Journal articles: 'Short-selling risk'

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ENGELBERG, JOSEPH E., ADAM V. REED, and MATTHEW C. RINGGENBERG. "Short-Selling Risk." Journal of Finance 73, no. 2 (February 13, 2018): 755–86. http://dx.doi.org/10.1111/jofi.12601.

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Ang (Chewie), Tze Chuan, Aziz Hayat, and Bob Li. "Short-selling risk in Australia." Pacific-Basin Finance Journal 63 (October 2020): 101406. http://dx.doi.org/10.1016/j.pacfin.2020.101406.

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Chung, Jay M., and Shu-Feng Wang. "Short selling and stock price crash risk." Journal of Derivatives and Quantitative Studies 28, no. 2 (July 13, 2020): 63–76. http://dx.doi.org/10.1108/jdqs-04-2020-0005.

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This paper aims to investigate short selling and stock price crash risk. The authors find that short selling is positively associated with one-month-ahead stock price crash risk, consistent with the literature showing that short sellers are informed traders. The authors attribute this prediction ability to the information short sellers receive from foreign investors with high levels of ownership in a firm. The results shed light on policy issues regarding short selling regulation.

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Richardson, Scott, Pedro A. C. Saffi, and Kari Sigurdsson. "Deleveraging Risk." Journal of Financial and Quantitative Analysis 52, no. 6 (December 2017): 2491–522. http://dx.doi.org/10.1017/s0022109017001077.

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Deleveraging risk is the risk attributable to investing in a security held by levered investors. When there is an aggregate negative shock to the availability of funding capital, securities with a greater presence of levered investors experience extreme return realizations as these investors unwind their positions. Using data on equity loans as a proxy for the degree of levered positions in a given stock, we find robust evidence of deleveraging risk. Stocks with a high degree of short selling experience large positive returns and a decrease in short selling around periods of funding capital scarcity.

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Hrapovic, Kenan. "Short selling and securities lending/borrowing." Ekonomski anali 56, no. 189 (2011): 117–30. http://dx.doi.org/10.2298/eka1189117h.

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This article analyzes the effectiveness of the short selling ban, and questions it with critiques from comparative empirical data. Authors have argued that the ban on short selling hit trading volumes but did not necessarily reduce market volatility. Today market regulators are seeking to rebuild a short selling policy that allows covered short selling while reducing the risk of market abuse. The reinforced framework must include rules and regulations that increase market efficiency, enhance the visibility of short selling to regulators and to investors, improve regulators? responsiveness to market failures and periods of extreme volatility, and enforce anti-abuse laws consistently and judiciously. Although most regulators have allowed their short sale bans to lapse and seem to be thinking constructively about the form of future regulation, the dust has not settled on the short sale debate. As the events of the year 2010 outline, short selling regulations tend to mirror the capital markets they oversee. The author questions if the capital market in Montenegro is ready to lift the short selling ban and to allow speculative trading again.

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Lewis, Thomas. "ESG METRICS IN FIRM RISK ASSESSMENT: EVIDENCE FROM SHORT SELLING." Journal of Academy of Business and Economics 20, no. 3 (October 1, 2020): 117–30. http://dx.doi.org/10.18374/jabe-20-3.9.

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Dezfouli, Kaveh Moradi, and Lawrence Kryzanowski. "Derivatives, Short Selling and US Equity and Bond Mutual Funds." Quarterly Journal of Finance 06, no. 01 (February 15, 2016): 1640002. http://dx.doi.org/10.1142/s2010139216400024.

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The use and effect of derivatives and short selling by US equity and bond open-end mutual funds are studied using a large and unique database. We find that the likelihood of their use is positively related to fund size, family size, and fund turnover for both fund types except for short selling by equity funds from larger families. Our findings suggest that funds that use derivatives exhibit significantly higher benchmark-adjusted performances based on both gross- and net-of-fees returns. This is done without adversely affecting market betas, net expense ratios (NERs), or brokerage fees as a proportion of total net assets (TNA). We find that for bond funds derivative use is negatively associated with non-systematic risk and short selling use is positively associated with total and systematic risk.

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Gao, Xinghua, and Scott D. Julian. "The Use of CSR to Insure Against Short Selling Downside Risk." Academy of Management Proceedings 2018, no. 1 (August 2018): 16664. http://dx.doi.org/10.5465/ambpp.2018.16664abstract.

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Khodamoradi, T., M. Salahi, and A. R. Najafi. "Robust CCMV model with short selling and risk-neutral interest rate." Physica A: Statistical Mechanics and its Applications 547 (June 2020): 124429. http://dx.doi.org/10.1016/j.physa.2020.124429.

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Galloppo, Giuseppe, Mauro Aliano, and Abdelmoneim Youssef. ""Much ado about nothing": Short selling ban effectiveness on bank stock prices." Risk Governance and Control: Financial Markets and Institutions 4, no. 4 (2014): 48–60. http://dx.doi.org/10.22495/rgcv4i4art6.

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Most regulators around the world reacted to the 2007-09 crisis by imposing bans on short selling. Using data from seven equity markets, this study empirically examines the impact of the 2008 short-selling bans on financial stocks. Using panel and matching techniques, evidence indicates that bans on short-selling (i) on the whole widen volatility both in terms of High-Low spread and GARCH analysis, (ii) were not able to reduce systematic risk, (iii) overall failed to support prices. On the whole our results are in line with previous literature.

