I read the book “The Peter Lynch Method. Strategy and tactics of the individual investor." In his book, Peter Lynch reveals a lot of different information about what you should pay attention to when buying American stocks. For myself, from this book I highlighted the chapter “key investor indicators”, which I will briefly outline in this article. Even though this book is about the American market, I think we can take something from it and apply it to our reality in Russian market.

Indicators that you should pay attention to when deciding whether to buy a stock. The order in which they appear is not related to their significance:

1. Share of sales.

If the company's interest is due to a particular product, the first step is to find out what this product means for the company, what is its share in the company's sales. If the share of sales of products you are interested in in the total income of the enterprise is not large (less than 10%), then you should not choose this company to buy shares only because of the product. You need to ask if there is another manufacturer of this product or forget about it.

2. P/E ratio

Serious earnings analysis involves the ratio of a stock's price to its earnings, known as the P/E ratio or multiple. This coefficient numerically characterizes the relationship between the stock price and the company's profit. The P/E ratio helps you understand whether a stock is overvalued or undervalued relative to the company's earnings potential. The P/E ratio can be thought of as the number of years it will take to pay back the initial investment, assuming earnings remain the same.

If you buy shares whose price is twice as high as earnings (P/E=2), then the initial investment will pay off in two years, and if its price is 40 times higher (P/E=40), then after 40 years. Slow-growing companies have the lowest P/Es, high-growth companies have the highest P/Es, and cyclicals have the highest P/Es. Below average P/E is (7-9), average P/E is (10-14), above average P/E (14-20). But buying shares just because a company's P/E is low makes no sense.

A company with fairly priced shares has a P/E equal to its earnings growth rate. For example, Coca-Cola, with an equal P/E of 15, should grow profits by 15% per year. If P/E half as much profit growth rate, this is considered very positive signal if at two more growth rate is very negative.

3. Cash position

You need to read the company's consolidated balance sheet, which shows assets and liabilities. Pay attention to short-term assets in the form of cash and cash equivalents, plus in the form of liquid shares. These two items constitute the cash position.

It is also necessary to refer to the second part of the balance sheet, namely the article “ Long-term loans". A reduction in debt obligations compared to previous years is a sign of prosperity. A cash position that far exceeds debt obligations improves the balance sheet. A lower cash position worsens the balance sheet. The calculations do not take into account short-term debt, given that the value of the company's other assets (inventory, etc.) exceeds short-term debt obligations.

Need to determine net cash position from the company's prepared statement by subtracting long-term debt from the cash position. Often long-term liabilities are higher than the cash position, cash items are reduced, debt increases, and the company has a weak financial position.

Dividing the net cash position by the number of issued shares of the company shows that per 1 share there is N amount of cash, this indicator is important. He says that N is the amount of cash per share, a kind of paper bonus that represents a hidden return of money. In addition, information about the company's own share repurchase is also important, which is a good sign. It is also necessary to take into account information about whether profits are growing and whether dividends are always paid. Target brief analysis is to find out whether the company's position is weak or strong.

4. Share of borrowed funds

How much does the company owe and how much debt does it have? Debt versus equity. This is the question that a credit officer is interested in when determining your credit risk.

A company's financial strength can be quickly assessed by comparing equity with debt on the right side of the balance sheet. It is necessary to calculate the debt/equity ratio (total share capital of the company).” In a normal balance sheet, equity should account for 75% and debt should account for 25% of the ratio. Short-term liabilities can be ignored when assessing if there are enough cash to cover them. Weak balance if 80% debt, and 20% equity.

Bank loans are the worst type of borrowing and are repayable on demand. Bond loans are the best type of borrowing; they do not provide for payment on demand while the borrower pays interest.

5. Dividends

Those who pay dividends are not inclined to throw away money on diversification. Dividends keep stocks from falling to a certain extent. On the other hand, less large companies Those that don't pay dividends and use the money to expand profits often experience faster growth.

prefers a company with an aggressive growth policy over boring companies that pay stable dividends. If you're buying a company's shares for the stability of its dividend payments, ask about the company's ability to pay them during downturns and financial difficulties. The best option for an investor is a company that increases dividends for 20-30 years.

