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본 연구는 국내주식시장 자료와 새로운 모수추정법인 2단계반복갱신법을 사용하여 구조형 부도확률모형들의 예측성과를 분석한다. 본 연구에서 채택한 부도확률모형은 Leland(2006)에서 비교한 구조모형들인 Longstaff and Schwartz(1995), Leland and Toft(1996), Merton(1974)과 Brockman and Turtle(2003)의 down and out 콜 옵션모형이다. 본 연구의 2단계반복갱신법은 기존의 반복갱신법으로 추정할 수 없었 던 Leland and Toft 및 down and out 콜옵션모형의 장벽모수를 일별로 추정할 수 있게 한다. 특히 본 연구는 반복갱신법과 역사적변동성법간 구조모형별 부도확률 예 측성과를 비교한다. 각 구조모형에 적합한 2단계 및 기존의 반복갱신법을 적용할 때 해당 구조모형의 부도확률 예측성과가 다른 모수추정법에 비하여 통계적으로 유의하 게 나타난다. 특히 역사적변동성법에서 부도확률의 예측성과가 나타나지 않던 Leland and Toft의 모형은 2단계반복갱신법을 적용할 경우 부도확률의 예측성과가 통계적 으로 유의하게 나타난다. 또한 Bharath and Shumway(2008)에서와는 달리 2단계반 복갱신법으로 추정한 구조모형 부도확률은 충분통계량의 성질을 만족시킨다
We construct a new iterative method to estimate parameters in structural default probability models and compare their forecasting performances using stock return and accounting data of Korea. To adopt the new iterative method, we select four structural default probability models: Longstaff and Schwartz (1995: LS), Leland and Toft (1996: LT), Merton (1974: DD), and the down and out call option model adopted in Brockman and Turtle (2003: DOC). The new method makes it possible to daily estimate the barrier parameter in LT and DOC, which is not possible under the existing methods [see Vassalou and Xing (2004) and Bharath and Shumway (2008)]. When we adopt the new iterative method to LT and DOC and the existing iterative method to LS and DD in order to analyze out-of-sample and accuracy ratio tests, forecasting performances of above calculated default probabilities are more statistically sufficient than those of default probabilities under other estimation methods. Especially, default probabilities in LT using the new iterative method show statistically supported forcasting performances, though those using the other estimation method have no forecasting performance. Moreover, unlike the results in Bharath and Shumway (2008), default probabilities under the new iterative method satisfy properites of sufficient statistics. The new iterative method is significant in three aspects. First, the new iterative method can offer a new approach to solving two puzzles in asset pricing, the equity premium puzzle and the credit spread puzzle, since the new method provides relatively effective default probabilities among other methods in structural default probability models. Vassalou and Xing (2004) construct rank portfolios by DD’s default probabilities with the existing iterative method used by KMV and study whether equity returns reflect performances for those portfolios. Goldstein (2009) and Chen et al. (2009b) study the relationship between the credit spread puzzle and the equity premium puzzle with structural default probability models. Second, the new iterative method is a simple alternative to MLE(maximum likelihood estimation) which requires heavy and complex calculation [see Ercsson and Reneby (2005), Chen et al. (2009a), Forte and Lovreta (2009), Wong and Choi (2009), and Chen et al. (2010)]. The new iterative method is, in fact, the only method that can daily provide barriers as well as total firm values. Both methods let the first passage time stochastic process of a firm follow a geometric Brownian motion with a drift rate and a volatility rate in, for instance, DOC and LT. Last, we test whether default probabilities of DOC, LT, LS, and DD are sufficient statistics using the forward induction iterative method. Bharath and Shumway (2008) test sufficient statistics only with DD’s default probabilities through the existing forward iterative method of KMV. In order to daily estimate implied barriers and total firm values for DOC using the new iterative method, we follow four steps. First, having fixed a moving window, ordinarily 1 year with 250 business days, we calculate standard deviations of moving averages of equity returns as initial volatility values of a firm under the forward induction. We use the total firm value equal to the book value of the total debt plus the market capitalization as an initial value for a firm on a given day. Second, on that day, we use the Newton-Rahpson method and calculate a implied barrier by taking the derivative of the option value with respect to the barrier. Then using the Newton-Rahpson method again, we calculate a new total firm value by taking the derivative of the option value with respect to the total firm value. Third, we repeat these procedures for the period within the window to get implied barriers and new total firm values. With daily returns of these new total firm values, we compute a new standard deviation and a new mean. Then we update the initial volatility with the new standard deviation for the next iteration, and use the mean as the drift term of the geometric Brownian motion for the total firm value. Finally, we obtain a new volatility following the second and third steps using the new variables generated in the third step. For the period within the window, we repeat the second step until the difference between the existing volatility and the updated volatility converges below the critical level, 10E-4. After we get the converged volatility for the period within the window, we move the window forward by one business day in the forward induction. Next, we follow the first step and repeat the second and third steps until we get a new converged volatility. Hence, we estimate daily total firm values, daily implied barriers, and other parameters to construct the geometric Brownian motion through the full sample period.
