DOCSLIB.ORG

To Get Started Trading Cme Interest Rate Products

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
To Get Started Trading Cme Interest Rate Products TO GET STARTED TRADING CME INTEREST RATE PRODUCTS ® TO GET STARTED TRADING CME INTEREST RATE PRODUCTS Since the introduction of financial futures at the Chicago Mercantile Exchange in 1972, the importance of futures in transferring financial risk has been proven by the explosive growth in the market. The vast array of CME interest rate prod- ucts allows professionals to manage interest rate risks ranging from one day to ten years. Interest rates, which loosely can be defined as the price of money, affect the liveli- hoods of individuals and businesses each and every day. The cost of a home mortgage, the finance charge applied to a credit card balance, the amount of inter- est received on a savings account or the coupon on a corporate bond issue are all examples of the interest rates that influence our personal and commercial activities. Like all goods and services, interest rates are determined by the market forces of supply and demand; however, the federal government also can influence key interest rates via monetary policy, that is, by adjusting them upward or downward to slow down or stimulate the economy. Interest rate levels often are regarded as key indicators of a country’s economic health. The money market comprises the markets for short-term, heavily traded credit instruments with maturities of less than one year. Money market instruments include Treasury bills, commercial paper, bankers’ acceptances, negotiable certifi- cates of deposit, Federal Funds, and short-term collateralized loans. While the markets for these various instruments are distinct, their respective interest rates reflect general credit conditions with adjustments for differences in risk and liquidity. As the money markets have become more liquid, money managers borrow and lend in whichever markets offer a price advantage. No longer willing to leave balances as unproductive, non-interest-earning demand deposits, corporations today are making more aggressive use of cash management techniques. Cash market participants primarily use the CME’s interest rate products for pricing and hedging their money market positions. CME INTEREST RATE The CME lists a variety of contracts The CME’s Eurodollar time on short-term US and foreign interest deposit futures contract reflects rates. Here’s a brief description of the the London Interbank Offered Rate markets on which the CME products (LIBOR) for a three-month, $1 mil- are based: lion offshore deposit. A total of 40 quarterly futures contracts, spanning THREE-MONTH EURODOLLARS ten years, plus the two nearest serial Eurodollars are simply US dollars on (non-quarterly) months are listed at deposit in commercial banks outside all times. Eurodollar futures are the of the United States. The Eurodollar cornerstone of the Exchange’s inter- market has burgeoned over the past est rate quadrant and are the most 30 years as the dollar has become a liquid exchange-traded contracts in world currency. Eurodollar deposits the world when measured in terms play a major role in the international of open interest. capital market. The interbank market for immediate (spot) and forward ONE-MONTH LIBOR delivery of offshore dollars is deep and LIBOR is a reference rate for dealing liquid, giving banks the ability to fund in Eurodollar time deposits between dollar loans to foreign importers with- commercial banks in the London out incurring currency exchange risks. Interbank Market. LIBOR often is Eurodollar deposits are direct the benchmark rate for commercial obligations of the commercial banks loans, mortgages, and floating rate accepting the deposits. They are not debt issues. The CME’s LIBOR con- guaranteed by any government. tract is analogous to the Eurodollar Although they represent low-risk contract, but represents one-month investments, Eurodollar deposits are LIBOR on a $3 million deposit. The not risk-free. Exchange currently lists twelve con- secutive monthly LIBOR futures at any given time. 3 THE CME-SIMEX MUTUAL OFFSET SYSTEM (MOS) In 1984, the Chicago Mercantile Exchange, in partnership with the Singapore International Monetary 13-WEEK TREASURY BILLS contracts traded on the Singapore 91-DAY CETES* Exchange, pioneered an innovative As direct obligations of the US International Monetary Exchange (MEXICAN TREASURY BILLS) approach to futures trading known as government,Treasury bills are consid- (SIMEX). Via the Mutual Offset Certificados de la Tesoreria de the Mutual Offset System (MOS). ered risk-free debt instruments and System with SIMEX, open positions la Federacion, commonly referred Through the MOS, contracts opened provide the foundation for the money may be held either in Chicago or to as Cetes, are government-issued, on one exchange can be liquidated or markets because of their unique Singapore. Like the SIMEX, the CME short-term discount instruments held at the other. The CME-SIMEX