6. Book value

Book value often has no relation to the actual value of the company. It is either higher or lower than the real value of the company. Overvalued assets are especially treacherous when there is a lot of debt.

Hidden assets: The book value is lower than the actual value as often as it is higher. Companies that own natural resources (land, timber, oil, precious metals) or brands like Coca-Cola may only show a fraction of their true value on their balance sheet.

7. Cash flow

Cash flow is the amount of money a company receives as a result of its activities. All companies receive funds, but the costs associated with receiving them are different for everyone. If it requires significant expenses to generate cash, the company will not be able to get very far. You need to take into account free cash flow - this is the money that remains after subtracting capital costs.

Cash flow is used to value a stock. A stock priced at $20 with annual cash flow of $2 per share has a standard ratio of 1/10. This 10% cash flow yield represents the stock's minimum expected return over the long term.

8. Inventories Peter Lynch looks at whether stocks are increasing. If a company boasts of growth of 10%, but inventories increase by 30%, this is a bad signal. The company should compromise on price and get rid of inventory. Otherwise, she may face problems next year. will compete with the old one, as a result, inventories will increase so much that the company will have to greatly reduce prices, and therefore profits. Rising inventories aren't as bad for auto companies.

9. Pension plans

The absence of pension obligations is a big plus. Even in bankruptcy, the company is obliged to fulfill pension obligations.

10. Growth themes

A business that, despite annual price increases, retains its clientele is an excellent investment opportunity. All other things being equal, a company with a growth rate of 20% and a P/E of 20 is a much better acquisition than a company with a growth rate of 10% and a P/E of 10.

11. Summary

The bottom line is the number at the end of the income statement, in other words profit after tax. Profit before taxes or gross profit is the main indicator by which a company is evaluated. It shows what is left of annual sales revenue after subtracting all costs, including depreciation and interest payments. Comparing the gross profit of companies in different industries is of little use; comparison in the same industry is another matter. The company with the highest gross profit is the lowest cost business, and the business in turn has the highest chance of survival.

Here is a brief summary of the important points of the book that I wrote; they were the first things I noticed when reading it.

Refers to the amount of actual cash that a given corporation, bank, or other legal entity has in its possession at a particular point on time. Generally, this includes the actual cash or accounts that are held by the company. It may also include other assets that are easily converted into cash, called liquid assets, such as short-term bonds or certificates of deposit. This does not include assets that have a low degree of liquidity, such as food, real estate, machinery or other items that cannot be quickly and easily converted into cash.

While individuals can technically have a cash position equal to the amount of their liquid investments, the term is most often used in a business context. A company, for example, lists its cash position on its balance sheet and communicates that cash position to investors, creditors, or other interested parties. The bank must have a cash position as well.

Generally, banks are required to have a minimum set amount of cash on hand based on the amount of funds people deposited into the bank. For example, if a brand new bank opened and 100 individuals each deposited $10 US Dollars (USD), then the cash position required by the bank would be based on $1,000 USD in escrow funds. The bank would thus be required to have at least $1,000 USD in cash so that it would have money to pay each of those people if they all came to take out their money at the same time.

For corporations, on the other hand, determining how much cash to have can be tricky. In general, a company does not want to have too little cash on hand. Cash is required to grow the fund's business and make purchases of supplies and services necessary to run the business. Cash can also be a sign of solvency and stability within a company. Cash, however, produces a relatively low investment return compared to other less liquid investments, and having too much cash on hand can be a downside to a company.

Investors can look at the cash positions of various companies when determining whether to invest or not. If a company does not have what is considered an adequate amount of cash, it may appear to be a weak investment. Achieving the proper balance in this way is important for a public company hoping to attract investors.

Trading on the stock exchange in the 21st century is an extremely high-tech process. In order for an investor to be able to carry out a transaction, various trading terminals are developed, brokerage systems are created that can cope with heavy loads, APIs for them are implemented, high-speed communication channels are laid, new technologies are put into operation, etc. This is not surprising - after all, the difference between success and failure, profit or loss in the stock market is often only a fraction of a second. Therefore, everything should work like clockwork and very quickly.