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DMITRAŠINOVIĆ-VIDOVIĆ, GORDANA, ALI LARI-LAVASSANI, XUN LI, and ANTONY WARE. "DYNAMIC PORTFOLIO SELECTION UNDER CAPITAL-AT-RISK WITH NO SHORT-SELLING CONSTRAINTS." International Journal of Theoretical and Applied Finance 14, no. 06 (September 2011): 957–77. http://dx.doi.org/10.1142/s0219024911006802.

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Portfolio optimization under downside risk is of crucial importance to asset managers. In this article we consider one such particular measure given by the notion of Capital at Risk (CaR), closely related to Value at Risk. We consider portfolio optimization with respect to CaR in the Black-Scholes setting with time dependent parameters and investment strategies, i.e., continuous-time portfolio optimization. We review the results from our previous work in unconstrained portfolio optimization, and then investigate and solve the corresponding problems with the additional constraint of no-short-selling. Analytical formulae are derived for the optimal strategies, and numerical examples are presented.

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Yu, Jing-Rung, Wan-Jiun Paul Chiou, and Da-Ren Mu. "A linearized value-at-risk model with transaction costs and short selling." European Journal of Operational Research 247, no. 3 (December 2015): 872–78. http://dx.doi.org/10.1016/j.ejor.2015.06.024.

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Khodamoradi, Tahereh, Maziar Salahi, and Ali Reza Najafi. "A Note on CCMV Portfolio Optimization Model with Short Selling and Risk-neutral Interest Rate." Statistics, Optimization & Information Computing 8, no. 3 (June 14, 2020): 740–48. http://dx.doi.org/10.19139/soic-2310-5070-890.

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In this paper, first we present some drawbacks of the cardinality constrained mean-variance (CCMV) portfolio optimization with short selling and risk-neutral interest rate when the lower and upper bounds of the assets contributions are -1/K and 1/K(K denotes the number of assets in portfolio). Then, we present an improved variant using absolute returns instead of the returns to include short selling in the model. Finally, some numerical results are provided using the data set of the S&P 500 index, Information Technology, and the MIBTEL index in terms of returns and Sharpe ratios to compare the proposed models with those in the literature.

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AlMaadeed, Temadher, Tahereh Khodamoradi, Maziar Salahi, and Abdelouahed Hamdi. "Penalty ADM Algorithm for Cardinality Constrained Mean-Absolute Deviation Portfolio Optimization." Statistics, Optimization & Information Computing 10, no. 3 (February 3, 2022): 775–88. http://dx.doi.org/10.19139/soic-2310-5070-1312.

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In this paper, we study the cardinality constrained mean-absolute deviation portfolio optimization problem with risk-neutral interest rate and short-selling. We enhance the model by adding extra constraints to avoid investing in those stocks without short-selling positions. Also, we further enhance the model by determining the short rebate based on the return. The penalty alternating direction method is used to solve the mixed integer linear model. Finally, numerical experiments are provided to compare all models in terms of Sharpe ratios and CPU times using the data set of the NASDAQ and S&P indexes.

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Wen, Fenghua, Longhao Xu, Bin Chen, Xiaohua Xia, and Jinyi Li. "Heterogeneous Institutional Investors, Short Selling and Stock Price Crash Risk: Evidence from China." Emerging Markets Finance and Trade 56, no. 12 (January 31, 2019): 2812–25. http://dx.doi.org/10.1080/1540496x.2018.1522588.

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Bogan, Andrew A., Brendan Connor, Thomas R. Bogan, and Elizabeth C. Bogan. "Asymmetries in Short Selling of Exchange-Traded Fundsand the Potential for Systemic Risk." Journal of Index Investing 2, no. 4 (February 29, 2012): 74–83. http://dx.doi.org/10.3905/jii.2012.2.4.074.

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GBADEBO, Abraham Oketooyin, and Yusuf Olatunji OYEDEKO. "EFFECT OF SHORT SELLİNG ON RİSK AND RETURN İN THE NİGERİAN STOCK MARKET." Journal of Public Administration, Finance and Law, no. 26 (2022): 99–114. http://dx.doi.org/10.47743/jopafl-2022-26-10.

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Chamon, Merijn. "EU Risk Regulators and EU Procedural Law." European Journal of Risk Regulation 5, no. 3 (September 2014): 324–37. http://dx.doi.org/10.1017/s1867299x00003858.

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Before the Treaty of Lisbon, EU agencies were unknown in the EU's primary law defined procedural law. Today, following (i) the Treaty's entry into force, (ii) the Common Approach on Decentralised Agencies and (iii) the European Court of Justice's ruling in Short–selling it is interesting to take a look at the peculiar position of EU agencies under the EU's primary and secondary law defined procedural law.

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Das, Sanjiv, Harry Markowitz, Jonathan Scheid, and Meir Statman. "Portfolio Optimization with Mental Accounts." Journal of Financial and Quantitative Analysis 45, no. 2 (February 19, 2010): 311–34. http://dx.doi.org/10.1017/s0022109010000141.

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AbstractWe integrate appealing features of Markowitz’s mean-variance portfolio theory (MVT) and Shefrin and Statman’s behavioral portfolio theory (BPT) into a new mental accounting (MA) framework. Features of the MA framework include an MA structure of portfolios, a definition of risk as the probability of failing to reach the threshold level in each mental account, and attitudes toward risk that vary by account. We demonstrate a mathematical equivalence between MVT, MA, and risk management using value at risk (VaR). The aggregate allocation across MA subportfolios is mean-variance efficient with short selling. Short-selling constraints on mental accounts impose very minor reductions in certainty equivalents, only if binding for the aggregate portfolio, offsetting utility losses from errors in specifying risk-aversion coefficients in MVT applications. These generalizations of MVT and BPT via a unified MA framework result in a fruitful connection between investor consumption goals and portfolio production.

