https://www.um.edu.mt/library/oar/handle/123456789/11492 Thu, 07 May 2026 06:13:27 GMT 2026-05-07T06:13:27Z https://www.um.edu.mt/library/oar/handle/123456789/102093 Title: A study of uses and misuses of derivatives Abstract: Overview- Derivatives activity continues to increase globally although they have provided a few of the largest financial disasters. The debate on their use and misuse has never been stopped and is still to some extent unresolved (Fernandez-Laviada, Martinez-Garcia and Montoya Del Corte, 2008). Therefore, identifying the real fundamental reasons for these problems when using derivatives is essential to help prevent new financial scandals. Purpose - The study seeks to determine whether the derivative instrument is the reason for the various problems faced by firms when using them. It seeks to identify and characterise the important determinants of safe derivative use and attempts to determine which of these determinants emerge as significant predictors of the difficulty often encountered by firms when using derivatives. Hypothesis - "There are a manifold of reasons concerning 'users' and 'controllers', rather than the derivative instruments themselves, that lead to unprofitable decisions." Research questions 1. What are the governing factors that influence the safe use of derivatives? 2. Is the problem the derivative instrument itself? Should derivative use be considered madness? Are they so bad and dangerous? Design/methodology/approach - A mixed approach of qualitative and quantitative analysis, following a conceptual framework was used in this study to understand the role played by derivatives in the problems faced by firms and to answer the research questions posed. Financial firms (Barings Bank Plc, Allied Irish Bank and Societe Generale), the financial Crisis of this decade; and non-financial films (Metallgesellschaft and Enron) cases of debacles blamed on derivatives are studied in debt and the factors influencing the safe use of derivatives are extracted. The selection of cases was determined following a review of literature and cases and the researcher' experience. The choice was made mainly based on the amount of publicity these firms attracted about their misuse of derivatives, therefore purposive sampling. A web-based questionnaire was completed by 420 international users/ and controllers of derivatives, selected via purposive and snowball sampling techniques. This questionnaire was purposely designed for the study and included both closed-ended and open-ended questions. The measures obtained from the closed-ended questions were analysed quantitatively, while the answers to the open-ended questions (which were not obligatory and were answered by 52 of the participants) were analysed qualitatively. Moreover, interviews were carried out with 46 international users and controller, also selected via purposive and convenience sampling techniques. These were asked six open ended questions purposely designed for the study. A featured participant among the interviewed was Mr. Nick Leeson. The data collected was analysed qualitatively. Findings - The empirical study identifies six factors that account for 68.2% of the variability in the derivative safe use and in five factors, the scores varied as of function of demographic variables. Additionally, two of these factors emerged as the significant predictors in classifying whether or not a company often encounters difficulty when using derivatives, with an overall holdout accuracy of 74.7%. When this is compared to the the other qualitative findings, the factors identified are 26, with Internal Controls, Standards, Knowledge, Understanding, Awareness, Complexity, Greed, Hubris, desire for Power and Perception of the usefulness of derivatives being those factors influencing the safe use of derivatives which were highlighted by all sources. Originality/Value -This study provides empirical and qualitative evidence that the incorporation of control factors as well as demographic factors make a significant contribution to the understanding of safe derivative use. Derivatives are useful financial instruments but if the implication of such factors is not looked into, then the true value and qualities of the derivative instrument are obscured. Keywords - financial derivatives, safe derivative use, derivative misuse, management control and process, users, controllers, risk management, internal control. Description: PH.D.BANK.&FIN. Sat, 01 Jan 2011 00:00:00 GMT https://www.um.edu.mt/library/oar/handle/123456789/102093 2011-01-01T00:00:00Z https://www.um.edu.mt/library/oar/handle/123456789/75570 Title: Assessing economic vulnerability and resilience in a DSGE framework Abstract: The analysis of vulnerable economies is established in the literature and it has been shown that small states especially are inherently vulnerable given their smallness and openness. Despite this, a number of success stories have been documented, proving that with the implementation of the right policies, these small states can develop an ability to withstand or recover from the negative effects of economic shocks. This work aims to capture the concepts of economic vulnerability and resilience in a framework which nowadays is considered to lie at the forefront of macroeconomic modelling. A Dynamic Stochastic General Equilibrium (DSGE) model of a small, open economy is used to assess the implications of vulnerability, and the effects of different policies that counter such vulnerability, in order to understand the dynamics behind the adjustment processes in small states. It is shown that a relatively simple model is able to replicate the dynamics implied by the data for the Maltese economy to a reasonable degree and the results indicate a preference towards one type of government policy over another. In line with other studies, it is argued that such a policy can only be afforded if the economy is willing to save and thus accumulate resources that it can utilise in times of distress. Description: M.A.ECONOMICS Sat, 01 Jan 2011 00:00:00 GMT https://www.um.edu.mt/library/oar/handle/123456789/75570 2011-01-01T00:00:00Z https://www.um.edu.mt/library/oar/handle/123456789/75491 Title: The effect of fiscal drag on the Maltese economy : analysing the Maltese tax burden through tax wedge indicators Abstract: This exercise computed tax wedge indicators for the Maltese tax system on employed labour, using the methodology as developed by the OECD. Between 2000 and 2009 the average tax burden for most households declined, as a result of reforms undertaken to the income tax and family benefits systems throughout this period. The largest declines were experienced by family types with earnings around the average wage value or higher. Taxpayers with lower income levels benefited less from the reduction in the tax burden on employed labour due to the presence of strong nominal and real fiscal drag effects. Description: M.A.ECONOMICS Sat, 01 Jan 2011 00:00:00 GMT https://www.um.edu.mt/library/oar/handle/123456789/75491 2011-01-01T00:00:00Z https://www.um.edu.mt/library/oar/handle/123456789/72896 Title: The setting of an optimum base rate : building a theoretical rate Abstract: With effect from 15 October 2008, the Governing Council of the European Central Bank (ECB) decided to lower its minimum bid rate by 50 basis points from 4.25% to 3.75%, in view of the then prevailing market conditions. A series of rate cuts in the minimum bid rate of the ECB followed this first decision, such that the minimum bid rate was reduced by 325 basis points to 1.00% in one and a half years. Initially domestic banks were implementing Governing Council decisions as soon as they occurred. However, following the rate cut taking effect on 11 March 2009, none of the domestic banks then operating in the Maltese Islands adopted this measure and no cuts were made to bank base rates. Such a decision was quite extraordinary for the local market since past movements in the base rate of domestic banks had always indicated that base rate modelling was mostly calculated on the ECB minimum bid rate. This study questions base rate modelling for domestic banks as it tries to identify the factors that influence base rate setting. Research was carried out on the type of market in which domestic banks operate. Both the data obtained from annual reports and financial statements, as well as figures for the number of licensed credit institutions (provided by the Malta Financial Services Authority), indicated that banks operating in the Maltese Islands were competing under an oligopolistic market structure. This dissertation also evaluated a historical analysis of the base rates set by four commercial banks; namely APS Bank Limited, Banif Bank (Malta) plc, Bank of Valletta plc, and HSBC Bank (Malta) plc. Deep analysis of the base rates discovered that the four banks under study have always competed in an oligopolistic market structure. In the past, three of the four banks under study modelled their base rate on variables related to liquidity. Today, banks operating in the Maltese market model their base rate as an average of liquidity variables (including the minimum bid rate, the gross domestic product, and the inflation rate), loan maturity, and the various risks that they face. Description: M.A.ECONOMICS Sat, 01 Jan 2011 00:00:00 GMT https://www.um.edu.mt/library/oar/handle/123456789/72896 2011-01-01T00:00:00Z