Special aspects of using hybrid financial tools for project risk management in Ukraine
-
Author(s)Volodymyr MishchenkoLink to ORCID Index: https://orcid.org/0000-0002-8565-2686
,
Svitlana NaumenkovaLink to ORCID Index: https://orcid.org/0000-0001-8582-6044
,
Viktor IvanovLink to ORCID Index: https://orcid.org/0000-0003-4121-0605
,
Ievgen TishchenkoLink to ORCID Index: https://orcid.org/0000-0002-1580-4701
-
DOIhttp://dx.doi.org/10.21511/imfi.15(2).2018.23
-
Article InfoVolume 15 2018, Issue #2, pp. 257-266
- Cited by
- 1682 Views
-
476 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
The relevance of the article is due to the need of using non-traditional tools for capital raising and hedging financial risks in Ukrainian conditions that allow investors to protect themselves against possible losses during the entire life cycle of the investment project. The study is based on the National Bank of Ukraine statistical data, data of Ukrainian commercial banks, as well as on the authors’ calculations based on empirical and economic-statistical methods. According to international practices, hybrid financial instruments were classified and the special aspects of their use in Ukraine were studied to manage the risks of project financing. Specific features of using the structured bonds for financing investment projects are determined based on the synthetic securitization scheme. The experience of Ukrainian banks was analyzed and the necessity to use financial instruments such as guarantees and letters of credit in risk management of project financing was substantiated. It has been established that forward contracts, currency swaps and over-the-counter currency options are the most acceptable instruments for hedging foreign exchange risks of project financing. Further studies of the problem should include the need for legislative regulation of using hybrid financial instruments, as well as methodological and regulatory support for the risk management of project financing at all stages of the investment project implementation.
- Keywords
-
JEL Classification (Paper profile tab)G10, G32
-
References22
-
Tables4
-
Figures0
-
- Table 1. Conditional calculation of the income of a bond issuer and an investor when using convertible bonds (on an annualized basis)
- Table 2. Calculated expenditure structure for issuance of corporate securitized bonds in Ukraine (in terms of bond issuance equal to USD 50 mln)
- Table 3. Letters of credit transactions of Ukrainian banks in 2016–2017 (at the beginning of the year)
- Table 4. Use of currency derivatives by Ukrainian banks to hedge currency risks in the period 2012– 2017, USD mln
-
- Basel Committee on Banking Supervision (2011, June). Principles for the Sound Management of Operational Risk.
- Bessis, J. (2015). Risk management in banking (4th ed.). Wiley.
- BIS (2004). International Convergence of Capital Measurement and Capital Standards: A Revised Framework.
- Boberski, V. (2010). Community Banking Strategies: Steady Growth, Safe Portfolio Management, and Lasting Client Relationships. Hoboken, New Jersey: John Wiley & Sons, Inc.
- Crouhy, M., Galai, D., & Mark, R. (2005). The Essentials of Risk Management. NY: McGraw-Hill.
- Davidson, А., Sanders, A., Wolff, L.-L., & Ching, A. (2004). Securitization: Structuring and Investment Analysis. Hoboken, New Jersey: John Wiley & Sons, Inc.
- Docherty, A., & Viort, F. (2013). Better Banking: Understanding and Addressing the Failures in Risk Management, Governance and Regulation. Hoboken, New Jersey: John Wiley & Sons, Inc.
- Fabozzi, F. J. (1996). Asset-Backed Securities. Hoboken, New Jersey: John Wiley & Sons, Inc.
- Ghosh, A. (2012). Managing Risks in Commercial and Retail Banking. Hoboken, New Jersey: John Wiley & Sons, Inc.
- Golin, J., & Delhaise, P. (2013). The Bank Credit Analysis Handbook: A Guide for Analysts, Bankers and Investors (2nd ed.). Hoboken, New Jersey: John Wiley & Sons, Inc.
- Jobst, А. (2008). What Is Securitization? Finance & Development, September, 48-49.
- King, B. (2014). Breaking Banks. The Innovators, Rogues, and Strategists Re-booting Banking. Hoboken, New Jersey: John Wiley & Sons, Inc.
- Kothari, V. (2006). Securitization: The Financial Instrument of the Future. Hoboken, New Jersey: John Wiley & Sons, Inc.
- Mishchenko, S. V., Naumenkova, S. V., & Lon, I. M. (2016). Монетарні цикли в економіці України [Monetarni tsykly v ekonomitsi Ukrainy]. Aktualni Problemy Ekonomiky, 11, 363-372.
