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Risk Management and Financial Derivatives: An Overview

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Abstract
Risk management is crucial for optimal portfolio management. One of the fastest growing areas in empirical finance is the expansion of financial deriva-tives. The purpose of this special issue on “Risk Management and Financial Deriva-tives” 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 cor-relations 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 advi-sors: a mean-variance-ratio test approach, forecasting volatility via stock return, range, trading volume and spillover effects: the case of Brazil, estimating and simulat-ing Weibull models of risk or price durations: an application to ACD models, valua-tion of double trigger catastrophe options with counterparty risk, day of the week effect on the VIX - a parsimonious representation, equity and CDS sector indices: dy-namic models and risk hedging, the probability of default in collateralized credit oper-ations, 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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  • Shawkat Hammoudeh & Michael McAleer, 2012. "Risk Management and Financial Derivatives: An Overview," Working Papers in Economics 12/10, University of Canterbury, Department of Economics and Finance.
    • Handle: RePEc:cbt:econwp:12/10
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    File URL: https://repec.canterbury.ac.nz/cbt/econwp/1210.pdf
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    References listed on IDEAS

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    1. 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.
    2. Chang, Chia-Lin & McAleer, Michael & Tansuchat, Roengchai, 2013. "Conditional correlations and volatility spillovers between crude oil and stock index returns," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 116-138.
    3. Lutz, Stefan, 2013. "Risk premia in multi-national enterprises," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 293-305.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. Chuang, Wen-I & Huang, Teng-Ching & Lin, Bing-Huei, 2013. "Predicting volatility using the Markov-switching multifractal model: Evidence from S&P 100 index and equity options," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 168-187.
    11. 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.
    12. 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.
    13. 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.
    14. 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.
    15. 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.
    16. 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.
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    Cited by:

    1. Bianconi, Marcelo & MacLachlan, Scott & Sammon, Marco, 2015. "Implied volatility and the risk-free rate of return in options markets," The North American Journal of Economics and Finance, Elsevier, vol. 31(C), pages 1-26.
    2. Chang, Chia-Lin, 2015. "Modelling a latent daily Tourism Financial Conditions Index," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 113-126.
    3. Chang, Chia-Lin & Hsu, Hui-Kuang & McAleer, Michael, 2014. "The impact of China on stock returns and volatility in the Taiwan tourism industry," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 381-401.
    4. Zheng, Chengli & Su, Kuangxi & Yao, Yinhong, 2021. "Hedging futures performance with denoising and noise-assisted strategies," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    5. Duc Hong Vo & Son Van Huynh & Anh The Vo & Dao Thi-Thieu Ha, 2019. "The Importance of the Financial Derivatives Markets to Economic Development in the World’s Four Major Economies," JRFM, MDPI, vol. 12(1), pages 1-18, February.
    6. Raimonda Martinkutė-Kaulienė, 2014. "Risk Factors in Derivatives Markets," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 2(4), pages 71-83.
    7. Kao, Yu-Sheng & Zhao, Kai & Chuang, Hwei-Lin & Ku, Yu-Cheng, 2024. "The asymmetric relationships between the Bitcoin futures’ return, volatility, and trading volume," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 524-542.
    8. Hong Vo, Duc & Van Nguyen, Phuc & Minh Nguyen, Ha & The Vo, Anh & Cong Nguyen, Thang, 2020. "Derivatives market and economic growth nexus: Policy implications for emerging markets," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    9. Bouwman, Kees & Buis, Boyd & Pieterse-Bloem, Mary & Tham, Wing Wah, 2015. "A practical approach to constructing price-based funding liquidity factors," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 90-97.
    10. Han, Chuan-Hsiang & Chang, Chien-Hung & Kuo, Chii-Shyan & Yu, Shih-Ti, 2015. "Robust hedging performance and volatility risk in option markets: Application to Standard and Poor's 500 and Taiwan index options," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 160-173.
    11. Hunzinger, Chadd B. & Labuschagne, Coenraad C.A., 2014. "The Cox, Ross and Rubinstein tree model which includes counterparty credit risk and funding costs," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 200-217.
    12. Mathias Tessmann & Carlos Carrasco-Gutierrez & Omar Khodr & Luiz Augusto Magalhães & Marcelo Passos, 2024. "Volatility Transmission and Market Connectivity of Metals and Energy Commodities: Insights from the Spillover Index," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 609-618, May.
    13. Kao, Yu-Sheng & Chuang, Hwei-Lin & Ku, Yu-Cheng, 2020. "The empirical linkages among market returns, return volatility, and trading volume: Evidence from the S&P 500 VIX Futures," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    14. César Augusto Giraldo-Prietoa & Gabriel Jaime González Uribe & Cristhian Vesga Bermejo & Diana Carolina Ferreira Herrera, 2017. "Financial hedging with derivatives and its impact on the Colombian market value for listed companies," Contaduría y Administración, Accounting and Management, vol. 62(5), pages 19-20, Diciembre.
    15. Liao, Shuyu & Sojli, Elvira & Tham, Wing Wah, 2015. "Managing systemic risk in The Netherlands," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 231-245.
    16. Yan Yan & Zhewen Liao & Xiaosong Chen, 2018. "Fixed-income securities: bibliometric review with network analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 116(3), pages 1615-1640, September.
    17. Atilgan, Yigit & Demirtas, K. Ozgur & Simsek, Koray D., 2016. "Derivative markets in emerging economies: A survey," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 88-102.
    18. Min Bai & Samir Harith, 2023. "Measuring SMEs Risk – Evidence from Malaysia," SN Business & Economics, Springer, vol. 3(7), pages 1-32, July.

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    More about this item

    Keywords

    Risk management; Optimal portfolios; Financial derivatives; Financial econometrics; Options; Futures; Volatility; Spillovers; Hedging; Default; Risk premia; Complete markets;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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