Financial reporting of derivatives in banks: Disclosure conventions in Germany, Great Britain and the USA

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Why Hedge? - A Critical Review of Theory and Empirical Evidence -

Finance theory does not provide a comprehensive framework for explaining risk management within the imperfect financial environment in which firms operate. Corporate managers, however, rank risk management as one of their most important objectives. Therefore, it is not surprising that papers on the question why firms hedge are mushrooming. This paper critically reviews this literature and analyses the implications for risk management practice. It is distinguished between two competing approaches to corporate hedging: equity value maximising strategies and strategies determined by managerial risk aversion. The first category suggests that managers act in the best interest of shareholders. They hedge to reduce real costs like taxes, costs of financial distress and costs of external finance or to replace home-made hedging by shareholders. The second category considers that managers maximise their personal utility rather than the market value of equity. Their hedging strategy, therefore, is determined by their compensation plan and reputational concerns. There is ambiguous empirical evidence on the dominant hedging motive. It depends on the environment in which firms operate (e.g. tax schedule) and on firm characteristics (e.g. capital intensity). In general, one can observe that (i) hedging taxable income is of minor importance, (ii) firms with a high probability of financial distress hedge more, (iii) companies with greater growth opportunities hedge more, (iv) managers with common stockholdings hedge more than managers with option holdings and (v) high ability managers hedge more than low ability managers. The total benefits of hedging are not the sum across the various motives. Therefore, a manager has to concentrate on a primary motive to implement an effective risk management programme: If his primary motive is to minimise corporate taxes, he will hedge taxable income. If his primary concern is to reduce the costs of financial distress and if he can faithfully communicate the firm?s true probability of default, his hedging strategy will focus on the market value of debt and equity. If hedging is prompted to reduce the demand for costly external finance, he will hedge cash flows. If the manager is concerned with his reputation, he will focus on accounting earnings. Once he has focused on a certain exposure, the manager has to decide whether he wants to minimise the volatility of this exposure or simply avoid large losses. -- Der Artikel gibt einen Literaturüberblick zur Fragestellung, warum Unternehmen Risikomanagement betreiben und analysiert die Umsetzung in der Unternehmenspraxis. Ausgehend von den Irrelevanzthesen von Modigliani/Miller wird gezeigt, daß die starke Betonung des Risikomanagements in Unternehmen auf zweierlei Arten erklärbar ist: Zum einen erhöht Hedging den Shareholder Value, da es Steuern, Bankrottkosten, die Kosten von externem Kapital und den Absicherungsbedarf von schlecht diversifizierten Aktionären verringern kann. Zum anderen kann Hedging den Nutzen von Managern erhöhen, soweit es einen Einfluß auf deren Vermögen oder Ruf hat. Was die Umsetzung der Hedging-Ziele in die Unternehmenspraxis anbetrifft, haben die Modelle unterschiedliche Konsequenzen bezüglich der Art und des Ausmaßes des abzusichernden Risikos.Risk Management,Hedging,Agency Theory,Shareholder Value

A supersymmetric holographic dual of a fractional topological insulator

We construct a supersymmetric generalization of the holographic dual of a fractional topological insulator found in \cite{HoyosBadajoz:2010ac}. This is accomplished by introducing a nontrivial gauge field on the world volume of the probe D7 brane. The BPS equations are derived from the $\kappa$-symmetry transformation of the probe brane. The BPS equations are shown to reduce to two first oder nonlinear partial differential equations. Solutions of the BPS equations correspond to a probe brane configuration which preserves four of the thirty-two supersymmetries of the $AdS_5\times S^5$ background. Solutions of the BPS equations which correspond to a holographic fractional topological insulator are obtained numerically.Comment: 27 pages, 5 figure

Laser-Induced Breakdown Spectroscopy (LIBS) in a Novel Molten Salt Aerosol System

In the pyrochemical separation of used nuclear fuel (UNF), fission product, rare earth, and actinide chlorides accumulate in the molten salt electrolyte over time. Measuring this salt composition in near real-time is advantageous for operational efficiency, material accountability, and nuclear safeguards. Laser-induced breakdown spectroscopy (LIBS) has been proposed and demonstrated as a potential analytical approach for molten LiCl–KCl salts. However, all the studies conducted to date have used a static surface approach which can lead to issues with splashing, low repeatability, and poor sample homogeneity. In this initial study, a novel molten salt aerosol approach has been developed and explored to measure the composition of the salt via LIBS. The functionality of the system has been demonstrated as well as a basic optimization of the laser energy and nebulizer gas pressure used. Initial results have shown that this molten salt aerosol–LIBS system has a great potential as an analytical technique for measuring the molten salt electrolyte used in this UNF reprocessing technology

Searching Low and High What Types of Firms use Universities as a Source of Innovation?

This paper examines the factors that influence whether firms draw from universities in their innovative activities. The link between the universities and industrial innovation, and the role of different search strategies in influencing the propensity of firms to use universities is explored. The results suggest that firms who adopt “open” search strategies and invest in R&D are more likely than other firms to draw from universities, indicating that managerial choice matters in shaping the propensity of firms to draw from universities.University-industry links, innovation, external search strategies