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Jain, Archana, Pankaj K. Jain, and Zabihollah Rezaee. "Value-Relevance of Corporate Social Responsibility: Evidence from Short Selling." Journal of Management Accounting Research 28, no. 2 (March 1, 2016): 29–52. http://dx.doi.org/10.2308/jmar-51439.

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ABSTRACT We examine whether short sellers, as informed investors, take into consideration corporate social responsibility (CSR) performance and disclosure in the areas of environmental, social, and governance (ESG) sustainability in making investment decisions. We find that firms' market value and future financial performance, measured by price per share, return on equity, and return on assets, are lower, whereas operating risk, measured by the standard deviation of return on equity and the standard deviation of return on assets, is higher for firms with low composite ESG scores. We detect a negative association between ESG scores and short selling, indicating that short sellers avoid firms with high ESG scores and tend to target firms with low ESG scores. We conclude that investors consider firms' ESG scores as value relevant in making investment decisions and thus management should integrate CSR into strategic decisions and corporate reporting. JEL Classifications: G32; M40.

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Kumar, Ronald Ravinesh, Peter Josef Stauvermann, and Aristeidis Samitas. "An Application of Portfolio Mean-Variance and Semi-Variance Optimization Techniques: A Case of Fiji." Journal of Risk and Financial Management 15, no. 5 (April 19, 2022): 190. http://dx.doi.org/10.3390/jrfm15050190.

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In this paper, we apply the Markowitz portfolio optimization technique based on mean-variance and semi-variance as measures of risk on stocks listed on the South Pacific Stock Exchange, Fiji. We document key market characteristics and consider monthly returns data from SEP-2019 to FEB-2022 (T = 30) of 17/19 listed companies on the stock exchange to construct various portfolios like 1/N (naïve), maximum return, and market and minimum-variance with and without short-selling constraints. Additionally, we compute each stock’s beta using the market capitalization-weighted stock price index data. We note that well-diversified portfolios (market portfolio and minimum-variance portfolio) with short-selling constraints have relatively higher expected returns with lower risk. Moreover, well-diversified portfolios perform better than the naïve and maximum portfolios in terms of risk. Moreover, we find that both the mean-variance and the semi-variance measures of risk yields a unique market portfolio in terms of expected returns, although the latter has a lower standard deviation and a higher Sharpe ratio. However, for the minimum-variance portfolios and market portfolios without short selling, we find relatively higher returns and risks using the mean-variance than the semi-variance approach. The low beta of individual stock indicates the low sensitivity of its price to the movement of the market index. The study is an initial attempt to provide potential investors with some practical strategies and tools in developing a diversified portfolio. Since not all the portfolios based on mean-variance and the semi-variance analyses are unique, additional methods of investment analysis and portfolio construction are recommended. Subsequently, for investment decisions, our analysis can be complemented with additional measures of risk and an in-depth financial statement/company performance analysis.

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Butin, F. "A new geometrical method for portfolio optimization." Mathematical Modeling and Computing 8, no. 3 (2021): 400–409. http://dx.doi.org/10.23939/mmc2021.03.400.

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Risk aversion plays a significant and central role in investors’ decisions in the process of developing a portfolio. In this portfolio optimization framework, we determine the portfolio that possesses the minimal risk by using a new geometrical method. For this purpose, we elaborate an algorithm that enables us to compute any Euclidean distance to a standard simplex. With this new approach, we can treat the case of portfolio optimization without short-selling in its entirety, and we also recover in geometrical terms the well-known results on portfolio optimization with allowed short-selling. Then, we apply our results to determine which convex combination of the CAC 40 stocks possesses the lowest risk. Thus, we not only obtain a very low risk compared to the index, but we also get a rate of return that is almost three times better than the one of the index.

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Tchana Tchana, Fulbert, and Georges Tsafack. "The implications of value-at-risk and short-selling restrictions for portfolio manager performance." Journal of Risk 21, no. 3 (2019): 81–108. http://dx.doi.org/10.21314/jor.2018.403.

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Emory, Claire. "Asymmetries in Short Selling of Exchange-Traded Funds and the Potential for Systemic Risk." CFA Digest 42, no. 3 (August 2012): 146–48. http://dx.doi.org/10.2469/dig.v42.n3.38.

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Li, Bob, Thomas Stork, Daniel Chai, Mong Shan Ee, and Hong Nee Ang. "Momentum effect in Australian equities: Revisit, armed with short-selling ban and risk factors." Pacific-Basin Finance Journal 27 (April 2014): 19–31. http://dx.doi.org/10.1016/j.pacfin.2014.01.001.

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Devaney, Michael, and William L. Weber. "Short‐sell moratorium effects on regional bank performance." Journal of Financial Economic Policy 5, no. 2 (May 24, 2013): 92–110. http://dx.doi.org/10.1108/17576381311329652.