We have already talked about direct connection technologies, which are used to send trading orders directly to the exchange, bypassing the broker's systems. However, direct access costs a lot of money and is not affordable for all traders, who nevertheless want to make transactions with maximum speed. In this topic, we will talk about how we carried out a complete upgrade of our trading system, which allowed us to create an infrastructure product that meets world standards of stock market technologies.

Welcome to the matrix

ITinvest has always been not just a broker that provides clients with the opportunity to trade on the stock exchange, but also a technological developer of trading products. Our founders are people who had experience in programming and have always been associated with technology. Therefore, part of the company's strategy has always been the development of its own software products.

Both money and time have always been invested in this. As a result, at the beginning of the 2000s, its own trading system, it-trade, was created, which included modules for processing trade orders, middle and back offices, as well as a digital signature system to ensure security. In addition, we have created a line of our own trading terminals. One of them, SmartTrade, has become very popular on the Russian market and, in principle, still remains a reliable and convenient means of placing trading orders on the market and analyzing the market itself. Clients could also carry out trading operations using the web interface.

The system has been operating for more than 13 years and the entire set of software products is objectively outdated. It became increasingly difficult to maintain them and develop functionality (one SmartTrade terminal has more than 1 million lines of code), in addition, the architecture itself also ceased to meet modern requirements - we had two trading desks with servers, and in order to develop the company’s business, their the number had to be increased, which would lead to problems with controllability and synchronization.

As a result, all efforts were spent on maintaining and normal functioning shopping complex, but there was no talk of developing new products. Requirements for work speed and quality were constantly growing, and meeting them within the framework of the old architecture and paradigm was becoming increasingly difficult. In addition, the “old” trading system had one weak link - its core, the risk management system (RMS), which fundamentally could not be parallelized and duplicated. Accordingly, its failure could stop trade.

All this confronted us with the need to create a new trading system that would meet the best world standards. Due to its matrix structure, and also due to the fact that the apparatus of matrix theory was used in calculating risks, the new system was called MatriX, that is, “Matrix”.

Architecture

If in broker system previous generation clients received all exchange data (orders, transactions, account status, etc.) by connecting to a single access server, then in the Matrix project it was decided to divide these data streams into two main “banks”: servers for accepting orders (Order Mamagagemegent Servers (OMS), and servers that provide market data and account information to clients.

The hardware of the complex uses PowerEdge blade servers and PowerVault storage systems from Dell.

Technology and hardware

In addition to the architecture, the quality of a brokerage trading system depends on the quality of the software that implements the main functions, as well as on the reliability of the hardware on which it runs. In order to be sure that our product truly complies with global standards, tenders were held among suppliers of both hardware solutions and software developers.

As a result, the iron part new system was provided by Dell, and the software (and some hardware) was supplied to us by IBM.

Dell PowerEdge Servers

Under each of these balancer servers there are several more servers that solve local problems. Client connections are distributed among them so that each server receives the same load.

Our servers are connected to each other and to the exchange trading system using a special high-speed bus built on IBM Data Power X75 and software MQ Low Latency Messaging.

Interesting fact: The MatriX project is the first case of using these servers in Russia. By the way, there were even some problems associated with this - the United States recognizes these technologies as having a dual purpose. That is, there is a possibility that someone will use them for military purposes. Due to the delays associated with all this, the delivery dates for equipment were delayed by as much as six months - and we were lucky that the famous Jackson-Vanik amendment was canceled, otherwise it is unknown how everything would have turned out in the end.

Behind this bus there are already exchange gateway servers. The bus decides on its own which of them to send a specific request through, or which of them to take data from. In principle, this is enough for the normal functioning of the entire system, but we also added a risk management server to it, which, unlike the previous system, is now not a central link, and any problems with it do not cause the entire system to stop.

Another innovation is the so-called FIX server, which allows you to connect applications written under the FIX protocol to the MatriX vehicle. We will talk about this solution in more detail in a separate topic.

The final system architecture looks like this:

What did it give?

This “matrix” approach to building a system made it possible to reduce the damage from possible failures (failure of a specific link does not lead to irreversible consequences), and also makes it possible to easily scale the system in the future. What is most important is that the speed of work has increased dramatically. Now the application processing speed in the system ranges from 500 microseconds to 2 - this is a very good result. The total time for an application to pass from the moment it enters the “Matrix” to its output to the exchange systems is from 2 to 5 milliseconds (excluding losses on communication channels to the system) - this is approximately 40/50 times faster than in the previous generation IT system. trade|SmartTrade…
For traders trading hands this is, of course, not so important, but for algorithmic traders using robots connected via API it is a significant advantage.

