November 26, 2010 – 2:20 pm
In an earlier post we discussed one of several reasons why companies tend to focus their hedges on short-term cash flows, leaving long-term cash flows unhedged. There we pointed out that the right response over the long-run to fluctuating prices and other risk factors, is changes in the operations and investments of the firm in [...]
November 24, 2010 – 4:21 pm
The International Energy Agency, OPEC and the International Energy Forum organized two days of meetings to discuss the interaction between financial and physical energy markets and the regulation of these markets — see the Financial Times’ coverage here and here. I was asked to speak on international coordination of regulation. Here are my slides. I [...]
November 22, 2010 – 2:16 pm
People are often surprised at the short horizon of many corporate hedges. For example, airlines with disciplined hedging programs, only buy fuel forward for a short horizon. A typical hedging program locks in 100% of anticipated fuel purchases over only the next few months—possibly 3-6 months. Thereafter the hedge ratio declines sharply, so that the [...]
November 19, 2010 – 2:23 pm
The Fed has just announced a second round of stress tests for US banks. This follows the first round of tests in Spring 2009 with results announced in May. There are many interesting issues one could touch on in regard to the role of stress tests in regulating the banking system. But this blog is [...]
November 18, 2010 – 2:41 pm
General Motors sold more than $20 billion in stock yesterday, the largest IPO ever. The sale is a milestone in the US government’s takeover of GM and Chrysler. Of course, success has many parents, so there is a small debate about who and what is the cause for the, so far, success of the turnaround [...]
November 11, 2010 – 10:12 pm
Nintendo’ management has decided to keep in US$ a significant fraction of its revenues from exports. Nintendo has a large $7.4 billion pile of cash held in foreign currencies (70% of Nintendo’s total cash reserves). See this Wall Street Journal article. With the sharp rise in the Yen since May 2010, after a crisis in [...]
November 10, 2010 – 10:51 pm
The last two years has seen a dramatic decoupling of natural gas and oil prices. After prices for both commodities collapsed at year-end 2008, the price of oil recovered, but the price of natural gas has remained low. The ratio of the natural gas price to the oil price is at the lowest point in [...]
November 10, 2010 – 2:29 pm
As the level of cash stockpiled by companies grows, so do the disputes between shareholders and management. The Financial Times reviews the positions being staked out by activist shareholders who want management to pay out more of that money. It’s no surprise that there are disagreements about whether the amount of cash held is too [...]
November 8, 2010 – 11:15 pm
My colleague, Yangbo Du, and I have just released a study of the dynamic structure of capacity factor risk through the life-cycle of a nuclear power plant. This is based on the performance of reactors in countries all around the world, using the International Atomic Energy Agency’s database. Here is the profile of the variance [...]