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PurposeThe purpose of this paper is to investigate the effects of the 2008 SEC short‐sell moratorium on regional bank risk and return. The paper also examines the decline in “failures to deliver” securities in the wake of SEC short‐sell moratorium.Design/methodology/approachIn total, six regional bank portfolios are derived and the beta coefficients from a CAPM model are estimated using the integrated generalized autoregressive conditional heteroskedasticity (IGARCH) method accounting for the short‐sell moratorium. Data on 110 regional banks in six US regions from January 2002 to December 30, 2011 are used to estimate the model.FindingsThe ban on naked short selling and the SEC short‐sell moratorium significantly increased individual bank risk for a majority of banks in six geographic regions, but also increased return in three of three regions. There was also reduced naked short selling as failures to deliver securities declined sharply after the September 2008 moratorium took effect.Originality/valueRegional banks have generally not achieved the size needed to be deemed “too big to fail” by policy‐makers. Thus, policy changes such as the SEC short‐sell moratorium might be expected to have larger effects on regional banks than on larger banks, which might be shielded from the policy change by having achieved “too big to fail” status. The authors' results are consistent with research that has shown that short‐sell restrictions increase risk by reducing liquidity and trading volume.

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Doukas, John A., Chansog (Francis) Kim, and Christos Pantzalis. "Arbitrage Risk and Stock Mispricing." Journal of Financial and Quantitative Analysis 45, no. 4 (August 2010): 907–34. http://dx.doi.org/10.1017/s0022109010000293.

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AbstractIn this paper we examine the relation between equity mispricing and arbitrage risk and find that stocks with high arbitrage risk have higher estimated mispricing than stocks with low arbitrage risk. These results are not limited to high book-to-market or small capitalization stocks, and they are not sensitive to transaction and short-selling costs. In addition, they remain robust to alternative multifactor return generating specification models and mispricing measures. Overall, our empirical results are consistent with the conjecture that mispricing is a manifestation of the inability of arbitrageurs to hedge idiosyncratic risk, a major deterrent to arbitrage activity.

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Schianchi, A., L. Bongini, M. D. Esposti, and C. Giardinà. "Multiple Optimal Solutions in the Portfolio Selection Model with Short-Selling." International Journal of Theoretical and Applied Finance 06, no. 07 (November 2003): 703–20. http://dx.doi.org/10.1142/s021902490300216x.

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In this paper an extension of the Lintner model [1] is considered: the problem of portfolio optimization is studied when short-selling is allowed through the mechanism of margin requirements. This induces a non-linear constraint on the wealth. When interest on deposited margin is present, Lintner ingeniously solved the problem by recovering the unique optimal solution of the linear model (no margin requirements). In this paper an alternative and more realistic approach is explored: the nonlinear constraint is maintained but no interest is perceived on the money deposited against short-selling. This leads to a fully non-linear problem which admits multiple and unstable solutions very different among themselves but corresponding to similar risk levels. Our analysis is built on a seminal idea by Galluccio, Bouchaud and Potters [3], who have re-stated the problem of finding solutions of the portfolio optimization problem in futures markets in terms of a spin glass problem. In order to get the best portfolio (i.e. the one lying on the efficiency frontier), we have to implement a two-step procedure. A worked example with real data is presented.

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Jiang, Shu, Zhanpeng Wang, Zilai Sun, and Junhu Ruan. "Determinants of Buying Produce on Short-Video Platforms: The Impact of Social Network and Resource Endowment—Evidence from China." Agriculture 12, no. 10 (October 15, 2022): 1700. http://dx.doi.org/10.3390/agriculture12101700.

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In the wake of the COVID-19 pandemic, selling by short video has become a new online selling model that enhances the communication between buyers and sellers. Therefore, it is necessary to identify the key factors influencing consumers’ purchase of agricultural products on short-video platforms. Additionally, it is also important to figure out the influencing mechanism and action path. Specifically, based on the ‘Stimulus-Organism-Response (SOR)’ framework and structural equation model, we delineate and empirically test hypotheses regarding the effects of key components on consumers’ purchase intentions and behaviors. The key components refer to three external stimuli of consumers’ social network, sellers’ resource endowment, and both sides’ infrastructure development levels. Simultaneously, we analyze the mediating role of consumers’ perceived value and perceived risk between external stimuli and consumers’ purchase intentions. This paper argues that short-video merchants improving the influence of their stores and platforms strengthening supervision and management are the keys to ensuring stable growth in consumers’ willingness to purchase agricultural products sold on short videos and promoting the development of the short-video live industry.

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Deshpande, Amogh. "On the role of Föllmer-Schweizer minimal martingale measure in risk-sensitive control asset management." Journal of Applied Probability 52, no. 3 (September 2015): 703–17. http://dx.doi.org/10.1239/jap/1445543841.

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Kuroda and Nagai (2002) stated that the factor process in risk-sensitive control asset management is stable under the Föllmer-Schweizer minimal martingale measure. Fleming and Sheu (2002) and, more recently, Föllmer and Schweizer (2010) observed that the role of the minimal martingale measure in this portfolio optimization is yet to be established. In this paper we aim to address this question by explicitly connecting the optimal wealth allocation to the minimal martingale measure. We achieve this by using a ‘trick’ of observing this problem in the context of model uncertainty via a two person zero sum stochastic differential game between the investor and an antagonistic market that provides a probability measure. We obtain some startling insights. Firstly, if short selling is not permitted and the factor process evolves under the minimal martingale measure, then the investor's optimal strategy can only be to invest in the riskless asset (i.e. the no-regret strategy). Secondly, if the factor process and the stock price process have independent noise, then, even if the market allows short-selling, the optimal strategy for the investor must be the no-regret strategy while the factor process will evolve under the minimal martingale measure.