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본 연구에서는 차등예금보험료 제도의 경기순응성(Pro-cyclicality) 완화 방법 중의 하나인 이동평균 예금보험료 부과방식의 도입을 제안하고 동제도의 적정성을 분석하 였다. 국내 98개 저축은행을 대상으로 2000년～2010년 재무제표자료를 이용하여 연 구한 결과, 옵션가치평가모형으로 산출된 차등보험료에 비해 현행 고정보험료가 현 저히 낮게 나타났다. 이는 현재 적용되는 고정보험료가 저축은행의 부실화 위험을 제 대로 반영하지 못한 채 너무 낮게 책정되어 있음을 시사하고 있다. 이와 같은 상황에 서 2014년 국내에 차등보험료율 제도가 도입된다면 재무건정성이 낮은 은행의 경우 경기침체가 바로 보험료율증가로 연결되어 부도 가능성이 더욱 높아질 것으로 보인 다. 예금보험료에 대한 이동평균법 적용방식의 효과를 분석한 결과, 이동평균 기간이 증가할수록 경영상태 평가지표들이 예금보험료율에 미치는 영향은 감소하는 것으로 나타났다. 이는 이동평균법을 적용하는 경우 급격한 경영악화가 즉각적인 보험료율 인상으로 연결되지 않기 때문이다. 이동평균 예금보험료율의 경기순응성 완화효과는 자본적정성, 자산건전성, 수익성 등 재무건전성이 낮은 그룹과 중소형 저축은행에서 더욱 크게 나타났다. 본 연구의 결과들은 일반은행에 비해 상대적으로 경기변동의 영 향을 많이 받게 되는 저축은행들이 이동평균에 의한 예금보험료율 부과방식의 제도 를 도입할 경우 더욱 많은 혜택을 받게 될 수 있음을 시사하고 있다.
Korea is scheduled to adopt the risk-based deposit insurance system starting from 2014. There have been growing concerns about the procyclicality embedded in the risk-based deposit insurance program. Indeed, while deposit insurance premium decreases during the economic upswings, poorly performing financial institutions are liable for greater insurance premium during economic downturns. In this paper, we examine whether procylical property of the risk-based insurance weaken with the application of a moving average deposit insurance contract using mutual savings banks (MSBs) in Korea. MSBs in Korea have been experiencing deterioration of loan quality. In particular, credit quality of loans to project financing (PF) firms in real estate has sharply declined in the distressed housing markets. Even though these MSBs have high risk exposure to real estate-related companies, they typically pay only 0.035% of the insured deposit amount as a fixed deposit insurance premium. If the cost of deposit insurance does not increase along with the default risk, the excess cost of deposit insurer becomes a subsidy to those MSBs. We show the risk-based deposit insurance premium by using the well-known option pricing model in this paper. We then evaluate whether the current deposit in surance premium is under-priced or not. Moreover, when designing a risk-based deposit insurance scheme, we should consider not only how to adapt the financial institution specific risk factors to the deposit insurance premium but also the effect of economy-wide systematic factors such as business cycle on the deposit insurance premiums. In a recessionary period, the risk to the financial institution is much higher than it is in an economic expansion; therefore, higher deposit insurance premium should be levied. This causes an adverse effect on the soundness of the financial institution, and the situation will get much worse. This implies that the risk-based deposit insurance scheme comes with a procyclical property. Pennacchi (2005) argues that if the deposit insurance premium is designed as a long-term moving average contract, procyclicality will be reduced. Our study concentrates on estimating the risk-based fair deposit insurance premium of Korean MSBs which currently pay a fixed deposit insurance premium. This paper contributes in the literature that it is the first attempt to price the risk-based deposit insurance premiums of Korean financial institutions, or to be more specific, privately held Korean MSBs. We have also empirically tested whether procyclicality is reduced if risk-based deposit insurance is designed as a moving average-type premium. The results show that the risk-based deposit insurance premium of MSBs is highly under-estimated when compared to their default risk level. Our paper also confirms that risk-based deposit insurance premiums have a procyclical