Policy Framework for Regulation of Financial Instruments An Analysis with Special Emphasis to Financial Derivatives

2017 ◽  
Author(s):  
John Varghese
Keyword(s):  
Financial Derivatives ◽  
Policy Framework ◽  
Financial Instruments

scholarly journals Risk management of derivative financial instruments

2021 ◽  
pp. 89-98
Author(s):  
Oksana Kirillova ◽  
Ellina Emelyanova
Keyword(s):  
Risk Management ◽  
Financial Derivatives ◽  
Financial Instruments ◽  
Financial Instrument ◽  
Russian Market ◽  
Advantages And Disadvantages ◽  
The Subject ◽  
Faster Development

The subject of the study is derivative financial instruments. At the beginning of the article, the concept of a derivative financial instrument (PFI) is considered, their advantages and disadvantages are given, after which the risks of operations carried out with PFI are formulated. Further, the article discusses the main problems inherent in the PFI market and suggests a number of measures to solve these problems. In conclusion, recommendations are made that will allow for faster development of the Russian market of financial derivatives.

scholarly journals Financial Derivatives, Hedge Accounting and Tax Aggressiveness in Brazil

2020 ◽  
Vol 15 (29) ◽  
pp. 19-39
Author(s):  
Antonio Lopo Martinez ◽  
José Enrique Teixeira Reinoso ◽  
Rafael Moreira Antonio ◽  
Rogiene Santos
Keyword(s):  
First Generation ◽  
Economic Incentives ◽  
Financial Derivatives ◽  
Financial Instruments ◽  
Tax Aggressiveness ◽  
Tax Legislation ◽  
Hedge Accounting ◽  
Derivative Instruments ◽  
The Relationship ◽  
A Company

This study investigated the relationship between the use of financial derivatives by non-financial corporations and tax aggressiveness in Brazil. In research on the American market, evidence was identified that non-financial entity users of financial derivatives were more tax aggressive. However, there is no reason to assume that this behavior is replicated in the Brazilian market, since tax legislation does not offer the same economic incentives, i.e., since it imposes limits on the tax deductibility of losses with these financial instruments, except in derivatives’ well-documented and proven use as a hedge tool. To verify this point, companies were classified into users and non-users of first-generation financial derivatives, and associated this classification with tax aggression metrics. The study focus was 384 non-financial companies listed on the B3 in the period from 2005 to 2015. The results of regression analysis using a probit estimate have pointed, in a distinctly different way than the American reality, that the most tax aggressive companies tend to use fewer financial derivatives. Nevertheless, when the use of derivative instruments as a hedge was controlled, it was found that when a company adopts hedge accounting, it is more likely it will be more tax aggressive. The result is presumably explained by the Brazilian tax treatment that authorizes the deductibility of losses, regardless of earnings, when using the derivative as a hedge.

6 The Revision of the Credit Derivative Definitions in the Context of the Bank Recovery and Resolution Directive

2016 ◽  
Author(s):  
Grieser Simon ◽  
Mecklenburg Christian
Keyword(s):  
Financial Crisis ◽  
Credit Derivatives ◽  
Reference Value ◽  
Financial Derivatives ◽  
Third Party ◽  
Financial Instruments ◽  
Credit Derivative ◽  
The Eu ◽  
Future Exchange

This chapter examines the adaptation of the International Swaps and Derivatives Association (ISDA) framework by means of the 2014 ISDA Credit Derivatives Definitions (2014 Definitions) in addressing how the EU Bank Recovery and Resolution Directive (BRRD) affects credit derivatives. Particularly, it analyses how the institution or obligation to which the credit derivative is referenced becomes subject to the measures. Financial derivatives are financial instruments which provide for an immediate or future exchange of a reference value. Its price inter alia derives from the underlying reference value. Credit Derivatives help transferring the risk of a referenced third party defaulting on its obligation from the buyer to the seller of the Credit Derivative. The chapter explores the documentation of Credit Derivatives and the adjustments made during the financial crisis. It concludes with an analysis of the BRRD from a Credit Derivatives’ perspective and illustrates experiences made during the financial crisis.

