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Fair and Legal Trading We will operate in a manner based on high ethical values with a consciousness of fair and appropriate trading. We will not pursue profits using improper or fraudulent methods, while maintaining an accurate understanding of and compliance with laws and regulations concerning corporate activities, such as the Anti-monopoly Act. For Japan Exchange Group to obtain confidence from society and maintain that confidence, we are required to conduct business operations while paying constant heed to fair and legal trading. Any unlawful conduct such as using an advantageous negotiating position during a transaction to force unreasonable requests on the opposite party or conduct unreasonable price demands, refusals, returns, or payment delays will contradict this principle and restrict free business activity, and therefore must be avoided at all costs. Additionally, when choosing service providers and business outsourcing providers, we are required to decide after evaluating the options through ...

Futures and Options Report 08/2022 A FINANCIAL ENGINEERING VIEW OF DRAWDOWNS IN THE STOCK MARKET PART I MASAHIKOEGAMI Graduate School of Economics, Kyoto University, Sakyo-ku, Kyoto, 606-8501, Japan. ABSTRACT. In this report, we collect some topics about how the stochastic (probabilistic) model analysis can provide us with insight into stock investment. We focus on drawdowns from the running maximum. Suppose that we start observing the stock price at time 0, and after a certain time interval t, the highest price between 0 and t has been attained at, say, s. The price at time s is called the running maximum up to time t. It follows that the current price, which is the price at time t, is lower than the running maximum. The stock is said to be in a drawdown period (from the running maximum). In financial engineering, for evaluating the price and risk of ...

Futures and Options Report 09/2022 A FINANCIAL ENGINEERING VIEW OF DRAWDOWNS IN THE STOCK MARKET PART II MASAHIKOEGAMI Graduate School of Economics, Kyoto University, Sakyo-ku, Kyoto, 606-8501, Japan. ABSTRACT. In this report, we collect some topics about how the stochastic (probabilistic) model analysis can provide us with insight into stock investment. We focus on drawdowns from the running maximum. Suppose that the stock price starts at time 0, and after a certain time interval t, the highest price between 0 and t is attained at s. The price at s is called the running maximum up to time t. It follows that the current price, which is the price at time t, is lower than the running maximum. The stock is said to be in a drawdown period (from the running maximum). Following Part I where we discussed financial modeling for the drawdown process, in this Part ...

Futures and Options Report 11/2022 1 Economic Uncertainty and Derivatives Usage by Japanese firms Juxin Yan Kokushikan University Yukihiro Yasuda Hitotsubashi University １．Introduction This paper aims to empirically investigate the effects of economic uncertainty on firms’demand for derivatives for hedging purposes focusing on Japanese listed companies. More concretely, we use the VIX (Volatility Index of Japan), which is constructed based on the implied volatility of option prices for a proxy of stock market uncertainty, and the EPU (Economic Policy Uncertainty) index created by Arbatli et al. (2022). Following the study of Baker et al. (2016), they used Japanese newspapers and constructed an index of Japanese EPU based on text mining. Figure 1. VIX and EPU indexes in Japan since 2013 Figure 1 represents both VIX and EPU indexes in Japan since 2013. Both indexes show that they are getting higher when uncertainty is high. We note that ...

Futures and Options Report 12/2022 1 A Further Investigation into Economic Uncertainty and Derivatives Usage by Japanese Firms Juxin Yan Kokushikan University Yukihiro Yasuda Hitotsubashi University １．Introduction The EPU (Economic Policy Uncertainty) indexes in Japan created by Arbatli et al. (2022) not only include the overall index but also include uncertainty indices for monetary policy, fiscal policy, trade policy and exchange rate policy, which distinguishes the Japan indexes from other countries. Among the Japan EPU indexes, we expect that firms’demand for interest rate derivatives for hedging purposes is related to monetary policy uncertainty. On the other hand, the usage of currency derivatives that apply hedge accounting is related to trade and exchange rate policy. Like Yan and Yasuda (2022), this paper aims to empirically investigate the effects of monetary policy, trade policy, and exchange rate policy uncertainty on Japanese firms’demand for interest rate derivatives and currency ...

Futures and Options Report 1/2025 1 The Introduction of Derivative Market Manipulation Part II Pei-Fang Hsieh pfhsieh@mx.nthu.edu.tw College of Technology Management, National Tsing Hua University Abstract. In this part of article, I introduce two of my recent workings related with derivative market manipulation. The first one is the settlement price manipulation for Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) futures and options. The rest is the potential spoofing tactics by analyzing comprehensive order and transaction data of TAIEX options and futures. 3. Settlement price manipulation The classical close price manipulation in cash-settled derivative contract can be referred to Kumar and Seppi (1993). They provide a two-date model in which trade occurs first in a futures market followed by a spot market. Suppose that an informed trader privately learns the value of the underlying asset before delivery, but that this value becomes ...

Futures and Options Report 01/2024 THE STRONG MARKOV PROPERTY APPLIED TO OPTION PRICING PART I MASAHIKOEGAMI Graduate School of Economics, Kyoto University, Sakyo-ku, Kyoto, 606-8501, Japan. ABSTRACT. In pricing and hedging derivatives, one uses stochastic processes to represent movement of underlying assets and other important state variables (such as volatility). In this report, we collect several techniques from stochastic analysis which we believe are useful for financial modeling, derivative pricing, and parameter estimation. A key element is the strong Markov property that helps to streamline seemingly complex equations and to tremendously reduce variance in numerical simulations. 1. INTRODUCTION In pricing and hedging derivatives, one uses stochastic processes to represent movement of underlying assets (stock price, index, interest rate) and other state variables such as volatility. Perhaps, the most popular is geometric Brownian motion, which is explained in almost all financial engineering books. A brief review is also ...

Futures and Options Report 02/2024 THE STRONG MARKOV PROPERTY APPLIED TO OPTION PRICING PART II MASAHIKOEGAMI Graduate School of Economics, Kyoto University, Sakyo-ku, Kyoto, 606-8501, Japan. ABSTRACT. In pricing and hedging derivatives, one uses stochastic processes to represent movement of underlying assets and other important state variables (such as volatility). In this report, we collect several techniques from stochastic analysis which we believe are useful for financial modeling, derivative pricing, and parameter estimation. A key element is the strong Markov property that helps to streamline seemingly complex equations and to tremendously reduce variance in numerical simulations. Following Part I where we discussed the definition of the strong Markov property and related mathemat- ical objects, we show more examples and a case where the strong Markov property is not applicable. We include proofs of some technical, but useful for applications, results in the Appendix. 4. OTHER EXAMPLES Let ...

Futures and Options Report 12/2024 1 The Introduction of Derivative Market Manipulation Part I Pei-Fang Hsieh pfhsieh@mx.nthu.edu.tw College of Technology Management, National Tsing Hua University Abstract. In this article, I first introduce the definition and types of market manipulation. The market manipulation tactics in derivative contract market would be illustrated in the first part. I express two common themes of derivative market manipulation 1) close price manipulation, and 2) order-based manipulation–spoofing tactics. 1. Introduction This article discusses the definition and several methods of market manipulation. I will concentrate on potential manipulation in derivative contract markets. This essay will first describe numerous potential manipulation tactics, and then outline legal detections. Finally, I will provide evidence for potential manipulation of the derivative markets discovered in crucial Asian derivative markets. In the opening of Alexander and Cumming's (2020) book, Tālis J. Putniņšclaims that "Market ...

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