Pricing financial derivatives: The impact of business conditions and systematic risk

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thesis dissertation on financial derivatives

  • Dorion, Christian
  • Peter Frederik Christoffersen (Supervisor1)
  • Kris J J Jacobs (Supervisor2)
  • This thesis comprises of three essays on the pricing of financial derivatives. In the first essay, we assess the return fitting and option valuation performance of generalized autoregressive conditional heteroscedasticity (GARCH) models. We compare component versus GARCH(1,1) models, affine versus nonaffine GARCH models, and conditionally normal versus nonnormal GED models. We find that nonaffine models dominate affine models in terms of both fitting returns and option valuation. For the affine models, we find strong evidence in favor of the component structure for both returns and options; for the nonaffine models, the evidence is less convincing in option valuation. The evidence in favor of the nonnormal GED models is strong when fitting daily returns, but not when valuing options. In the second essay, we introduce a dynamic volatility model in which stock market volatility varies around a time-varying fundamental level. This fundamental level is determined by macroeconomic risk, quantified using a mixed data sampling (MIDAS) structure to account for changes in the recently introduced Aruoba-Diebold-Scotti (ADS) Business Conditions Index. The new model outperforms the benchmark in fitting asset returns and in pricing options, especially in the 1990-1991 and 2001 recessions. The benchmark model exhibits a counter-cyclical option-valuation bias across all maturities and moneyness levels, and the newly introduced model removes this cyclicality by allowing the conditional expected level of volatility to evolve with business conditions. We extract the volatility premium implied by the model and find that an economically significant 13% of its variation through time can be explained by the impact of macroeconomic risk. In the third essay, we study the impact of systematic risk on the pricing of two economically similar derivative contracts: credit default swaps and equity put options. We document, for roughly 130 firms that have been part of the CDX index between
  • Cette thèse repose sur trois essais traitant de l'évaluation de produits dérivés financiers. Le premier essai porte sur la performance relative de différents modèles d'évaluation d'option à variance GARCH. Nous comparons ces modèles suivants trois axes : variance à deux composantes vs. GARCH(1,1), variance affine versus non affine, rendements conditionnellement Gaussiens ou non. Les différents modèles sont comparés sur la base de leur capacité à correctement expliquer la série des rendements (estimation) et à prédire le prix des options (prédiction). Les résultats obtenus favorisent largement les modèles à volatilité non affine sur ceux à volatilité affine, tant du point de vue de l'estimation que de la prédiction. Pour les modèles à volatilité affine, les modèle à composantes sont favorisée par les données, à l'estimation et à la prédiction ; pour les modèles à volatilité non affine, les résultats sont moins convaincants au point de vue de la prédiction. À l'estimation, la supériorité des modèles qui ne reposent pas sur une hypothèse de normalité conditionnelle est clairement démontrée, mais les résultats à la prédiction sont plus mitigés. Dans le second essai, nous introduisons un modèle de volatilité dynamique suivant lequel la volatilité du marché varie autour d'un processus de volatilité fondamental dont le niveau est déterminé par une mesure de risque macroéconomique. Ce risque est quantifié à l'aide d'une structure de données échantillonnées à intervalles irréguliers (MIDAS) permettant de capturer les variations d'un nouvel indicateur macroéconomique, le Aruoba-Diebold-Scotti (ADS) Business Conditions Index. Le nouveau modèle performe mieux que le modèle de référence, tant en ce qui à trait à l'estimation qu'à la prédiction, tout particulièrement aux environs des récessions de 1990-1991 et de 2001. Peu importe la maturité ou le degré de parité des options, le modèle de réf
  • Economics - Finance
  • McGill University
  •  https://escholarship.mcgill.ca/concern/theses/12579s62z
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  • Doctor of Philosophy
  • Desautels Faculty of Management
  • Theses & Dissertations

The Impact of Financial Derivatives on Economic Growth: Implications for Financial Risk Management

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thesis dissertation on financial derivatives

  • Weiting Liu 7  

Part of the book series: Applied Economics and Policy Studies ((AEPS))

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Derivatives market is important to many aspects of the financial system and the economy, but only limited research has shed light on its relationship to economic growth, let alone any studies that consider the influence of risk measures. Based on 32 quarters (2012Q3 to 2020Q2) of data from six countries and taking risk factors into account, this paper uses a panel vector autoregression to investigate the dynamic causality between economic growth and the financial derivatives market. The results indicate that there is significant unidirectional relationship from the factors of financial markets to the economic growth. Meanwhile, the results show that trade openness and inflation also have significant positive effects on economic growth. However, to investigate how risk factors, for instance, volatility and value at risk, would affect the model, further methodology needs to be introduced.