Other advantages of the new trading system include:

• Increased productivity (up to 2000 orders per second in one thread, more than 10 million orders per trading day).
• The already mentioned ability to access external systems via OMS-FIX 4.4 Gates.
• Single cash position (SCP) and own risk accounting for client portfolios.

You can use the new trading system when working through the SmartX terminal, new version web interface of the trading system or SmartCOM API (version no lower than 3.0).

Single cash position

The single cash position service for clients has become one of the main “features” of the entire new trading system. Its essence is as follows:

When working with the previous version of the it-trade/SmartTrade trading system, the client was provided with a separate personal account for each trading platform. For example, the Moscow Exchange Stock Market is an MS account; Moscow Exchange derivatives market - RF account; Currency market Moscow Exchange - FX account (non-deliverable) or CD account (deliverable) and others. With such a division, securities And cash located on one trading platform cannot serve as collateral for transactions on another.

When using a single cash position, the client is provided with a single account with an MO identifier, which includes several trading platforms at once:

• Stock market of the Moscow Exchange (all instruments traded in T+2 mode).
• Derivatives market of the Moscow Exchange (futures, options).
• Foreign exchange market of the Moscow Exchange (non-deliverable mode).
• London Stock Exchange section IOB (ADRs of Russian issuers).

This account becomes unified for all trading platforms, and assets (money, securities) located on one trading platform of the market can be used as collateral in other markets included in a single monetary position. (You can listen to more about the single monetary position in webinar recordings Chairman of the Board of ITinvest Vladimir Tvardovsky starting at 17:01).

The easiest way to understand the benefits of a single cash position is simple example. If in the old it-trade trading system, to purchase 100 shares of Lukoil (LKOH), 43,800 rubles would be required as collateral (the cost of a share as of 10/22/2013 was 2,030 rubles, the amount of collateral for the T+2 market was 438 rubles, i.e. . 100 x 438 - 43500), and to sell 10 futures contracts for shares of the same issuer LKOH-12.13 (on the same date, 1 futures cost 20,650 rubles, collateral - 2,132 rubles) would require 10 x 2132 = 21320 rubles In total, to complete two not very large transactions, the amount of funds required to secure the transaction would exceed 65,000 rubles.

In the new trading system it would be equal to 26,746 rubles. The difference is quite significant - it turns out that you can manage your own funds more flexibly; they can work, rather than being idle in a state blocked as collateral.

Need for Speed

A single cash position, as you might guess, with all its advantages, can be of interest to traders and traders of any type - from investors who do not make very many transactions, to scalpers who do not take their fingers off the keyboard.

At the same time, it is obvious that the speed advantages of the Matrix trading system most of all attract high-speed traders (HFT traders) who trade on the stock exchange using mechanical trading systems. It is this type of traders that “makes” most of the turnover of all popular exchange platforms. Such traders play a big role in the stock market ecosystem (read our special topic for more information about the trends and prospects of algorithmic trading). But no algorithmic trading strategy, even the most successful in theory, can work properly in practice if proper speed is not ensured.

Therefore, both the exchanges themselves and brokers are constantly developing their own infrastructure - in 2010 alone, exchanges, telecommunications companies, algorithmic hedge funds, corporate and private algorithmic traders spent more than $2 billion on technical re-equipment in order to increase the speed of trading around the world.

Domestic exchange platforms (in particular, the Moscow Exchange) also follow this trend. If in 2010 the execution time of orders in the trading systems ASTS (MICEX stock market) and FORTS (RTS derivatives market) was 5-15 and 15-50 ms, respectively, then already in 2013 the figures were 0.700 ms and 3-5 ms. Now the execution time of orders in the core of the exchange system does not exceed 50 microseconds.

When looking at all these efforts, it is clear that brokers simply do not have the right to lag behind, so further upgrade and improvement of this link in the chain that the application passes on the way from the user to the exchange is simply inevitable.