property, which fluctuates along with the business cycle. This suggests that banks with poorer financial strength will be liable for increased deposit premium, and hence the probability of bankruptcy will be greater under the simple risk-based deposit insurance scheme. Thus, we suggest the adoption of the moving average technique in the risk-based insurance scheme to attenuate its procyclicality property. We further find that with a longer moving average window, the average premium gets larger while its standard deviation becomes smaller. The reduction in the standard deviation indicates that the premium imposed on a financial institution does not change substantially in response to radical changes in business cycles. On the other hand, the increase in the average premium suggests that the premium imposed on the moving average deposit insurance system should be assessed highly in expansions relative to simple differential premiums. Also, with a longer moving average window, we show that the imposed premium gets less sensitive to financial strength measures. This implies that the moving average method mitigates the impact and significance of financial strength measures on premiums, indirectly showing the attenuation of procyclicality in risk-based deposit insurance system. In addition, the attenuating effects are substantial for mutual saving banks with weak capital adequacy, weak asset quality and weak earnings, and in small or medium sizes. As a result, the adoption of the moving average differential deposit insurance contract would be more beneficial to financial institutions with poorer financial strengths that would be severely affected by business fluctuations. The findings of this paper suggest several policy implications. While deposit insurance system plays an important role in attenuating moral hazard problems, it has been well known that the risk-adjusted deposit insurance can also destabilize financial markets by making bank performance procyclical. Based on the results of our analysis, we suggest that it is not necessarily so. Moving average deposit insurance scheme ensures that insurance premium varies with risk exposure of each bank, but the moving average of yearly risk-adjusted risk premium can smooth out the time-series variation of deposit insurance premium at the same time. We do show that the moving average (1 to 5 year moving windows) of yearly risk-adjusted risk premium can mitigate the potential problem of procycality of deposit insurance. However, we do not thoroughly examine how to set the optimal moving average window length, a crucial question for practical purposes. We leave this issue for the future research. As noted earlier, the Korean government has a plan to adopt a risk-based deposit insurance premium system. The main result of our research suggests that we adopt the moving average scheme into the risk-based insurance program, and this idea can be used as a policy reference tool for designing the risk-based deposit insurance system.
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본 연구는 국내 투자자의 관점에서 해외투자펀드에 대한 국제분산투자 실효성을 분 석하고자 한다. 세계 주요국의 펀드를 MSCI의 구분에 따라 소형주와 대형주 지수로 구분하여 환헤지를 한 경우와 하지 않은 경우를 각각 고려하여 수익률과 위험의 특징 을 분석한 뒤, 이를 토대로 샤프지수를 분석한다. 또한, 시가총액 규모에 근거한 소 형주와 대형주의 지수펀드에 대해 국가별 상관관계를 분석하고 분석대상 전체기간을 전반기와 후반기로 나누어 비교분석 한다. 국내 투자자들의 관점에서 세계 주요국의 소형주 지수펀드 투자에 대한 Spanning 검증을 분석하고, 이를 환율변동과의 연계 성 속에서 재검토한다. 실증분석 결과를 보면, 국제 자본시장의 통합화로 인해 세계 각 국의 주식시장 간에 동조화가 많이 진행되어, 소형주 해외투자펀드에서도 국제분 산투자의 이점이 거의 사라지고 있는 것으로 나타났다. 이는 해외투자펀드의 환헤지 여부와 상관없이 동일한 결과를 가져온다. 따라서 본고는 국내 투자자들의 소형주 해 외투자펀드에 대한 국제분산투자의 방향에 대해 시사점을 제공하며, 국제분산투자의 효율성을 증진시킬 새로운 분산투자의 전략을 개발해야 할 필요성을 시사한다.
