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Proactive Structural Derivatives Pricing for
Global/China Corporate Governance Operations
Simulation Analysis and Early Warning, Prevention
Int’l Finance, Corporate Governance Conference
Dec.13-14 2006 NTU , Finance Institute, Taipei , Taiwan
Macro-economic Control, Assets Prices Mechanism, for
Proactive Corporate Governance OSA Early Warning
Dr Warren Huang, ( 黃華南博士)
OSA Global Strategic Management website: www.osawh.com /
www.osaglobalstrategicmanagement.com
[email protected]/ [email protected]
Fenglan Zhang Zhejiang University
Lecture Summary
Proactive Asset Prices and Corporate Governance
Operations Simulation Analysis (OSA)
 What is OSA? And its Accomplishments.
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What is wrong with current corporate governance and internal
auditing control
Proactive Structural Dynamic Asset Prices and Corporate
Governance
New generation CPA/CFA/CFO corporate governance decision
analysis training,
Corporate scandals cycle economic, capital markets, asset bubble
boom/bust cycles .
Country Risks Macro-economic control OSA
Economic, Banking, Finance, Enterprises reform, privatization IPO
Prices
Housing Prices Bubble, Interest Rates Derivatives Mechanism,
Scandal Cycles OSA
Oil, Energy , Derivatives Prices Bubbles and Scandals Cycles
Mechanism OSA
Lecture Summary
Proactive Corporate Governance
Operations Simulation Analysis (OSA)
 IT Demand, Expansion Bubbles and Scandals Mechanism OSA
 Proactive Strategic Investment Banking for Corporate M/A
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Scandals Early Warning OSA
Proactive Market Risks OSA: Global/China Stock indices futures,
derivatives price bubbles corporate scandal cycles early warning
Proactive Inflation, Interest rate, Derivatives Price Risks, Bond
yield simulation, scandals cycle early warning
Daily real time Dow Jones Stock Index futures OSA
Daily real time Hang Seng Stock Index futures OSA
Daily real time Nikkei Stock Index futures OSA
Conclusion & Recommendation
What is wrong with current corporate governance
and internal auditing control
 Despite China new accounting, auditing guideline, security law
and US COSO and Sarbanes-Oxley act requiring independent
directors, internal auditing committee tracking, control auditing
function and performance
Current board and internal auditing control are not knowledge to
monitor and control complicated fast changing
structured finance based cost, financial, derivatives accounting
scandals and risks , tricks:
A. Loop holes in accounting cost/ tax, security law structures
B. Off balance sheet commodity, financial futures, derivatives
trading and hedging
C. Speculation investment banking IPO, Merger/ Acquisition
 Poor internal auditing and corporate core business process unit
daily integration to meet independent and transparency
requirement
What is OSA and its Accomplishments
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Dr. Warren Huang has over 35 year develop, implemented structural dynamic simulation,
optimization for US Mobil and China/ Taiwan, Asian Oil companies board directors oil, gas
upstream/downstream performances ,achieve sustainable profit dream come true
Inspired by Prof Nash turning numbers into equation, he pioneered Nobel Prize idea ; two
master hands controlling global economy, finance, capital market equities, bond, housing,
commodities, financial futures asset prices:information knowledge base development Out of
1972 -2005 ( daily Wall Street Journals, Business Week, trading data, web market,
economic technical analysis, Monte Carlo, Risk Metric analysis fail to track asset prices .
He Trained thousands Taiwan, Tsinghua, Tunghai, Peking, Tsinghua, Fudan, Zechiang,
University students, apply his Ph.D thesis Moon-landing guidance and control to challenge
the unknown future in thousands structural dynamic models development, implementation.
20 years information knowledge base, He patented “ Improve Process by OSA” in US and 82
countries, 1980, published thousands articles 100 million copies on Taiwan and China
government, banking, finance, investment daily news papers, and on his patented Proactive
structural oil price on US Oil & Gas Journal predicted global oil, gas, currency, interest, stock
futures prices since 1980
He lectured China, Taiwan, US 15 cities ( Beijing, Shanghai, Taipei, San Francisco Silicon
Valley) TV, radio , OPEC petroleum ministers, executives China/global strategic investment
risk management workshops to 30 million investors, banking finance executives.