Tags: Add tags

When making a monetary transaction, the bank acquires 1 hard currency and sells another. In a transaction with immediate delivery of hard currency, this means investing his resources in the hard currency that he sells. Since the bank takes a position for a term, then, when buying a claim in a certain currency, it perceives a promise in another currency. As a result of these operations, two different currencies appear in the assets and liabilities of the bank, in the form of currency or in the form of obligations, the rate of which changes independently among themselves, leading to the fact that at a certain moment it can exceed the liability, forming, or vice versa.

The correspondence of the claims and obligations of the bank, including its off-balance sheet transactions, in foreign currency characterizes its monetary transaction. If they are equal for a certain hard currency, the monetary position is considered closed, and if they do not match, it is considered open. An open monetary position can be short, since the promises for the sold currency exceed the assets and claims in it, and long, since the assets and claims for the purchased currency exceed the liabilities and obligations. When long, the trader, in anticipation of a rise in the exchange rate, buys the base currency. Among other things, it will be considered that there is an open long position in a certain foreign hard currency, since at equilibrium there is an asset denominated in this foreign currency, for example, acquired Eurobonds.

In the same way, the bank will have a long transaction in the American dollar, since there are no funds raised in this currency, including contributions from the population, account balances legal entities The bank has issued loans denominated in United States dollars. In a short position, in anticipation of a depreciation, the base currency is sold. Among other things, it will be considered that there is a position to sell in this hard currency, since there is a liability, for example, loan promises, denominated in dollars. For the example with a bank, the position will become short when, in the absence of issued loans, balances on correspondent accounts denominated in hard currency, the bank has attracted funds denominated in it, for example, deposits. As a result of a reverse sale for a long position or a reverse buyout for a short position, or if the assets in a certain hard currency become equal to the liabilities in the same hard currency, the cash position is said to be closed.

A short cash position can be offset by a long position if the size, transaction deadline and free currency of these positions are similar. This principle is important because an open monetary position is associated with the risk of losses for the bank, when by the episode of a counter-transaction, in other words, the purchase of previously sold hard currency and the sale of earlier acquired hard currency, the rate of these hard currency changes in an unfavorable direction. As a result, the bank will either be able to acquire, through a counter-transaction, the smallest required amount of hard currency than it previously sold, or it will be obliged to pay for the same required amount a larger equivalent of the previously acquired hard currency. In two options, the bank incurs expenses of its funds associated with changes in the monetary exchange rate. is constantly present in the presence of open positions, both long and short.

Since an open cash position is created for certain hard currency, in the process of the bank’s constant operations on the foreign exchange market, cash positions constantly appear and disappear. A change in the amount of a cash position occurs, as noted earlier, through the configuration of the amounts of liabilities and assets in hard currency. Changes in assets and liabilities, moreover, occur through the performance of specific current monetary transactions and transactions related to the movement of money.

The occurrence of losses or the receipt of benefits will depend on the direction of the monetary exchange rate configuration and on whether the bank is in a net-long or net-short position in foreign hard currency. The net position is oriented by adding up all net positions taking into account the symbol, in contrast to the calculation of monetary risk, where the position symbol is not provided. If the bank has a long trade in a currency, the revaluation will cause profits when the hard currency exchange rate rises, and losses when the hard currency exchange rate falls. And, on the contrary, a sell position will give rise to gains when the rate of foreign hard currency decreases, and to losses when the rate of foreign hard currency increases. Banks constantly monitor changes in the monetary position, set a limit for any partner bank, assessing the monetary risk and the likely outcome in the event of its immediate full coverage at available monetary rates. This task is complicated by the fact that the actual monetary transaction includes cash and urgent transactions, absolute at different times at different rates.

The result of the cash position is positive for the bank if it held a long transaction in hard currency, the rate of which increased. But this success can be fully realized only by closing all cash positions at current rates. This operation is called the realization of benefits and traditionally occurs during periods of intense trend in hard currency, stopping its movement, and from time to time temporarily changing its dynamics in the opposite direction.

The creation of currency positions throughout the day is justified by the conduct of arbitrage monetary transactions in time and can be eliminated by the simultaneous covering of any transaction with a counter-transaction. But big banks resort to counter-transactions exclusively during a global crisis. Maintaining long or sell positions in some currencies for several days or weeks is regarded as monetary transactions, since if short-term arbitrage positions can be considered the result of requests from the bank’s clientele, maintaining an open monetary position for a long time is a responsible action aimed at benefiting from changes in exchange rates.

