Other Papers and Articles

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Other Papers and Articles

Using a PERCS-for-Common Exchange Offer to Reduce the Costs of a Dividend Cut

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Douglas R. Emery and John D. Finnerty, Journal of Applied Corporate Finance, pp. 77-89. 1995 Winter

Financial Engineering as a Solution to Interest-Rate Risk Management Challenges

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John D. Finnerty, in Anthony G. Cornyn, Robert A. Klein, and Jess Lederman, eds., Controlling & Managing Interest-Rate Risk. New York Institute of Finance, New York, ch. 17. 1997

The PricewaterhouseCoopers Credit Derivatives Primer

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John D. Finnerty, PricewaterhouseCoopers LLP, New York 1998

Russian Settlements Will Put Credit Derivatives to the Test

Opinion. Focuses on the credit derivatives used in Russia. Effectiveness as a risk management tool; Value of the instrument; Structures of credit derivatives; Legal documentation of credit derivatives; Issues in using credit derivatives.

John D. Finnerty, American Banker, p. 21. 1998 December 4

Structuring Derivative Instruments to Adjust Risk Exposure: The Arithmetic of Financial Instruments

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John D. Finnerty, PricewaterhouseCoopers LLP, New York 1999

Will Credit Derivatives Survive the Stress Test?

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John D. Finnerty, Solutions, pp. 5, 8. 1999 Winter

Measuring Damages in Securities Fraud Class Action Lawsuits

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Keith R. Ugone and John D. Finnerty, CD-ROM accompanying Michael R. Young, ed., Accounting Irregularities and Financial Fraud. Harcourt Professional Publishing, New York. 2000

Securitizing Political Risk Investment Insurance: Lessons from Past Securitizations

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John D. Finnerty, in Theodore H. Moran, ed. International Political Risk Management: Exploring New Frontiers. World Bank, Washington, DC, pp. 77-147. 2001

How to Test Hedge Effectiveness Under FAS 133

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John D. Finnerty and Dwight Grant, Estrategica, pp. 8-16. 2001 April/June

Testing Hedge Effectiveness

SFAS 133, Accounting for Derivative Instruments and Hedging Activities, marked a large step forward in FASB's quest to record financial instruments at fair value. The new accounting for hedges can introduce some complexity into the financial statements that can be avoided if the hedge qualifies as a "highly effective" hedge. Applying the definition of such a hedge, however, is subject to debate. Three common methodologies for testing hedge effectiveness are presented and analyzed: the dollar-offset method, the variability-reduction method, and the regression method. The dollar-offset method, which is more sensitive to small changes, but also stresses the importance of examining all the specifics of the situation, is not recommended. SFAS 133 standardizes the accounting treatment for derivative instruments by requiring all entities to report derivatives as assets and liabilities on the balance sheet at their fair value. A case of a company that is considering hedging a purchase is used to illustrate the methods described.

John M. Althoff and John D. Finnerty, in Henry A. Davis, ed., FAS 133 and the New Derivatives Accounting Landscape. Institutional Investor, New York, pp. 44-51. 2001 Fall