4. Electronic Theses and Dissertations (ETDs) - Faculties submissions
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Item Hedging effectiveness of Cryptocurrencies in African Stock Markets(University of the Witwatersrand, Johannesburg, 2024) Singh, TanvirThe aim of this paper is twofold: first, to examine the hedging effectiveness of bitcoin for the biggest 7 African stock markets in bullish and bearish market conditions. Second, to contrast cryptocurrency to gold as a safe haven asset. To end, daily data from 2018 to 2022 were employed in an Autoregressive Distributive Lag (ARDL) framework. The findings have significant implications for investors, financial intermediaries and regulators.Item An Investment House Using Contracts for Differences to Grow the Business(University of the Witwatersrand, Johannesburg, 2023) Maine, Mothepu Zebedia; Horne, ReneeThe world of financial markets and investments has grown enormously over the years, with various products developed over the years. Besides the normal shares that one can invest in, bonds, Single Stock Futures (SSF), exchange traded products/notes and Contracts for Differences (CFDs) have been introduced into the financial markets. SSFs and CFDs are leveraged financial instruments that are derivatives of shares. They leveraged, meaning that the profits and losses resulting from the derivatives are enhanced when compared to profits and losses from normal shares investments/trading. The research conducted for this business venture report indicates that there is a potential market gap that can be exploited. The SSFs are more costly compared to CFDs and they expire every three months. The CFDs on the other hand do not expire, meaning they can be held for a long time, as long as they don’t move too fast and far against your position. This business venture proposal justifies through research, that the CFDs are the cost-effective derivative instruments through an investment house to grow a business. Data analysis over hedge fund managers’ performance through unspecified derivatives, and hedging activities by different listed firms gleaned from their financial statements give a strong assurance that the business model based on the CFDs is viable. The business model and proposal was first developed using the business canvas model together with some financial assumptions, and then expanded into the report.Item Valuation and hedging of loan prepayment risk: an options pricing approach(2022) Dube, MduduziThis thesis discusses loan prepayment risk and describes a binomial model that can be used to value and hedge this risk. Borrowers have an option to repay lenders before the respective loans reach maturity. In the particular case of fixed rate loans and mortgages, this poses risks to lenders. If prepayment occurs when market interest rates have declined, lenders are forced to replace the high interest loans with low interest ones, thereby reducing their net interest margin. The option to repay loans early is an American call option on a bond. Bonds with embedded options can be valued using a binomial interest rate tree. In this thesis, the Black Derman Toy binomial model is calibrated to the South African continuous term structure of interest rates and interest rate cap volatilities. Prepayment risk is then valued as the embedded call option for fixed rate loans of various maturities. Option greeks delta, vega and gamma are described and calculated. Various instruments that exist in the South African fixed income market and can be used to hedge prepayment risk are presented.