The Three Topics I Chose For My Final Project Were Those

The three topics I chose for my final project were those of Safe Sex, STI’s, and Pregnancy. These three topics interested me the most and what’s really cool is that they can all be linked and come hand in hand with each other. Pregnancy has a lot of positive and negative sides to it, not to mention a lot of cool facts behind it as far as child bearing choices. Safe sex was particularly interesting with all the statistics and prevention methods of pregnancy (condoms and birth control) and STI’s. Also, the number of different infections that can occur from unprotected sex was astounding. The way I think of it is if safe sex is not happening and being taught, then the products of sexually transmitted infections and pregnancy can occur. The†¦show more content†¦I guess to me and probably many other women it depends on the situation we are in and possibly even how the baby was conceived, would be another deciding factor. The SEX ED GAME has a particular scena rio that states that a pregnancy test came up positive, you are having a baby, time to go get checked out and discuss choices of child bearing. However, it does make you lose a turn, I did this entirely because society looks at pregnancy in many different ways. Most commonly negative, mostly depending on age. In this case the game is teen based, which in society’s perspective, teen pregnancy is negative. Sex is enjoyable. I think almost everyone can agree to that. However, it is the matter of being safe while being pleasured is the issue here. Having sex safely can reduce the chances of pregnancy and sexually transmitted diseases. There are a number of ways to practice safe sex. Using the prevention methods is key. Whether it is condoms, birth control, female condoms etc.†¦ Condoms are the most effective method of safe sex that can prevent both issues. They are 98% effective in preventing pregnancy and STI’s when used properly. â€Å"There is no definitive study about condom effectiveness for all STDs. But several studies have demonstrated Final Project Narrative PSYX 235D Sec 1:40 Hannah Moncur that condoms, when used consistently and correctly, can protect against the transmission of bacterial infections.† (Dawson) Birth control is typically for the female.Show MoreRelatedWriting Assignments For College And High School Essay1288 Words   |  6 Pagesthere is much more expected from me as a writer. In high school, we were given a topic to write about whereas in college, we are given the opportunity to write about what we want to. When I am able to choose what I want to write about, it makes the writing process easier. When being able to pick your own topic for a paper, you can relate to the paper more, rather than having to write about something you know nothing about or a topic that isn’t interesting to you. 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Introduction To The Main Derivative Contracts Finance Essay - Free Essay Example

Sample details Pages: 16 Words: 4740 Downloads: 5 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? According to the Bank of International Settlements (1995), a derivative is defined as a contract whose value depends on the price of underlying asset, but which does not require any investment of principal in those assets. As a contract between two counterparties to exchange payments based on underlying prices or yields, any transfer of ownership of the underlying asset and cash flows becomes unnecessary. Derivatives play a large and increasingly important role in financial markets. Derivatives markets for financial variables were developed back in 1970, and are still dominated by all financial institutions which actively market their products and services to corporate, institutional and government clients. Don’t waste time! Our writers will create an original "Introduction To The Main Derivative Contracts Finance Essay" essay for you Create order Bodie (2009, pg 671) explains that the value of derivatives is said to be derived from other securities. They are also called contingent claims due to the fact that their payoffs are contingent on the prices of other securities. Financial institutions use derivatives in order to hedge and speculate assets which are subject to price fluctuations. Forwards, swaps and options are regularly traded outside exchanges by financial institutions and their corporate clients in what are termed the over-the-counter (OTC) market. At the same time futures are actively traded on many exchanges. The derivatives highlighted in this dissertation will fall under four main headings, namely: Forwards, Futures, Options and Swaps. 