safety and liquidity. Because of their currently lists twelve quarterly Euroyen that are denominated and paid in link effectively extends the trading risk-free nature, changes in the yield contracts, covering three years. Mexican pesos. The Cetes market hours of both exchanges beyond on T-bills reflect “pure” interest rate is considered the benchmark for their operating hours, allowing movements. Four quarterly T-bill ONE-MONTH FEDERAL FUNDS short-term interest rates in Mexico. traders to manage their overnight futures contracts are available for Federal Funds are funds in excess of Like US Treasury bills, Cetes are risk. This agreement, the first inter- trading at any given time. reserve requirements held by member issued in a variety of maturities, national futures trading link of its banks of the Federal Reserve System, with 28-day and 91-day maturity kind, is available for both Eurodollar EUROYEN transferable between those banks issues the most common. and Euroyen futures. Analogous to Eurodollars, Euroyen within one business day. Because the For a more detailed description of are Japanese yen deposits outside reserve accounts banks maintain at 28-DAY TIIE MOS, please consult the brochure Japan. Like the dollar, the Japanese the Fed are not interest-bearing, sell- (MEXICAN INTEREST RATE) titled CME/SIMEX Mutual Offset yen is globally traded on a 24-hour-a- ing Fed Funds allows institutions to The Tasa de Interés Interbancario de System:The World’s Most Successful day basis. The CME’s Euroyen futures earn a positive return on balances that Equilibrio, or TIIE,is a benchmark Trading Link. are fully fungible with the Euroyen might otherwise lie idle. The most interbank interest rate that repre- common Fed Funds transaction is an sents the price at which Mexican overnight, unsecured loan between banks are willing to borrow from or two banks. lend to the Bank of Mexico (the coun- The CME lists twelve consecutive try’s central bank). The TIIE is an Fed Funds futures, the same as LIBOR, equilibrium or market-clearing rate. with a new month added on the first business day following expiration of the front-month contract. INTEREST RATE FUTURES INTEREST RATE CONTRACT MONTHS Eurodollar, LIBOR,TIIE, Fed Funds and T-bill contracts are listed for all calendar months. Cetes and Euroyen contracts are on a March quarterly INTEREST RATE number of ticks moved, multiplied properly constructed futures hedge cycle–March, June, September and FUTURES BASICS by the value of the tick. For the first can also generate losses that will off- December. A contract month identi- All CME interest rate futures con- four quarterly and two serial set the effects of a beneficial interest fies the month and year in which the tracts are traded using a price index, Eurodollar and T-bill contracts,as rate move. In addition, because futures or options contract ceases to which is derived by subtracting the well as all LIBOR contracts, the mini- futures are quoted in terms of price exist. It is also known as the “deliv- futures’ interest rate from 100.00. For mum tick is .005, or $12.50. Thus a rather than interest rate, futures ery month.” This procedure ensures instance, an interest rate of 5.00 per- price move of from 95.005 to 95.01 exhibit an inverse relationship that the futures price converges with cent translates to an index price of for example, would mean a $12.50 between rates and price. A borrower the cash market price. However, the 95.00 (100.00 – 5.00 = 95.00). Given gain for the long position and a would sell futures to protect against vast majority of market participants this price index construction, if inter- $12.50 loss for the short position. an interest rate rise, i.e., to profit from close out their positions before expi- est rates rise, the price of the contract For the Euroyen contract and the a decrease in the futures price, and a ration by establishing new positions falls and vice versa. Therefore, to Mexican interest rates, the treat- lender would buy futures to hedge in the next month or rolling their profit from declining interest rates, ment is analogous, but the gains and against an interest rate decline or positions forward. In fact, only a very you would buy the futures contract losses are realized in Japanese yen capitalize on an increase in the futures small percentage of futures transac- (go long); to profit from a rise in inter- and Mexican pesos, respectively. price. Consider these examples: tions reach delivery. est rates, you would sell the contract That is, each 0.01 price move gives a (go short). In either case, if your view ¥2,500 or MP 50 result. Hedging a Forward Borrowing Rate turns out to be correct, you will be In late September a corporate trea- CONTRACT MONTH SYMBOLS able to liquidate or offset your original HEDGING WITH surer projects that cash flows will position and realize a gain. If you are require a $1 million bank loan on January F July N INTEREST RATE FUTURES wrong, however,your trade will result Interest rate futures can be used to December 16.