Methodological approaches to accounting for financial instruments: Current issues and advisable solutions

2020 ◽  
Vol 23 (6) ◽  
pp. 604-626
Author(s):  
T.Yu. Druzhilovskaya ◽  
N.A. Dobrolyubov
Keyword(s):  
Critical Analysis ◽  
Scientific Literature ◽  
Accounting Standards ◽  
Financial Derivatives ◽  
Regulatory Framework ◽  
International Standards ◽  
Financial Accounting ◽  
Financial Assets ◽  
Financial Instruments ◽  
Methodological Approaches

Subject. The article discusses the way financial instruments are accounted for, and related issues. Objectives. We outline our recommendations to address problems concerning the financial instruments accounting technique. Methods. The study involves a critical analysis, synthesis, comparison, observation, analogies. Results. We prove the inadequacy of the regulatory framework for accounting for financial instruments of the Russian non-credit institutions. As discussed in the scientific literature on accounting for financial instruments, advisable methodological approaches were found to vary significantly. We justify our recommendations on addressing challenging issues of accounting for non-derivative and derivative financial instruments and provide our suggestions on accounting for financial assets qualified as cash equivalents, advice on separate accounting and recognition of financial liabilities, recognition of financial derivatives in accounts. Conclusions and Relevance. Currently, Russia's regulations govern only some issues of accounting for financial instruments. There are plenty of accounting aspects concerning derivative and non-derivative financial instruments that remain unregulated. As proposed in the scientific literature on accounting for financial instruments, methodological approaches significantly differ. International standards do not exhaustively govern complicated issues of accounting for financial instruments. Thus, research on accounting for financial instruments should continue. It is important to promote the regulatory framework for financial instruments accounting as long as a set of the Russian accounting standards are revised. The findings are of applied and theoretical nature for financial accounting.

scholarly journals Evaluation of derivatives impact to early systemic risk of Euro area

2020 ◽  
Vol 4 (1) ◽  
pp. 62-71
Author(s):  
Rima Žitkienė ◽  
Valdas Grigonis ◽  
Pavlo Burak
Keyword(s):  
Regression Analysis ◽  
Euro Area ◽  
Systemic Risk ◽  
Linear Regression Analysis ◽  
Financial System ◽  
Financial Derivatives ◽  
Size Factor ◽  
Financial Instruments ◽  
Systemic Crisis ◽  
The Impact

Introduction. Evaluation of systemic risk is very complicated, as it is difficult to accurately predict the extent of the links between various institutions, and the possible spread and scale of the country's systemic risk. In addition, the country's systemic crisis is affected by many factors, many elements of the financial system. Financial derivatives are one of many elements of financial system, and the market of financial derivatives is huge compared to other financial instruments. The impact of financial derivatives to economies of various countries has been widely studied, however, the research on their impact to countries‘ early systemic risk remains under-researched. For this reason, assessment of the impact of derivative financial instruments on the early systemic risk is very relevant. Aim and tasks. The purpose of the article is to assess the impact of financial derivatives on the country's early systemic risk in the Euro area region. Results. It is shown that correlation fluctuates between weak-strong level, when analyzing relationship between various factors of financial derivatives and early systemic risk in the Euro area. Results of linear regression analysis prove that the group of financial derivatives independent variables (interconnection, size, liquidity, complexity, stability, leverage) can be used to reliably estimate the dependent variable (early systemic risk). Logistic regression analysis also provides similar results to the linear regression analysis. Additionally, it is shown, that logistic regression is more suitable to analyze impact on early systemic risk. Analysis of impact of individual financial derivatives factors to early systemic risk demonstrate, that three financial derivatives factors – size, complexity, and leverage – may be the best predictors of an impending systemic crisis. Among these factors, the size factor has the largest impact on early systemic risk of the Euro area, and complexity factor shows improved statistical parameters, which indicates, that this parameter is more suitable to be used in early warning system models. Conclusions. The use of financial derivatives has strong impact on early systemic risk in the Euro area. The size factor of financial derivatives indicates the highest probability of an impending systemic crisis. Nevertheless, complexity factor of financial derivatives is the only statistically significant factor, that has an impact on early systemic risk. The results suggest that the inclusion of these factors in the systemic risk assessment models, which are developed by researchers, could increase the accuracy of the models. It is noted, that country’s systemic risk may not necessarily arise in financial derivatives, because there are many different financial products in the financial system. As a result, other financial instruments could also be the subject to further research by scientists. The inclusion of factors of various financial instruments could help to better identify the risks of impeding systemic crisis in systemic risk assessment models.

scholarly journals Edward LiPuma and Benjamin Lee. Financial Derivatives and the Globalization of Risk. Durham and London: Duke University Press, 2004 (224 pp. + xi)

2006 ◽  
Vol 48 (1) ◽  
pp. 237-237
Author(s):  
Bill Maurer
Keyword(s):  
Systemic Risk ◽  
Financial Derivatives ◽  
Financial Globalization ◽  
Financial Instruments ◽  
Global Capital ◽  
Public Consciousness ◽  
Duke University

This book is a primer on financial globalization, specifically the emergence and operation of a particular set of complicated financial instruments that the authors see as signaling a far-reaching transformation of the domain conventionally referred to as “the economy:” derivatives. While derivatives have sometimes entered into public consciousness due to scandal, crises, and crime, the authors use derivatives as a window into the new everyday operations of global capital and the new normalcy of “systemic risk”—the risk that the entire international financial and banking architecture may implode.