2.2 Forwards Forwards are binding contracts between two financial institutions or between a financial institution and one of its clients. Hull (1997, pg.2) explains that when entering into forwards contracts, one of the parties assumes a long position in the contract. This means that the party agrees to buy the underlying asset at an agreed price today at some specific date in the future. At the same time, the other party in question takes a short position as one agrees to sell the same asset at the negotiated price for the same specific date. The forward contract is worth zero when initiated due to the fact that it costs nothing to take either a long or a short position. The party who is in a short position transfers the agreed asset to the party who is in the long position in return for the delivery price. Foreign exchange forward contracts are very popular with banks. This is because they hedge exchange rates to offset any fluctuations in prices of currency. In fact most banks have a forward desk, within a foreign exchange trading room, to carry out these contracts. 2.2.1 Example of a Forward Contract Consider a farmer who grows wheat. The entire planting seasons revenue depends critically on the highly volatile crop price. The miller who must purchase wheat for processing, faces the same portfolio problem as the farmer. The latter is subject to profit uncertainty because of the unpredictable future cost of the wheat. Both parties can reduce this source of risk by entering into a forward contract binding the former to deliver the wheat at a pre-agreed price, say $100, on a specified date, and say 1st January 2010, regardless of the market price. In other words we can say that the miller has a long forward contract in wheat whilst the farmer has a short forward contract in wheat. 2.2.2 Payoffs from Forward Contracts Since both parties agree on a fixed price, when the contract is signed, one of the parties involved will gain whilst the other will lose when the latter is compared to the market price on maturity. Keeping the above example in mind, if the market price on 1st January 2010 is $110, the miller is still allowed to buy the wheat at $100, thus increasing the millers value by $10. In general, the payoff from a long position in a forward contract on one unit of an asset is St K Equation : Payoff from a Long Position Where K, is the delivery price and St is the spot price of the asset at maturity of the contract. This equation can also be explained in figure 1, where it clearly shows that as the spot price of the asset increases the payoff for the buyer increases thus, making the value of the buyer even greater. +10 Payoff K=$100 $110 0 St Figure : Long Position Conversely, if let us say the price on the market is $90 per bushel of wheat, the miller is obliged to purchase the bushel at $100 due to the forward contract. The payoff from the short position in a forward contract on one of an asset is K St Equation : Payoff from a Short Position Payoff Figure 2 graphically illustrates that if on maturity the spot price is less than the pre-determined price the payoff for the seller increases resulting to an even higher value. +10 $90 K=$100 St Figure : Short Position 2.3 Futures A futures contract is also a binding contract between two parties who agree to exchange an asset at a pre-agreed price, called the futures price, which is to be paid on maturity. Again, the trader who commits to purchase the asset on the delivery date takes a long position whilst a short position is taken by the trader who delivers the asset in question. One of the main differences between forwards and futures, noted by Hull (1997, pg 3), is that futures are not traded over-the-counter but through an exchange. Thus, standardised features must be included in order to make trading possible. Another difference, also explained by Hull (1997, pg 3,) is that the two parties do not necessarily know each other due to having an exchange mechanism in between. This exchange provides a guarantee that the contract will be honoured on maturity date. 2.3.1 Specification of the Futures Market Since future contracts mostly deal with commodities, the exchange must specify in some detail the exact nature of agreement between the two parties. Specifications are mainly found in the following alternatives which are also shown in Appendix 1: Asset: as we are dealing with commodities, variations in quality may be found. Therefore, the exchange stipulates a benchmark grade in order to classify the quality of the product. Product size: the exchange denotes the exact amount of the commodity that needs to be delivered. Delivery arrangements: these arrangements are very important and are clearly explained by the Chicago Mercantile Exchange Group (CME). The clearing house defines the exact procedure of settlement between the parties. The timeline, obligations for the buyer and seller, delivery costs, payment instructions, etc are all explained in detail to eliminate any misunderstandings. Price quotes: the futures price is quoted in a way that makes it easy to understand for any user. For example on the New York Mercantile Exchange (NYMEX), Natural Gas is quoted in dollars per 10,000 million British Thermal Units (mmBtu). Daily price movement limits: keeping Natural Gas as an example, the minimum and maximum price fluctuations are also given by the NYMEX. In fact this commodity has a $0.001 per mmBtu as a minimum price fluctuation whilst a $3.00 per mmBtu for all months as the maximum price fluctuation. Position limits: an investor can only hold a specified amount of contracts. The CME positions the limit at 1000 contracts per speculator, who cannot receive more than 300 contracts within one month. 