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Liu, W. (2021). The Impact of Financial Derivatives on Economic Growth: Implications for Financial Risk Management. In: Yuan, C., Li, X., Kent, J. (eds) Proceedings of the 4th International Conference on Economic Management and Green Development. Applied Economics and Policy Studies. Springer, Singapore. https://doi.org/10.1007/978-981-16-5359-9_30

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50 Best Finance Dissertation Topics For Research Students

Finance Dissertation Made Easier!

Embarking on your dissertation adventure? Look no further! Choosing the right finance dissertation topics is like laying the foundation for your research journey in Finance, and we're here to light up your path. In this blog, we're diving deep into why dissertation topics in finance matter so much. We've got some golden writing tips to share with you! We're also unveiling the secret recipe for structuring a stellar finance dissertation and exploring intriguing topics across various finance sub-fields. Whether you're captivated by cryptocurrency, risk management strategies, or exploring the wonders of Internet banking, microfinance, retail and commercial banking - our buffet of Finance dissertation topics will surely set your research spirit on fire!

What is a Finance Dissertation?

Finance dissertations are academic papers that delve into specific finance topics chosen by students, covering areas such as stock markets, banking, risk management, and healthcare finance. These dissertations require extensive research to create a compelling report and contribute to the student's confidence and satisfaction in the field of Finance. Now, let's understand why these dissertations are so important and why choosing the right Finance dissertation topics is crucial!

Why Are Finance Dissertation Topics Important?

Choosing the dissertation topics for Finance students is essential as it will influence the course of your research. It determines the direction and scope of your study. You must make sure that the Finance dissertation topics you choose are relevant to your field of interest, or you may end up finding it more challenging to write. Here are a few reasons why finance thesis topics are important:

1. Relevance

Opting for relevant finance thesis topics ensures that your research contributes to the existing body of knowledge and addresses contemporary issues in the field of Finance. Choosing a dissertation topic in Finance that is relevant to the industry can make a meaningful impact and advance understanding in your chosen area.

2. Personal Interest

Selecting Finance dissertation topics that align with your interests and career goals is vital. When genuinely passionate about your research area, you are more likely to stay motivated during the dissertation process. Your interest will drive you to explore the subject thoroughly and produce high-quality work.

3. Future Opportunities

Well-chosen Finance dissertation topics can open doors to various future opportunities. It can enhance your employability by showcasing your expertise in a specific finance area. It may lead to potential research collaborations and invitations to conferences in your field of interest.

4. Academic Supervision

Your choice of topics for dissertation in Finance also influences the availability of academic supervisors with expertise in your chosen area. Selecting a well-defined research area increases the likelihood of finding a supervisor to guide you effectively throughout the dissertation. Their knowledge and guidance will greatly contribute to the success of your research.

Writing Tips for Finance Dissertation

A lot of planning, formatting, and structuring goes into writing a dissertation. It starts with deciding on topics for a dissertation in Finance and conducting tons of research, deciding on methods, and so on. However, you can navigate the process more effectively with proper planning and organisation. Below are some tips to assist you along the way, and here is a blog on the 10 tips on writing a dissertation that can give you more information, should you need it!

1. Select a Manageable Topic

Choosing Finance research topics within the given timeframe and resources is important. Select a research area that interests you and aligns with your career goals. It will help you stay inspired throughout the dissertation process.

2. Conduct a Thorough Literature Review

A comprehensive literature review forms the backbone of your research. After choosing the Finance dissertation topics, dive deep into academic papers, books, and industry reports, gaining a solid understanding of your chosen area to identify research gaps and establish the significance of your study.

3. Define Clear Research Objectives

Clearly define your dissertation's research questions and objectives. It will provide a clear direction for your research and guide your data collection, analysis, and overall structure. Ensure your objectives are specific, measurable, achievable, relevant, and time-bound (SMART).

4. Collect and Analyse Data

Depending on your research methodology and your Finance dissertation topics, collect and analyze relevant data to support your findings. It may involve conducting surveys, interviews, experiments, and analyzing existing datasets. Choose appropriate statistical techniques and qualitative methods to derive meaningful insights from your data.

