FINANCIAL ENGINEERING AS A TOOL FOR THE DEVELOPMENT OF CORPORATE BOND MARKET IN EASTERN EUROPE ON THE EXAMPLE OF UKRAINE

Maria Iorgachova, Olena Kovalova, Ivan Plets

Abstract


In the context of the gap between the financial and real sectors of the Ukrainian economy, there is a problem of the absence of financial instruments able to solve the issue of financing the development of the national economic system on a long-term basis. At the current stage of the stock market development, financial engineering has a significant potential for the effective application since it can become an instrument that meets the current needs of the market. The purpose of this article is to study the current dynamics of development and features of the corporate bond market in Ukraine, as well as to develop the parameters of the new profit-bonds with the help of financial engineering, which takes into account investors’ inquiries in the formation of an investment portfolio and supposed to be a profitable form of attracting financial resources for issuers. Methodology. Materials of periodicals, analytical market reviews, resources of the Internet are the informational and methodological basis of the investigation. The research is based on general scientific and special methods, such as: comparison, systematic approach factor analysis, economic and mathematical methods. A comparative analysis of the parameters of financial instruments has been carried out that allowed determining the investors’ inquiries, investment trends and features of the choice of financial instruments by investors and accordingly to offer competitive debt securities according to the parameters of payment, maturity, security, repayment order, issue of currency. The results of the study indicate that there is the necessity of reformation of the stock market in terms of expanding the range of financial instruments based on financial engineering. The introduction of profit-bonds will allow offering participants of the Ukrainian market competitive conditions for the issue of securities, which are based on the modelled parameters of bonds. A schematic algorithm for the implementation of profit bonds is developed; it joins a complex of interrelated stages of implementation, which are sensitive to internal and external factors of influence. Practical implications. Directions for improving financial instruments on the basis of financial engineering can be applied by the participants of the stock market that will increase the general level of economic activity in the national economy and permit to accumulate financial resources on the profitable terms. Value/originality. The article reveals the development of the domestic market for corporate bonds as an important segment of the stock market through the application of financial engineering and the use of new financial products created to address the issue of attracting the necessary financial resources to the real sector. The introduction of financial engineering as a tool for the development of Ukrainian corporate bond market and its schematic algorithm of the implementation will allow an investor to react in time to the market changes. The creation of the State Fund for the Guaranteeing of Income of the Investors Market Act, which is formed at the state level by analogy with the existing Guarantee Fund for Individual Deposits, will allow the fulfilment of the security parameter that will classify profit bonds as long-term debt instruments with a high credit rating.

Keywords


bond, financial engineering, stock market, issuer, investor

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References


Database ETF (2017). Retrieved December 16, 2017 from: http://etfdb.com/

National Bank of Ukraine (2017). Retrieved December 16, 2017 from: http://www.bank.gov.ua/

National Rating Agency “Rurik” (2018). Retrieved May 16, 2018 from: http://rurik.com.ua/

National Securities and Stock Market Commission (2018). Retrieved February 10, 2018 from: http://www.nssmc.gov.ua/

State Statistics Service of Ukraine (2018). Retrieved May 16, 2018 from: http://www.ukrstat.gov.ua/

The First Stock Trading System (2017). Retrieved December 16, 2017 from: http://www.pfts.ua/




DOI: http://dx.doi.org/10.30525/2256-0742/2018-4-4-120-125

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