Study On The Different Types Of Forward Contracts Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1551 Downloads: 10 Date added: 2017/06/26 Category Finance Essay Type Compare and contrast essay Did you like this example? FORWARD CONTRACTS: A forward contract agreement is effective under the consistent critical terms method if all the following criteria are met: 1. The forward contract is for the purchase or sale of the same quantity or notional amount and at the same time as the hedge able item. 2. Upon association with the hedge able item, the forward contract has a zero fair value. 3. The references rate of the forward contract is consistent with the reference rate of the hedge able item. Example: While entering into agreement of forward contracts which involve buying an equity forward, that is purchasing the equity at a specific date in the future, for the price which has been agreed at the time of forward contract is made or entered in it. (Tomas Bjork) INTEREST-RATE FORWARD CONTRACTS: It involves interest rates on agreement; the seller has the opportunity of hedging against a futures fall in interest rates. As wall as the buyer has the security from a future ri se in interest rates. Interest rate forward contract, more normally called a forward rate agreement or FRA. The FRA has instruments on which they are based; there is a worldwide market for time deposition in various currencies issued by large responsible banks. (Financial News, journal ) LONG POSITION: The purchase or buying of securities such as commodity, stock or currency, with the intention that the assets value will rise in coming future. The long position is far used by banks and bay window to manage foreign exchange risk. In context of options, the buying of an options contract. Its like opposite to Short position. Example: The shareholder in KFCs corp. is said to be long KFCs or has the long position in KFCs. Buying a put option contract from a writer entitle you the right, not the obligation to buy (or sell) a specific asset for a specified amount at a specified time or date. (Fischer Black) SHORT POSITION, HEDGE: The sale of borrowed shares or securities, commodit y with an expectation that the price of the asset might fall in value. In the context of option, it is the sale of an options contract. Opposite of long position. Example: The classic economic rationale for future markets is, of course, that they facilitate hedging-that they allow those who deal in a commodity to transfer the risk of price change in that commodity to speculators more willing to bear such risk. An investor who borrows shares of from a broker and sells them in open market is said to have a short position in the stock. The investor must eventually return the borrowed stock by buying it back from the open market. And if the price of stock falls in the market, the investor buys it for less than the price from he or she sold it, thus making a profit. Selling a put options contract to buyer entitles the buyer the right, not the obligation to buy from or sell to you a specific asset or commodity for a specified amount at a specified time or date. (Louis H. Ederington) FINANCIAL FUTURE CONTRACT: A similar, moveable, exchange-traded contract that delivery of trade good, securities, currency, or stock market index, at a specified price, on a specified time to come. Unlike options, futures convey an indebtedness to buy. The risk to the holder is unlimited, and because the yield pattern is proportionate, the risk to the seller is unlimited as well. Dollars lost and increase gain by each party on a futures contract is equivalent and opposite. In other words, future trading is a zero-sum game. The exchange of assets occurs on the date specified in the declaration. An exchange traded contract, for settlement at a date beyond the normal spot settlement data, for the purchase and sale of a standardized quantity of a financial instrument. The futures contract locks in the future rate of return on a notional investment by the buyer, the seller lock in the cost of borrowing. (Investor word, journal) ARBITRAGE: Attempting to profit by overwork price differ ences of indistinguishable or similar financial instruments, on different markets or in different forms. The ideal version capture slight difference in price is riskless arbitrage. A risk-free transaction of securities industry, the purchasing of under value share and the simultaneously resale of these shares for a higher price, generating a profit on the difference. (Tomas Bjork) MICRO HEDGE: Hedge is designed to reduce or eliminate risk resulting from a particular asset or liability, as opposed to the risk arising from an entire list of the financial assets held by an individual or a bank. If the asset or liability is part of a large portfolio with a number of correlate risks, then micro-hedge is less likely to be an effective technique. Opposite of macro-hedge. (Stephen G. Cecchetti) MACRO HEDGE: Hedge designed to reduce or eliminate risk for an entity. Opposite of micro-hedge. An investment technique used to reduce