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This research applies a static hedging portfolio method derived from Derman, Ergener, and Kani (1995) (henceforth Derman's SHP method) and a new SHP method with European cash-or-nothing binary options developed by Chung, Shih, and Tsai (2013) to price European continuous double barrier (ECDB) options and the rebates of the ECDB options. Our numerical results indicate that the new SHP method outperforms Derman's SHP method in terms of efficiency and effectiveness under all circumstances.

This paper shows a new methodology for evaluating the value and sensitivity of autocall knock-in type equity-linked securities. While the existing evaluation methods, Monte Carlo simulation and finite difference method, have limitations in underestimating the knock-in effect, which is one of the important characteristics of this type, this paper presents a precise joint probability formula for multiple autocall chances and knock-in events. Based on this, the calculation results obtained by utilizing numerical and Monte Carlo integration are presented and compared with those of existing models. The results of the proposed model show notable improvements in terms of accuracy and calculation time.

In this paper we analyze the shortfall risk implied in the auto call step down equity linked securities (ELS) based on two underlying assets, which is a major product of the rapidly growing ELS market as the low interest rate environment continues. And we also present the hedging strategies for managing shortfall risk. In the position of auto call step down ELS issuer, 1) until the underlying asset price reaches at knock-in (KI) level, the delta of the underlying is continually and significantly increased in order to hedge the short position of the Down and Out (DO) option and the long position of the put option inherent in ELS, 2) however, the hedger must reduce this delta as soon as the underperformed underlying price touches KI level, which triggers the vanishing of the DO option.

As a way to manage these shortfall risks, this paper proposes two new hedging strategies of minimizing these shortfall risks and depending on the KI probability. Also this paper shows that these hedging strategies provide better performance than traditional BS hedging strategy when these hedging strategies are applied to a sample product with real market data.

As the policy proposals, first, in order to prevent the concentration of the KI prices, ELS issue amount based on the same underlying is needed to be determined in consideration of both the average market trading volume and maximum leverage delta. Second, in the realm of pin risk such as Knock-In or Knock-Out, where the leverage increases, it is recommended to mitigate the risk management delta limit based on the BS model which is made under the assumption of continuous hedging infinitesimally.

This chapter aims to find an optimal way to hedge foreign exchange exposures on three main currency pairs being the EURUSD, EURGBP and EURJPY. Furthermore, it analyses the risk level of each portfolio together with its kurtosis level. This chapter also looks into the relationship between the EURUSD portfolios and the VIX level.

This study is based on a back-testing analysis over a period of seven years starting in January 2007 and ending in December 2014. Two main Foreign Exchange Premium-Free strategies were structured using the Bloomberg Terminal. These were the ‘At-Expiry Forward Extra’ and the ‘Window Forward Extra’. Portfolios were created using FX options strategies, FX spot and FX forwards. The EURUSD portfolios were also analysed and compared with the VIX level in order to see whether volatility has a direct effect on the outcome of the strategies. The statistical significance of the difference between returns of portfolios was analysed using a paired sample t-test. Finally, the histogram and distribution curve of each portfolio were created and plotted in order to provide a more visual analysis of returns.

It was found that the optimal strategies in all cases were the FX option strategies. The portfolios’ risk was analysed and indicated that optimal portfolios do not necessarily derive the lowest risk. It was also found that with a high VIX level, the forward contract was the most beneficial whilst the option strategy benefited from a low VIX level. When testing for statistical significance between returns of different portfolios, in most cases, the difference in returns between portfolios resulted to be statistically insignificant. Although some similarities were noticed in distribution curves, these differed from the normal distribution. When analysing the kurtosis levels, it is found that such levels differed from that of a normal distribution which has a kurtosis level of 3. Interpretation of such histograms, distribution curves and the kurtosis analysis was explained.

The purpose of this summary is to provide excerpts of selected Financial Industry Regulatory Authority (FINRA) Regulatory Notices and Disciplinary Actions issued in January, February, and March 2010.

The paper provides excerpts from FINRA Regulatory Notice 10‐05, Deferred Variable Annuities; Regulatory Notice Regulatory Notice 10‐09, Reverse Convertibles, and Regulatory Notice 10‐14, Trade Reporting and Compliance Engine (TRACE).

