Corporate Case Study: Tracking & Reporting for Hedges Our Client: A global musical instruments manufacturer and distributor who actively manages FX and interest rate risk exposures. Situation: The company was managing over 1,500 derivative instruments in Excel and was applying hedge accounting for more than half of their derivatives portfolio. They were applying a hedge accounting methodology that caused some earnings volatility and wanted to evaluate whether another approach, such as regression for effectiveness assessment and hypothetical derivative method for measurement, could produce better results. The period end process was taking longer than our client wanted, and, unfortunately, it was necessary to enter and maintain every derivative into multiple systems or spreadsheets. The company was seeking to implement a hedging, hedge accounting & derivative reporting solution that would: Ease the administrative burden of tracking and reporting derivative transactions Eliminate risk…

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In this week’s installment, Part III and our final installment of our series, we look at the impact hedge accounting rules and changes can have on your hedging program in 2014. In Part II, we looked derivatives regulation on your hedging program, and in Part I,  Fed Policy and its impact on hedging programs. Part III: Hedge Accounting. Several key developments in the world of hedge accounting last year could impact your derivatives and hedging programs this year. First, the FASB approved in July 2013 the use of the Fed Funds Effective Rate (or OIS) as a benchmark interest rate, which along with LIBOR and Treasury rates can now receive favorable hedge accounting treatment under many routine hedging strategies. This is great news for entities with floating-rate assets or liabilities indexed to the Fed Funds Effective Rate, as it simplifies their ability to hedge their…

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Oscar Wilde would have loved the Twitter genre; he was a veritable epigram machine. Even though everything he wrote is now at least a century old, it hasn’t lost relevance or zing. Think of how pertinent Wilde’s statements still are on topics as diverse as Narcissism: “To love oneself is the beginning of a lifelong romance.” Celebrity: “There is only one thing in the world worse than being talked about, and that is not   being talked about.” Identity: “Be yourself; everyone else is already taken.” Transcendence: “We are all in the gutter, but some of us are looking at the stars.” Modern conveniences: “We live in an age when unnecessary things are our only necessities.” For us, though, the best Oscar Wilde quote is from The Picture of Dorian Gray: “Nowadays people know the price of everything and the…

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Firm hits $1 trillion in notional and rolls out its first client-facing technology solution in debt management. Credit valuation adjustment models (CVAs) are developed in house for incorporation into clients’ valuations

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Our ChathamDirect Technology Platform For more than a decade, Chatham Financial has invested in building an advanced technology platform to support our thriving risk management consulting practices. More recently we’ve also begun offering direct access to clients. The result is a market-leading SaaS platform based on the latest technologies and designed to rapidly evolve in response to the constantly changing requirements of today’s markets. Our platform handles all facets of our business, supporting multiple asset classes including foreign currency, interest rate, commodity and inflation, and multiple instrument types, including complex debt and derivatives. Leveraging this foundation, we offer advanced analytical capabilities in the areas of risk management, hedge accounting, derivative valuations, debt management and defeasance. Based on a robust common architecture, we offer solutions tailored to our clients’ specific needs–whether they are in the Real Estate, Financial Institutions, Private Equity…

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Experts in CRE debt and derivatives valuation Determining the accurate, fair value of commercial real estate loan debt or applied derivative instruments may seem simple on the surface. Nonetheless, improper measurements can lead to significant, long-term financial loss over the course of the loan or derivative. It may also prompt questions from investors, auditors, and regulators. How Chatham’s valuation services help real estate clients Independent third-party expertise: Chatham has been working with real estate companies for over 20 years, using proprietary models and independently gathered data to value debt and derivatives. And our advisors are in the markets every day, continually building market knowledge, monitoring trends, and adjusting for changing standards. From caps, swaps, and FX forwards, through to more exotic derivatives, Chatham offers a robust platform that provides clients with real-time values via our secure website. Our best-in-class valuation…

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Adding clarity and precision to derivative valuations Failure to properly measure the fair value of a derivative instrument can result in significant losses for a company. It can also lead to sub-optimal pricing when executing a derivative transaction. This translates into real economic losses over the life of the instrument. In addition, using outdated valuation modeling techniques or not understanding how derivative fair values are measured often lead to additional scrutiny from management, auditors, and regulators, further increasing costs to a company. Benefits of Chatham Derivative Valuation Services Independent third-party perspective: We cover all types of interest rate, foreign currency, and commodity derivatives, from caps and all types of swaps including cross-currency to FX forwards, options, and exotic derivatives. As a trusted third party that is independent and objective, Chatham offers a robust platform with proprietary methodology that provides real-time…

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