...Risk Measurement Techniques FIN/415 Corporate Risk Management Business risk measurement is a process in which a company will try to determine what risks the business faces for each part of its operations. There are several different methods to measure risk for a company, the main goal is to better understand whether or not it is worth it to invest money in that particular area. After proceeding with due diligence and the potential profits out way the potential loss the company will proceed to make the investment. The earnings volatility method is where the potential earnings are measured against expected and unexpected losses. The idea is to identify the potential risks so a company can be well prepared to combat such a risk. There are various methods of identifying such exposures, loss exposures can be identified through analysis of the firm’s financial statements, discussions with managers throughout the company, surveys and risk management consultants. As we consider uncertainty, we use demanding quantitative studies of chance. Many of these methods are used to quantify how many times these possible events may occur. As models are created based upon probability statistics, it will probably recognize that these studies hold true to that they will present the best possible scenario. Corporations generate financial statements to obtain information about the status of the financial health of the company. Analysis of these statements provides...
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...NBER WORKING PAPER SERIES FINANCIAL RISK MEASUREMENT FOR FINANCIAL RISK MANAGEMENT Torben G. Andersen Tim Bollerslev Peter F. Christoffersen Francis X. Diebold Working Paper 18084 http://www.nber.org/papers/w18084 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 May 2012 Forthcoming in Handbook of the Economics of Finance, Volume 2, North Holland, an imprint of Elsevier. For helpful comments we thank Hal Cole and Dongho Song. For research support, Andersen, Bollerslev and Diebold thank the National Science Foundation (U.S.), and Christoffersen thanks the Social Sciences and Humanities Research Council (Canada). We appreciate support from CREATES funded by the Danish National Science Foundation. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2012 by Torben G. Andersen, Tim Bollerslev, Peter F. Christoffersen, and Francis X. Diebold. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Financial Risk Measurement for Financial Risk Management Torben G. Andersen, Tim Bollerslev, Peter F. Christoffersen, and...
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...Credit risk economic capital: Measure, Attribution of portfolio diversification benefit, Allocation key to portfolio components. Emmanuel Noblet Executive Summary Recent years have witnessed significant advances in the design, calibration and implementation of credit risk portfolio models. [BANK X] currently uses Moody’s KMV (Kealhofer, McQuown and Vasicek) Portfolio Manager ([PM]). Models enrich management’s ability to make informed decisions to identify concentrations of risk and opportunities for diversification within a disciplined and objective framework, and thus offer a more sophisticated, less arbitrary alternative to traditional lending limit controls. It is thus essential to make sure models are in line with management’s goals and vice versa to make sure management takes some perspective to understand how the central measure it returns, namely credit risk economic capital ([EC]), is constructed and what it means. This memo aims at explaining: A) how credit risk is measured; B) what the implications of attributing or not portfolio diversification effects are; C) how this portfolio measure is then allocated back to the portfolio components. A - How is credit risk measured? Back to basics, a credit risk portfolio model is a function that maps a set of facility-level characteristics and market-level parameters to a distribution of potential portfolio credit losses. This definition is better known as Value-at-Risk ([VaR]). The concept of VaR has become the standard...
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...measures of performance in the plan. They should be kept in mind at least to the extent that the performance measures chosen for the plan are compatible with an do not work against the overall accomplishment of the component’s business objectives. B. J Also, the relative current importance or ranking of these objectives will provide guidance in selecting the number and type of performance measures to be included in the plan. A plan that is difficult to understand will lose a great deal of its motivation force, as well as be costly to administer properly. For those who currently have a variable sales compensation plan(s) for their salespeople, a good starting point would be to consider the measures used in those plans. Although the measurements used for sales managers need not be identical, they should at least be compatible with those used to determine their salespeople’s commissions. However, keep in mind that a performance measure that may not be...