He predicted years/month ahead of Asian Financial crisis 1997, US asset bubble burst 2000
and current China/US rate hikes, 2006 oil price from 55 to 78, gas 9- 16 and record
commodities prices on China CEO workshops and his www.osawh.com website (visited
by 4 million global central banks, banking, finance, corporate executives, universities.
What, Why, How, and Timing of Proactive Structural
Dynamic Asset Prices and Corporate Governance OSA
 Huang gave up current statistical, Monte Carlo CAPM
approach 30 years ago, pioneered Proactive structural
dynamic asset price OSA ( Operations Simulation Analysis)
through two master hands controlling global economy and
asset prices, patented 1983 in US, predicted months ahead
last 20 years macro-economic control impact on daily asset
prices and associated cost, financial, derivatives
accounting, stock prices, tracking, identify month ahead
accounting statements, derivatives, investment banking
speculation scandals replacing current reactive statistical
CAPM models which fail to predict the dynamic impact on
asset prices and scandals
Zhang completed New generation CPA/CFA/CFO decision
analysis training: decisions supported Corporate Governance
auditing team and business process units OSA integration
 Corporate government OSA teams integrate internal auditing
and core business units
Internal auditing
scandals, risks control
CG committee
CPA financial,
derivatives
accounting
Core investment, marketing,
supply chain financial
accounting report to CFO
CFA equities,
investment
banking
Proactive structural dynamic equities, bond, commodities,
financial futures prices and financial, derivatives
accounting, tracking, scandals, risks early warning
Corporate scandals cycle and economic, capital
markets, asset bubble boom/bust cycles
 Banking, Finance, Energy, IT corporate scandals cycles
coincide with the boom and bust of capital markets (stock
indices), its associated boom and bust of industrial
(housing, energy, IT) asset prices bubble cycles
Macroeconomic control
impact on stock indices
Boom and Bust cycle
Industrial demand,
asset prices
boom and bust cycle
Cost, financial, derivatives accounting,
tracking, restatement (inflated earning,
sales loss) scandal cycles
Country Risks Macro-economic control
OSA :Monetary, Economic, fiscal policy,
WTO impact on inflation, GDP growth
 Excessive money supply, DFI resulted soaring commodity, asset prices
and falling US dollar push inflation and GDP higher
export
Consumer demand
Monetary policy
Foreign direct investment
Macro-economic inflation
and GDP growth
currency
Business demand
Fixed
investment
Commodity prices
Energy asset bubble
scandals (Enron, China aviati
Proactive investment banking: Economic, Banking, Finance,
Enterprises reform, privatization MBO and IPO Prices OSA
 Privatization, board members organization, debt restructuring.
 Maximize corporate/plant wide cost, financial accounting tracking,
operating profit margin through cost reduction and products, market
innovation develop, implemented by goal, mission, performance
oriented strategic (top management), and executive Operations
Simulation Analysis teams maximize China, US oil, gas corporate
performances and IPO stock prices in
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MBO/IPO prices =F (listed market investor sentiment,
and corporate profit margin)
= F (Shanghai/Shenzhen index, corporate profit margin)
China oil/gas ADR shares prices ( SINOPEC, PetroChina, CNOOC
IPO other market prices =F (China market investor sentiment, US
market investor sentiment, and corporate profit margin)
= F ( Dow Jones index, Shanghai/Shenzhen index, corporate profit
margin)
Housing Prices Bubble, Interest Rates Derivatives Mechanism,
Scandal Cycles OSA
 Housing, properties prices bubbles are fueled by low
interest credit money supply, stock markets wealth gain
which induce greedy corporate scandals
Money supply growth
Housing, Land, Stock prices
bubbles, wealth gain OSA
Low mortgage interest
Mortgage Securitization
Credit derivatives
Housing, mortgage
Derivatives corporate
scandals
US Fannie Mae,
Taiwan Land dev
Shanghai city scandals
Stock market wealth
stock indices gain
Oil, Energy , Derivatives Prices Bubbles and
Scandals Cycles Mechanism OSA
 Excessive money supply, rate , tax cuts and cold weather
stimulate excessive consumer, business demand for oil,
