Use of Derivatives as Hedging Instruments and Application of Hedge Accounting : Effects on Income Volatility

2019 ◽  
Vol 44 (2) ◽  
pp. 1-38
Author(s):  
Hyun-Young Park ◽  
Ho-Young Lee
Keyword(s):  
Income Volatility ◽  
Hedge Accounting

Risk-Relevance of Fair-Value Income Measures for Commercial Banks

2006 ◽  
Vol 81 (2) ◽  
pp. 337-375 ◽  
Author(s):  
Leslie D. Hodder ◽  
Patrick E. Hopkins ◽  
James M. Wahlen
Keyword(s):  
Standard Deviation ◽  
Stock Returns ◽  
Commercial Banks ◽  
Fair Value ◽  
Net Income ◽  
Income Volatility ◽  
Expected Return ◽  
Market Pricing ◽  
Share Prices ◽  
Comprehensive Income

We investigate the risk relevance of the standard deviation of three performance measures: net income, comprehensive income, and a constructed measure of full-fair-value income for a sample of 202 U.S. commercial banks from 1996 to 2004. We find that, for the average sample bank, the volatility of full-fair-value income is more than three times that of comprehensive income and more than five times that of net income. We find that the incremental volatility in full-fair-value income (beyond the volatility of net income and comprehensive income) is positively related to marketmodel beta, the standard deviation in stock returns, and long-term interest-rate beta. Further, we predict and find that the incremental volatility in full-fair-value income (1) negatively moderates the relation between abnormal earnings and banks' share prices and (2) positively affects the expected return implicit in bank share prices. Our findings suggest full-fair-value income volatility reflects elements of risk that are not captured by volatility in net income or comprehensive income, and relates more closely to capital-market pricing of that risk than either net-income volatility or comprehensiveincome volatility.

Towards Employment Insurance?

2017 ◽  
Author(s):  
Günther Schmid
Keyword(s):  
Life Course ◽  
Social Insurance ◽  
Market Work ◽  
Income Volatility ◽  
Family Work ◽  
Life Course Transitions ◽  
Social Risks ◽  
Employment Insurance ◽  
Labour Division ◽  
The Life Course

New social risks have arisen due to the deepening of global labour division and the invasion of digital technologies into the production of goods and the delivery of services, but also due to changing preferences and individual work capacities over the life course. As these risks are not only connected with unemployment but also with income volatility due to critical life-course transitions (in particular, between family work and labour-market work, lifelong learning and employment), the need to extend unemployment insurance (UI) towards a system of employment insurance becomes evident. This argument is developed by focusing on the investment character of social insurance against the mainstream view of moral hazard related to any insurance, and by providing good practices or opportunities from various European member states.

Longitudinal Links between Income Dynamics and Young Adult Socioeconomic and Behavioral Health Outcomes

2021 ◽  
pp. 0044118X2199638
Author(s):  
Kendra Whitfield ◽  
Laura Betancur ◽  
Portia Miller ◽  
Elizabeth Votruba-Drzal
Keyword(s):  
Young Adult ◽  
Health Outcomes ◽  
Behavioral Health ◽  
Low Income ◽  
Family Income ◽  
Adult Outcomes ◽  
Income Volatility ◽  
Income Loss ◽  
Socioeconomic Outcomes ◽  
Young Adult Outcomes

Longitudinal links between childhood family income and adult outcomes are well documented. However, research on childhood income volatility and young adult outcomes is limited. This study utilizes data from the NLSY ( N = 6,410) to examine how childhood family income and income volatility relate to socioeconomic outcomes and mental/behavioral health in emerging adulthood. Results show that lower childhood income was associated with young adult socioeconomic and behavioral health outcomes. Higher income volatility was associated with increased depression and teen parenthood during young adulthood. Additional analyses examining trajectories of income volatility illustrated that children in families with unstable income trajectories (i.e., frequent income losses and gains) showed higher depression scores than those with stable trajectories. These findings suggest that income volatility, not just income level or income loss, is important to consider when studying economic disparities in young adult outcomes. Implications for policies and programs for low-income, high-volatility households are discussed.

Determinants and Consequences of Firms' Derivative Accounting Decisions

2020 ◽  
Vol 5 (1) ◽  
pp. 81-114 ◽  
Author(s):  
Spencer Pierce
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Fair Value ◽  
Financial Accounting ◽  
Firm Risk ◽  
Accounting Firms ◽  
Earnings Volatility ◽  
Hedge Accounting ◽  
Reported Earnings ◽  
Jel Classifications

ABSTRACTFinancial accounting standards require derivatives to be recognized at fair value with changes in value recognized immediately in earnings. However, if specified criteria are met, firms may use an alternative accounting treatment, hedge accounting, which is intended to better represent the underlying economics of firms' derivative use. Using FAS 161 disclosures, I examine determinants of hedge accounting use and the effects of hedge accounting on financial reporting and capital markets. I find variation in firms' hedge accounting use and provide evidence that compliance costs of applying hedge accounting affect firms' decision to use hedge accounting. Firms decrease their reported earnings volatility via derivatives that receive hedge accounting and could further decrease their earnings volatility if hedge accounting were applied to all their derivatives. Inconsistent with arguments given for using hedge accounting, I fail to find a decrease in investors' assessments of firm risk from using hedge accounting.JEL Classifications: M40; M41; G32.

scholarly journals A administração do lucro contábil e os critérios para determinação da eficácia do hedge accounting: utilização da correlação simples dentro do arcabouço do sfas nº 133

2003 ◽  
Vol 14 (31) ◽  
pp. 16-25
Author(s):  
Alexsandro Broedel Lopes ◽  
Nelson Seixas dos Santos
Keyword(s):  
Ad Hoc ◽  
Hedge Accounting ◽  
Sfas 133

O hedge accounting constitui inovação relevante introduzida pelo SFAS 133. Dentro desse critério, operações designadas como hedge deverão ter seus resultados diferidos para o momento no qual os itens sendo protegidos forem reconhecidos. Problema central nessa contabilização é a determinação do quê constitui uma operação de hedge. Os órgãos reguladores analisados neste trabalho apresentam critérios ad hoc para a determinação da eficácia das operações de hedge. Esses critérios não possuem propriedades estatísticas de previsão do comportamento dos ativos no futuro, condição necessária para o sucesso do hedge. Esse tipo de qualificação de hedge introduz enorme subjetividade no processo de reconhecimento contábil, fornecendo ampla margem para manipulação dos resultados. Este trabalho analisa e critica a opção adotada pelo FASB e outros órgãos reguladores e oferece sugestões.

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