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Deshpande, Amogh. "On the role of Föllmer-Schweizer minimal martingale measure in risk-sensitive control asset management." Journal of Applied Probability 52, no. 03 (September 2015): 703–17. http://dx.doi.org/10.1017/s0021900200113385.

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Kuroda and Nagai (2002) stated that the factor process in risk-sensitive control asset management is stable under the Föllmer-Schweizer minimal martingale measure. Fleming and Sheu (2002) and, more recently, Föllmer and Schweizer (2010) observed that the role of the minimal martingale measure in this portfolio optimization is yet to be established. In this paper we aim to address this question by explicitly connecting the optimal wealth allocation to the minimal martingale measure. We achieve this by using a ‘trick’ of observing this problem in the context of model uncertainty via a two person zero sum stochastic differential game between the investor and an antagonistic market that provides a probability measure. We obtain some startling insights. Firstly, if short selling is not permitted and the factor process evolves under the minimal martingale measure, then the investor's optimal strategy can only be to invest in the riskless asset (i.e. the no-regret strategy). Secondly, if the factor process and the stock price process have independent noise, then, even if the market allows short-selling, the optimal strategy for the investor must be the no-regret strategy while the factor process will evolve under the minimal martingale measure.

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Linnertová, Dagmar. "How Did Short Sale Ban Affect German Capital Market Risk?" Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis 65, no. 6 (2017): 2017–24. http://dx.doi.org/10.11118/actaun201765062017.

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The problem of short sale is a popular issue of stock trading and efficiency of pricing. Most regulatory authorities around the world adopted in the period 2007–2010 ad hoc bans on short selling. This paper provides an examination of an impact of the short sale regulation on the German capital market during crisis period 2008–2010. The purpose is to identify effects of the short sale regulation on level of systematic risk on German capital market and to investigate the discovery of stock prices of German blue chips at the period from May 2007 to April 2011 and three sub periods which demonstrate different regulatory approach to naked short sale regulation. The results suggest that short sale ban affects the level of systematic risk in the German market and prolongs a price reaction on new information. Further, short sale ban limits activities of investors with bearish view. After adoption of short sale ban the level of systematic risk increases and not only banned stocks are affected by the regulation. Finally, at the analyzed period the problem of negative information corporation in stock prices has arisen. Thereafter, the short sale ban is lifted the level of systematic risk decrease and there are not significant differences for banned and not banned stocks. Further, the price efficiency measured by autocorrelation also decreased after ban is lifted.

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LEUNG, TIM, and PENG LIU. "RISK PREMIA AND OPTIMAL LIQUIDATION OF CREDIT DERIVATIVES." International Journal of Theoretical and Applied Finance 15, no. 08 (December 2012): 1250059. http://dx.doi.org/10.1142/s0219024912500598.

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This paper studies the optimal timing to liquidate credit derivatives in a general intensity-based credit risk model under stochastic interest rate. We incorporate the potential price discrepancy between the market and investors, which is characterized by risk-neutral valuation under different default risk premia specifications. We quantify the value of optimally timing to sell through the concept of delayed liquidation premium, and analyze the associated probabilistic representation and variational inequality. We illustrate the optimal liquidation policy for both single-name and multi-name credit derivatives. Our model is extended to study the sequential buying and selling problem with and without short-sale constraint.

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Tan, Kelvin Jui Keng, Jia Min Lee, and Robert W. Faff. "Short-selling pressure and last-resort debt finance: evidence from 144A high-yield risk-adjusted debt." Accounting & Finance 56, no. 4 (April 27, 2015): 1149–85. http://dx.doi.org/10.1111/acfi.12125.

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Dana, R. A. "Comonotonicity, efficient risk-sharing and equilibria in markets with short-selling for concave law-invariant utilities." Journal of Mathematical Economics 47, no. 3 (May 2011): 328–35. http://dx.doi.org/10.1016/j.jmateco.2010.12.016.

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Timková, Monika, and Michal Šoltés. "Managing the equity risk using Short Put Ladder strategy by barrier options." Investment Management and Financial Innovations 16, no. 4 (December 3, 2019): 133–45. http://dx.doi.org/10.21511/imfi.16(4).2019.12.

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The main aim of the paper is to measure hedging efficiency using the Short Put Ladder strategy formed by barrier options in the equity market. The researchers hedge full protection against price’s drop, combining the European down and knock-in put options with the lowest exercise price and vanilla or barrier put options with the higher exercise prices. The authors chose the analyzed alternatives according to the requirement of the zero-cost strategy. The aim of the investigated hedging variants is to secure the minimum constant selling price for the underlying asset’s price drop. Theoretical results of this approach were applied in the equity market, i.e., SPDR S&amp;P 500 ETF. The authors analyzed and compared all hedging variants to each other, however, only the selected techniques were presented in the paper. The findings reveal that the barrier options used for managing the equity risk produce significant reductions of that risk. The right combination of options with the strike prices and the barrier levels wisely selected plays a significant role in risk elimination. Finally, according to the findings, the recommendations for potential investors are introduced.

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Yoon, Sun-Joong. "Structured Products Markets and Implied Volatility Distortion." Journal of Derivatives and Quantitative Studies 22, no. 3 (August 31, 2014): 433–64. http://dx.doi.org/10.1108/jdqs-03-2014-b0003.