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...The Agilent Advantage Agilent Technologies The World’s Premier Measurement Company When measurement matters, engineers, scientists, researchers, manufacturers, businesses, universities, and government agencies rely on Agilent Technologies’ tools and solutions. From home entertainment to homeland security, from food safety to network reliability, and from communicating wirelessly to discovering the genetic basis of disease, Agilent Technologies provides the measurement capabilities that make our world more productive and a safer, healthier, more enjoyable place to live. Agilent Technologies operates two primary businesses — (1) electronic measurement (EMG) and (2) life sciences and chemical analysis (LSCA) — supported by a central research group, Agilent Laboratories. Our businesses excel in applying measurement technologies to develop products that sense, analyze, display, and communicate data. Agilent Technologies’ 19,000 employees serve customers in more than 110 countries. These customers include many of the world’s leading high-technology firms, which rely on our products and services to increase profitability and competitiveness, from research and development through manufacturing, installation, and maintenance. We enable our customers to speed their time to market and achieve volume production and high-quality precision manufacturing. In fiscal year 2006, Agilent Technologies had net revenue of $5 billion. More than half of this revenue was generated from outside...
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...The twelve guiding principles for instituting variable team-based pay structures within organization are: First principle, goals should cover areas that team members can directly affect, meaning compensation will not motivate employees unless there is a direct line of sight between performance and results. Second principle, balance the mix of individual and team-based pay a thoughtful balance of individual and group incentives may be most appropriate. Third principle, consult the team members, who will be affected, the programs with the greatest likelihood of success are those that have input from all levels of the organization, including members of the team, teams that support or interface with the team, those who will administer the plan, management, and customers. Fourth principle avoids organizational myopia; many programs fail not because they are inherently flawed, but rather because they create problems with other teams, groups, and units within the organization. Fifth, principle, determine eligibility who is qualifies for the plan, every member of the team should be eligible for the plan, and the plan should indicate when someone becomes eligible or loses eligibility. Six principles, determine equity method, there are two basic variations: same dollar amount and same percentage amount. Seventh, principle, quantify the criteria used to determine payout, there are two main ways to measure team results: financial and operational. Financial measures tend to be ''bigger...
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...Journal of Accounting and Economics 50 (2010) 344–401 Contents lists available at ScienceDirect Journal of Accounting and Economics journal homepage: www.elsevier.com/locate/jae Understanding earnings quality: A review of the proxies, their determinants and their consequences$ Patricia Dechow a, Weili Ge b, Catherine Schrand c,n a b c University of California, Berkeley, CA 94720, United States University of Washington, Seattle, WA 98195, United States University of Pennsylvania, Philadelphia, PA 19104, United States a r t i c l e i n f o abstract Available online 4 November 2010 Researchers have used various measures as indications of ‘‘earnings quality’’ including persistence, accruals, smoothness, timeliness, loss avoidance, investor responsiveness, and external indicators such as restatements and SEC enforcement releases. For each measure, we discuss causes of variation in the measure as well as consequences. We reach no single conclusion on what earnings quality is because ‘‘quality’’ is contingent on the decision context. We also point out that the ‘‘quality’’ of earnings is a function of the firm’s fundamental performance. The contribution of a firm’s fundamental performance to its earnings quality is suggested as one area for future work. & 2010 Elsevier B.V. All rights reserved. JEL classification: G31 M40 M41 Keywords: Earnings quality Earnings management Review Survey 1. Introduction Statement of Financial Accounting...
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...Outline for further research The main and utmost goal is to eliminate and prevent ‘workplace bullying’. After the introduction of term ‘workplace bullying’ in 1990s, still there hasn’t been a uniformal and accurate measurement tool implemented. Due to a variable factors in profession and working environment it may not be possible to create uniformal measurement for ‘workplace bullying’. To accurately measure and identify ‘workplace bullying’ in nursing, certain factors needed to researched. There are two type of Measurements currently used for measuring and each has it’s own characteristic of benefits and flaws. -Self-Assessment Method: gives the respondents free to decide whether they are bullied (Glalanaki and Papalexandris, 2013, p2110). Which has lower rates of ‘workplace bullying’. -NAQ – more commonly uses measurement where categorization is pre-set by the researcher tends to show higher rate of ‘workplace bullying’ Both method need to be conducted to accurately classify and identify ‘workplace bullying’ ,where NAQ might categorize the responder to be being bullied but he/she might not feel as they are being bullied. If a person doesn't feel being bullied is it right to account others as the persecutor? Most of the database samples were isolated to Ethnic, Gender and Geology, specially in the management level researches. Example: Surveys conducted by Etienne (Exploring Workplace Bullying in Nursing, 2014, p8) and Johnson (JONA, Vol 45,No. 9, p458), responds...
