Kawaller & Company http://kawaller.com Managing Risk Through Derivatives Tue, 14 Apr 2015 17:41:08 +0000 en-US hourly 1 Tactical Considerations of Hedging Currency Exposures http://kawaller.com/tactical-considerations-of-hedging-currency-exposures/ http://kawaller.com/tactical-considerations-of-hedging-currency-exposures/#comments Mon, 13 Apr 2015 19:29:07 +0000 http://kawaller.com/?p=1623 Key Insights Traders may offer valuable lessons to hedgers. Hedgers should consider a hedging process that requires terminating losing hedges before their natural termination dates. If an organization understands the nature of its exposures and their hedges, outcomes should be … Continue reading

The post Tactical Considerations of Hedging Currency Exposures appeared first on Kawaller & Company.

]]>
http://kawaller.com/tactical-considerations-of-hedging-currency-exposures/feed/ 0
Accounting for Commodity Hedges: Hypothetically Speaking http://kawaller.com/accounting-commodity-hedges-hypothetically-speaking/ http://kawaller.com/accounting-commodity-hedges-hypothetically-speaking/#comments Wed, 25 Mar 2015 21:03:38 +0000 http://kawaller.com/?p=1612 American companies that hedge commodity purchases and sales almost always suffer from basis risk—the risk that changes in cash prices paid or received for commodities being hedged will differ from the price changes that underlie hedging derivatives. This risk arises … Continue reading

The post Accounting for Commodity Hedges: Hypothetically Speaking appeared first on Kawaller & Company.

]]>
http://kawaller.com/accounting-commodity-hedges-hypothetically-speaking/feed/ 0
Comparing Hedge Accounting Under GAAP and IFRS 9 http://kawaller.com/comparing-hedge-accounting-gaap-ifrs-9/ http://kawaller.com/comparing-hedge-accounting-gaap-ifrs-9/#comments Mon, 23 Feb 2015 21:51:15 +0000 http://kawaller.com/?p=1604 Key Insights IFRS 9 is more compact and offers less prescriptive guidance than U.S. GAAP. IFRS 9 is more liberal than U.S. GAAP in allowing for component hedging in the commodity sector and in the elimination of retrospective effectiveness testing. … Continue reading

The post Comparing Hedge Accounting Under GAAP and IFRS 9 appeared first on Kawaller & Company.

]]>
http://kawaller.com/comparing-hedge-accounting-gaap-ifrs-9/feed/ 0
Evolution of Over-the-Counter Derivatives and Associated Accounting Concerns http://kawaller.com/evolution-counter-derivatives-associated-accounting-concerns/ http://kawaller.com/evolution-counter-derivatives-associated-accounting-concerns/#comments Mon, 26 Jan 2015 20:09:06 +0000 http://kawaller.com/?p=1595 Sometimes it takes a while for accounting guidance to catch up with financial innovations. A case in point arises in connection with the implementation of Dodd-Frank and the expansion of trading of over-the -counter (OTC) derivatives on swap execution facilities … Continue reading

The post Evolution of Over-the-Counter Derivatives and Associated Accounting Concerns appeared first on Kawaller & Company.

]]>
http://kawaller.com/evolution-counter-derivatives-associated-accounting-concerns/feed/ 0
Caps: Challenging the Conventional Wisdom that Caps are Too Expensive http://kawaller.com/caps-challenging-conventional-wisdom-caps-expensive/ http://kawaller.com/caps-challenging-conventional-wisdom-caps-expensive/#comments Sat, 01 Nov 2014 18:02:43 +0000 http://kawaller.com/?p=1581 In my last Risk Column in the July/August issue of Exchange, “Comparing Apples and Oranges (and Pears),” I presented a methodology for comparing swaps, caps, and swaptions for companies interested in hedging their exposure to variable interest rates on their … Continue reading

The post Caps: Challenging the Conventional Wisdom that Caps are Too Expensive appeared first on Kawaller & Company.

]]>
http://kawaller.com/caps-challenging-conventional-wisdom-caps-expensive/feed/ 0
Hedging Bank Portfolios: Framing the Issue http://kawaller.com/hedging-bank-portfolios-framing-issue/ http://kawaller.com/hedging-bank-portfolios-framing-issue/#comments Wed, 17 Sep 2014 21:24:47 +0000 http://kawaller.com/?p=1570 Conceptually, hedging a bank’s balance sheet from the ef- fects of interest rate changes is pretty straightforward. We can think about addressing this concern in one of two ways: either we can assess the duration or interest rate sensitivity of … Continue reading

The post Hedging Bank Portfolios: Framing the Issue appeared first on Kawaller & Company.

]]>
http://kawaller.com/hedging-bank-portfolios-framing-issue/feed/ 0
Comparing Apples and Oranges (and Pears) http://kawaller.com/comparing-apples-oranges-pears/ http://kawaller.com/comparing-apples-oranges-pears/#comments Mon, 25 Aug 2014 19:09:39 +0000 http://kawaller.com/?p=1559 “By hedging now, companies are assured of protection if rates spike sooner than widely expected, while bearing only minimal cost.” Given the pace of the U.S. economic recovery and the Fed Reserve’s stance relating to maintaining low interest rates for … Continue reading

The post Comparing Apples and Oranges (and Pears) appeared first on Kawaller & Company.

]]>
http://kawaller.com/comparing-apples-oranges-pears/feed/ 0
Hedging Cross-Border Balance Sheet Exposures http://kawaller.com/hedging-cross-border-balance-sheet-exposures/ http://kawaller.com/hedging-cross-border-balance-sheet-exposures/#comments Wed, 16 Apr 2014 22:27:07 +0000 http://kawaller.com/?p=1546 Entities that operate across borders undoubtedly appreciate that changing exchange rates will impact earnings—sometimes for better and sometimes for worse. Of course, these effects can generally be hedged, but not without appreciating an inherent tradeoff: Protecting the firm from currency … Continue reading

The post Hedging Cross-Border Balance Sheet Exposures appeared first on Kawaller & Company.

]]>
http://kawaller.com/hedging-cross-border-balance-sheet-exposures/feed/ 0
Pros and Cons of Hedging Book Values http://kawaller.com/bank-assetliability-management-pros-cons-hedging-book-values/ http://kawaller.com/bank-assetliability-management-pros-cons-hedging-book-values/#comments Mon, 20 Jan 2014 08:19:30 +0000 http://kawaller.com/?p=1474 Assuming the traditional bank structure of longer-term assets funded by shorter-term liabilities, it is generally well understood that the same pay-fixed/receive-floating interest rate swap could be thought of as a hedge of the fixed rate asset or a hedge of … Continue reading

The post Pros and Cons of Hedging Book Values appeared first on Kawaller & Company.

]]>
http://kawaller.com/bank-assetliability-management-pros-cons-hedging-book-values/feed/ 0
Managing Risk: Where to start http://kawaller.com/managing-risk-start/ http://kawaller.com/managing-risk-start/#comments Tue, 19 Nov 2013 13:49:38 +0000 http://kawaller.com/?p=1469 All commercial enterprises face risk – of myriad types. In fact, the term “enterprise risk” has become a catch-all to cover this wide range, encompassing everything from, legal risk, reputational risk, operational risk, political risk, etc., etc., etc. And while … Continue reading

The post Managing Risk: Where to start appeared first on Kawaller & Company.

]]>
http://kawaller.com/managing-risk-start/feed/ 0