RESEARCH PROPOSAL

Research Proposal

Research Proposal

Aims and Objectives of the Research

The research aims to extract the impact of activities of hedging on the value of firm. This research is based on considering the oil and gas industry. The research also aims to establish the relationship of growth prospects of countries based on the oil and gas production and supply. The second part of the research is based on the experience of Nigeria.

Research Questions

Following are the questions for our research:

Whether the impact of hedging is positive or negative on the on value of firm within the consideration of oil and gas industry?

What is the affect of total and adjusted delta on Q-ratio?

Whether Nigeria was benefited by becoming an oil and gas economy?

What is the relation of oil and gas exploration on the balance of payment and GDP in Nigeria?

Hypotheses

Delta value (hedging activities) has a negative impact on the Q-value (firm's value)

Nigeria's GDP was increased and Balance of payment was decreased by becoming an oil and gas economy.

Methodology

For proving the first part of our research, we have gathered the data from the financial reports of 30 companies for past 5 years about the Delta and Q-ratio. The researcher has selected total 30 companies in which 15 are the companies which are involved in hedging and 15 are non-hedging companies. The delta and Q-values of both are compared to formulae, identify and analyze the relationship (Eichengreen, 1996). Delta hedging is defined as an Absicherungsstragie, with which there is an option position against price changes in the underlying hedges. For this purpose, to build a position in the underlying security whose value changes in price movement to change the value of the option position is exactly the opposite (Mosley, 2004).

The delta of an option indicates how much the price of an option changes completely when the price of the underlying price changes by 1 EUR. 1000 has an investor such as put options on a particular stock with a delta of -0.6 bought, it means that his option position loses value EUR 600 (with a subscription ratio of 1:1) when the underlying share 1 EUR in value wins. The amount of -600 EUR is the product of the delta of -0.6, the business volume of 1,000 shares and the price change of 1 EUR. If the investor buys 600 shares now, the same change in value of the change in value of the option position ...