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Item Open Access Energy, precious metals, and GCC stock markets: Is there any risk spillover?(Elsevier, 2019) Al-Yahyaee, K.; Mensi, W.; Şensoy, Ahmet; Kang, S.Show more We analyze dynamic return and risk spillovers between commodity futures (energy & precious metals) and the Gulf Cooperation Council (GCC) stock markets. Utilizing dynamic equicorrelation (DECO) models and the spillover index of Diebold and Yilmaz (2012), we show the existence of significant return and risk spillovers between the commodities and the GCC stock markets, particularly during the onset of the 2008–2009 global financial crisis. In addition, silver, platinum, and energy futures markets are net transmitter of returns to stock markets. Precious metals (except silver) and WTI oil are net transmitter of risk to GCC markets. Abdu Dhabi and Dubai are net transmitter of returns and risk to other markets. Moreover, portfolio management analysis shows that the mix of commodities and GCC equities provides diversification opportunities for different crisis periods. Finally, precious metal markets offer superior hedging effectiveness over energy markets for all GCC markets.Show more Item Open Access Expected gain-loss pricing and hedging of contingent claims in incomplete markets by linear programming(Elsevier, 2010) Pınar, M. Ç.; Salih, A.; Camcı, A.Show more We analyze the problem of pricing and hedging contingent claims in the multi-period, discrete time, discrete state case using the concept of a "λ gain-loss ratio opportunity". Pricing results somewhat different from, but reminiscent of, the arbitrage pricing theorems of mathematical finance are obtained. Our analysis provides tighter price bounds on the contingent claim in an incomplete market, which may converge to a unique price for a specific value of a gain-loss preference parameter imposed by the market while the hedging policies may be different for different sides of the same trade. The results are obtained in the simpler framework of stochastic linear programming in a multi-period setting, and have the appealing feature of being very simple to derive and to articulate even for the non-specialist. They also extend to markets with transaction costs.Show more Item Open Access Gain-loss pricing under ambiguity of measure(E D P Sciences, 2010) Pınar, M. Ç.Show more Motivated by the observation that the gain-loss criterion, while offering economically meaningful prices of contingent claims, is sensitive to the reference measure governing the underlying stock price process (a situation referred to as ambiguity of measure), we propose a gain-loss pricing model robust to shifts in the reference measure. Using a dual representation property of polyhedral risk measures we obtain a one-step, gain-loss criterion based theorem of asset pricing under ambiguity of measure, and illustrate its use.Show more Item Open Access Hedging of a multinational firm using futures and options that is subject to price uncertainty due to foreign exchange fluctuations(Bilkent University, 1994) Özmen, Z. MelikeShow more After the switch to floating exchange rates in 1973, internationally active companies became exposed to interest and foreign exchange risks. In this thesis, the hedging alternatives due. to foreign currency risk and devaluation are analyzed for a multinational firm whose liabilities from import activity is fixed in terms of foreign currency, but the corresponding domestic price is uncertain. As the main alternative ' fiitures and options ' are examined. Firstly, the related literature is investigated, the required information is given, and the case study is introduced. Under three different scenarios, the possible changes in foreign exchange rates are given. In the first scenario; the possibility of dollar's gaining value, in the second scenario; the possibility of the cross' being the same at expiry, and in the last scenario the possibility of dollar’s loosing value in foreign market are considered. Since the aim is to hedge the potential losses due to changes in cross rates, the company's position is carried in a % 50 US dollar % 50 Deutsche mark basket. This position is analyzed according to the three different scenarios and the profit / loss realized under the alternative hedging strategies are demonstrated. The alternative hedging methods are no hedging, forward with cross, forward with domestic currency unit, and options on futures. It is shown that the alternatives provide perfect hedge but, since the application of the different strategies involves advantages and disadvantages depending on the particular scenario, the decision on which strategy or combination of strategies to use has to be made on the merits of each individual situation.Show more Item Open Access Identifying diversifiers, hedges, and safe havens among Asia Pacific equity markets during COVID-19: New results for ongoing portfolio allocation(Elsevier BV, 2023-02-22) Ali, F.; Şensoy, Ahmet; Goodell, J. W.Show more We identify diversification benefits among Asian equity markets in the COVID-19 era. We find that such benefits among Asia-Pacific markets changed considerably during the pandemic, and most changes were persistent. In most cases, any of the sample equities had at least one safe-haven protection. The exceptions are Pakistan, Thailand, and Singapore, where diversification benefits are limited and vary across subperiods. The Hong Kong equity market provides safe-haven protection to most markets during periods of extreme negative returns. Further, we find that greater (lower) weightings on the Bangladeshi, Taiwanese, and Malaysian (Thai) markets provide important diversification in terms of maximizing Sharpe ratio and minimizing variance during the pandemic.Show more Item Open Access An integer programming model for pricing American contingent claims under transaction costs(2012) Pınar, M. Ç.; Camcı, A.Show more We study the problem of computing the lower hedging price of an American contingent claim in a finite-state discrete-time market setting under proportional transaction costs. We derive a new mixed-integer linear programming formulation for calculating the lower hedging price. The linear programming relaxation of the formulation is exact in frictionless markets. Our results imply that it might be optimal for the holder of several identical American claims to exercise portions of the portfolio at different time points in the presence of proportional transaction costs while this incentive disappears in their absence.Show more Item Open Access Lower hedging of American