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Risk Management and Financial Derivatives: An Overview

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  • Shawkat Hammoudeh

    ()
    (Department of Economics Drexel University)

  • Michael McAleer

    (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute, The Netherlands, Department of Quantitative Economics, Complutense University of Madrid, and Institute of Economic Research, Kyoto University)

Abstract

Risk management is crucial for optimal portfolio management. One of the fastest growing areas in empirical finance is the expansion of financial derivatives. The purpose of this special issue on “Risk Management and Financial Derivatives” is to highlight some areas in which novel econometric, financial econometric and empirical finance methods have contributed significantly to the analysis of risk management, with an emphasis on financial derivatives, specifically conditional correlations and volatility spillovers between crude oil and stock index returns, pricing exotic options using the Wang transform, the rise and fall of S&P500 variance futures, predicting volatility using Markov switching multifractal model: evidence from S&P100 index and equity options, the performance of commodity trading advisors: a mean-variance-ratio test approach, forecasting volatility via stock return, range, trading volume and spillover effects: the case of Brazil, estimating and simulating Weibull models of risk or price durations: an application to ACD models, valuation of double trigger catastrophe options with counterparty risk, day of the week effect on the VIX - a parsimonious representation, equity and CDS sector indices: dynamic models and risk hedging, the probability of default in collateralized credit operations, risk premia in multi-national enterprises, solving replication problems in a complete market by orthogonal series expansion, downside risk management and VaR-based optimal portfolios for precious metals, oil and stocks, and implied Sharpe ratios of portfolios with options: application to Nikkei futures and listed options.

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Bibliographic Info

Paper provided by Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales in its series Documentos del Instituto Complutense de Análisis Económico with number 2012-08.

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Length: 15 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:ucm:doicae:1208

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Keywords: Risk management; Optimal portfolios; Financial derivatives; Financial econometrics; Options; Futures; Volatility; Spillovers; Hedging; Default; Risk premia; Complete markets.;

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References

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  1. Bai, Zhidong & Phoon, Kok Fai & Wang, Keyan & Wong, Wing-Keung, 2013. "The performance of commodity trading advisors: A mean-variance-ratio test approach," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 188-201.
  2. Divino, Jose Angelo & Rocha, Líneke Clementino Sleegers, 2013. "Probability of default in collateralized credit operations," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 276-292.
  3. Gonzalez-Perez, Maria T. & Guerrero, David E., 2013. "Day-of-the-week effect on the VIX. A parsimonious representation," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 243-260.
  4. Chang, Chia-Lin & Jimenez-Martin, Juan-Angel & McAleer, Michael & Amaral, Teodosio Perez, 2013. "The rise and fall of S&P500 variance futures," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 151-167.
  5. Roengchai Tansuchat & Chia-Lin Chang & Michael McAleer, 2010. "Conditional Correlations and Volatility Spillovers Between Crude Oil and Stock Index Returns," CIRJE F-Series CIRJE-F-706, CIRJE, Faculty of Economics, University of Tokyo.
  6. Caporin, Massimiliano, 2013. "Equity and CDS sector indices: Dynamic models and risk hedging," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 261-275.
  7. Dong, Chaohua & Gao, Jiti, 2013. "Solving replication problems in a complete market by orthogonal series expansion," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 306-317.
  8. Akuzawa, Toshinao & Nishiyama, Yoshihiko, 2013. "Implied Sharpe ratios of portfolios with options: Application to Nikkei futures and listed options," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 335-357.
  9. Mahmoud Hamada & Michael Sherris, 2003. "Contingent claim pricing using probability distortion operators: methods from insurance risk pricing and their relationship to financial theory," Applied Mathematical Finance, Taylor & Francis Journals, vol. 10(1), pages 19-47.
  10. Jiang, I-Ming & Yang, Sheng-Yung & Liu, Yu-Hong & Wang, Alan T., 2013. "Valuation of double trigger catastrophe options with counterparty risk," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 226-242.
  11. Allen, David & Ng, K.H. & Peiris, Shelton, 2013. "Estimating and simulating Weibull models of risk or price durations: An application to ACD models," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 214-225.
  12. Stefan Lutz, 2012. "Risk premia in multi-national enterprises," The School of Economics Discussion Paper Series 1216, Economics, The University of Manchester.
  13. Labuschagne, Coenraad C.A. & Offwood, Theresa M., 2013. "Pricing exotic options using the Wang transform," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 139-150.
  14. Hammoudeh, Shawkat & Araújo Santos, Paulo & Al-Hassan, Abdullah, 2013. "Downside risk management and VaR-based optimal portfolios for precious metals, oil and stocks," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 318-334.
  15. Asai, Manabu & Brugal, Ivan, 2013. "Forecasting volatility via stock return, range, trading volume and spillover effects: The case of Brazil," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 202-213.
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Citations

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Cited by:
  1. Chia-Lin Chang & Hui-Kuang Hsu & Michael McAleer, 2013. "The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry," Documentos del Instituto Complutense de Análisis Económico 2013-30, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, revised Aug 2013.
  2. Chang, Chia-Lin, 2014. "Modelling a Latent Daily Tourism Financial Conditions Index," MPRA Paper 54887, University Library of Munich, Germany.

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