Hedge Accounting Changes: What, Where, When and How March 15, 2018 | 2PM EDT / 11AM PDT | 1 hour | Online | by Chatham Financial Please join us for an in depth review of the new hedge accounting standard (ASU No. 2017-12) and better understand the effects it could have on your hedging program. During our session we will walk through what has changed, where you will see the impacts, when you can adopt, and how that process can be best accomplished. In this webinar, we will cover the following learning objectives: – Understand changes to the hedge accounting standard – Uncover potential new opportunities and strategies available as a result of the changes – Familiarize yourself with the steps necessary for adoption Speakers: Aaron Jacob, CPA is a manager on the Accounting Advisory team providing solutions for FX,…

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To hedge, or not to hedge By Nia Tam July 04, 2016 Rob Dornton-Duff, who leads Chatham Financial’s global infrastructure and project finance advisory business, explains that infrastructure projects are not normally structured to provide sufficient headroom to absorb market risks – including currency risk – based on available cashflows to service debt. He suggests that a typical debt service coverage ratio of 1.2 could see a payment default if the debt and revenue are mismatched, say due to a foreign exchange rate movement in a 20 percent range. “And 20 percent isn’t severe by the volatility standard for any currency. We cannot assume the headroom is available to absorb such market risks,” he points out.Read More *Registration may be required

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The World After Brexit Over the last few days, we’ve already spoken with numerous clients about the potential financial and regulatory impacts of the UK’s vote to leave the European Union. As the referendum’s outcome reverberates through the markets, here are a few key notes: 1) What happened in financial markets? The British pound plummeted 12% overnight from Thursday, nearly doubling its worst ever one-day percentage loss that occurred in 1992 when it came under speculative attack and fell out of the ERM – it has continued to fall sharply today. The euro also weakened substantially, while the Japanese yen strengthened considerably as the safe-haven currency of choice (the Swiss franc’s pressure to appreciate was mitigated by Swiss Central Bank activity). Bonds from the US to the UK to Germany rose sharply, anticipating expansionary monetary policy to ward off recession.…

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Hedging Lessons from Brexit On Thursday, British citizens will vote in a referendum posing this question – “Should the United Kingdom remain a member of the European Union or leave the European Union?” The result will have sweeping implications for trade policy, the flow of immigrants, and even the continued viability of the European Union. Hence, as the referendum’s projected outcome has shifted from Remain to Leave and back again, worldwide currency, interest rate, and equity markets have swung wildly. As a global company with operations in the UK and Europe, we’ve been monitoring the referendum buildup closely. In addition to its anticipated economic and political impacts, there are also numerous valuable risk management lessons, including (1) The best time to buy insurance: The cost of seasonal hurricane insurance on an Outer Banks home skyrockets once there’s already a Category…

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The Black Swan of Leicester Last summer, London bookmakers were updating their odds list for the most outlandish possibilities. Cantankerous TV personality Simon Cowell to become Prime Minister: 500/1. The Loch Ness monster to be discovered: 500/1. Her Majesty the Queen to release a chart-topping hit that Christmas: 1000/1. Kim Kardashian to become US president: 2000/1. Elvis to be found alive and well: 2000/1. But then the bookies took a more preposterous step; they offered 5000/1 odds that humble soccer team Leicester City, having barely escaped being relegated (i.e. unceremoniously dumped to the lower leagues) the season before, would win the English Premier League. Now the English top-flight soccer league constitutes a pure plutocracy – the wealthiest clubs buy all the best players, and with neither annual draft nor salary cap to restore some semblance of parity, the top five…

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A Hedge! A Hedge! My Kingdom for a Hedge! Four centuries ago, the most influential English-language playwright in history was laid to rest in Stratford-upon-Avon. Yet since April 25th, 1616, William Shakespeare has captivated four centuries of audiences and readers with his masterful dramatic arcs, playful neologism, and comprehensive depiction of life’s full breadth. In fact, Shakespeare’s astonishing thematic scope led Ralph Waldo Emerson to declare: “What point of morals, of manners, of economy, of philosophy, of religion, of taste, of the conduct of life, has he not settled? What mystery has he not signified his knowledge of?” As we reflected on Emerson’s adulation, it dawned on us that if Shakespeare really did settle all points of the economy, he must have written plenty about risk management. We spent the weekend curled up with our college Shakespeare text and, as…

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Executive Summary On October 22, 2015, U.S. prudential regulators published final and interim final margin rules governing swaps that are not centrally cleared (the “PR margin rule”) and on December 16, 2015, the Commodity Futures Trading Commission published its corresponding final margin rules (the “CFTC margin rule” and together with the PR margin rule, the “Margin Rule”). The Margin Rule requires financial end users to back their uncleared OTC derivatives transactions with cash or liquid securities. Who is Affected? Financial end users that may face these requirements include private equity, real estate, infrastructure, and microfinance fund vehicles, as well as banks and insurance companies, among others. These Financial end users could face substantial new requirements mainly as a result of the variation margin (“VM”) obligations. In contrast, banks are not required to impose margin requirements on nonfinancial end users which…

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Understanding Today’s Low Interest Rate Environment: A Q&A With Equity Methods and Chatham Financial March 14, 2016 The United States is in a prolonged low interest environment. What does this mean for derivatives accounting, hedging, and financial instrument valuation? Industry experts from Chatham Financial and Equity Methods trade observations. Read Complete Article

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Later this month, we’ll be checking out of the grocery store, absently scanning the gift cards hanging by the conveyor belt. “Cheesecake Factory. Ruby Tuesday’s. Berkshire Hathaway. Wait … what?” But that gift card emblazoned with the moniker of an international conglomerate won’t just be in our imagination, though we’re usually driven to near delirium by the din of holiday shoppers and the insanity of repeated riffs on reindeer. Instead, it will be the work of a new company called Stockpile, which plans to uberize the giving of stocks by offering branded gift cards that represent fractional investments in public companies, funds that track the price of gold, and even fully hedged international real estate ETFs. Gift card recipients will have the option of converting to hundreds of other stocks if they doubt our pick – they will even be…

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Common Challenges to Hedging FX Risk Chatham Financial White Papers – October 2015 Early 2015 ushered in currency volatility and dollar strength unseen in decades. Every day, new headlines of companies negatively impacted by large exchange rate movements greeted readers of financial news. Earnings calls are littered with references to “constant currency” impacts and earnings forecast reductions driven by significant currency movements. With this background, analysts, investors, Board Members and senior management have asked, “What is stopping us from hedging our risk more effectively?” This article will cover three key hurdles that companies face when crafting and maintaining currency hedging programs: Data, Design, and Accounting.

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