Load more

Recommended publications
  • Calls, Puts and Select Alls
    CIMA P3 SECTION D – MANAGING FINANCIAL RISK THE PUTS, THE CALLS AND THE DREADED ‘SELECT ALLs’ Example long form to OT approach Here is my favourite long form question on Interest rate risk management: Assume you are the Treasurer of AB, a large engineering company, and that it is now May 20X4. You have forecast that the company will need to borrow £2 million in September 20X4 for 6 months. The need for finance will arise because the company has extended its credit terms to selected customers over the summer period. The company’s bank currently charges customers such as AB plc 7.5% per annum interest for short-term unsecured borrowing. However, you believe interest rates will rise by at least 1.5 percentage points over the next 6 months. You are considering using one of four alternative methods to hedge the risk: (i) A traded interest rate option (cap only); or (ii) A traded interest rate option (cap and floor); or (iii) Forward rate agreements; or (iv) Interest rate futures; or You can purchase an interest rate cap at 93.00 for the duration of the loan to be guaranteed. You would have to pay a premium of 0.2% of the amount of the loan. For (ii) as part of the arrangement, the company can buy a traded floor at 94.00. Required: Discuss the features of using each of the four alternative methods of hedging the interest rate risk, apply to AB and advise on how each might be useful to AB, taking all relevant and known information into account.
    [Show full text]
  • International Harmonization of Reporting for Financial Securities
    International Harmonization of Reporting for Financial Securities Authors Dr. Jiri Strouhal Dr. Carmen Bonaci Editor Prof. Nikos Mastorakis Published by WSEAS Press ISBN: 9781-61804-008-4 www.wseas.org International Harmonization of Reporting for Financial Securities Published by WSEAS Press www.wseas.org Copyright © 2011, by WSEAS Press All the copyright of the present book belongs to the World Scientific and Engineering Academy and Society Press. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Editor of World Scientific and Engineering Academy and Society Press. All papers of the present volume were peer reviewed by two independent reviewers. Acceptance was granted when both reviewers' recommendations were positive. See also: http://www.worldses.org/review/index.html ISBN: 9781-61804-008-4 World Scientific and Engineering Academy and Society Preface Dear readers, This publication is devoted to problems of financial reporting for financial instruments. This branch is among academicians and practitioners widely discussed topic. It is mainly caused due to current developments in financial engineering, while accounting standard setters still lag. Moreover measurement based on fair value approach – popular phenomenon of last decades – brings to accounting entities considerable problems. The text is clearly divided into four chapters. The introductory part is devoted to the theoretical background for the measurement and reporting of financial securities and derivative contracts. The second chapter focuses on reporting of equity and debt securities. There are outlined the theoretical bases for the measurement, and accounting treatment for selected portfolios of financial securities.
    [Show full text]
  • Interest Rate Caps “Smile” Too! but Can the LIBOR Market Models Capture It?
    Interest Rate Caps “Smile” Too! But Can the LIBOR Market Models Capture It? Robert Jarrowa, Haitao Lib, and Feng Zhaoc January, 2003 aJarrow is from Johnson Graduate School of Management, Cornell University, Ithaca, NY 14853 ([email protected]). bLi is from Johnson Graduate School of Management, Cornell University, Ithaca, NY 14853 ([email protected]). cZhao is from Department of Economics, Cornell University, Ithaca, NY 14853 ([email protected]). We thank Warren Bailey and seminar participants at Cornell University for helpful comments. We are responsible for any remaining errors. Interest Rate Caps “Smile” Too! But Can the LIBOR Market Models Capture It? ABSTRACT Using more than two years of daily interest rate cap price data, this paper provides a systematic documentation of a volatility smile in cap prices. We find that Black (1976) implied volatilities exhibit an asymmetric smile (sometimes called a sneer) with a stronger skew for in-the-money caps than out-of-the-money caps. The volatility smile is time varying and is more pronounced after September 11, 2001. We also study the ability of generalized LIBOR market models to capture this smile. We show that the best performing model has constant elasticity of variance combined with uncorrelated stochastic volatility or upward jumps. However, this model still has a bias for short- and medium-term caps. In addition, it appears that large negative jumps are needed after September 11, 2001. We conclude that the existing class of LIBOR market models can not fully capture the volatility smile. JEL Classification: C4, C5, G1 Interest rate caps and swaptions are widely used by banks and corporations for managing interest rate risk.