This paper analyzes how international small-cap stocks affect portfolio diversification from the perspectives of Korean investors who hold stakes in the major 24 countries’ MSCI small-cap index funds. We also examine correlations between cap-based index funds for the whole period from June 1994 to December 2010 and its sub-periods. Finally, we perform the Huberman-Kandel mean-variance spanning tests on the returns of the small-cap funds from those countries, in the cases of both fully-hedged and no-hedged risks for foreign exchange rate volatility. Korean investors’ investments in international funds have sharply grown thanks to the backdrop of Korea’s quickly expanding fund industry. In fact, Korea’s total fund sales have grown from KRW 234 trillion as of the end of 2006 to KRW 309 trillion at the end of 2010, recording a compound annual growth rate of 8%. The figure of Korea’s total fund sales as of the end of 2010 is equivalent to 30% of Korea’s GDP or 27% of Korea’s stock market capitalization. Especially, the proportion of Korea’s international fund investments among total fund sales has grown from 8% at the end of 2006 to 21% at the end of 2010. Generally, investment in international funds is an effective way to diversify a portfolio, thereby reducing risks inherent to asset investments. Accordingly, one may expect that portfolio diversification through international fund investments is to be more active as a coping mechanism during a financial crisis. Interestingly, however, during the previous global financial meltdown Korea’s international fund investments lagged behind domestic fund investments. In fact, as of the end of 2010, while Korea’s total fund sales went up by 10%, Korea’s total international fund sales dropped by 13% compared to 2007. This shows Korean investors’ shifted risk-minimizing strategy by reducing, rather than boosting, international fund investments . This change in the strategy can be explained by the fact that global crisis generates the effect of diluting the advantage of international portfolio diversification, shrinking the benefits from diversified international investments became smaller as a result. In short, Korean investors make the endogenous portfolio choices mainly to reduce international fund investments while increasing domestic fund investments that are less affected by the global crisis. This article, therefore, studies whether Korean investors can utilize the benefits of international diversification with small-cap funds. For this study, we used Datastream’s MSCI monthly indices covering small- and large-cap funds from 24 countries during the period from June 1994 to December 2010 and its sub-periods (the period from June 1994 to December 2002 and the period from January 2003 to December 2010). We analyze: returns, risks, and the Sharpe index of each cap-based fund by country; the correlation of each cap-based fund; the mean-variance spanning tests for small-cap funds; and their relation with international exchange rates. The main results can be summarized as follows. First, cap-based returns of both smalland large-cap funds in Korea were negatively correlated with changes in the international exchange rates in major economies around the world. Taking into account the positive correlation between international and domestic fund returns, we found that international exchange rates have a complementary relationship with international fund returns because the reduction in international fund returns would be smaller than the favorable changes in exchange rates in case of global crisis. Thus, risks incurred by international fund investments would be less when international exchange risks are not hedged. Second, global integration has eroded the benefits of diversifying investments across different countries, industries, and cap-based stocks. Especially global integration and, hence, the weakening benefits of international portfolio diversification have been accelerated since the year 2000. Third, Korea showed less correlation with BRICs countries than it did with developed countries or Asia, and the Sharpe ratios of BRICs countries were higher than those of other countries. While Korean investors’ international fund diversification to BRICs countries was more effective than it was to other countries, the Korean economy was, nevertheless, highly correlated with Asian countries. Also, the Sharpe ratios of Asia countries were higher than those of other countries. The benefits from international portfolio diversification in Asian countries were likely to be smaller, which can prompt the decrease in Korean investors’ international fund investments in Asia countries even though their total fund sales increased during the global financial crisis. Fourth, spanning tests resulted in no rejection of the null hypothesis over small-cap funds in most countries. Thus, Koreans investments in international small-cap funds do not bring additional benefits to each country’s index fund worldwide. The results were more strongly supported for the period from January 2003 to December 2010 than the previous period, from June 1994 to December 2002. Fifth, the Sharpe ratios of Korean investors’ international fund investments were higher in the case of no-hedged risks for international exchange rate volatility than in case of fully-hedged ones. The correlations of fund returns among countries were also lower in the case of no-hedged risks from international exchange rate volatility. The results of spanning tests with no rejection of the null hypothesis over small-cap funds in most countries were more strongly supported in the case of no-hedged risks for international exchange rate volatility. Sixth, the analysis of variance decomposition for each country’s small-cap fund return showed that the influence of global factor on the return and its variance greatly increased during the period from January 2003 to December 2010 compared to that from June 1994 to December 2002.