gas, fuel demand, Derivatives Prices bubbles which induce
greedy corporate scandals
Excessive money
supply
Excessive rate
tax cuts
Extreme cold
weather
Consumer
Gasoline demand,
price
Business, Factory
Fuel
Demand
Home heating
oil demand
Crude oil, gas,
gasoline, heating oil
Futures, stock prices
bubbles
Black-Schole
call/put option
price
Oil, gas, energy
derivatives trading loss
and scandals
Enron,China Aviation Oil
IT Demand, Expansion Bubbles and
Scandals Mechanism OSA
 IT, communication downstream demand bubbles are fueled
by low interest credit money supply, stock markets wealth
gain which induce greedy corporate merger/acquisition
inflate sales, earning speculate stock prices scandals
Excess money supply
Excessive consumer
demand
Excessive rate,
tax cuts
Excessive business
demand
Equities wealth gain
Technical, market
Competition
Soaring demand for
IT upstream/downstream
products and stock price
Inflate sale, earning to speculate
stock prices
Behavior Finance
soaring investor sentiment pushing stock
WCOM, Apple, UMC
index new high
Proactive Strategic Investment Banking for Corporate
M/A Scandals Early Warning OSA
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Cut pre-merger, joint venture costs by 50 % in pre-merger speculation and
scandals in early warning Stock prices plunged more than 50-90 % gained in
pre-merger speculation. Post merger integration , profit creation performances,
Pre-merger goal
setting, target
margin analysis
Pre-merger financial
accounting OSA
Investors sentiment
stock index
Pre-merger target
profit margin stock prices
performances
Post merger integration
strategy, financial accounting
profit margin, stock price
performance
Cost, Financial accounting tracking
scandals early warning
Proactive Market Risks OSA: Global/China Stock indices
futures, derivatives price bubbles and trading volume ,
corporate scandal cycles early warning
 www.osawh.com/prod03.html tracking 40 stock indices
derivatives prices , from excessive money supply, lower
interest rates, strong currency, hot money inflow, investor
sentiments (trading volume) and scandals cycle
Excessive money
supply
Excessive rate,
tax cuts
Strong currency
induced FDI
Consumer demand
Shanghai-Shenzhen Index, Dow Jones,
Nikkei, Hang Seng Taiwan Dax, LFT 40
stock indices future prices , trading volume
investors sentiment OSA
Black-Schole or OSA call/put
option price OSA
Business demand
Dow Jones index
investor
sentiment
Corporate scandals cycle follow
stock indices boom and bust
Barring brother speculate on Nikkei
option loss, Guanxia on China A
index, Fannie Mae on Dow peak
China Trust on Taiwan index peak
Proactive Inflation, Interest rate, Derivatives Price Risks,
Bond yield simulation, scandals cycle early warning
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Soaring asset, commodity prices, falling currency excessive money
supply led to continued China/US inflation, credit tightening led to rising
interest rates and bond yields, betting on the wrong direction of interest
rate as central bank stop rate hikes, resulted scandals Fannie Mae, Freddie
Mae in hiding billion dollar interest rate derivatives loss.
Excessive money
supply
Excess consumer,
business demand
resulted inflation
Excessive rate
tax cuts
Stocks, housing
wealth bubbles
Soaring oil,
commodity prices
Rate hikes, credit
tightening, followed by
rate cuts
Black-Schole or OSA
derivatives calculation
Betting on the wrong
direction of interest
rates scandals
Fannie, Freddie Mae
Behavior finance
soaring housing ,
stock price bubble
Daily Dow Jones Index Future Simulation
Daily Hang Seng index future OSA
Hong Kong
money
supply
growth
Yen
Conclusions, Recommendation
 Huang’s proactive OSA simulators predicted 6 month ahead
in last 20 years global/China monetary, economic, fiscal
policy, WTO impact on macro-economic, capital market
assets, derivatives prices, financial crisis, credit, market,
operational risks and corporate scandals cycles
 Zhang’s experience in integrating these simulators into new
generation CPA/CFA/CFO training tracking ahead the
corporate scandal will be valuable to banking, finance,
enterprise corporate governance internal auditing control
and government oversight board, securities, banking,
insurance regulation, supervision decision tools, to avoid
current reactive statistical asset prices resulted trillion
dollar loss and billion dollar share holder interest damages.