Analysis of the bank’s currency position and ways to adjust it

The work of banks in money markets is associated with the management of assets and liabilities in foreign currencies, monetary risks that arise from the introduction of different currencies during banking operations. Currency risk- this is the risk of loss or shortfall in benefits in the state currency associated with a negative configuration of the monetary exchange rate. In addition, risk is the possibility of losses or additional costs during the execution of a monetary transaction, stimulated by a lack of analysis of this transaction with a monetary asset, miscalculation or unforeseen situations in general. Currency risk is considered a type of monetary risk, therefore, when assessing it, the same informants are used, in fact, when assessing the overall condition of the bank, on the one hand, and in general, an adequate assessment of the bank’s monetary position is not possible in the absence of a separate assessment of monetary risk.

The cash position appears on the date of decision of the transaction for the purchase or sale of foreign hard currency and other monetary assets, as well as the date of crediting to the account, debiting from the account of profits or expenses in foreign hard currency. The indicated dates also characterize the date of reflection in the reporting of the corresponding changes in the value of the open monetary position. The value of an open monetary position is based on reliable accounting information, reflecting claims to acquire and promises to deliver funds in designated currencies, both for transactions completed with settlements in real terms on the reporting date, but also for transactions for which settlements will be completed in the future, after the reporting date . Traditionally, the value of the cash position is calculated using hard currency for an explicit period relative to the state hard currency. In the case of active participation in international operations, the bank must constantly keep records of open positions in the relevant currencies.

These positions demonstrate unfinished transactions in a specific hard currency at any time, regardless of the timing of transactions. An assessment of the likely outcome of closing an open position is achieved by recalculating all amounts of long and sell positions into national hard currency at the current rate at which transactions have every chance of being covered, taking into account the delivery time of hard currency for urgent transactions, in other words, the date of execution of the terms of the transaction. This recalculation is carried out in 2 steps: first, all positions are recalculated into a more common hard currency, for example, the dollar, then the dollar amounts or their total - into the national hard currency.

Factors influencing the currency position

Transactions that have a major impact on changes in the cash position include:

• receiving interest and other earnings in foreign currencies;

• payment of interest and other costs in foreign currencies;

• for the purchase of own funds in foreign currencies;

• conversion transactions with immediate delivery of funds, no later than 2 working banking days from the date of decision of the transaction, and their delivery for a period greater than 2 working banking days from the date of decision of the transaction, including transactions with cash foreign hard currency;

• urgent transactions, including forward and futures transactions, settlement forwards, " " transactions, options, for which claims and promises appear in foreign hard currency, regardless of the method and form of settlement for these transactions;

• other transactions in foreign hard currency and transactions with other monetary values, not counting precious metals, including derivative monetary instruments of the currency market, even the exchange market, if the terms of these transactions in some form take into account the exchange, in other words, the conversion of foreign hard currency or monetary values, excluding valuable metals;

• purchased irrevocable guarantees denominated in foreign hard currency. Included in the calculation of the open cash position from episode 1 of non-payment on the loan for which security was received;
• issued irrevocable guarantees denominated in foreign hard currency. They are included in the calculation of the open monetary position from the stage when, according to the target assessment of the authorized bank, it becomes possible for the beneficiary to submit claims for payment of a foreign currency amount.

Banks will try to hold long cash positions in strong currencies, especially when they expect their exchange rates to increase, and short positions in weak currencies. If unexpected changes in monetary exchange rates occur: a strong hard currency becomes cheaper and a weak hard currency rises in price, then the bank has probable expenses of its funds, which it is given the opportunity not to note, but to wait until the hard currency of the long position rises in price again, and the hard currency of the short position becomes cheaper, after this is to close the open position with a profit.

To avoid monetary risk, it is necessary to coordinate assets and liabilities for any hard currency, and also strive to form an overlapped position for any hard currency at the end of the period, or it is possible to compensate for the imbalance of assets and liabilities in foreign hard currency by the discrepancy between the sizes of sold and acquired hard currency, thereby reducing the monetary risk to zero, following the principle: a sell position in some foreign currency can be offset by a long cash position, if the size, expiration date and hard currency of these positions are similar. This principle is especially important because it serves as a prototype for all methods of covering monetary risk.

