An Empirical Study on the Hedging Effects on Related to ELS Underlying KOPSPI200 and Performance of ELS Redemption

Byeongmon Cho (Korea Securities Depository)
Sangbin Lee (Hanyang University)
Junghoon Seo (KEB HanaBank)

Journal of Derivatives and Quantitative Studies: 선물연구

ISSN: 1229-988X

Article publication date: 31 May 2017

Abstract

This study tests empirically the impacts that the issue and redemption of index-typed ELS has on KOSPI200 & KOSPI200 Future Index and the performance of ELS redemption by using daily stock market data of year 2010-2015. The first one of research results is that net amount of ELS issue has significantly negative (-) effect on KOSPI200 Index and KOSPI200 Future Index, which ascertains that the amount of ELS issue becomes larger as KOSPI200 Index gets lower. It shows that index-typed ELS has reverse-hedging effect while underlying stock-typed ELS has hedging effect. This phenomenon seems to have arisen in the complex conditions of ELS structural traits and vulnerable situations of security market where KOSPI Index has moved up and down with in-box pattern and KOSPI200 trading volume and KOSPI200 Future trading amount & volume have been decreasing consistently. Second result is that ELS performance in advanced redemption fund (principal non-guarantee type) shows the fact that return of private equity fund has been significantly 0.37% higher than that of public offering fund, while performance in maturity redemption fund (principal guarantee type) shows the fact that return of public offering fund has been significantly 1.26% higher than that of private placement. Considering of the meager difference of return in advanced redemption fund and the higher return of public offering fund in maturity redemption fund, we can infer that efficiency of ELS market would leave no information asymmetry by the difference between the fund-raising types.

Keywords

Citation

Cho, B., Lee, S. and Seo, J. (2017), "An Empirical Study on the Hedging Effects on Related to ELS Underlying KOPSPI200 and Performance of ELS Redemption", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 25 No. 2, pp. 169-199. https://doi.org/10.1108/JDQS-02-2017-B0001

Publisher

:

Emerald Publishing Limited

Copyright © 2017 Emerald Publishing Limited

License

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