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OverviewIn 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. Full Product DetailsAuthor: Jan Olaf GaudestadPublisher: LAP Lambert Academic Publishing Imprint: LAP Lambert Academic Publishing Dimensions: Width: 15.20cm , Height: 0.50cm , Length: 22.90cm Weight: 0.141kg ISBN: 9783838385792ISBN 10: 3838385799 Pages: 88 Publication Date: 16 August 2010 Audience: General/trade , General Format: Paperback Publisher's Status: Active Availability: In Print This item will be ordered in for you from one of our suppliers. Upon receipt, we will promptly dispatch it out to you. For in store availability, please contact us. Table of ContentsReviewsAuthor InformationTab Content 6Author Website:Countries AvailableAll regions |