The value of losses or income generated when the monetary exchange rate changes, embodied in the state hard currency, is oriented as the product of an open monetary position in a predetermined hard currency by the change in the rate of the state hard currency relative to this hard currency, in other words, by adjusting the value of the monetary position, you can influence the value of losses.

The bank is obliged to constantly review the state of the open monetary position solely for the purpose of monitoring compliance with the limits of the open monetary position established by the Central Bank of the country, and also for the purpose of analyzing possible expenditures of its funds and profits associated with maintaining an open monetary position.

Ways to regulate the monetary risk of a currency position

There are 2 main ways to regulate monetary risk: limiting, mandatory and voluntary. Hedging is a method of adjusting monetary risk, based on the development of a compensating monetary position, in which selective or absolute compensation of one monetary risk occurs with another suitable risk. A restriction is a method of adjusting a monetary position, based on an indispensable or voluntary limiting of the values ​​of the bank's open monetary position in accordance with established limits.

Hedging instruments are used by banks to adjust the values ​​of open cash positions with the goal of completely closing them, reducing them, or conducting these transactions with foreign hard currency, which will not lead to a future increase in the values ​​of the cash position for a predetermined hard currency or group of currencies. Instruments for hedging a bank's open cash positions are: decision different types balancing immediate and cash transactions for the purchase and sale of hard currency; premature refusal to perform, extension of a previously concluded transaction; solving transactions similar to “swap”, as well as conducting operations that do not involve the exchange of one foreign currency for another; offsetting existing claims and obligations with one counterparty for the greatest reduction in monetary transactions by the method of their consolidation.

Limitation, in contrast to hedging, is used both by banks and by control authorities and consists of a voluntary, on the part of the bank, or an indispensable, prescribed by the control authority, limiting the value of the bank’s open cash positions in accordance with established limits.

The more fundamental features of the quality of the cash position management process at the bank level include: efficiency and sophistication of banking information systems; skill, knowledge, professionalism and interest of management and staff. This process must be supported by adequate banking technology and be based on a correct, reliable accounting system in a credit institution.

Stay up to date with all the important events of United Traders - subscribe to our

Objective of IFRS No. 29 “Financial reporting in hyperinflationary environments”– determination of the procedure for recalculating financial reporting indicators in conditions of hyperinflation.

The standard is applied to the preparation of primary financial statements in the currency of a country with a hyperinflationary economy.

Criteria, allowing us to call the economy hyperinflationary:

1. the majority of the population prefers to keep savings in non-monetary form or relatively stable currency;
2. prices are most often indicated in foreign currency;
3. sales and purchases on credit are carried out at prices that compensate for the expected loss of purchasing power of money during the term of the loan, even if it is short;
4. prices, wages, discount rates are determined based on the price index;
5. the cumulative increase in inflation in recent years is approaching 100% or more.

The effect of inflation is expressed in a fall in the purchasing power of money and cash equivalents, which leads to a profit or loss on the net monetary position.

Net cash position– positive or negative difference between the company's monetary assets and liabilities.

The financial statements of an entity that reports in the currency of a hyperinflationary country must be restated in units of measurement in effect at the reporting date. The restated financial statements replace ordinary financial statements.

Ways to take into account the impact of inflation:

1. direct (determines the impact of inflation when restating financial statements based on the actual cost of acquisition);
2. indirect (financial statements are restated on the basis of replacement cost).

Inflation has a different impact on reporting items. Profit (loss) on net monetary items should be included in net income and disclosed separately. If the economy ceases to be hyperinflationary, the enterprise does not apply this standard for reporting. When presenting financial statements, amounts expressed in units of measurement valid at the end of the previous reporting period are used as the basis for the carrying amounts in subsequent financial statements.

Information disclosed in the reporting:

1. the fact that the financial statements for the prior period have been restated to take account of changes in the general purchasing power of the reporting currency and are presented in units of measurement effective at the reporting date;
2. price index level at the reporting date;
3. changes in the price index for the current and previous reporting periods;
4. method of preparing financial statements.