5. Structure and Organization

Pay attention to the structure and organization of your dissertation. Follow a logical progression of chapters and sections, ensuring that each chapter contributes to the overall coherence of your study. Use headings, subheadings, and clear signposts to guide the reader through your work.

6. Proofread and Edit

Once you have completed the writing process, take the time to proofread and edit your dissertation carefully. Check for clarity, coherence, and proper grammar. Ensure that your arguments are well-supported, and eliminate any inconsistencies or repetitions. Pay attention to formatting, citation styles, and consistency in referencing throughout your dissertation.

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Finance Dissertation Topics

Now that you know what a finance dissertation is and why they are important, it's time to have a look at some of the best Finance dissertation topics. For your convenience, we have segregated these topics into categories, including cryptocurrency, risk management, internet banking, and so many more. So, let's dive right in and explore the best Finance dissertation topics:

Dissertation topics in Finance related to Cryptocurrency

1. The Impact of Regulatory Frameworks on the Volatility and Liquidity of Cryptocurrencies.

2. Exploring the Factors Influencing Cryptocurrency Adoption: A Comparative Study.

3. Assessing the Efficiency and Market Integration of Cryptocurrency Exchanges.

4. An Analysis of the Relationship between Cryptocurrency Prices and Macroeconomic Factors.

5. The Role of Initial Coin Offerings (ICOs) in Financing Startups: Opportunities and Challenges.

Dissertation topics in Finance related to Risk Management

1. The Effectiveness of Different Risk Management Strategies in Mitigating Financial Risks in Banking Institutions.

2. The Role of Derivatives in Hedging Financial Risks: A Comparative Study.

3. Analyzing the Impact of Risk Management Practices on Firm Performance: A Case Study of a Specific Industry.

4. The Use of Stress Testing in Evaluating Systemic Risk: Lessons from the Global Financial Crisis.

5. Assessing the Relationship between Corporate Governance and Risk Management in Financial Institutions.

Dissertation topics in Finance related to Internet Banking

1. Customer Adoption of Internet Banking: An Empirical Study on Factors Influencing Usage.

Enhancing Security in Internet Banking: Exploring Biometric Authentication Technologies.

2. The Impact of Mobile Banking Applications on Customer Engagement and Satisfaction.

3. Evaluating the Efficiency and Effectiveness of Internet Banking Services in Emerging Markets.

4. The Role of Social Media in Shaping Customer Perception and Adoption of Internet Banking.

Dissertation topics in Finance related to Microfinance

1. The Impact of Microfinance on Poverty Alleviation: A Comparative Study of Different Models.

2. Exploring the Role of Microfinance in Empowering Women Entrepreneurs.

3. Assessing the Financial Sustainability of Microfinance Institutions in Developing Countries.

4. The Effectiveness of Microfinance in Promoting Rural Development: Evidence from a Specific Region.

5. Analyzing the Relationship between Microfinance and Entrepreneurial Success: A Longitudinal Study.

Dissertation topics in Finance related to Retail and Commercial Banking

1. The Impact of Digital Transformation on Retail and Commercial Banking: A Case Study of a Specific Bank.

2. Customer Satisfaction and Loyalty in Retail Banking: An Analysis of Service Quality Dimensions.

3. Analyzing the Relationship between Bank Branch Expansion and Financial Performance.

4. The Role of Fintech Startups in Disrupting Retail and Commercial Banking: Opportunities and Challenges.

5. Assessing the Impact of Mergers and Acquisitions on the Performance of Retail and Commercial Banks.

Dissertation topics in Finance related to Alternative Investment

1. The Performance and Risk Characteristics of Hedge Funds: A Comparative Analysis.

2. Exploring the Role of Private Equity in Financing and Growing Small and Medium-Sized Enterprises.

3. Analyzing the Relationship between Real Estate Investments and Portfolio Diversification.

4. The Potential of Impact Investing: Evaluating the Social and Financial Returns.

5. Assessing the Risk-Return Tradeoff in Cryptocurrency Investments: A Comparative Study.

Dissertation topics in Finance related to International Affairs

1. The Impact of Exchange Rate Volatility on International Trade: A Case Study of a Specific Industry.

2. Analyzing the Effectiveness of Capital Controls in Managing Financial Crises: Comparative Study of Different Countries.