the risk of portfolio of commodity. In most cases, this wo uld mean taking a position that offsets the whole portfolio. But it is difficult proficiency in exercise because there is seldom one commodity that offset the risk of a broader portfolio, so applying for a macro-hedge is most likely requires taking an outset position in each single commodity. An index fund manager believes that there will be a loss in the index in the upcoming future. To reduce the risk of a downward turn in the index, the manager can take a short position in the index funds future market that might lock in a price for the index. (Carl Ackermann) CROSS HEDGE: Hedging one instruments risk with a different by taking a particular portion is a related financial instrument. This is frequently done when there is no financial instrument being hedged, or a suitable financial instrument exists but the marketplace is extremely illiquid. The cross hedging counts completely on how strongly correlate the instrumental being hedged is with the semantic role or tool which underl ies the financial instrument or derivative contract. Furthermore; the recognition quality of the derivation and the instrument being hedged need to be of similar liquid, so that price changes are resemblance. Lastly, the due date of the financial instrument must be at least as long as the due date of the craved hedged; otherwise investor will be left with an un-hedged exposure for a point of time. (Ronald W. Anderson, Columbia University) HEDGE RATIO: The change in price of a call option for every one-point move in the price of the rudimentary security. The hedge ratio is also called delta. The ratio of volatility of the portfolio to be hedged and of the volatility of the hedging instrument. Example: the price of a commodity future with a hedge ratio of 40 will rise 40% (of the security-price move) if the price of the rudimentary stock increases. Typically, options with lofty level hedge ratio are usually more fruitful to buy rather than pen since the degree the portion moveme nt-relative to the rudimentary price and the comparable little time-value wearing-the greater the leverage. The opposite is true for alternative with a low hedge ratio. (Financial Institution Market Madura International Edition 9th Edition 2010) BASIC RISK: An applied to interest rate swap, risk that the index used for an interest rate swap doesnt move perfectly in tandem with floating-rate instrument specified in a swap agreement. As applied to financial futures, risk that the future prices do not move perfectly to in tandem with the assets that are hedged. (Financial Institution Market Madura International Edition 9th Edition 2010) STOCK MARKET RISK: The variability in returns on stock that is due to basic swapping changes in investor expectations is referred to as market risk. It is part of systematic risk. They are caused by tangible events like political, social, or economical and intangible events like market psychology. Other factors playing a major role in market ris k are interest rate and inflation. (Financial Institution Market Madura International Edition 9th Edition 2010) PORTFOLIO INSURANCE: A strategy of hedging a stock portfolio against market risk by selling stock index futures short or buying stock index put options. Program trading combined with the trading of index futures to hedge against market movements. The hedging technique is frequently used by institutional investors when the market direction is uncertain or volatile. Short selling index futures can offset any downturns, but it also hinders any gains. (Financial Institution Market Madura International Edition 9th Edition 2010) REQUIREMENTS: If you expect interest rates to increase, what type of hedge should you set up, long or short? And why? Sol: Long hedge requires taking a long position in future contract, it is appropriate when a certain asset or commodity would be purchased in the future and one is interested in locking in the price now. For example, the tex tile company would use a long hedge. And short hedge involves a short position in the future contract, it can be applicable when a hedger already owns asset and expect to sell it in the future. For example, the aluminium producer would use a short hedge. If 1% increases in the interest rate results in a decline in the value for treasury bonds of par. So, I would like to set up short hedge or short position because the interest rate is going to increase in the future period. Don’t waste time! Our writers will create an original "Study On The Different Types Of Forward Contracts Finance Essay" essay for you Create order

Film Analysis The Minority Report Essay - 1596 Words