    [Show full text]
  • Liquidity Effects in Options Markets: Premium Or Discount?
    Liquidity Effects in Options Markets: Premium or Discount? PRACHI DEUSKAR1 2 ANURAG GUPTA MARTI G. SUBRAHMANYAM3 March 2007 ABSTRACT This paper examines the effects of liquidity on interest rate option prices. Using daily bid and ask prices of euro (€) interest rate caps and floors, we find that illiquid options trade at higher prices relative to liquid options, controlling for other effects, implying a liquidity discount. This effect is opposite to that found in all studies on other assets such as equities and bonds, but is consistent with the structure of this over-the-counter market and the nature of the demand and supply forces. We also identify a systematic factor that drives changes in the liquidity across option maturities and strike rates. This common liquidity factor is associated with lagged changes in investor perceptions of uncertainty in the equity and fixed income markets. JEL Classification: G10, G12, G13, G15 Keywords: Liquidity, interest rate options, euro interest rate markets, Euribor market, volatility smiles. 1 Department of Finance, College of Business, University of Illinois at Urbana-Champaign, 304C David Kinley Hall, 1407 West Gregory Drive, Urbana, IL 61801. Ph: (217) 244-0604, Fax: (217) 244-9867, E-mail: [email protected]. 2 Department of Banking and Finance, Weatherhead School of Management, Case Western Reserve University, 10900 Euclid Avenue, Cleveland, Ohio 44106-7235. Ph: (216) 368-2938, Fax: (216) 368-6249, E-mail: [email protected]. 3 Department of Finance, Leonard N. Stern School of Business, New York University, 44 West Fourth Street #9-15, New York, NY 10012-1126. Ph: (212) 998-0348, Fax: (212) 995-4233, E- mail: [email protected].
    [Show full text]
  • Consolidated Policy on Valuation Adjustments Global Capital Markets
    Global Consolidated Policy on Valuation Adjustments Consolidated Policy on Valuation Adjustments Global Capital Markets September 2008 Version Number 2.35 Dilan Abeyratne, Emilie Pons, William Lee, Scott Goswami, Jerry Shi Author(s) Release Date September lOth 2008 Page 1 of98 CONFIDENTIAL TREATMENT REQUESTED BY BARCLAYS LBEX-BARFID 0011765 Global Consolidated Policy on Valuation Adjustments Version Control ............................................................................................................................. 9 4.10.4 Updated Bid-Offer Delta: ABS Credit SpreadDelta................................................................ lO Commodities for YH. Bid offer delta and vega .................................................................................. 10 Updated Muni section ........................................................................................................................... 10 Updated Section 13 ............................................................................................................................... 10 Deleted Section 20 ................................................................................................................................ 10 Added EMG Bid offer and updated London rates for all traded migrated out oflens ....................... 10 Europe Rates update ............................................................................................................................. 10 Europe Rates update continue .............................................................................................................
    [Show full text]
  • A Comparison of Alternative SABR Models in a Negative Interest Rate Environment
    Master of Science Thesis A Comparison of Alternative SABR Models in a Negative Interest Rate Environment Esmée Winnubst 10338179 30th December 2016 Faculty of Economics and Business · University of Amsterdam A Comparison of Alternative SABR Models in a Negative Interest Rate Environment Master of Science Thesis For the degree of Master of Science in Financial Econometrics at the University of Amsterdam Esmée Winnubst 10338179 30th December 2016 Supervisor: Dr. N. Van Giersbergen Second Reader: Dr. S.A. Broda Faculty of Economics and Business · University of Amsterdam Statement of Originality: This document is written by Esmée Winnubst who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for supervision of completion of the work, not for the contents. Acknowledgement: I would like to thank my supervisor Noud van Giersbergen for his as- sistance during the writing of this thesis. The work in this thesis was supported by EY. I would like to thank my colleagues at EY for their support and time. Copyright c All rights reserved. Abstract The widespread used SABR model (P. S. Hagan, Kumar, Lesniewski, & Woodward, 2002) is not able to correctly price options, capture volatility curves and inter- and extrapolate market quotes in a negative interest rate environment. This thesis investigates two extensions of the SABR model that are able to work with negative rates: the normal SABR model and the free boundary SABR model.