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...page 16 Error Analysis Types of Experimental Errors page 17 Error Analysis: Some Key Ideas page 18 Precision and Accuracy in Measurements A Tale of Four Cylinders Assessment of Errors and Uncertainties in IB Lab Reports Explaining Terms and Concepts in Error Analysis page 19 - 20 page 21 Mathematics of Evaluating Accuracy and Precision page 26 - 27 Rejection of Data page 28 More Examples of Propagating Error page 29 - 31 page 22 - 25 Typical Instrumental Uncertainties page 32 Checklist for Writing IB Lab Reports page 33 - 34 Please read carefully and keep this handy reference for future use in writing exemplary lab reports. Page 1 IB Guide to Writing Laboratory Reports Explanations, Clarifications, and Handy Hints The nature of science is to investigate the world around you. An inquiring mind is essential to science. Experiments are designed by curious minds to gain insight into wonder-producing phenomena. Hopefully, this process of designing experiments, doing experiments, thinking about experimental results, and writing lab reports will tremendously benefit YOU! IB Chemistry is the challenge you have chosen. Congratulations! IB learners strive to be: Inquirers Knowledgeable Thinkers Communicators Principled Open-minded Caring Risk-takers Balanced Reflective * the IB learner profile This process will challenge your thinking skills more than you can imagine. We...
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...discover something. Method of knowing: approaches to answer question 1. Tenacity==>idea is not changing, so in future i) Always been that way true ii) People do not consider the possibility that come of their beliefs might be wrong even if there is conflicting information. iii) Problem: Even when proved wrong, such beliefs are hard to overcome 2. Authority i) We know many things because somebody we trust has given us that information ii) Problem: issue of the credibility the source 3. Intuition i) Self-evident ii) People think something is true because they believe they are insightful(successful from prior experience) iii) Problem * Risks in cost and effort * May be reasonable in thought but not in reality 4. Science (Characteristics of scientific research) i) Public ii) Objective: * has explicit rule and procedure * based on fact, no opinion and interpretation iii) Empirical * Something can be through observation and experience * Can be measured iv) Systematic and accumulative v) Predictive Research procedure: 1) Selection of problem 2) Review of existing research and theory 3) Statement of hypothesis or research question 4) Determination of methodology and design 5) Data collection 6) Analysis and interpretation of data 7)...
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...July 25, 1999 Chapter 2: Normative Accounting Theory The purpose of this chapter is to identify those characteristics of accounting information that are thought to make one system of accounting better than another. Since the material is based on eighty years of accounting research, by countless researchers, it is clearly neither possible nor desirable to review all the arguments, or even the main arguments, used by advocates of all the different competing accounting systems. For instance, it would be difficult to improve on Henderson and Peirson's [1983] 268-page thorough, balanced, well-documented portrayal of the evolutionary development of accounting thought from the "pre-theory period" (1494-1800), through the "general scientific theory period" (1800-1955), and the "general normative theory period" (1956-1970), to the "scientific theory period" (post-1970). The approach adopted for this chapter is therefore to aim for a concise summary of the products of normative accounting theory. The objective is to search for common ground wherever possible, without ignoring important differences. What is reported is intended to cover most of what is said to be "good", "useful", or "desirable" about accounting information. The four-step structure of this chapter is depicted in Figure 2.1 (next page). To begin with, a search of the literature identifies three main Objectives of Accounting. This list of objectives, which is presented and discussed in Section 2.1, is intended...
