A Major Threat Of An Economy Comes From Climate Change

What elements of the business (examples: revenues, investment needs, etc.) might be affected by weather risk or environmental liability, and how?

Derivative contracts were either negotiated with specific counterparties (over-the-counter) or were standardized contracts executed and traded on an exchange. Negotiated over-the-counter derivatives were comprised of forwards, swaps, and specialized options contracts. Over the counter derivatives can be tailored to meet the customers’ needs with respect to time and quantity and they are not traded in an organized exchange. On the other hand, standardized exchange-traded derivatives consisted of futures and options contracts. Even though over-the-counter derivatives were usually not traded like securities in an exchange, they might be terminated or assigned to an alternative counterparty. Standardized derivatives trade on an exchange and have time and quantity that are fixed.

Mr. Brown readily admitted that he was not at ease discussing the most recent approaches to risk reduction or hedging. He had received his MBA from Harvard in the 1960s and had spent most of his career working for a company that had little international exposure. Moreover, he was not familiar with derivatives such as currency options, which until recently were not widely traded. However, Mr. Brown had recently hired an assistant, Mr. Dan Pross, who had some knowledge of hedging and derivatives. As a student at UCLA, Mr. Pross had traded various types of derivatives for his own portfolio and was familiar with how they were traded. Although Mr. Pross did not have a finance background, he was, in Mr. Brown’s opinion, extremely intelligent and highly capable. Mr. Brown suggested that Mr. Pross make a presentation to the senior management on the use of derivatives to reduce risk.

There are lots of methods to solve the changes in foreign currency and interest rates issue, however, derivative financial instruments are the major tunes Nike enterprise has used to tackle this issue. Despite the fact that this approach does not wipe out comprehensively the risk of foreign exchange, Nike enterprise still utilize it to minimize or delay the negative consequences. Specifically, the derivative financial instruments comprise embedded derivatives, interest rate swap, and foreign exchange forwards and options contracts (Nike annual report, 2014).

In his speech at the 2016 Oscars, Leonardo DiCaprio declared that climate change is the planet’s most severe threat and encouraged his audience to “work collectively together and stop procrastinating” about the issue (Mooney). That seems ironic coming from the guy who played Jack, a character that drowned because of a giant iceberg, but I guess Leo understands the titanic effect climate change is having on the world. So what exactly is climate change? Climate change consists of variations in the average weather patterns of a region. This is mainly caused by a layer of greenhouse gases, like carbon dioxide, that blanket the atmosphere, trapping heat on earth’s surface. NASA reported that global temperatures have risen 1.4 degrees Fahrenheit

It is estimated that about 75% of American companies use derivatives. The main risk remains that most companies do not monitor their position frequently (Operational) and only few really understand the instruments (Intellectual). Moreover, as an off-balance-sheet item it reduces the public awareness of such items (accounting).

ic: Show how transactions in derivative instruments can be used to either hedge risks or to open speculative positions.

Hedging is a significant measure of financial risk management. Since the 1970s, the increasing number of powerful companies started to control the risk of the exchange rate, the interest rate and commodity by using financial derivatives. ISDA (2013) based on the Global 500 Annual Report 2012 survey found that 88 percent of companies use foreign exchange derivatives. Modigliani & Miller (1958) believed that if the financial markets were under perfect conditions, for instance, there was no agency costs, asymmetric information, taxes and transaction costs, hedging would not increase the company 's value because investors can hedge by themselves. However, a large number of practical studies have shown that hedging is beneficial

The evidence of climate change in Kenya is undeniable, while its effects on economic growth are no more mysterious; rather, they are rapidly unfolding to a startling reality and concern for humanity. Accelerated emissions of green house gases (GHGs) globally, from combustion of fossil fuels and unsustainable land use practices is the key driver of anthropogenic climate change, which is manifested in; temperature variations, frequent and extensive droughts, intensive rainfalls and floods, seasonal and regional pest and disease prevalence that result to conflicts for pasture and water resources,

Derivatives are financial contracts whose price is either linked to the price of an underlying asset, commodity, rate, index or the occurrence or significance of a certain event. The phrase derivative originated from how the price of these contracts is derived from the price of some underlying commodity, security or index or the magnitude of an event. The set of financial instruments that include futures, forwards, options and swaps are referred to by the term Derivative. A derivative can be combined with a security or loan which will be then called a hybrid instrument or alternatively a structured security and structured financing. (Dodd, R., 2002).

w how transactions in derivative instruments can be used to either hedge risks or to open speculative positions.

There is a need of more innovation in Derivative Market because in today scenario even educated people also fear for investing in Derivative Market because of high risk involved in Derivatives.Derivative Type:

In 1984, Financial Accounting Standards no. 80, Accounting for Futures Contracts, also known as FAS 80 had become effective. This document included all hedge accounting practices for entities in the United States. But FAS 80 had several faults. One of its faults was that it was bounded to exchange-traded futures and options and not to over the counter (OTC) derivatives. In 1999, FAS 80 was replaced by Financial Accounting Standards no.133, Accounting for derivative instruments and hedging activities. Despite, the numerous amendments, clarifications and interpretations this document had over the years, it still remains at the core of current derivatives accounting practices. This essay tends to provide a definition of a derivative, its characteristics

Climate change is an environmental and business issue that has gained more and more attention from society nowadays. The meaning of it seems to be not as easy as its name indicates which is merely a difference in climate. NASA (2011) reports, “Climate change, therefore, is a change in the typical or average weather of a region or city… Climate change is also a change in Earth 's overall climate. This could be a change in Earth 's average temperature, for example.” Therefore, climate change in our world has various effects in our life, which, for example, like extreme weather, global warming, higher sea-level and etc., do really affect our daily life and production process. Understanding what the climate change is, and why these changes occur so frequently and obviously in recent decades is of essential importance, not only for our economy, but also for society. This paper is going to introduce how this issue links to the business world from several dimensions. In the following paragraphs, the paper will demonstrate the complex relations between climate change and business by exploring on: first, the interaction between business and climate change with a brief stakeholder analysis; second, analyzing the business debates underpinning this issue consisting of stakeholders/shareholders debates and long term/short term debates and the way how business, and other stakeholders address the issue; third, figuring out potential solutions to address the issue and its obstacles.

creations of the Earth and we are beginning to take over that role partly because of our