    [Show full text]
  • Dealers' Hedging of Interest Rate Options in the U.S. Dollar Fixed
    Dealers’ Hedging of Interest Rate Options in the U.S. Dollar Fixed-Income Market John E. Kambhu s derivatives markets have grown, the The derivatives markets’ rapid growth has been scope of financial intermediation has driven by a number of developments. In addition to evolved beyond credit intermediation to advances in finance and computing technology, the rough cover a wide variety of risks. Financial balance of customer needs on the buy and sell sides of the Aderivatives allow dealers to intermediate the risk man- market has contributed to this expansion. This balance agement needs of their customers by unbundling customer allows dealers to intermediate customer demands by passing exposures and reallocating them through the deriva- exposures from some customers to others without assum- tives markets. In this way, a customer’s unwanted risks ing excessive risk themselves. Without this ability to pass can be traded away or hedged, while other exposures exposures back into the market, the markets’ growth are retained. For example, borrowers and lenders can would be constrained by dealers’ limited ability to absorb separate a loan’s interest rate risk from its credit risk customers’ unwanted risks. by using an interest rate swap to pass the interest rate The balance between customer needs on both risk to a third party. In another example of unbun- sides of the market is most apparent in the swaps mar- dling, an option allows an investor to acquire exposure ket, the largest of the derivatives markets, where only a to a change in asset prices in one direction without small amount of residual risk remains with dealers.1 In incurring exposure to a move in asset prices in the the over-the-counter U.S.
    [Show full text]
  • How to Find Data on Reuters Quickly and Easily
    How to find data on Reuters Just what you were looking for… The world’s financial markets generate awesome amounts of data ceaselessly, and Reuters brings it straight to you. If you want to make sure that you’re benefiting from the full breadth and depth of what’s available, this book will tell you how. How to find data What’s the quickest way to find an instrument or a display in your asset on Reuters class? ... What search tools can you use?... How are the codes structured?… Which codes do you need to know? ... What news formats quickly and easily are available? ... How do you control the news you get for your market or region? quickly and easily In other words, you want specific figures and relevant analytical context. This is just what you were looking for. 2nd edition ed. Marcus Rees The second edition of the book that made sense of data 2nd edition ed. Marcus Rees 2nd edition ed. Marcus SECOND EDITION The production of this Second Edition was made possible by the kind assistance and input provided by colleagues who are experts in their respective disciplines. A special thank you goes to the following How to find data people who have helped ensure that the information here is as accurate and on Reuters comprehensive as possible. Stephen Cassidy, Stephen Connor, Ciaran quickly and easily Doody, Marian Hall, Elliott Hann, Desmond Hannon, Elaine Herlihy, Marcus Herron, Jutta Werner-Hébert, Trudy Hunt, Ian Mattinson, Barbara Miller, Vincent Nunan, 2nd edition ed. Marcus Rees Richard Pembleton, Tony Warren A further thank you to Elke Behrend and John Hendry who provided the structure and format of this guide through their work on the first edition.
    [Show full text]
  • Debt Instruments Set 9 Interest-Rate Options 0. Overview
    Debt Instruments Set 9 Backus/Novemb er 30, 1998 Interest-Rate Options 0. Overview Fixed Income Options Option Fundamentals Caps and Flo ors Options on Bonds Options on Futures Swaptions Debt Instruments 9-2 1. Fixed Income Options Options imb edded in b onds: { Callable b onds { Putable b onds { Convertible b onds Options on futures { Bond futures { Euro currency futures OTC options { Caps, o ors, and collars { Swaptions Debt Instruments 9-3 2. Option Basics Big picture { Options are everywhere Sto ck options for CEOs and others Corp orate equity: call option on a rm Mortgages: the option to re nance { Options are like insurance Premiums cover the down side, keep the up side Customers like this combination Insurer b ears risk or shares it diversi cation or reinsurance { Managing cost of insurance Out-of-the-money options are cheap er insurance with a big deductable Collars: sell some of the up side Aggregate: basket option cheap er than basket of op- tions { Managing option b o oks Customer demands may result in exp osed p osition Particular exp osure to volatility: puts and calls b oth rise with volatility Hedging through replication is another route Debt Instruments 9-4 2. Option Basics continued Option terminology { Basic terms Options are the right to buy a cal l or sell a put at a xed price strike price The thing b eing b ought or sold is the underlying This righttypically has a xed expiration date A short p osition is said to have written an option { Kinds of options European options can b e exercised only at expira- tion American options can b e exercised any time Bermuda options can b e exercised at sp eci c dates eg, b onds callable only on coup on dates Debt Instruments 9-5 2.
