only supported for certain value orientations. In conclusion, explanations for these results are given and limitations for this study are discussed. Also, suggestions for future research are presented in the final part of the article.

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    Bibliographic Info

    Article provided by Faculty of Management, Academy of Economic Studies, Bucharest, Romania in its journal ECONOMIA seria MANAGEMENT / ECONOMY - MANAGEMENT series.

    Volume (Year): 14 (2011)
    Issue (Month): 2 (December)
    Pages: 519-526

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    Handle: RePEc:rom:econmn:v:14:y:2011:i:2:p:519-526

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    Related research

    Keywords: derivatives; investments; risk management; valuation models.;

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