Constructing synthetic swaps, Financial Management

Assignment Help:

(a) Prior to FAS 133 if companies qualified for hedge accounting their hedges were assumed to be perfect-no valuation or testing required. Currently under FAS 133 risk managers seeking hedge accounting treatment have to thoroughly document every hedge from the outset and explain why they are undertaking the transaction. They have to spot their derivatives to market every quarter no small feat for many instruments afterwards prove they are effectively hedging the underlying exposure.

It's this logic of having to pay for the sins of others that accounts for the deep resentment toward FAS 133. Several finance executives suspect the new rules have less to do with improving financial statements than with discouraging treasury departments from speculating with derivatives.

(b) Constructing synthetic swaps will engage replication of a swap by portfolios of bonds. These do not come under the considerations of FAS 133.


Related Discussions:- Constructing synthetic swaps

Describe the main elements of working capital management, Question: (a)...

Question: (a) Describe the main elements of Working capital management? (b) Belle Rive Ltd Belle Rive Ltd has an annual turnover of Rs 60 million of which 80% is on cr

Takeover risk, If the issuer company is taken over, then the bondhold...

If the issuer company is taken over, then the bondholders are likely to suffer. It is due to lowering of the stock prices in the market as a post takeover effect.

Shoppers stop, how are indian customers visiting shoppers stop

how are indian customers visiting shoppers stop

Explain the term - timing of benefits, Explain the term - Timing of Benefit...

Explain the term - Timing of Benefits A more significant technical objection to profit maximisation, as a guide to financial decision making, is that it ignores the differen

Multi-period compounding or else future value, Multi-period Compounding or ...

Multi-period Compounding or else Future Value :- If the company determination compounding interest half-yearly (semi-annually) instead of annually then investors will gain as he wi

Clemson software, Clemson Software is considering a latest project whose da...

Clemson Software is considering a latest project whose data are given below.  The needed equipment has a 3-year tax life, after which it will be worthless,and it will be depreciate

Irregular variation in time series analysis, Irregular Variation As the...

Irregular Variation As the name suggests, the movement of the variable is random in nature without consistency and therefore, highly unpredictable. Since this type of irregular

Define the basic motivations for a counterparty, Define the basic motivatio...

Define the basic motivations for a counterparty to enter into a currency swap.  Answer:  One major reason for a counterparty to enter into a currency swap is to exploit the comp

Introduction to mortgage-backed securities, A mortgage may be defined as a ...

A mortgage may be defined as a pledge of property to secure payment of a debt. Depending upon the terms of mortgage agreed upon between the lender and the borrower, mor

Explain do mergers result in layoffs, Do mergers result in layoffs? Whole...

Do mergers result in layoffs? Whole employment in the banking industry in fact has increased slightly over the last ten years. A few mergers do result in layoffs. Though, many ba

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd