twp views of volatility

twp views of volatility - wo Views of Volatility - CFO.com

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Unformatted text preview: wo Views of Volatility - CFO.com http://www.cfo.com/printable/article.cfm/11040359/c_11040462?f=options of 2 4/15/2008 8:35 AM Two Views of Volatility Mark-to-market accounting will lead to steeper ups and downs in share prices. But is that a bad thing? David M. Katz , CFO.com | US April 14, 2008 Regardless of whether they like fair-value accounting or not, most of the players involved with the wholesale changeover to the new system begun this quarter agree that it will deliver shocks to the financial system. The likely outcome? Waves of volatility through the capital markets for the foreseeable future. The knowledge of current market worth that fair value provides seems sure make investors more trigger-happy. What preparers and users of financial statements don't agree on, however, is whether fair value is worth the cost of that volatility. The differing viewpoints were very much on display at two gatherings held last week to discuss the implications of the changeover to fair value under SFAS No. 157, Fair Value Measurements . The standard is effective for fiscal years starting after Nov. 15, 2007 and for periods within those years. For sophisticated investorsthe managers of large pools of capitalthere's no question that fair value is worth more than its own weight in volatility. Putting down accurate bets on swings in the market is how they make their money, so more volatility means more opportunity. On top of that, mark-to-marketdown accurate bets on swings in the market is how they make their money, so more volatility means more opportunity....
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This note was uploaded on 02/05/2011 for the course ACCT 301 taught by Professor Hasan during the Fall '09 term at George Mason.

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twp views of volatility - wo Views of Volatility - CFO.com

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