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...What types of measurements indicate that climate change is occurring? We can definitely measure the climate changes when change occurs in the temperature. This winter has been horrific and seeing the temperature drop drastically is definitely a sign of the climate change. More snow and precipitation is seen. Water levels rise. I live right near a river and the ice buildup caused flooding in the nearby neighborhoods where some residents needed to evacuate. In the spring, pollen counts rise which can indicate climate change. Droughts can occur which is an obvious climate change. How were these measurements collected? Technology has definitely progressed and collecting measurements in climate change is easier to record. Above just observation, satellites can collect data along with instruments like weather balloons. Comparing old data records can help us see the changes over time by comparing and analyzing data. What are some of the challenges associated with collecting data over large periods of time (i.e., hundreds of years)? Since technology wasn't as advanced as it is now, data collected over the years may not be as detailed and we can get now. Theories have been created and it’s not possible to go back in time to reevaluate what was written for that time. Scientists were limited in what they could test as compared to today’s abilities. How has technology enhanced our ability to collect the data necessary to understand climate change? Since the equipment...
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...ACCT 463/CCMA523 WINTER 2015 ASSIGNMENT 1 KRANWORTH CHAIR CORPORATION Company Overview Kranworth Chair Corporation (KCC) was incorporated in 1987 by Weston Krantsz and Kevin Wentworth. KCC is a manufacturing company, and the name of the Company is associated with FOLD-IT! brand that includes production of high-quality and fashionable portable, folding chairs and related products. The main manufacturing line was concentrate to produce (i) folding chairs (produced at several price points) and related products (tripod stools, ottomans, costs, and stadium seats) in Mexico and China manufacturing facility and (ii) custom-designed products in the Denver location. The main KCC’s customers were: • Major retail chains (Wal-Mart, K-Mart, Target) that provided highest sales volumes but with lower gross margin; • Other retail chains (e.g. sporting goods); • Corporations for custom-design products orders. From the begging of activity KCC was a Company that had little competition and high margin rate. However, since 1999 the Company faces some cash and business issues related to the new loan, the new competitors on the market and the worldwide recession. At that point of time Kevin realized that in order to keep the business in good shape new changes should be done . This changes are to solve the main strategic issues the company faces, which include: eroding profit margin, fierce completion, inventory in more than a thousand types of products and parts and rather tight...
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...1. How would you define what a sustainable product is? How could you measure it? Who should define the standards of what counts as sustainable? A sustainable product is a product that provides opportunities to reduce costs and improve environmental performance. The product cannot negatively impact society and the environment. It should positively impact the well-being of mankind. The parties involved in manufacturing, selling, and purchasing the product become a good steward of the environment by engaging in the commerce of such a product. Sustainability should be measured by a third party with no conflict of interest such as a tax auditor. A third party should define the standards of what counts as sustainable with the involvement of NGOs, market players, consumers, and activists in order to define an agreed upon set of standards that will be adopted by all. 2. Assume you are the senior Vice President for Sustainability at Walmart. What is your analysis of the problem (from Walmart's perspective) of defining sustainable products? Selling sustainable products was not possible unless Walmart could find a means of defining, measuring, and communicating its chosen environmental or sustainable standards. Walmart debated whether or not it should "establish a new set of product standards in-house, buy or license an existing set of standards on the open market, or lead a collaborative effort to develop public standards, together with other large corporations and stakeholder...
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...According to FASB, This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. The argument behind the use of present value techniques is that more relevant information is produced due to factoring in the uncertainties and risks associated with the amount and timing of cash flows. This form of accounting measurement is designed to capture the economic substance of a set of cash flows in a manner similar to that of how the market behaves. Present value techniques attempt to measure assets (or liabilities) at their fair value. Present value in accounting measurements argues that its application results in a decrease in the reliability of accounting information. A present value calculation requires numerous estimates regarding the timing and amount of future cash flows, interest rates, and economic conditions. The use of these estimates is seen as a threat to the reliability of accounting information either through differing opinions as to future conditions...
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