Niklas Norén presents his master's thesis

Sec Market Risk Disclosures - What do investors really learn?

Abstract

The Security and Exchange Commission (SEC) 1997 issued new
rules about market risk disclosures. The SEC, since then, requires
U.S. listed companies to make an annual quantitative and qualitative
assessment in their annual report about the market risks they
face. The rules require that information about market risk exposure
will be disclosed for four different market risks (interest rate risk,
foreign currency exchange risk, commodity price risk and equity price
risk). In this thesis I make a critical assessment of the information
ABB is required to disclose in relation to the key market risks it
faces as a multinational company. In addition I compute the
Value-at-Risk for ABB's equity risk sensitive instruments and
compare this approach with the shift-system that ABB currently is
using. I find that the SEC mandated market risk disclosure rules do
not provide investors with a satisfactorily picture of the
registrants' overall market risk exposure. I further find that
the Value-at-Risk based approach has certain benefits as compared to
the system that ABB currently uses.