2.3.2 Characteristics of the Futures Market One of the main features of a futures market is that the contract takes place through a broker or an exchange. The latter will require a deposit by both the buyer and the seller. This is a risk-reducing mechanism as the deposit amount serves as an element that bounds both parties not to default. Futures contracts are also valued on a daily basis, thus marking the market. For example: Day 0 1 2 3 4 5 Total Price $100 $101 $102 $101 $100 $99 Buyer +1 +1 -1 -1 -1 -$1 Seller -1 -1 +1 +1 +1 +$1 Table : Marking the Market On day 1 the buyer makes $1 profit; another $1 on day 2; makes a loss of $1 on day 3; loses $1 on day 4 and finally loses another $1 on day 5. Over the 5 days the buyer lost a $1 from the beginning till the end of the contract whilst the seller gained $1 from the contract. During this period, the accounts of the parties in question were being charged and credited in accord ance with the fluctuation in the contract. This is why a futures contract is normally said to be a string of one day forward contracts. Futures contracts must be standardised. They cannot be tailor-made according to the buyer as in the case of forward contracts. Also when entering into futures, the buyer knows that if one wants to purchase corn, the trader would know the common characteristics for each and every commodity. Futures contracts are also very liquid due to the fact that buyers may decide to terminate the contract earlier than maturity by simply selling back the contract to the broker, where the latter will find another trader. 2.3.3 Payoffs from a Future Contract When the broker provides a full detailed description as to when, where and what will be delivered, the party with the short position, according to Hull (1997, pg 29), sends a notice of intention to deliver to the exchange. The price paid is normally the settlement price. The exchange will then select a party with an outstanding long position to accept delivery. 2.3.4 Types of Future Markets Future markets can be either in Contango or else in Backwardation as shown in figure 4. Future Prices Bodie (2009, pg 781) says that a futures market is said to be in Contango when the futures price is above the expected future spot price. Conversely, Backwardation is when the futures price is below the expected spot prices. Contango +10 E(Pt) Normal Backwardation Delivery Date Figure : Types of Futures Markets 2.4 Options According to Aristotle (1952, pg.453), an option can be described as a financial derivative which involves a principle of universal application. These contracts have initiated since 1973 when the Chicago Board Options Exchange (CBOE) began listing companies on the national exchange. Bodie (2009, pg 671) states that when these contracts were introduced on the markets they were a huge success, crowding out the previously existing OTC trading in stock options. An option is a different contract to forwards and futures. The differences are summarised by J.P Morgan and Arthur Andersens as stated in Reynolds (1995) who said the advantage of options over swaps and forwards is that options give the buyer the desired protection while allowing him to benefit from a favourable movement in the underlying price. Thus options give the right and not the obligation to buy or sell an underlying asset, for a pre-determined price and by a certain date in the future. Since this derivative is based o n rights, the holder will not exercise the contract if it is not profitable. In exchange for this right, the holder is bound to pay a premium which would be lost if the contract is not exercised. Nowadays, options are traded on many exchanges all over the world, starting from OTC by banks and also by many other financial institutions. The underlying assets can vary from stocks, stock indices, commodities, currencies, securities in warrants, etc. One major distinction between American and European options is that the former options can be exercised at any time up to the expiry date, whilst the latter options can only be exercised on the date of maturity. There are two types of options which will be explained in the following sub-headings. 