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This study verifies the existence of implied volatility distortion by the rapid growth of structured products such as Equity Linked Securities (ELS) in Korean financial markets and provides the policy implications to overcome such a distortion. The most ELS products issued in Korea have a step-down auto-callable payoff structure consisting of short position in down-and-in barrier put options and long position in digital call options. Financial companies which have issued ELS are exposed to the volatility risk, i.e. long vega position, and tend to execute the volatility transactions of short vega. For instance, the financial companies issue Equity-Linked Warrants or sell listed/over-the-counter vanilla options, both of which have short position in volatility risk. Accordingly, the demand for selling volatility is stronger than for buying volatility in the Korean financial markets. According to the empirical results, we conform that the rapid growth of the ELS products induces the pressure for lowering volatility and furthermore, the volatility spreads, defined as the difference between implied volatility and realized volatility, also decrease with respect the amount of the newly issued ELS. Lastly, to mitigate the volatility distortion effect, we suggest to list VKOSPI-related derivatives securities such as VKOSPI futures and options, which in turn balance the trading demands for selling and buying volatilities.

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Nurma Khusna Khanifa, Nurma Khusna Khanifa. "INTER-DISIPLINARITASNALAREKONOFISIKA DI PASAR MODALTERHADAP OPSI SAHAM SEBAGAI SIASAT INVESTASI." SPEKTRA : Jurnal Kajian Pendidikan Sains 4, no. 1 (April 17, 2018): 66. http://dx.doi.org/10.32699/spektra.v4i1.47.

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Saham adalah instrumen investasi yang sampai saat ini masih menjadi primadona investor pasar modal. Kegiatan investasi saham berkaitan dengan jual beli jangka pendek (short selling). Kegiatan short selling bagian yang tidak terpisahkan dari unsur spekulasi.Ini artinya saat demi saat di pasar modal hanyalah spekulasidemi spekulasi. Spekulasi tidak sepenuhnya merupakan permainan judi,dimana tidak ada sama sekali ukuran-ukuran untuk menilainya.Pada gilirannya, apabila ukuran-ukuran itu bisa dihitungsecara tepat (eksak) maka akan membuat semakin matangsebuah pengambilan keputusan dalam penanaman modal,sehingga seorang pemodal tidak perlu harus swarga nunutneraka katut pada pemodal lain.Ranah kajian semacam ini di ?sika merupakan bagian dariekono?sika (econophysics). Beberapa yang lain menyebutkajian seperti ini dengan istilah ?sika keuangan (phynance).Di sini dapat melihat sinergi yang sangat menarik keterkaitan antara fisika dan ekonomi. Saham dikenal dengan investasi yang memberikan peluang keuntungan tinggi namun juga memiliki risiko tinggi.Melalui analisis inter-disiplinaritas ekonofisika seorang investor bisa mempertimbangkan high risk-high returndi pasar modal.

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Ha-Huy, Thai, Cuong Le Van, and Manh-Hung Nguyen. "Arbitrage and asset market equilibrium in infinite dimensional economies with short-selling and risk-averse expected utilities." Mathematical Social Sciences 79 (January 2016): 30–39. http://dx.doi.org/10.1016/j.mathsocsci.2015.10.007.

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Dana, R. A., and C. Le Van. "Overlapping risk adjusted sets of priors and the existence of efficient allocations and equilibria with short-selling." Journal of Economic Theory 145, no. 6 (November 2010): 2186–202. http://dx.doi.org/10.1016/j.jet.2010.08.002.

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CACCIOLI, FABIO, IMRE KONDOR, MATTEO MARSILI, and SUSANNE STILL. "LIQUIDITY RISK AND INSTABILITIES IN PORTFOLIO OPTIMIZATION." International Journal of Theoretical and Applied Finance 19, no. 05 (July 29, 2016): 1650035. http://dx.doi.org/10.1142/s0219024916500357.

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We show that including a term which accounts for finite liquidity in portfolio optimization naturally mitigates the instabilities that arise in the estimation of coherent risk measures on finite samples. This is because taking into account the impact of trading in the market is mathematically equivalent to introducing a regularization on the risk measure. We show here that the impact function determines which regularizer is to be used. We also show that any regularizer based on the norm [Formula: see text] with [Formula: see text] makes the sensitivity of coherent risk measures to estimation error disappear, while regularizers with [Formula: see text] do not. The [Formula: see text] norm represents a border case: its “soft” implementation does not remove the instability, but rather shifts its locus, whereas its “hard” implementation (including hard limits or a ban on short selling) eliminates it. We demonstrate these effects on the important special case of expected shortfall (ES) which has recently become the global regulatory market risk measure.

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Xiong, Xiong, Hailiang Yuan, Wei Zhang, and Yongjie Zhang. "Program trading and its risk analysis based on agent-based computational finance." International Journal of Financial Engineering 02, no. 02 (June 2015): 1550014. http://dx.doi.org/10.1142/s2424786315500140.

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Program trading originates from combination trading technology in 70's in America. It was popular, but once it was considered as root of disaster. Nowadays, there are many divergences on program trading risk in international academic world. This essay is to analyze program trading on risk of stock market. The method adopts computational experiment to build artificial stock market under various experimental conditions. The research will consider two strategies: combination insurance strategy and arbitrage strategy to inspect stock index futures' influences on artificial stock market. Through contrast experiments, it finds that program trading will cause abnormal fluctuation of stock market in short-term period but it will have slight impact on fluctuation of stock market in long-term period. On the whole, stock index futures reduce price fluctuation of spot market. Besides, the research finds that combination insurance strategy will increase short selling expectation in pessimistic market to accelerate market collapse when the market gives the same downside price expectation and the market should consider the influence of combination insurance strategy.