3. The Role of International Financial Institutions in Promoting Economic Development in Developing Countries.

4. Evaluating the Implications of Trade Wars on Global Financial Markets.

5. Assessing the Role of Central Banks in Managing Financial Stability in a Globalized Economy.

Dissertation topics in Finance related to Sustainable Finance

1. The impact of sustainable investing on financial performance.

2. The role of green bonds in financing climate change mitigation and adaptation.

3. The development of carbon markets.

4. The use of environmental, social, and governance (ESG) factors in investment decision-making.

5. The challenges and opportunities of sustainable Finance in emerging markets.

Dissertation topics in Finance related to Investment Banking

1. The valuation of distressed assets.

2. The pricing of derivatives.

3. The risk management of financial institutions.

4. The regulation of investment banks.

5. The impact of technology on the investment banking industry.

Dissertation topics in Finance related to Actuarial Science

1. The development of new actuarial models for pricing insurance products.

2. The use of big data in actuarial analysis.

3. The impact of climate change on insurance risk.

4. The design of pension plans that are sustainable in the long term.

5. The use of actuarial science to manage risk in other industries, such as healthcare and Finance.

Tips To Find Good Finance Dissertation Topics 

Embarking on a financial dissertation journey requires careful consideration of various factors. Your choice of topic in finance research topics is pivotal, as it sets the stage for the entire research process. Finding a good financial dissertation topic is essential to blend your interests with the current trends in the financial landscape. We suggest the following tips that can help you pick the perfect dissertation topic:

1. Identify your interests and strengths 

2. Check for current relevance

3. Feedback from your superiors

4. Finalise the research methods

5. Gather the data

6. Work on the outline of your dissertation

7. Make a draft and proofread it

In this blog, we have discussed the importance of finance thesis topics and provided valuable writing tips and tips for finding the right topic, too. We have also presented a list of topics within various subfields of Finance. With this, we hope you have great ideas for finance dissertations. Good luck with your finance research journey!

Frequently Asked Questions

How do i research for my dissertation project topics in finance, what is the best topic for dissertation topics for mba finance, what is the hardest finance topic, how do i choose the right topic for my dissertation in finance, where can i find a dissertation topic in finance.

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  1. PDF Risk Analyses of Financial Derivatives and Structured Products

    This thesis considers different risk aspects of trading in financial deriva-tives and structured products. A financial derivative is an agreement to exchange cash or assets over time given some condition on the value of an underlying asset. In general, the purpose of derivatives trading is to transfer risk. Derivatives can be

  2. (PDF) Financial Derivatives Use: A Literature Review

    CHAPTER 2: Financial Derivative Use Theory: A Literature Review. 2.0 Introduction. As the author has highlighted in the previous chapter, derivatives have come under. wide criticism for their ...

  3. Master Thesis: "The impact of the Derivatives' use, as a hedging

    forwards futures and swaps whereas derivatives that fall in the latter group are called options. Thirdly, derivatives can be traded through organized exchanges or over the counter, that is, through contracts that are negotiated privately between the parties. Figure 2.1 gives an overview of the main types of financial derivatives.

  4. PDF Equity Derivatives: Regulation and Uncertainty a Dissertation Submitted

    equity derivatives: regulation and uncertainty a dissertation submitted to the department of economics and the committee on graduate studies of stanford university in partial fulfillment of the requirements for the degree of doctor of philosophy elizabeth connor stone july 2010.

  5. PDF Managing Volatility Risk

    Innovation of Financial Derivatives, Stochastic Models and Their Analytical Implementation Chenxu Li This dissertation investigates two timely topics in mathematical finance. In partic-ular, we study the valuation, hedging and implementation of actively traded volatil-ity derivatives including the recently introduced timer option and the CBOE (the

  6. Valuation of Financial Derivatives Subject to Liquidity Risk

    To construct a hedged portfolio, the seller should. buy 0.3 x 100 = 30 shares of stock. If the stock price goes up $1, the option price will go. up by $0.3, and then the seller has a $30 ($1 x 30 shares) gain in its stock position, and a. $30 ($0.3 x 100 shares) loss in its option position. The net gain/loss is zero.

  7. PDF TOPICS IN FINANCIAL MARKET RISK MODELLING

    provided a solid basis for this present thesis. Dr. Metcalf's understanding, encouragement and ... volatility of financial markets combined with the rapid innovation of derivatives. Since the 1970s, several financial crises have occurred globally with devastating consequences for financial and non-financial institutions and for the real ...

  8. (PDF) The Use of Financial Derivatives in Measuring Bank Risk

    The Use of Financial Derivatives in Measuring Bank Risk Management Efficiency: A Data Envelopment Analysis Approa. ch.pdf. Content available from CC BY 4.0: 5b397b6a4585150d23ee08e2.pdf.

