Financial derivatives are financial instruments whose payoff is linked to some fundamental financial assets or indices. They are essential tools for speculation and risk-management. This paper focuses on the pricing of a common type of derivatives: convertible bonds (CBs), which incorporate the features of both bonds and stocks. Chambers and Lu propose a popular two-factor tree model for CBs pr...

Hedging practices among Shari’ah compliant firms (ShC) are still not well explored and in Malaysia is very much lag behind derivatives usage against the developed countries. This study investigates influence of financial on value non-Shari’ah (non-ShC) compares between two categories firms. To meet its objective, Generalized Method-of-Moment estimator (System-GMM) employed a set panel data from...

This article develops a model for evaluating alternative hedging strategies for financially constrained firms. A key advantage of the model is the ability to capture the intertemporal effects of hedging on the firm’s financial situation. We characterize the optimal hedge. A wide range of alternative hedging strategies can be specified and the model allows us to determine in each case if the hed...

The study examined the impact of derivatives usage on performance Shari'ah-compliant firms in Malaysia. employed a Generalised Method-of-Moment estimator (System-GMM) set panel data from 2012 to 2017. A paired sample t-test for mean difference and Wilcoxon Signed-ranks test was performed examine between users non-users derivatives. provided strong evidence significant Moreover, observed better ...

We introduce the industrial portfolio of a wind farm hypothetical company and its valuation consistent with financial market. Next, we propose static risk management policy originating from hedging against volumetric due to drops in intensity discuss consequences. The effectiveness firstly requires adequate modeling calibration an extensive knowledge these atypical (commodity) markets. In this ...

This paper introduces a financial hedging model for global environment risks. Our approach is based on portfolio insurance under hedging constraints. Investors are assumed to maximize their expected utilities defined on financial and environmental asset values. The optimal investment is determined for quite general utility functions and hedging constraints. In particular, our results suggest ho...

We study mathematical aspects of dynamic hedging of Credit Valuation Adjustment (CVA) in a portfolio of OTC financial derivatives. Since the sub-prime crisis, counterparty risk and wrong-way risk are a crucial issue in connection with valuation and risk management of credit derivatives. In this work we first derive a general, model free equation for the dynamics of the CVA of a portfolio of OTC...

If a firm has information pertinent to its own dividend stream that is not made available to its shareholders, it may be in the interests of the firm and its shareholders to adopt a financial hedging policy. This is in contrast with the Modigliani-Miller Theorem, which implies that, with informational symmetry, such financial hedging is irrelevant. In certain cases, hedging policies are identif...

In this paper we propose a maximum entropy estimator for the asymptotic distribution of hedging error options. Perfect replication financial derivatives is not possible, due to market incompleteness and discrete-time hedging. We derive options under generalised jump-diffusion model with kernel bias, which nests number very important processes in finance. then obtain an estimation by maximising ...