Identifying and Ranking the Factors and Strategies Affecting the Use of Financial Derivative Contract in Risk Management

Document Type : Original Article

Authors

1 Ph.D. Student, Faculty of Management and Accounting, Islamic Azad University, Rudehen, Tehran, Iran.

2 Assistant Professor, Faculty of Management and Accounting, Islamic Azad University, Rudehen, Tehran, Iran.

Abstract

The present study aimed to identify and rank the factors and strategies affecting financial derivative contracts in risk management. In order to achieve the objectives of the research using the non-random judgment method, the opinions of 15 experts in the field of risk management and derivative contract in the Tehran Stock Exchange and investment companies, up to the stage of theoretical saturation, were used. The present study uses the mixed exploratory research method in two parts: qualitative and quantitative. In the qualitative section, open coding was performed first using open, grounded theory and line-by-line analysis of the interviews. During the coding, 55 items were obtained as basic concepts from the text of the interviews, which were classified into 11 subcategories and three main categories, including underlying factors, intervenors, and strategies. In the quantitative part of the research, through the questionnaire, experts' views were collected. Then, the data were determined using a fuzzy hierarchical process, analysis, and prioritization of components in each of the main categories. The results showed that perception was the highest priority among the underlying factors; structural and technical factors were the highest priority among the interventionist factors. The establishment of a stability council between the financial institutions of Iran was the highest priority among the strategies.

Keywords

References

  • Bayat, M., Talebi, M., and Qudusi, H. (2018). The study of the reasons for non-acceptance and dissemination of innovation in Islamic financial instruments in the Iranian capital market. Islamic Financial Research, 14(7), 277-308. (In Persian)
  • ‏‫Khozin, A. and Dankob, M. (2011). Prioritization of practical factors in using a derivative contract in Tehran Stock Exchange. Financial Engineering and Securities Management Journal (Portfolio Management), 2(7), 145-166. (In Persian)
  • ‏‫‏‫Shahmoradi Khordeh Bolagh, N. (2017). Predicting cash and future fluctuations of gold coins and their effects on each other using mixed garch and neural networks models (M.Sc. Thesis). Faculty of Al-Zahra University, Faculty of Social and Economic Sciences. (In Persian)
  • ‏‫Issazadeh Larzjani, H., Fereyduni Kouchaksarai, Z., and Saeedi, P. (2018). Risk management strategy in new financial markets and products. Strategic Studies in Humanities and Islamic Sciences, 15(3), 87-96. (In Persian)
  • Mohammadi, M., (2017). Feasibility study of launching futures contracts and index speculator in Tehran Stock Exchange and reviewing its economic consequences (Ph.D. thesis). Faculty of Tarbiat Modares University, Faculty of Economics (In Persian).
  • ‏‫Nazarpour, M.N., and Haghighi, M., (2014). Risk Management of Istisna bonds Using the financial instrument of the transaction option. Journal of Islamic Economics and Banking, 3 (8), 75-100. (In Persian)
  • Jalali, F., and Bahrami Nasab, A., (2012). Using Financial Derivative Contract to Cover Risk. Paper presented at the Third Conference on Financial Mathematics and Applications. (In Persian)

 

  • Bae, Sung C.; & Kwon, Taek Ho. (2020). Hedging operating and financing risk with financial derivatives during the global financial crisis. Journal of Futures Markets. https://doi.org/10.1002/fut.22174
  • Bandaly, D.; Shanker, L.; & Şatır, A. (2018). Integrated Financial and Operational Risk Management of Foreign Exchange Risk, Input Commodity Price Risk, and Demand Uncertainty. IFAC-PapersOnLine, 51(11), 957-962. https://doi.org/10.1016/j.ifacol.2018.08.484
  • Bodnar, Gordon M; & Gebhardt, Günther. (1999). Derivatives usage in risk management by US and German non‐financial firms: A comparative survey. Journal of International Financial Management & Accounting, 10(3), 153-187.
  • Bodnar, Gordon M; Hayt, Gregory S; Marston, Richard C; & Smithson, Charles W. (1995). Wharton survey of derivatives usage by US non-financial firms. Financial management, 24(2), 104-114.
  • Dodd, Randall. (2008). Consequences of liberalizing derivatives markets. The Initiative for Policy Dialogue Series, 288.
  • Geczy, Christopher; Minton, Bernadette A; & Schrand, Catherine. (1997). Why firms use currency derivatives. The Journal of Finance, 52(4), 1323-1354.
  • Grima, Simon; Bezzina, Frank; & Romānova, Inna. (2016). Misuse of Derivatives: Considerations for Internal Control. In Contemporary Issues in Finance: Current Challenges from Across Europe (Vol. 98, pp. 49-62). Emerald Group Publishing Limited.
  • Grima, Simon; & Thalassinos, Eleftherios I. (2020). The Perception on Financial Derivatives: The Underlying Problems and Doubts. In Financial Derivatives: A Blessing or a Curse? Emerald Publishing Limited.
  • Hallahan, Terrence A; Faff, Robert W; & McKenzie, Michael D. (2004). An empirical investigation of personal financial risk tolerance. Financial Services Review-greenwich-, 13(1), 57-78.
  • Huan, Xing; & Parbonetti, Antonio. (2019). Financial derivatives and bank risk: evidence from eighteen developed markets. Accounting and Business Research, 49(7), 847-874. https://doi.org/10.1080/00014788.2019.1618695
  • Li, Shaofang. (2018). The use of financial derivatives and risks of US bank holding companies. In Financial Institutions in the Global Financial Crisis (pp. 9-67). Springer.
  • Li, Shaofang; & Marinch, Matej. (2014). The use of financial derivatives and risks of US bank holding companies. International Review of Financial Analysis, 35, 46-71.
  • Mian, Shehzad L. (1996). Evidence on corporate hedging policy. Journal of Financial and Quantitative Analysis, 419-439.
  • Nance, Deana R; Smith Jr, Clifford W; & Smithson, Charles W. (1993). On the determinants of corporate hedging. The journal of Finance, 48(1), 267-284.
  • Nguyen, Hoa; & Faff, Robert. (2002). On the determinants of derivative usage by Australian companies. Australian Journal of Management, 27(1), 1-24.
  • Sandra, S. (2021). A Study of Indian Derivatives Market and its Current Position in Global Financial Derivatives Market. International Journal of Research in Engineering, Science and Management, 4(1), 1-6.
  • Stiglitz, Joseph E.; & Ocampo, José Antonio. (2008). Capital Market Liberalization and Development. OUP Oxford.
  • Valaskova, Katarina; Kliestik, Tomas; & Kovacova, Maria. (2018). Management of financial risks in Slovak enterprises using regression analysis. Oeconomia Copernicana, 9(1), 105-121.
  • Zekos, Georgios I. (2021). Risk Management Developments. In Economics and Law of Artificial Intelligence (pp. 147-232). Springer.
  • Zitkiene, Rima; Grigonis, Valdas; & Burak, Pavlo. (2020). Evaluation of Derivatives Impact to Early Systemic Risk of Euro Area.
International Journal of Finance & Managerial Accounting
Volume 8, Issue 28 - Serial Number 28
January 2023
Pages 217-230

Files

Share

How to cite

Statistics