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Norwegian Towns Investing in Tender Option Bonds


Marketed By :  LAP LAMBERT Academic Publishing   Sold By :  Kamal Books International  
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  • Product Description

In July 2007, eight Norwegian municipalities invested in complex financial instruments sold by Citigroup through Terra Securities. All eight municipalities were hydro electric power producers and a considerable amount of their tax income was based on concession fees from electricity. To stabilize the volatile income from the energy market, the municipalities sold the future electricity production and invested the present value in the international financial markets. Narvik Kommune, one of the eight municipalities, invested in a Tender Option Bond (TOB) using a Collateralized Debt Obligation (CDO) as collateral. Only four months after the initial investment, Citigroup liquidated the investment creating a realized loss of 90%. The analysis of the TOB and the CDO structure shows that the reason for the sudden drop in the investment value was related to the loss of correlation between taxable and tax-free interest rates causing the hedges to break. In addition, the mark-to-market valuation guidelines created by the Financial Accounting Standards Board (FASB) did not offer clear guidance for how to valuate illiquid securities such as the TOB and the CDO.

Product Specifications
SKU :COC48844
AuthorJan Olaf Gaudestad
Number of Pages88
Publishing Year2010-08-16T00:00:00.000
Edition1 st
Book TypeInternational economics
Country of ManufactureIndia
Product BrandLAP LAMBERT Academic Publishing
Product Packaging InfoBox
In The Box1 Piece
Product First Available On ClickOnCare.com2015-04-08 00:00:00
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