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본 연구는 대표적인 시장중립 매매 전략 중 하나인 페어 트레이딩 전략을 고빈도 데이 터를 활용할 수 있는 형태로 변형하여 국내 시장에 적용한 연구이다. 기존 연구와의 차별성은, 일별 종가가 아닌 고빈도 데이터를 활용하여 성과의 특성을 연구하였다는 점, 그리고 이를 위해 매매 신호 추출 시 칼만필터(Kalman Filter)를 이용하여 시변 (Time-adaptive) 회귀상수를 계산한 뒤 종목 간 스프레드를 계산하였다는 점이다. 전략 성과 측정을 위한 대상종목은 거래 특성을 고려하여 유동성이 높고 차입이 원활 한 대형주 유니버스로 제한하였고, 성과 분석 결과 보수적인 거래비용을 고려했음에 도 시장국면에 무관한 유의적인 양의 수익을 얻을 수 있었다. 전략의 주요 성과 특징 으로는, 시장 하락기에 성과가 상대적으로 더 좋게 나타났고, 업종 간 성과의 차별성 을 확인할 수 있었으며, 장 시작 직후 및 장 마감 근처에 진입한 매매에서 상대적으로 높은 승률과 수익률이 실현되었다. 한편 표본 평균회귀강도(Mean-reversion Strength), 표본 정보비율(Information Ratio), 표본ADF(Augmented Dickey-Fuller) 테 스트 t-통계량을 추가적으로 고려하여 합산 통계량 순위 상위 페어를 선정한 뒤 선택 적 매매를 할 경우 성과가 더욱 향상되는 것을 확인할 수 있었다.
The pairs trading is a strategy often adopted to identify arbitrage opportunity based on historical equilibrium in spread between the share prices. Basically, an investor evaluates the current position of the spread based on its historical fluctuations and seizes the moment when the current spread deviates from its historical mean level by a pre-determined threshold. In this study, the well-known basic pairs trading strategy, one of typical market neutral strategies, is modified so as to utilize high frequency data, and it is also applied to the constituent shares of the KOSPI (The Korea Composite Stock Price Index) 100 index. We also introduce the use of the high frequency equity data in strategy modeling, although the industry practice for market neutral hedge funds is to use daily sampling frequency of equity data in designing a trading model. In this study, intraday stock prices data sampled at a 30-minute interval is used for the strategy, and the performance is analyzed in high frequency domain. The data set covers the horizon from the 1st of October 2008 to the 31st of July 2010, which includes bullish, bearish, and flat market periods within the horizon. We highlight how perfor- mance varies depending on market condition, industry group, and timing of the market entry. This study is distinguished from the most previous works on the traditional pairs trading strategy in that we introduce the use of high frequency data in strategy modeling instead of daily closing prices, which allows us to analyze the performance of the strategy in high frequency domain. More specifically, we extract the trading signal, which is based on the spread between stocks of comprising a pair, by estimating time adaptive regression coefficient using the Kalman filter scheme. This study is the first practice in the realm of the high frequency market neutral trading strategy that extracts trading signal by estimating time adaptive regression coefficient using the Kalman filter scheme. Moreover, our loss-cut strategy clears position if holding duration exceeds the pre-determined maximum trading duration. As for the underlying universe for the strategy, we confine ourselves by considering only the most liquid top 100 stocks in terms of larger trading amounts and higher liquidity as a basket for our experiment. This is to get rid of other external variables that may add undesirable noises to the overall performance which would make it difficult to analyze pure performance of the strategy itself. We analyze the results of out-of-sample performance test from various angles. Major findings include that arbitrage profitability is, in fact, present without being subject to market condition even when conservative transaction costs are taken into account. In particular, our strategy outperforms better in the bear market condition, showing 2.55% of average rate of return per trade in bearish period, which is higher than 0.80% in the bullish period and 0.39% in the flat period. The performance of the pair trading strategy varies depending on the industry group. Those industry groups dominantly influenced by domestic demand i.e. non-cyclical in Korea such as Distribution, Household & Personal Products, and Automobiles and Components show relatively higher winning ratios and average rates of return per trade whereas the industry groups involving fast-paced technological development and variable international demand such as Technology Hardware and Software & Services give out relatively low statistics. The results also demonstrate that the performance of the strategy is dependent upon the time when trading position is set up during daily trading hours; the performance of trades entered around at opening and closing of the daily market appears to