(10‐05) FINRA Rule 2330 (formerly NASD Rule 2821) establishes sales practice standards regarding recommended purchases and exchanges of deferred variable annuities. No member shall recommend to any customer the purchase or exchange of a deferred variable annuity unless such member or person associated with a member has a reasonable basis to believe that the transaction is suitable in accordance with NASD Rule 2310 and, in particular, that there is a reasonable basis to believe that the customer has been informed, in general terms, of various features of deferred variable annuities. NASD Rule 2310 requires that, before recommending the purchase or sale of a security, firms must have a reasonable basis for determining that the product is both suitable for at least some investors, and suitable for each specific customer to whom it is recommended. (10‐09) Reverse exchangeable securities, commonly called “reverse convertibles,” are popular structured products with retail investors, due in large part to the high yields they offer. However, reverse convertibles are complex investments that often involve terms, features and risks that can be difficult for retail investors and registered representatives to evaluate. (10‐14) FINRA believes that it is important to provide access to historical transaction‐level data through the Trade Reporting and Compliance Engine (TRACE), particularly for research purposes.

These are direct excerpts designed to provide a useful digest for the reader and an indication of regulatory trends. The FINRA staff is aware of this summary but has neither reviewed nor edited it. For further detail as well as other useful information, the reader should visit www.finra.org

In this paper, we analyze the hedging risk intrinsic in the auto call step down equity linked securities (ELS) based on two underlying indices including HSCEI, which are major products of the ELS market. And we also propose new hedging strategies based on Conditional Value at Risk (CVaR) using stocks portfolio and futures. Due to the non-symmetric bimodal distribution for return of ELS, which comes from the Knock-In (KI) property inherent in step down ELS structure, and inherent shortfall risk in the ELS structure, a local delta hedging strategy has a limit. In addition, hedging using futures are difficult because of 1) frequent roll-over related with HSCEI futures, 2) price difference between underlying index and futures and 3) lack of futures liquidity caused by excessive ELS issue based on HSCEI. As a way to manage these problems, this paper proposes new hedging strategies : First, construct stocks portfolio tracking index using method suggested by Rockafellar and Uryasev (2002), Alexander, Coleman and Li (2006). Second, do hedging by using this stocks portfolio and futures. This paper shows that 1) index-tracking stocks portfolio based on CVaR has a better performance and lower shortfall risk than index by comparing market ratio, information ratio and Sharpe Ratio, and 2) hedging using stocks portfolio is better than futures. As the policy proposals, if ETF, which tracks the underlying indices of ELS based on CVaR, is to be listed on the exchange (KRX), various kinds of product structures for mid-risk-mid-return structured products will be able to develop further, as well as offer more convenience with hedging.

The depth and breadth of the market for contingent claims, including exotic options, has expanded dramatically. Regulators have expressed concern regarding the risks of exotics to the financial system, due to the difficulty of hedging these instruments. Recent literature focuses on the difficulties in hedging exotic options, e.g., liquidity risk and other violations of the standard Black‐Scholes model. This article provides insight into hedging problems associated with exotic options: 1) hedging in discrete versus continuous time, 2) transaction costs, 3) stochastic volatility, and 4) non‐constant correlation. The author applies simulation analysis of these problems to a variety of exotics, including Asian options, barrier options, look‐back options, and quanto options.

The credibility of journalists and public relations professionals took some bad knocks in 2004. This paper examines the recent history of the debate and some of the efforts being made within the communications industry to rebuild the public confidence that journalism is a vital part of the democratic process. The NUJ has issued new guidelines to its members in public relations at a time when PR professionals are calling for a rethink about the relationship between journalism and PR. The heart of the matter is the issue of trust – which is also high on the post‐Hutton media agenda. Public trust in journalism and in corporate social responsibility is low; “spin” has been disgraced, and media regulation is under reconstruction. How can media professionals forge new relationships with their publics, to promote healthy and open democracy? It is time for dialogue and commitment to work together on redefining the role of all media professionals in an open democracy.

Purpose – This chapter is about the author's experience working for Barack Obama's presidential campaign and the racial as well as race–gender dynamics of such work.

Methodology/approach – An autoethnographic analysis was conducted based on participant observation, primarily, door knocking in California and Texas and phone canvassing Americans across the country on a daily or weekly basis.

Findings – The fieldwork revealed the persistence of racially unequal discourse and stratification, not the workings of a post-racial society. While some Americans openly used the word “nig*er” or referenced lynching, more common were the coded forms of racism, such as the notion of “good” (Obama) versus “bad” Blacks. Also, terms like “Muslim” or “not-American” revealed a citizenship-based racism usually reserved for Asian Americans and Latinos now being levied against Black Americans. This more coded racialization hinged on a combination of subordinating Muslims as perpetual racial foreigners and fearing the “browning of America” brought on by immigration.

Research limitations/implications – As this study of a campaign assessed one point in time from an autoethnographic perspective, it is not generalizable to the United States. It, however, is an important window into the social processes involving race (and gender) when historic candidates and elections move the country in a direction it has never been to before and perhaps will never be to again.

Originality/value of paper – Although many scholars have done racial analyses of Obama's campaign and of our society's negotiation of race in relation to the man, few have conducted in-depth analyses from the vantage of a full-scale Obama campaign volunteer.