The Minority Report is a film that tries to stop crimes before they happen, with the enlistment of 3 teen pre-cogs. These pre-cogs predict future murders and the authorities swoop in and arrest the would-be murders, before they have the chance of committing the crime. Even thing goes great until Anderton, a cop played by Tom Cruise, is suspected. Written by Philip K. Dick and then turned to film by Steven Spielberg in 2002, the short story to film became a success. Though there are many differences between the book and the movie, one would think Steven Spielberg would not be able to grab audience’s attention, but with his skills, Spielberg went above and beyond all measures. Many times, novels to films end up being either a great hit†¦show more content†¦This was a vision that was never told to be wrong, and for that every individual that came up as a suspect was bound to do exactly what the pre-cogs predicted in the exact order and time. Pre crime was made to keep out crime and those who attempted to commit it, but that all changes when John Anderton finds himself a suspect. There is much to point out within the difference of the book and the movie. They were made in two different time frames by two different people, and made with a traditional but radical transition. Like any other, the book is supposed to seem more detailed and convincing, but in this case I vote for the movie by Steven Spielberg. The film on The Minority Report comes to life in a modernized and technical way rather that the book, just old John and deformed idiots called pre-cogs. Furthermore, to read the book and see the film, much is told differently, but they work with the same plot, and that is the reason that the transition is successful. 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Starting Up a Cookie Company Free Essays

Starting up a cookie company on-campus You and your roommate are preparing to start a company producing cookies in your oncampus apartment. By starting up this business, you want to provide fresh cookies to starving fellow students late at night. However, you still have to figure out some aspects of the business model such as the price to charge, whether you will be able to make profit and how many orders you can accept. We will write a custom essay sample on Starting Up a Cookie Company or any similar topic only for you Order Now The business concept You have an extraordinary idea: to bake fresh cookies on delivery, using a customer chosen combination of ingredients. The cookies can be picked up at your apartment within one hour. Several factors will enable you to be different from your competitors such as store-bought cookies. First, the cookies will be fresh since they will only be produced after the order is received. Therefore, the buyer will be getting cookies that are literally hot out of the oven. Second, you will have a variety of ingredients available to add to the basic dough, including chocolate chips, MM’s, chopped Heath bars, coconut, walnuts, and raisins. Buyers will telephone in their orders and specify which of these ingredients they want in their cookies. Consequently, you will have the freshest, most exotic cookies anywhere, available to your fellow students next to campus. The production process Baking cookies is simple: mix all the ingredients in a food processor, spoon out the cookie dough onto a tray, put the cookies into the oven, bake the cookies, take the tray of cookies out of the oven, let the cookies cool and finally, take them of the tray and pack them in a box. You and your roommate already own all the necessary capital equipment: a food processor, cookie trays and spoons. Your apartment is equipped with a small oven that is able to hold one tray at a time. Your landlord pays your electricity. As such, the variable costs are merely the cost of the ingredients (estimated to be 1 Euro/dozen), the cost of the box in which the cookies are packed (0,30 Euro/box, each box holds a dozen cookies), and your time (what value do you place on your time? ) A more detailed description of the production process is described below. The first step of the whole process is to take the order. Your roommate has figured out how to do this quickly and This case is an adapted version of the Kristen Cookie case, Harvard Business Review. ith 100% accuracy: by using electronic mail to accept orders and to inform customers when the order will be ready. Since this process runs automatically, it does not take any of your time. Therefore, this step will be ignored in further analysis of the process. You and your roommate have timed the necessary physical operations. The first physical production step is to wash out the mixing bowl from the previous batch, add all of the ingredients, and mix them in your food processor. The mixing bowls hold ingredients for up to three dozen cookies. You then dish up the cookies, one dozen at a time onto a cookie try. These activities take about six minutes for the washing and mixing steps, regardless of how many cookies (i. e. , one or more dozens). However, dishing up the cookies onto the tray takes two minutes per tray per dozen. The next step, performed by your roommate, is to put the cookies in the oven and set the thermostat and timer, which takes about one minute. The cookies bake for the next nine minutes. So the total baking time is 10 minutes, during which your roommate is busy setting the oven during the first minute. Since the oven only holds