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Khan, Irfanullah, and Biswajit Sarkar. "Transfer of Risk in Supply Chain Management with Joint Pricing and Inventory Decision Considering Shortages." Mathematics 9, no. 6 (March 17, 2021): 638. http://dx.doi.org/10.3390/math9060638.

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This study is the first to consider a distribution-free approach in a newsvendor model with a transfer of risk and back-ordering. Previously, in many articles, discrete demand is considered. In this model, we consider a newsvendor selling a single seasonal item with price-dependent stochastic demand. Competition in markets has forced the retailer and manufacturer to coordinate in decentralized supply chain management. A coordination contract is made between a retailer and manufacturer to overcome the randomness of demand for a short-life-cycle product. The retailer pays an additional amount per product to transfer the risk of unsold items. The manufacturer bears the cost of unsold products from the retailer. Shortages are allowed with back-ordering costs during the season. The distribution-free model is developed and solved with only available demand data of mean and standard deviation. Stackelberg’s game approach is used to calculate the optimal ordering quality and price. This model aims to maximize expected profit by optimizing unit selling price and ordered quantity through coordination. To illustrate that the model is robust, numerical experiment and sensitivity analyses are conducted for both decentralized and centralized supply chain management. For applicability of the model in the real-world business scenario, managerial insights are provided with sensitivity analysis.

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Li, Deqing Diane, and Kenneth Yung. "International Real Estate Review." International Real Estate Review 7, no. 1 (June 30, 2004): 56–70. http://dx.doi.org/10.53383/100053.

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We examine short interests in equity real estate investment trusts (REITs) between 1994 and 2001. Our results show that only high levels (the 90th percentile) of short interest are associated with significant negative REIT returns as the bearish content of short interest may have been mitigated by the favorable risk characteristics of real estate securities. In addition, the significant negative relationship between short interest and REIT returns applies only to REITs with poor performance. The result implies that the bearish sentiment of short interest could also be mitigated by good REIT managers in a real estate market that is informationally inefficient. The results of a logistic regression model further show that the short selling of REIT shares can be explained by firm-specific factors such as operating efficiency, fundamental value, and liquidity. Given that short interest is not indiscriminately associated with negative REIT returns and that the short positions are firm-specific, the results are consistent with implications that short interests in REITs represent attempts to make short-term profits rather than general bearishness regarding real estate investments.

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Muhtaseb, Majed R. "Fraud against hedge funds: implications to operational risk and due diligence." Journal of Financial Crime 27, no. 1 (January 24, 2020): 67–77. http://dx.doi.org/10.1108/jfc-03-2019-0032.

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Purpose The loss of an amount in excess of $100m cash deposit can be disruptive to the operations, definitely the liquidity of the hedge fund. Should a hedge fund liquidity position deteriorate, its compromised solvency could impact its vendors, most notably creditors and prime brokers. Large successful hedge funds do make basic mistakes. Lawyer Marc Dreier committed the criminal act of selling fraudulent promissory notes to hedge funds and others. Mr Drier’s success in selling fraudulent promissory notes was facilitated by his accomplices who posed as fake representatives of legitimate institutions. Drier and team presented bogus “audited financial statements” and forged developer’s signatures, and even went as far as using the unsuspecting institutions’ premises for meetings to meet potential notes buyers to further falsely legitimize the scheme. He had the notes buyers send their payments to his law firm account, to secure the money. His actions cost his victims, who include 13 hedge fund managers, other investors and entities, $400m in addition to his law firm’s employees who also suffered when his law firm was dissolved. For his actions, he was sentenced 20 years in federal prison for investment fraud. This study aims to direct hedge fund investors and other stakeholders to thoroughly vet the compliance function, especially controls on cash disbursements, even if the hedge fund is sizable (in excess of $1bn). Investors and even other stakeholders also should place a greater focus on what is usually overlooked issue; most notably the credit quality and authenticity of short-term investments bought by their hedge funds. Design/methodology/approach A thorough investigation of a fraud committed by a lawyer against a number of hedge funds. Several important lessons are identified to professionals who conduct due diligence on hedge funds. Findings The details of the case are very remarkable. This case directs investors’ attention to place greater efforts on certain aspects of operational risk and due diligence on not only hedge funds but also other investment managers. Normally investors conduct operational due diligence on the fund and its operations. Investors also vet fund external parties such as prime brokers, custodians, accountants and fund administrators. Yet, investors normally do not suspect the quality of short-term fund investments. In this case, the short-terms investments were the source of unforeseen yet substantial risk. Research limitations/implications Stakeholders in hedge funds need to carefully investigate the issuer of and the quality of short-term investments that a hedge fund invests in. Future research can investigate the association of hedge fund manager failure with a liquidity position of the fund. Practical implications Investors must thoroughly the entirety of the fund including short-term securities. Originality/value Normally, it is the hedge funds that commit the fraud against investors. In this case, it is the multi-billion hedge funds run by sophisticated fund managers, who are the victims.

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McDermott, Alan, Simon Lovatt, and Scott Koslow. "Supply chain performance measures for producers and processors of premium beef cuts: A conjoint approach." Journal on Chain and Network Science 4, no. 1 (June 1, 2004): 33–43. http://dx.doi.org/10.3920/jcns2004.x040.

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The performance measures important to New Zealand beef producers and processors in their selling and buying decisions were studied using a conjoint analysis methodology. 98 producers and 5 processors were asked to rank and rate various scenarios. Producers preferred situations in which they received a high price, had high payment security, a premium for quality, had a short lead-time and the processor shared some information. Processors focussed on factors that enabled them to reduce their risk and cost of supply, and ensure traceability back to farms.