  9. Thesis

    This thesis comprises of three essays on the pricing of financial derivatives. In the first essay, we assess the return fitting and option valuation performance of generalized autoregressive conditional heteroscedasticity (GARCH) models. ... Theses & Dissertations; Items. Thumbnail Title Date Uploaded Visibility Actions; 474299516: 2019-09-21 ...

  10. Dissertations / Theses: 'Derivative financial instruments'

    Consult the top 50 dissertations / theses for your research on the topic 'Derivative financial instruments.'. Next to every source in the list of references, there is an 'Add to bibliography' button. Press on it, and we will generate automatically the bibliographic reference to the chosen work in the citation style you need: APA, MLA, Harvard ...

  11. The Impact of Financial Derivatives on Economic Growth ...

    Notwithstanding financial risk management is of great significance to financial derivatives and economic growth, it seems difficult for the model to explain how the risk indicators affect the gross domestic product of a country, hampering the governments or financial institutions to put forward the effective and enduring method of risk ...

  12. Mathematical Modeling of Financial Derivative Pricing

    Introduction. The binomial asset-pricing model is used to price financial derivative securities. In this text, we will mostly use the example of the European call option to illustrate the function the binomial model serves. This type of derivative is one that allows its owner the right (but not the obligation) to buy.

  13. PDF essays on financial econometrics and Derivatives pricing

    The unifying themes of this dissertation are nancial econometrics and derivatives pricing. An underlying topic is the price behavior of a nancial asset, be it a stock market index or a commodity derivative, with an additional focus on the factors a ecting this behavior, like the volatility and inventory levels. Practical implementation issues ...

  14. The Role of Financial Derivatives in Financial Risks Management

    Financial derivatives are financial instruments whose price is derived from the basic fin ancial. instruments' prices. They represent derivative financial instruments created based on the ...

  15. PDF Essays in Financial Economics

    Professor John Y. Campbell. Author: Christopher Anderson. Essays in Financial Economics. Abstract. The ・〉st essay studies consumption-based asset pricing models in which consumers make mistakes. I build a model in which a portfolio manager selects portfolio weights on behalf of a potentially non-optimizing consumer.

  16. PDF This electronic thesis or dissertation has been downloaded from Explore

    2 Abstract Using a multilevel approach, I examine individual and contextual determinants of financial inclusion. I investigate, in a cross-country-setting, factors that affect people's decision making

  17. Dissertations / Theses: 'Financial Derivative'

    List of dissertations / theses on the topic 'Financial Derivative'. Scholarly publications with full text pdf download. Related research topic ideas.

  18. Essays in Finance and Development

    Abstract. This dissertation studies the impact of financial institutions and information frictions on economic growth, as well as the effect of local economic fluctuations on aggregate financial outcomes. In the first chapter, co-authored with Chenzi Xu, we use a historical laboratory to show that banks impact real economic activity through the ...

  19. A STUDY ON FINANCIAL DERIVATIVES (FUTURES & OPTIONS) With ...

    Abstract. The emergence of the market for derivatives products, most notably forwards, futures and options, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. Derivatives are risk management instruments, which derive their value from an ...

  20. 50 Best Finance Dissertation Topics For Research Students

    Opting for relevant finance thesis topics ensures that your research contributes to the existing body of knowledge and addresses contemporary issues in the field of Finance. Choosing a dissertation topic in Finance that is relevant to the industry can make a meaningful impact and advance understanding in your chosen area. 2. Personal Interest.

  21. Finance Theses and Dissertations

    Theses/Dissertations from 2012 PDF. On The Efficiency of US Equity Markets, Mikael Carl Erik Bergbrant. PDF. Two Essays on the Sell-side Financial Analysts, Xi Liu. PDF. Two essays on Corporate Restructuring, Dung Anh Pham. PDF. Two Essays on Corporate Governance, Yuwei Wang

  22. Dissertation or Thesis

    This dissertation is about forces which persistently push financial variables away from theirsteady state. In chapter one, we show that a steady state is not necessary in perturbations formacro-financial models with periodic state-switching. We present a novel perturbation procedurebased on 'steady cycles': periodic analogues to fixed points.

  23. (PDF) A Study of Indian Derivatives Market and its ...

    Financial derivatives can be used in two ways; to hedge against unwanted risk or to speculate by taking apposition in anticipation of a market movement. Organizations today can use financial ...

  24. Thesis Dissertation On Financial Derivatives

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