one tray, a second dozen takes an additional 10 minutes to bake. Your roommate also performs the last steps of the process by first removing the cookies from the oven and putting them aside to cool for 5 minutes, then carefully packing them in a box and accepting payment. Removing the cookies from the oven takes only a negligible amount of time, since it must be done promptly. Furthermore, it takes two minutes to pack each dozen and about one minute to accept payment for the order. As experienced bakers know, the description above contains some simplifications. For example, the first batch of cookies for the night requires preheating the oven. However, such complexities will be put aside for now. Please begin your analysis by developing a process flow diagram of the cookiemaking process. Question before starting up your business To launch your business, you need to set prices and rules for accepting orders. Some issues will only be resolved after you get started and try out different ways of producing the cookies. Before you start, however, you at least want a preliminary plan, which as much a This case is an adapted version of the Kristen Cookie case, Harvard Business Review. possible specifies, so that you can do a careful calculation of how much time you will have to devote to this business each night, and how much money you can expect to make. For example, when you conduct a market survey to determine the likely demand, you will want to specify exactly what your order policies will be. Therefore, you will have to answer the following operational questions: How long will it take you to fill a rush order? -How many orders can you fill in a night, assuming you are open four hours each night? -How much of your own and your roommate’s valuable time will it take to fill each order? -Because your baking trays can hold exactly one dozen cookies, you will produce and sell cookies by the dozen. Should you give any discount for people who order two dozen cookies, three dozen cookies, or more? If so, how much? Will it take you any longer to fill a twodozen cookie order than a one-dozen cookie order? How many food processors and baking trays will you need? -Are there any changes you can make in your production plans that will also allow you to make better cookies or more cookies in less time or at lower cost? For example, is there bottleneck operation in your production process that you can expand cheaply? What is the effect of adding another oven? How much would you be willing to pay to rent an additional oven? This case is an adapted version of the Kristen Cookie case, Harvard Business Review. How to cite Starting Up a Cookie Company, Papers

Sexual Diversity Mode of Discipline

Question: Discuss about the Sexual Diversityfor Mode of Discipline. Answer: In the particular reading, Fausto-Sterling demonstrates the ways that the state, the law and the medical systems maintain a dual sex binary. The author uses the concept of intersex to enhance the ways that do not entail two sexes only. The author maintains a continuous sequence and hardly underscores binary method (Rosenblum Travis, 2015). She adumbrates a history of intersexuality and shows a teleological approach. The author carries forward a very important message that two sexes are not enough. She maintains that there are five or more sexes. The most interesting quote that I have come across is the knowledge developed in biochemistry, embryology, endocrinology, psychology, and surgery has enabled physicians to control the very sex of the human body, as well as a mode of discipline Hermaphrodites have unruly bodies (p.471). To my belief, the quote is engrossing and challenging. She posits the notion of bio power that is introduced by Michael Foucault. In the 20th century, the treatment of intersexuality reflects on the concept of bio power. By this, Foucault refers to practice of public health, control of heredity and risk management. The concept of Foucault closely resembles the concept propounded by the author in the passage (Hondagneu-Sotelo et al., 2015). In the segment, I have quoted an interesting passage from the article. The passage is the knowledge developed in biochemistry, embryology, endocrinology, psychology, and surgery has enabled physicians to control the very sex of the human body, as well as a mode of discipline Hermaphrodites have unruly bodies (p.471). My interest about the history of intersexuality is piqued by the passage. From this passage (quoted above), I get to know that in normal life the knowledge developed in varied streams regulate the discipline. The author aims to meld the concept of intersexuality with the Foucaults bio power notion. It encapsulates a baffling concept that needs to be studied in depth. Reference Hondagneu-Sotelo, P., Zinn, M. B., Denissen, A. M. (2015).Gender through the Prism of Difference. Oxford University Press, USA. Rosenblum, K., Travis, T. M. (2015).The meaning of difference: American constructions of race, sex and gender, social class, sexual orientation, and disability. McGraw-Hill Higher Education.