How fair-value accounting can influence firm hedging

The potential influence of accounting regulations on hedging strategies and the use of financial derivatives is a research topic that has attracted little attention in both the finance and the accounting literature. However, recent surveys suggest that company hedging can be substantially influenced by the accounting for financial instruments. In this study, we illustrate not only why but also how the accounting regulations may affect hedging behavior. We find that under mark-to-market accounting, most firms concerned with earnings smoothness adopt myopic hedging strategies relative to the benchmark, cash flow hedging. The specific influence of the accounting regulations depends on market and firm-specific characteristics, but, in general, the firms dramatically reduce the extent of hedging addressing price risk in future accounting periods. We illustrate that the change in hedging behavior significantly dampens the increase in earnings volatility stemming from fair value accounting of derivatives. However, the adjusted hedging strategies may substantially increase the firms’ cash flow volatility.     

Markov models for commodity futures: theory and practice

The objective of this paper is to develop a generic, yet practical, framework for the construction of Markov models for commodity derivatives. We aim for sufficient richness to permit applications to a broad variety of commodity markets, including those that are characterized by seasonality and by spikes in the spot process. In the first, largely theoretical, part of the paper we derive a series of useful results concerning the low-dimensional Markov representation of the dynamics of an entire term structure of futures prices. Extending previous results in the literature, we cover jump-diffusive models with stochastic volatility as well as several classes of regime-switching models. To demonstrate the process of building models for a specific commodity market, the second part of the paper applies a selection of our theoretical results to the exercise of constructing and calibrating derivatives trading models for USD natural gas. Special attention is paid to the incorporation of empirical seasonality effects in futures prices, in implied volatilities and their ‘smile’, and in correlations between futures contracts of different maturities. European option pricing in our proposed gas model is closed form and of the same complexity as the Black–Scholes formula.     

The new investment theory and aggregate dynamics

This paper develops a dynamic general-equilibrium model of capital adjustments under monopolistic competition. Investments are partially irreversible. The model includes microfoundations for consumption decisions and capital-adjustment strategies. The effects of the model parameters on the optimal capital-adjustment strategy are determined analytically. A major result is that the aggregate net investment is proportional to the difference between the desired and previous aggregate capital. The speed of adjustment decreases with the cost of reversibility, is invariant to the shares of labor and capital, and increases with the level of macroeconomic uncertainty. However, the latter effect is not quantitatively important.     

Natural resources damages from Chernobyl

Conclusion In this note, we have reported a simple attempt to examine the stability over time of willingness-to-pay measures. By running a simple regression equation, we are able to explain why the average willingness to pay fell between two consecutively hunting seasons. The most important explanation is that hunting in the second hunting season was affected by the nuclear radiation accident at Chernobyl. Almost 10 percent of the hunters stated that their willingness to pay was affected due to the fact that their moose meat was contaminated. Since there are 24,000 moose hunters in the county of Västerbotten, we arrive at a yearly loss of about SEK 2 million for the county. Assuming that our figures apply also at the national level, Swedish moose hunters suffered a loss of almost SEK 30 million in the 1986 hunting season. If the same impact on hunters was felt for, say, 3 to 4 years, the present value of the loss caused by the Chernobyl accident could amount to over SEK 100 million (assuming a discount rate of 5 percent). This is a considerable amount, given that Swedish moose hunters constitute only a small fraction of all those who were affected by the Chernobyl accident.     

Endogenous monopsony and the perverse effect of the minimum wage in small firms

The minimum-wage rate has been introduced in many countries as a means of alleviating the poverty of the working poor. This paper shows, however, that an imperfectly enforced minimum-wage rate causes small firms to face an upward-sloping labor supply schedule. Since this turns these firms into endogenous monopsonists, the minimum-wage rate has the perverse effect of reducing employment in small firms as well as what these firms offer their workers. Thus, if there are only small firms, the minimum-wage rate makes all workers that would be employed in the absence of a minimum-wage rate worse off.     

It all started in Falköping, Sweden: Safe Communities - global thinking and local action for safety

After constructing the Safe Community model and applying it in Falk?ping Municipality, Sweden, a first step was taken to establish a Swedish network for knowledge exchange between Safe Communities. Falk?ping was the first to be involved, and was then joined by Lidk?ping and Motala. Later, there followed Harstad in Norway, and some communities in Australia. Criteria were developed to define the concept operationally. In 1986, collaboration was embarked upon with the World Health Organization, and since 1991 there have been annual conferences on Safe Communities. Many academic centres around the world are now involved. Certification of communities started in 1989, and 272 communities have now been designated as a Safe Community (20 February 2011). The regional organisations, especially the Asian and European networks, embrace more than half of the designated communities. A global organisation has been considered, but the strength of the movement lies in local engagement and regional networking.     

The research group, the conference programme and academic training in safety promotion - a report of the activities at Karolinska Institutet, Sweden

The research group was established in 1967 at Lund University and moved to Karolinska Institutet in 1980. Work began with epidemiological studies of all injuries in the local community in support of various experimental local interventions. An important element was the creation of 'surveillance systems' in healthcare. The work resulted in the establishment of a WHO Collaborating Centre and an international safety-building programme called 'Safe Communities'. In parallel, training at both master's and doctoral level and the building of a conference programme were embarked upon. The research group consists of three sections. Specific efforts are being made by some countries to address their own injury problems.     

Testing the central market hypothesis: a multivariate analysis of Tanzanian sorghum markets

The central market hypothesis is important in the analysis of market integration because it implies a specific market structure while avoiding a simultaneity problem. However, despite its importance, the central market hypothesis is difficult to test and is therefore often assumed. This article shows that the hypothesis can be tested in a Johansen cointegration test provided that prices are nonstationary. This approach is applied to reveal the existence of central markets for sorghum in Tanzania. The results indicate that the Tanzanian sorghum market can be grouped into two market regions, with prices being determined in a central market in each region.