BBSA Research Projects (2017)

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    Pricing of climate change catastrophe bonds in Kenya
    (Strathmore University, 2018) Kung'u, Rahab Wambui
    Catastrophe bonds have become popular with insurance companies, world over, since their invention in 1996 because of their ability to hedge the insurer against catastrophic risks. With increasing cost and burden on the public budget due to catastrophic disasters in developing countries, a government issued catastrophe bond can be suggested as a timely solution (Mahul & Cummins 2008). Since the financial impact of drought in Kenya has been regarded as catastrophic over the years, this research sought to find out what the price of a drought linked zero coupon CAT bond issued by the Kenyan government would be. Single trigger zero coupon catastrophe bonds launched on 1st August 2017 and set to have varying maturities of 91 days, 182 days and one year were priced under various contract terms. The underlying trigger chosen was drought, which was defined as rainfall amounts falling below the long term average of 47.90 millimeters.
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    Why Trustees Shy Away From Investing in Riskier Asset Classes: The Kenyan Case
    (Strathmore University, 2017) Kireru, Petronillah Wangechi
    This paper seeks to examine the influence of trustees on the choice of investment classes, for the Kenyan case. We ask how trustees make decisions in investing in two classes allowed by the Retirement Benefits Act (2014) of Kenya which are considered relatively riskier: Private equity and Real Estate: and control for personal investment behavioral biases. We perform a logit regression against factors which include: How long one has been a trustee, size of the fund, level of knowledge on what private equity is, their perception on the riskiness of private equity and demographic factors. We find that trustees mainly are hesitant to invest in these risky assets mainly due to the pension fund characteristics, which do not allow them to invest in the risky assets. Moreover, trustees carry their personal risk characteristics while investing the pension fund assets, and thus influence decisions made on the board. We found that most trustees are risk averse, and consequently avoid investing the funds ' assets in ventures that the return is not certain.
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    Viability of home equity conversion mortgage in Kenya
    (Strathmore University, 2017) Okoth, Mollette Achieng
    Housing wealth as a source of retiree income is normally neglected. This form of wealth could have an incremental value on the homeowner's retirement income if they could be able to leverage this ownership as collateral for capital. Releasing home equity may result in a marked increase in consumption, a drop in public pension liability and access to long-term care facilities. This may also ease the tax burden imposed by the increasing population ageing on the traditional state-funded retirement provisions.
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    Valuing inpatient cover as a put option
    (Strathmore University, 2017) Ai-Raidy, Mohamed Abubakar
    Kenya has witnessed a steep rise in the cost of healthcare since January 2008 (Nduati, 201O) says Mr. Peter Nduati, the chief executive officer of Resolution Health East Africa, a medical insurance provider. The cost of healthcare in the country has been increasing by 10 to 20 per cent annually in the last 10 years, as per the research by Smart Company. Over the period, the consultancy fee in various hospitals has risen from Sh800 to Sh2, 000, which is a 150 per cent increase. The cost of simple painkillers have gone up by up to 28 per cent as of recently. In the three years preceding. September 2010, medical costs in Kenya were reported to have risen by an average of20% per annum, more than any other country on the continent. This was largely attributed to the steep rise in doctor's fees, thanks to the collapse of the pricing guidelines fronted by the Medical Practitioners and Dentists Board. Consultation fees for general practitioners tripled within the same period while specialists such as gynecologists and oncologists were charging up to Ksh. 10,000 before diagnosis (Yumbya, 2010). For a country grappling with high inflation and perennial increase in prices of medicines, the need for health insurance needs little emphasis. (Liss, 2014)
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    The influence of peers on investment decisions: the case of university undergraduates in Kenya
    (Strathmore University, 2017) Mwenda, Gloria Mukami
    People's choices often look like the choices made by those around them. Such peer effects have been analyzed across different fields. These have been motivated by concerns of herding and financial l market instability which are all factors under the field of behavioral finance studies. This study is aimed at seeking to test how undergraduate students in Kenya make their investment decisions. It will thus be worth establishing whether the investors' decisions vary with each respondent's source of investment inform at ion. The study then focuses on the factor of peer influences the investment decision making of the sampled demographic In this study 206 individuals from three leading universities of Kenya completed questionnaires which were meant to determine the existence of their influences by their peers while making their investment decision. The study used a multinomial regression analysis using the latest SPSS Software. The study finds out that indeed it is likely for university undergraduate students in Kenya to face influences by their peers when making investments. This information can be used further to inform the effectiveness of NSE and CME campaign on improving investment behavior and decisions making process among the young investors from the sampled demographics.