contingent claims with minimal surplus risk in finite-state financial markets by mixed-integer linear programming(2014) Pınar, M. Ç.Show more The lower hedging problem with a minimal expected surplus risk criterion in incomplete markets is studied for American claims in finite state financial markets. It is shown that the lower hedging problem with linear expected surplus criterion for American contingent claims in finite state markets gives rise to a non-convex bilinear programming formulation which admits an exact linearization. The resulting mixed-integer linear program can be readily processed by available software.Show more Item Open Access Pricing American contingent claims by stochastic linear programming(Taylor & Francis, 2009) Camcı, A.; Pınar, M. Ç.Show more We consider pricing of American contingent claims (ACC) as well as their special cases, in a multi-period, discrete time, discrete state space setting. Until now, determining the buyer's price for ACCs required solving an integer programme unlike European contingent claims for which solving a linear programme is sufficient. However, we show that a relaxation of the integer programming problem that is a linear programme, can be used to get the same lower bound for the price of the ACC.Show more Item Open Access Pricing and hedging of contingent claims in incomplete markets(Bilkent University, 2010) Camcı, AhmetShow more In this thesis, we analyze the problem of pricing and hedging contingent claims in the multi-period, discrete time, discrete state case. We work on both European and American type contingent claims. For European contingent claims, we analyze the problem using the concept of a “λ gain-loss ratio opportunity”. Pricing results which are somewhat different from, but reminiscent of, the arbitrage pricing theorems of mathematical finance are obtained. Our analysis provides tighter price bounds on the contingent claim in an incomplete market, which may converge to a unique price for a specific value of a gain-loss preference parameter imposed by the market while the hedging policies may be different for different sides of the same trade. The results are obtained in the simpler framework of stochastic linear programming in a multiperiod setting. They also extend to markets with transaction costs. Until now, determining the buyer’s price for American contingent claims (ACC) required solving an integer program unlike European contingent claims for which solving a linear program is sufficient. We show that a relaxation of the integer programming problem which is a linear program, can be used to get the buyer’s price for an ACC. We also study the problem of computing the lower hedging price of an American contingent claim in a market where proportional transaction costs exist. We derive a new mixed-integer linear programming formulation for calculating the lower hedging price. We also present and discuss an alternative, aggregate formulation with similar properties. Our results imply that it might be optimal for the holder of several identical American claims to exercise portions of the portfolio at different time points in the presence of proportional transaction costs while this incentive disappears in their absence. We also exhibit some counterexamples for some new ideas based on our work. We believe that these counterexamples are important in determining the direction of research on the subject.Show more Item Open Access Sharpe-ratio pricing and hedging of contingent claims in incomplete markets by convex programming(Elsevier, 2008-08) Pınar, M. Ç.Show more We analyze the problem of pricing and hedging contingent claims in a financial market described by a multi-period, discrete-time, finite-state scenario tree using an arbitrage-adjusted Sharpe-ratio criterion. We show that the writer’s and buyer’s pricing problems are formulated as conic convex optimization problems which allow to pass to dual problems over martingale measures and yield tighter pricing intervals compared to the interval induced by the usual no-arbitrage price bounds. An extension allowing proportional transaction costs is also given. Numerical experiments using S&P 500 options are given to demonstrate the practical applicability of the pricing scheme.Show more Item Open Access U.S. equity and commodity futures markets: Hedging or financialization(Elsevier, 2020) Nguyen, D. K.; Şensoy, Ahmet; Sousa, R. M.; Uddin, G. S.Show more In this paper, we investigate the hedging versus the financialization nature of commodity futures vis-à-vis the equity market using a ARMA filter-based correlation approach. Our results suggest that while gold futures are typically seen as a hedge against unfavorable fluctuations in the stock market, the majority of commodity futures appears to be treated as a separate asset class in line with their increasing financialization. Our results are robust to the presence of inflation, highlight the hedging role played by fuel (energy) commodity futures in the nineties, and reveal that the commodity financialization boosted since the 2000s. We also show that gold futures are partially a safe haven for equity investments in the short-term, but not in the mid-term. Finally, we uncover some hedging (financialization) of crude oil futures associated to global demand (oil supply) shocks.Show more Item Open Access Use of currency hedging instruments by non-financial Turkish firms(Bilkent University, 2018-09) Akay, MustafaShow more Having significant exchange rate exposure, Turkish non-financial firms face both operational and financial risk caused by exchange rate movements. Despite not being as deep as in the developed countries, Turkish financial markets offer currency hedge instruments. Although Turkish firms have option for hedging against currency risk, it is observed that use of those instruments is not common for Turkish firms. This thesis aims to examine firm specific factors that affect the use of hedging instruments as well as the degree of hedging. A sample of 178 Turkish non-financial firms listed in Borsa Istanbul is examined for the period between 2007 and 2017. The use of currency derivatives is considered appropriate representation of hedging tendency for Turkish firms, as FX positions of firms arise from derivative contracts are reported accurately in disclosures of financial reports. It is found that firm size and leverage have a positive effect on the probability of using currency derivatives whereas fixed asset ratio has negative effect. Moreover, liquidity buffer as a substitute for derivative usage is found to reduce the degree of hedging.Show more