Liabilities and Linear: Difference between pages

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imported>Doug Williamson
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imported>Doug Williamson
(Add definition - source - The Treasurer online 14 Oct 2022 - https://www.treasurers.org/hub/treasurer-magazine/corporates-act-mitigate-fx-volatility)
 
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1. ''Financial reporting - balance sheet''.
1. ''Numerical relationships.''


In financial reporting, liabilities are amounts or obligations of a reporting entity arising from past transactions or events, the settlement of which may result in:
Straight-line, or approximately straight-line.


* The transfer or use of assets, for example payments of money
* The provision of services or
* Other yielding of economic benefits in the future.


2.  ''Interest rate derivatives.''


Examples include overdrafts, trade payables, accruals and provisions.
Describing interest rate derivatives whose values are determined primarily by the reference interest rate, in an approximately proportional relationship.


Examples include interest rate swaps and forward rate agreements.


Liabilities are represented in the balance sheet by credit balances.
Contrasted with non-linear interest rate derivatives.




2. ''Lending - borrowing.''
3. ''Foreign exchange contracts.''


More generally, liabilities are any obligations or amounts owed to others (whether or not they are obligations of a financial reporting entity).
Describing foreign exchange contracts whose values are determined primarily by the related foreign exchange rate, in an approximately straight line - or sometimes exactly straight line - relationship.
 
Examples include forward foreign exchange contracts.
 
Contrasted with non-linear - or exotic - contracts.
 
 
:<span style="color:#4B0082">'''''Corporates act to mitigate FX volatility'''''</span>
 
:“Currency volatility has become one of the dominant macroeconomic trends of the year. The dollar has surged to 20-year highs while the pound and euro have slumped to 50- and 20-year lows respectively. The pressure on corporates is intensifying as they adapt to this new environment.
 
:“During calmer times pre-COVID-19, some corporates moved towards more exotic products. Now they appear to be reverting back towards the more straightforward linear products such as forwards, which are more liquid and easier for corporates to unwind should the market move against them.”
 
:''Eric Huttman, CEO at MillTechFX, The Treasurer online - 14 October 2022.''




== See also ==
== See also ==
* [[Accrual]]
* [[Compounding effect]]
* [[Assets]]
* [[Corporate]]
* [[Balance]]
* [[Currency contract]]
* [[Balance sheet]]
* [[Exotic]]
* [[Capital]]
* [[Exponential growth]]
* [[Compound instrument]]
* [[Foreign exchange forward contract]]
* [[Credit balance]]
* [[Forward rate agreement]]
* [[Disaggregation]]
* [[FX]]
* [[Discharge]]
* [[Geometric progression]]
* [[Equity]]
* [[Interest rate derivative]]
* [[Exemption clause]]
* [[Interest rate swap]]
* [[Fair value]]
* [[Linear interpolation]]
* [[Financial liability]]
* [[Linear regression]]
* [[Financial reporting]]
* [[Liquid]]
* [[Indemnity clause]]
* [[Macroeconomics]]
* [[Interest gap]]
* [[Mitigate]]
* [[Liabilities and equity]]
* [[Non-linear]]
* [[Mismatch]]
* [[Positive linear relationship]]
* [[Net assets]]
* [[Unwind]]
* [[Net worth]]
* [[Volatility]]
* [[Off balance sheet finance]]
* [[Offset]]
* [[Overdraft]]
* [[Provision]]
* [[Reporting entity]]
* [[Trade payables]]
* [[Wealth]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Financial_products_and_markets]]

Revision as of 19:30, 13 October 2022

1. Numerical relationships.

Straight-line, or approximately straight-line.


2. Interest rate derivatives.

Describing interest rate derivatives whose values are determined primarily by the reference interest rate, in an approximately proportional relationship.

Examples include interest rate swaps and forward rate agreements.

Contrasted with non-linear interest rate derivatives.


3. Foreign exchange contracts.

Describing foreign exchange contracts whose values are determined primarily by the related foreign exchange rate, in an approximately straight line - or sometimes exactly straight line - relationship.

Examples include forward foreign exchange contracts.

Contrasted with non-linear - or exotic - contracts.


Corporates act to mitigate FX volatility
“Currency volatility has become one of the dominant macroeconomic trends of the year. The dollar has surged to 20-year highs while the pound and euro have slumped to 50- and 20-year lows respectively. The pressure on corporates is intensifying as they adapt to this new environment.
“During calmer times pre-COVID-19, some corporates moved towards more exotic products. Now they appear to be reverting back towards the more straightforward linear products such as forwards, which are more liquid and easier for corporates to unwind should the market move against them.”
Eric Huttman, CEO at MillTechFX, The Treasurer online - 14 October 2022.


See also