- Mishchenko, V. I., Naumenkova, S. V., & Shapoval, O. A. (2016). Сек’юритизація споживчих кредитів [Sekiurytyzatsiia spozhyvchykh kredytiv]. Aktualni Problemy Ekonomiky, 12, 311-321.
- Moenjak, T. (2014). Central Banking: Theory and Practice in Sustaining Monetary and Financial Stability. Wiley Finance Series.
- Sokolov, B.I. & Sokolova, S.V. (2016). Эволюция парадигмы го¬сударственного долга [Evolyucija paradigmy gosudarstvennogo dolga]. Aktualni Problemy Ekonomiky, 5, 49-56.
- Weltman, J. (2015). Country risk: Why betting on Ukraine is for the fortuitous or foolhardy. Washington.
- World Bank Group (2010). Investment Guarantee Guide. Multilateral Investment Guarantee Agency.
- World Bank Group (2012, March). MIGA’s Non-Honoring of Sovereign Financial Obligations Product. Multilateral Investment Guarantee Agency.
- Yehorycheva, S., Kolodiziev, O., & Prasolova, S. (2017). Actual problems of the capital stability management in the Ukraine’s banking system. Banks and Bank Systems, 12(2), 60-67.
- Yescombe, E. R. (2014). Principles of Project Finance (2nd ed.). YCL Consulting Ltd.
-
Assessment and mitigation of credit risks in project financing
Svitlana Naumenkova ,
Ievgen Tishchenko ,
Svitlana Mishchenko ,
Volodymyr Mishchenko ,
Viktor Ivanov
doi: http://dx.doi.org/10.21511/bbs.15(1).2020.08
Banks and Bank Systems Volume 15, 2020 Issue #1 pp. 72-84 Views: 1570 Downloads: 1188 TO CITE АНОТАЦІЯLending to long-term investment projects in fragile countries requires additional financial instruments to control the sustainability of project cash flows and to increase the borrower’s financial discipline in debt servicing. This paper analyzes the special aspects of using financial covenants as credit risk mitigation instruments in project financing in Ukraine. It also argues that regulatory requirements to maintain financial strength indicators at the appropriate level have an indirect impact on the change in project finance loan rates. The study primarily aims at developing approaches to defining a credit rate corridor for an investment project, depending on changes in the values of financial sustainability indicators. The implementation of the proposed approach allows increasing the validity of credit risk components for investors and optimizing capital value for borrowers.
As required by international practice, violation of covenant terms is the trigger for satisfying the creditors’ claims. According to the authors’ conclusions, the use of financial covenants as a tool for protecting the creditors’ interests should not be an instrument of unreasonable financial pressure on borrowers. The study reveals benefits and drawbacks of using financial covenants to mitigate credit risk and reduce the probability of a borrower default in the field of project financing in Ukraine. -
Modeling of structural and temporal characteristics in the corporate securities market of Ukraine
Mykhailo Kuzheliev ,
Ihor Rekunenko ,
Antonina Boldova ,
Maksym Zhytar ,
Serhij Stabias
doi: http://dx.doi.org/10.21511/imfi.16(2).2019.22
Investment Management and Financial Innovations Volume 16, 2019 Issue #2 pp. 260-269 Views: 947 Downloads: 198 TO CITE АНОТАЦІЯThe development of the corporate securities market and the effective use of tools for its regulation cannot be achieved without models and methods of economic and mathematical modeling. The aim is to analyze and systematize the structural and temporal characteristics of the corporate securities market in Ukraine by applying economic and mathematical modeling methods. In the paper, linear interpolation is used to assess the temporal characteristics of corporate securities under market uncertainty. Descriptive and simulation modeling methods are also applied to carry out a formal description of the process of evaluating the structural characteristics of securities. The result of the study involves developing a descriptive model to analyze the structural and temporal characteristics of the Ukrainian corporate securities market. The approbation of the proposed model makes it possible to draw the following conclusions. First, Perspektiva Stock Exchange, Ukrainian Exchange and PFTS – the First Stock Trading System, are the most important trading platforms. They are determined by the monthly bidding dynamics and can belong to the same group – active players in the corporate securities market of Ukraine. Second, in terms of endogenous priorities, the development of the corporate securities market is mostly influenced by inflation rates (consumer price index), economic development indicators (key branches production index) and interest rates on alternative financial instruments (new deposit interest rates of deposit-taking corporations). Third, the rate of corporate securities issue and the native currency rate do not significantly affect the corporate securities market development, in particular, the former is characterized by a slight negative impact, and the latter – by a slight positive impact on the price dynamics.