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Dixit, Alok, Surendra S. Yadav, and P. K. Jain. "Testing Lower Boundary Conditions for Index Options Using Futures Prices: Evidences from the Indian Options Market." Vikalpa: The Journal for Decision Makers 36, no. 1 (January 2011): 15–32. http://dx.doi.org/10.1177/0256090920110102.

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Options are the contracts which serve as a tool for risk hedging, price discovery, and better allocation of capital. The efficiency of an options market, i.e., the correctness of option prices denotes that it is working well at its well-identified functions (Ackert and Tian, 2000). In view of this, the efficiency of options market has been of equal interest to the academics as well as practitioners and a number of studies on efficiency of options market have been carried out across the globe in different options markets. The present paper attempts to assess the pricing efficiency of the S&P CNX Nifty index options in India by testing the Lower Boundary Conditions (LBCs) using futures prices instead of spot values. The methodology adopted essentially tests a joint market efficiency hypothesis of index options and index futures. This has been done in view of the fact that the use of futures markets helps in doing away with the short-selling constraint as futures can easily be shorted. And, it becomes a natural choice for analysis as the short-selling has been banned in the Indian securities market during the period under reference. Moreover, the use of futures markets, to a marked extent, helps in ensuring the exploitability of arbitrage opportunities when underlying asset is an index. The study covers a period of six years from June 4, 2001 (starting date for index options in India) to June 30, 2007. The major findings of the study are: The put options market is more efficient than the call options market, given the existing market microstructure in India during the period under reference. Another equally important finding is that the put options market showed an improvement in the pricing efficiency over the years whereas the call options market demonstrated a counterintuitive and adverse development. However, the profit potential offered by highly traded opportunities both in the cases of call and put options seems to be unexploitable in the presence of transaction costs. Moreover, the dearth of liquidity in the case of otherwise exploitable opportunities which carry higher profit potentials has been the main inhibiting factor to arbitrageurs. Therefore, in short, it is reasonable to conclude that majority of violations in call as well as put options could not be exploited on account of the existing market-microstructure in India during the period under reference (especially short-selling constraint that caused underpricing in futures to persist) and the dearth of liquidity in the options market. In other words, the revealed state of options pricing can be designated to the short-selling constraints and dearth of liquidity.

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Sawicki, Łukasz, and Bożena Horbaczewska. "Role of the state in implementation of strategic investment projects: The SaHo Model for nuclear power." International Journal of Management and Economics 57, no. 4 (October 13, 2021): 343–59. http://dx.doi.org/10.2478/ijme-2021-0020.

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Abstract The purpose of the paper is to present an innovative business model, the SaHo Model, designed specifically to enable the Polish government to implement nuclear power development plans, which can be possibly used in other countries and in sectors requiring high capital expenditures. The SaHo Model solves the problems identified in the nuclear energy sector, which are related to high investment risk and high costs of capital at the investment stage, and ensures revenues after connection to the grid. Since the state is the investor at the initial stages, it takes over most of the risk in the short term. Selling the shares before connection to the grid, the state significantly reduces the financial involvement in the long term. From then on, the SaHo Model works similar to the Finnish Mankala or American electric cooperative models, producing and selling energy to their shareholders at production costs. None of the models used so far in nuclear energy provides such opportunities. The SaHo Model allows to enhance the competitiveness of the national industry and to increase public acceptance for nuclear power. Thus, it is not only a business model but also a concept for the functioning of the nuclear industry.

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Sawicki, Łukasz, and Bożena Horbaczewska. "Role of the state in implementation of strategic investment projects: The SaHo Model for nuclear power." International Journal of Management and Economics 57, no. 4 (October 13, 2021): 343–59. http://dx.doi.org/10.2478/ijme-2021-0020.

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Abstract The purpose of the paper is to present an innovative business model, the SaHo Model, designed specifically to enable the Polish government to implement nuclear power development plans, which can be possibly used in other countries and in sectors requiring high capital expenditures. The SaHo Model solves the problems identified in the nuclear energy sector, which are related to high investment risk and high costs of capital at the investment stage, and ensures revenues after connection to the grid. Since the state is the investor at the initial stages, it takes over most of the risk in the short term. Selling the shares before connection to the grid, the state significantly reduces the financial involvement in the long term. From then on, the SaHo Model works similar to the Finnish Mankala or American electric cooperative models, producing and selling energy to their shareholders at production costs. None of the models used so far in nuclear energy provides such opportunities. The SaHo Model allows to enhance the competitiveness of the national industry and to increase public acceptance for nuclear power. Thus, it is not only a business model but also a concept for the functioning of the nuclear industry.

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Khodamoradi, T., M. Salahi, and Ali Reza Najafi. "Portfolio Optimization Model with and without Options under Additional Constraints." Mathematical Problems in Engineering 2020 (November 26, 2020): 1–10. http://dx.doi.org/10.1155/2020/8862435.

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In this paper, first, we study mean-absolute deviation (MAD) portfolio optimization model with cardinality constraints, short selling, and risk-neutral interest rate. Then, in order to insure the investment against unfavorable outcomes, an extension of MAD model that includes options is considered. Moreover, since the data in financial models usually involve uncertainties, we apply robust optimization to the MAD model with options. Finally, a data set of S&P index is used to compare the effectiveness of options in the models in terms of returns and Sharpe ratios.

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Journal articles on the topic 'Short-selling risk'

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