RISK MANAGEMENT OF FINANCIAL DERIVATIVES

2004 ◽  
Vol 10 (3-4) ◽  
pp. 107-126
Author(s):  
Elvis Mujacevic ◽  
Vanja Ivanovic
Keyword(s):  
Risk Management ◽  
Financial Markets ◽  
Balance Sheet ◽  
Cash Flows ◽  
Financial Derivatives ◽  
Management Systems ◽  
Financial Instruments ◽  
Factors Associated ◽  
For Profit ◽  
And Control

Financial derivatives come in many shapes and forms, including futures, forwards, swaps, options, structured debt obligations and deposits, and various combinations thereof. Some are traded on organized exchanges, whereas others are privately negotiated transactions. Derivatives have become an integral part of the financial markets because they can serve several economic functions. Derivatives can be used to reduce business risks, expand product offerings to customers, trade for profit, manage capital and funding costs, and alter the risk-reward profile of a particular item or an entire balance sheet. Although derivatives are legitimate and valuable tools for banks and corporations, like all financial instruments they contain risks that must be managed. Managing these risks should not be considered unique or singular. Risks associated with derivatives are not new or exotic. They are basically the same as those faced in traditional activities (e.g., price, interest rate, liquidity, credit risk). Fundamentally, the risk of derivatives (as of all financial instruments) is a function of the timing and variability of cash flows. It is very important to understand the various risk factors associated with business activities and to establish appropriate risk management systems to identify, measure, monitor, and control exposure and risk associated with derivatives.

scholarly journals DEVELOPMENT OF DERIVATIVE MARKET IN 2000-2012

2014 ◽  
pp. 88-95
Author(s):  
E. V. Vasina
Keyword(s):  
Interest Rates ◽  
World Trade ◽  
World Market ◽  
Financial Derivatives ◽  
Market Segment ◽  
Financial Instruments ◽  
Otc Derivatives ◽  
The World ◽  
Derivative Market ◽  
Xix Century

At the end of XIX century futures exchange emerged, in the early 70-ies XX century - option exchange of financial derivatives. These exchanges gave a huge boost to the development of market of the operations with derivative financial instruments. In fact, in the 1970-1980-ies a new market segment was actually formed - the stock and financial derivatives. Trade in financial derivatives began in the OTC market, which accounts for most of the trade of derivatives. Today volumes of the OTC market of derivatives are several times greater than the volume of world trade and world GDP. From 2000 to 2007 derivative OTC market grew rapidly. In 2007-2008 there is a decline in trade of derivatives, but already in 2009 the world market of OTC derivatives returned to pre-crisis growth rates. Among all the instruments of the OTC market of derivatives swaps on interest rates stand out in the volumes, which even in the crisis of2007-2008 slightly, but increased. Analysis of indicators of the global OTC market of derivatives reveals the predominance of instruments on interest rates: their share in the total world market in 2012 amounted to about 77%. If we consider the structure of the OTC market of derivatives on type contracts, in 2012 most of the contracts (66%) belonged to the swaps. As regards the structure of the world market of exchange derivatives, in 2012 the options had the largest share - 54 %, futures accounted for 46 %. Among all the exchange instruments on interest rates held 92%.

scholarly journals A Survey on Accounting for Derivatives and Other Financial Instruments

1970 ◽  
Vol 15 (2) ◽  
pp. 131-147
Author(s):  
Alan Reinstein ◽  
Gerald Lander
Keyword(s):  
Financial Statements ◽  
Fair Value ◽  
Financial Derivatives ◽  
Securities And Exchange Commission ◽  
Financial Accounting ◽  
Financial Instruments ◽  
Financial Accounting Standards Board ◽  
Derivative Instruments ◽  
Gains And Losses ◽  
Financial Securities

In response to the recent growth in the use of derivative financial instruments, the Financial Accounting Standards Board (FASB) recently required all companies to make certain classifications and disclosures for such "complex" financial instruments. Yet, the Securities and Exchange Commission (SEC) and the FASB now demand even further reporting requirements - including requiring companies to recognize the "fair value" (and resultant gains and losses) of their financial derivatives as well as make other "qualitative disclosures" of the potential risk of holding such financial securities. The provisions of the current and proposed standards will affect significantly virtually all types of companies, especially those using derivative instruments. Hence, those preparing and evaluating financial statements under this emerging set of standards must comprehend these new provisions. The paper first discusses the current standards relating to financial derivatives and other financial instruments; it then provides examples of "leading" disclosures of such financial instruments. Then, based upon the responses to a mail questionnaire, the paper discusses how key groups view potential SEC changes in accounting for derivatives. All four of the groups generally agree with the provisions of SFAS No. 119 and most favor the recently passed, increased reporting standards.

Sign in / Sign up

Export Citation Format

Share Document