| Invisible Shadow Risk of Equity Linked Security |
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Sung Won Lim, Do Hyun Pak, Ki Beom Binh |
| 보이지 않는 "ELS 그림자 위험" |
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임성원, 박도현, 빈기범 |
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| Abstract |
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This paper investigate new risk ELS investors can be exposed to in Korean ELS (equity linked security) market. ELS was introduced in 2003. It has been issued and sold largely and continually. The issuance size amounted to KRW 34.4 trillion in 2012 and 42.7 trillion in 2013. So it settles down into OTC derivative purchased by individual investors. Recently, the problem of the conflict of interests between investors and issuing institutions emerges in ELS market and regulator. So the regulator announced measures for protecting ELS investors. However, in this paper, we take notice that there is new and non-traditional risk that ELS investor can be exposed to. We call it as ELS shadow risk. It can be caused by intended short-sales which are implemented by third party market traders informed of ELS payoff and hedge structures. This paper probes the existence and degree of the ELS shadow risks in Korean market employing case studies of two ELS examples. Our finding implies that financial authority should prepare the regulation of the ELS shadow risks. |
| Key Words:
Stock Short-Sales,Knock-In Risk,Finite Difference Method,Equity-Linked Security,ELS Shadow Risk,ELS 그림자 위험,ELS,주식공매도,유한차분법,녹인리스크 |
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