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imported>Doug Williamson |
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| ''Risk management''. | | ''Fair value accounting. '' |
| A form of hedge using options.
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| Collar hedges are more complex structures, compared with a simpler cap option or floor option.
| | Unobservable valuation inputs are valuation inputs: |
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| An advantage of collars is that they can reduce the net premium paid for the hedge. They do this by adding a short option position to the simple cap or floor. In other words by the corporate hedger ''selling'' an option (in addition to ''buying'' the simple cap or floor option).
| | #For which market data are not available and |
| | #That are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability. |
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| The premium received by the corporate reduces their net premium payable. The net premium payable is often zero. (This arrangement is called a ''zero cost'' collar.)
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| It is also possible - though less common - to construct a ''negative cost'' collar, the net premium being ''receivable'' by the corporate.
| | ==See also== |
| | | *[[Fair value]] |
| The case where the corporate hedger ''pays'' a net premium for the collar is known as a ''positive cost'' collar.
| | *[[IFRS 13]] |
| | | *[[Observable valuation inputs]] |
| In all cases, the net result and intention is to ‘collar’ the all-in hedged rate achieved within a range which is acceptable to the hedging corporate.
| | *[[Valuation inputs]] |
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| Collars are also known as ''cylinders'', ''corridors'' or ''range forwards''.
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| == See also == | |
| * [[Cap]] | |
| * [[Floor]]
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| * [[Negative cost collar]] | |
| * [[Positive cost collar]] | |
| * [[Zero cost]] | |
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| | [[Category:Accounting,_tax_and_regulation]] |
Revision as of 20:09, 27 June 2022
Fair value accounting.
Unobservable valuation inputs are valuation inputs:
- For which market data are not available and
- That are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability.
See also