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Decomposing Equity Risk: The Case for Segment-Level Financial Derivatives with Automated Regulatory Settlement

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Listed:
  • Hamza, Ameer Hamza

Abstract

Equity markets price corporations as unified entities, yet large companies are composites of fundamentally different businesses. A fund manager who believes Amazon’s AWS will outperform while e-commerce underperforms has no exchange-listed instru- ment to express that view. This structural gap suppresses informed trading, impairs price discovery, and prevents segment-level risk transfer and alpha generation from thematic exposures. We argue that mandatory XBRL-tagged SEC filings have created for the first time a technically viable foundation for segment-level financial derivatives. Using five years of audited data for Amazon and Apple, we show that hypothetical segment strategies generate sustained alpha largely uncorrelated with par- ent equity returns and serve as efficient hedges for thematic portfolios. Segment-level derivatives represent a significant and addressable gap in financial market infrastructure.

Suggested Citation

  • Hamza, Ameer Hamza, 2026. "Decomposing Equity Risk: The Case for Segment-Level Financial Derivatives with Automated Regulatory Settlement," MPRA Paper 128824, University Library of Munich, Germany, revised 20 Apr 2026.
    • Handle: RePEc:pra:mprapa:128824
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    References listed on IDEAS

    as
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    2. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    3. repec:reg:rpubli:460 is not listed on IDEAS
    4. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
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    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software

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