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Accounting for financial instruments in the banking industry: conclusions from a simulation model
(2003)
The paper analyses the effects of three sets of accounting rules for financial instruments - Old IAS before IAS 39 became effective, Current IAS or US GAAP, and the Full Fair Value (FFV) model proposed by the Joint Working Group (JWG) - on the financial statements of banks. We develop a simulation model that captures the essential characteristics of a modern universal bank with investment banking and commercial banking activities. We run simulations for different strategies (fully hedged, partially hedged) using historical data from periods with rising and falling interest rates. We show that under Old IAS a fully hedged bank can portray its zero economic earnings in its financial statements. As Old IAS offer much discretion, this bank may also present income that is either positive or negative. We further show that because of the restrictive hedge accounting rules, banks cannot adequately portray their best practice risk management activities under Current IAS or US GAAP. We demonstrate that - contrary to assertions from the banking industry - mandatory FFV accounting adequately reflects the economics of banking activities. Our detailed analysis identifies, in addition, several critical issues of the accounting models that have not been covered in previous literature.
Auf dem Internationalen Kongress für Kunstgeschichte in Berlin 1992 stellte Rosalind Krauss eine neue Interpretation von Pollocks Drip Painting vor, die sich gegen "sublimatorische" Lesarten richtete. Pollock habe nicht bestimmte künstlerische Intentionen verfolgt. Es gebe keinerlei Evidenz dafür, dass er über Ideen verfugt habe, die ihm nicht von anderen eingegeben oder durch die Erwartungen und Normierungen der Rezipienten gesteuert seien. Solche herkömmlichen Verständnisweisen hielten an einem traditionellen Gestaltsehen, am Prinzip der Repräsentation fest. Erst die auf Pollock folgende Künstlergeneration habe den eigentlichen Stellenwert seiner drip paintings "through a far more violent and desublimatory grid" erkannt. Cy Twomblys 'Graffiti', Robert Morris' 'anti-form' und Andy Warhols 'Piss Painting' hätten die triviale, biologisch-naturgesetzliche Dimension von Pollocks Tropftechnik bewusst gemacht und auf die in ihr vorgenommene Entweihung der vertikal anthropomorphisierten Bildebene verwiesen. Die neue Horizontalität oder auch 'Niedrigkeit' des Bildes entlasse es aus den Intentionen seines Schöpfers, bestimme die Form zur Spur eines Unbeabsichtigten, Unbewussten. ...
Die von Hegel übernommenen und in zahlreichen Romanen lancierten Stereotypen haben noch heute nichts von ihrem suggestiven Potential verloren, denn sie schaffen einfache Evidenzen in einer komplizierten Welt. Die Legende vom Durchschnittsbürgerkonsumenten, der nicht einmal weiß, wo Afghanistan liegt, ist symptomatisch für die Aktualität des Jahrhunderte alten Paradigmas der "Erfindung Amerikas".
Equal size, equal role? : interest rate interdependence between the Euro area and the United States
(2003)
This paper investigates whether the degree and the nature of economic and monetary policy interdependence between the United States and the euro area have changed with the advent of EMU. Using real-time data, it addresses this issue from the perspective of financial markets by analysing the effects of monetary policy announcements and macroeconomic news on daily interest rates in the United States and the euro area. First, the paper finds that the interdependence of money markets has increased strongly around EMU. Although spillover effects from the United States to the euro area remain stronger than in the opposite direction, we present evidence that US markets have started reacting also to euro area developments since the onset of EMU. Second, beyond these general linkages, the paper finds that certain macroeconomic news about the US economy have a large and significant effect on euro area money markets, and that these effects have become stronger in recent years. Finally, we show that US macroeconomic news have become good leading indicators for economic developments in the euro area. This indicates that the higher money market interdependence between the United States and the euro area is at least partly explained by the increased real integration of the two economies in recent years.
The paper analyses the effects of three sets of accounting rules for financial instruments - Old IAS before IAS 39 became effective, Current IAS or US GAAP, and the Full Fair Value (FFV) model proposed by the Joint Working Group (JWG) - on the financial statements of banks. We develop a simulation model that captures the essential characteristics of a modern universal bank with investment banking and commercial banking activities. We run simulations for different strategies (fully hedged, partially hedged) using historical data from periods with rising and falling interest rates. We show that under Old IAS a fully hedged bank can portray its zero economic earnings in its financial statements. As Old IAS offer much discretion, this bank may also present income that is either positive or negative. We further show that because of the restrictive hedge accounting rules, banks cannot adequately portray their best practice risk management activities under Current IAS or US GAAP. We demonstrate that - contrary to assertions from the banking industry - mandatory FFV accounting adequately reflects the economics of banking activities. Our detailed analysis identifies, in addition, several critical issues of the accounting models that have not been covered in previous literature. December 2002. Revised: June 2003. Later version: http://publikationen.ub.uni-frankfurt.de/volltexte/2005/1026/ with the title: "Accounting for financial instruments in the banking industry : conclusions from a simulation model"
Kulturelle Bedeutungen und zivilreligiöse Vorstellungen in der amerikanischen Sicherheitspolitik
(2003)
Taking shareholder protection seriously? : Corporate governance in the United States and Germany
(2003)
The paper undertakes a comparative study of the set of laws affecting corporate governance in the United States and Germany, and an evaluation of their design if one assumes that their objective were the protection of the interests of minority outside shareholders. The rationale for such an objective is reviewed, in terms of agency cost theory, and then the institutions that serve to bound agency costs are examined and critiqued. In particular, there is discussion of the applicable legal rules in each country, the role of the board of directors, the functioning of the market for corporate control, and (briefly) the use of incentive compensation. The paper concludes with the authors views on what taking shareholder protection seriously, in each country s legal system, would require.