    [Show full text]
  • EUROPEAN COMMISSION Brussels, 18.9.2013 SWD(2013) 336 Final COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying Th
    EUROPEAN COMMISSION Brussels, 18.9.2013 SWD(2013) 336 final COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on indices used as benchmarks in financial instruments and financial contracts {COM(2013) 641 final} {SWD(2013) 337 final} EN EN TABLE OF CONTENTS 1. INTRODUCTION ...................................................................................................................................................................1 2. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES....................................................................................2 2.1. CONSULTATION OF INTERESTED PARTIES ..................................................................................................................................2 2.2. STEERING GROUP...............................................................................................................................................................2 2.3. IMPACT ASSESSMENT BOARD ...............................................................................................................................................3 3. POLICY CONTEXT .................................................................................................................................................................3 3.1. THE CURRENT EU LEGISLATIVE FRAMEWORK ON BENCHMARKS ......................................................................................................3 3.2. NATURE
    [Show full text]
  • Interest Rate Derivatives the Most Widely Used Underlying Variables in Derivatives Are Stock Prices, Stock Indexes, Commodity Pr
    Interest Rate Derivatives By Majd Bakir / www.investment-and-finance.com The most widely used underlying variables in derivatives are stock prices, stock indexes, commodity prices, exchanges rates, and interest rates. Other types of derivatives becoming very popular in recent years include credit derivatives, weather derivatives, energy derivatives, insurance derivatives, and volatility derivatives. However, the interest rate derivatives market is the largest derivative market worldwide, with a whopping notional amount outstanding, estimated in June 2009 at US$437 trillion according to the Bank for International Settlements. Of which, OTC interest rate swaps claim the lion’s share with an estimated amount outstanding of US$ 342 trillion, or 78% thereof). An interest rate derivative is a financial instrument whose payoff is based or dependent in some way on the performance of an underlying interest rate. It gives the holder the right to pay or receive a notional principal at a predetermined interest rate. This instrument, with all its different types and variants, is notoriously used to hedge exposures to interest rate movements. Product-type Classification In terms of product type, interest rate derivatives fall into three major groups: interest rate options, interest rate futures, and interest rate swaps. Interest Rate Options The most popular interest rate option products are: bond options, interest rate caps and floors, and swap options (swaptions). - Bond Options A bond option is an option that gives the holder the right to buy or sell a specific bond within a particular period or by some future date for a set price. Bond options are mainly traded over the counter, and are also embedded in bonds to be issued.
    [Show full text]
  • International Harmonization of Reporting for Financial Securities
    International Harmonization of Reporting for Financial Securities Authors Prof. Jiri Strouhal Dr. Carmen Bonaci Editor Prof. Nikos Mastorakis Published by WSEAS Press ISBN: 978-1-61804-008-4 www.wseas.org International Harmonization of Reporting for Financial Securities Published by WSEAS Press www.wseas.org Copyright © 2011, by WSEAS Press All the copyright of the present book belongs to the World Scientific and Engineering Academy and Society Press. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the Editor of World Scientific and Engineering Academy and Society Press. All papers of the present volume were peer reviewed by two independent reviewers. Acceptance was granted when both reviewers' recommendations were positive. See also: http://www.worldses.org/review/index.html ISBN: 978-1-61804-008-4 World Scientific and Engineering Academy and Society Preface Dear readers, This publication is devoted to problems of financial reporting for financial instruments. This branch is among academicians and practitioners widely discussed topic. It is mainly caused due to current developments in financial engineering, while accounting standard setters still lag. Moreover measurement based on fair value approach – popular phenomenon of last decades – brings to accounting entities considerable problems. The text is clearly divided into four chapters. The introductory part is devoted to the theoretical background for the measurement and reporting of financial securities and derivative contracts. The second chapter focuses on reporting of equity and debt securities. There are outlined the theoretical bases for the measurement, and accounting treatment for selected portfolios of financial securities.
    [Show full text]