be relatively superior to that of trades executed in the rest of daily trading hours in terms of the average rate of return per trade, the winning ratio, and the information ratio. Recalling that intraday volatility pattern is generally formed in U-shape, the strategy seems to achieve higher performance in intraday time zone with higher volatility, which also corresponds to our previous finding that our strategy returns outstanding figures in volatile market trend. Besides, the strategy seems to take advantage of inefficiency derived from where stock price reflects the undisclosed market information. Furthermore, we introduce an enhanced version of the pair trading strategy and compare the performances with the basic strategy. One difference between the basic and the enhanced model is that it selects high-ranking pairs to trade for the next time period based on a set of in-sample statistics, which includes in-sample ADF (Augmented Dickey-Fuller) test t-statistics, in-sample information ratio, and in-sample mean reversion strength. In our study, moving window with the size of 2 weeks is considered as an in-sample period. It is verified that the performance of the enhanced strategy had better profitability and reliability compared with our basic strategy.
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The main purpose of this paper is to review the literature on derivatives securities published in Korean finance and economics journals by focusing on three research areas: derivatives markets, the valuation of derivatives securities, and risk management. First, the literature on derivatives markets is reviewed in terms of four issues: the effects of launching the derivative securities on the underlying assets markets; the lead and lag effects between derivatives and the underlying assets markets, which have drawn substantial attention from academia; and the price discovery functions of derivatives markets as well as the expiration-day effects of options. In addition, papers analyzing arbitrage trading strategies with derivative securities are reviewed. Second, for the valuation of derivatives securities, we review papers presenting theoretical models for the pricing of futures, various types of options, and interest rate derivatives. Then, empirical papers on the valuation of derivative securities are reviewed. These papers examine empirically the distributions and stochastic processes of the underlying asset prices, as well as the behavior of volatilities in order to understand and overcome the limitations of the standard models. Third, we review the literature on risk management, which is regarded as one of the main functions of derivative securities. These papers investigated how to formulate effective hedging strategies using derivative securities. Finally, we make suggestions as to the next steps and directions for future research on derivative securities in Korea based on the review of the literature.
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Empirical studies have identified a variety of capital market regularities that are commonly known as anomalies including the size effect, book-to-market effect, the January effect, the weekend effect, long-term reversal effect, net stock issues effect, the first-day underpricing and the long-term underperformance of Initial Price Offerings (IPOs) and the post-merger underperformance. For each anomaly, we discuss the existence and consequences of these well-known effects in the Korean stock market. The empirical evidence on the anomalies in Korea can be summarized as follows. The anomalous returns are significant in most of the cross-sectional regressions. The anomalous returns associated with net stock issues are positive in the short period around the issue date, a finding opposite to the evidence found in the U.S. markets. Momentum phenomenon in average returns exist on the industry level, but they are absent for individual stocks. Also, momentum anomalies are only found at the individual level when stock markets are less volatile. That is, Momentum anomalies are less robust in Korea than in the U.S. and European countries. Additionally, dividend yields and market interest rates have no ability to predict stock market returns in Korea contrary to U.S. findings, while earning price ratios have some predictability. The turn-of-the-year effect, the weekend effect and the long-term reversal effect are persistent in Korea.
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