2.4.1 Call Options Willmott (1998, pg 22) defines a call option as the right to buy a particular asset for an agreed amount at a specified time in the future. A call option can also be divided into a Buy or a Sell call. A buy call is the right to buy the underlying asset at an agreed price today at some agreed day in the future. When considering a sell call, the holder has the obligation to sell the asset, at a fixed price and date, when the buy call holder decides to exercise the call option. If the buy call holder decides that it is better to purchase the asset from the market, the seller of the call will gain the premium paid by the buy call holder. 2.4.2 Example of a Call Option Consider a call option on IBM stock which gives the holder the right to buy a share of IBM at a strike price of $105 in six months time. The buy call holder also paid a premium of $5. If on the expiration date the price of 1 IBM share is less than $105, say $103, the buy call holder would not exercise the option but buy the share directly from the stock exchange, thus, only losing the $5 premium. This is clearly explained in figure 5: Profit ($) $110 +$5 Stock Price ($) 0 $103 -$5 $105 Figure : Buy Call Profit ($) +$5 $110 $103 $105 Stock Price ($) 0 -$5 Figure : Sell Call Conversely, if IBM stocks are selling above $105, say $ 110, the call holder will find it optimal to exercise the option as one would make $5 profit. (Tough in reality, the proceeds from the exercise will just cover the original cost of the call.) 2.4.3 Put Options Willmott (1998, pg 22) also defines put options as the right to sell a particular asset for an agreed amount at a specified time in the future. A put option is also divided into a Buy or a Sell put. A buy put gives the holder the right to sell an underlying asset at a fixed price and date. In these types of options the buyer is also bound to pay a premium which will be lost if the latter does not exercise the option. A sell put option guarantees the buyer, that the holder will purchase the asset at the same fixed price and date. Similarly to call options, the buy put holder decides whether to exercise the option or not. If the option is not exercised the only thing gained by the sell put holder is the premium. 2.4.4 Example of a Put Option Profit ($) Consider that two parties agree to exchange an IBM share at an exercise price of $105 in six months time. The buy put holder also pays a premium of $5. If an IBM stock is being bought on the market at $110, the buyer is better-off to sell on the market, though still losing the $5 premium. +$5 Stock Price ($) $110 $105 0 $100 -$5 Figure : Buy Put Profit ($) +$5 $100 Stock Price ($) $110 $105 0 -$5 Figure : Sell Put Contrary, if prices on the market are less than $105, say $103, the holder is better-off to sell the share to the put writer as one would be gaining $2. 2.5 Swaps Coyle (2000, pg2) states that swaps were developed in 1979 by major commercial and investment banks to serve as an instrument for debt management and interest rate management. Willmott (1998, pg 419) defines a swap as an agreement between two parties to exchange, or swap, future cash flows. The exchange is made up of a stream of payments which are pre-negotiated over an agreed period of years. Therefore, the study of swaps, as mentioned by Bodie (2009, pg 804), is a multi-period extension of forward contracts. Thanks to swaps, Oldani (pg 2) explains that new investment opportunities were invented to hedge against any risk and also to speculate. 2.5.1 Types of Swaps Swaps can be sub-divided into three categories. These are: Equity Swap The two counterparties agree to exchange an amount of payments based on the performance on an equity index. The total return on the index measures this equity component. Commodity Swap In this type of swap both parties exchange cash flows based on commodity prices. One party agrees to pay a floating price based on the commoditys average price over a period whilst the other party pays a fixed price on an underlying quantity of the commodity. Credit swaps Credit swaps are sub-divided into: Currency swaps According to Willmott (1998, pg 424) these swaps are exchanges of interest payments in one currency for payment in another currency. The interest payments swapped can be either fixed, floating or one of each. It is important to note that there may be an exchange of the principal at the beginning and the end of the contract. Consider that two companies, A and B one in US and the other in UK respectively, enter into a currency swap for a principal amount of $50 million. The exchange rate at the date of the currency swap is: $ 1.25 = ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ 1.00 $ 1.00 = ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ 0.80 Principal = ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬40mPPP Principal = $50m A B As mentioned earlier, the firms exchange the principal amounts at both the beginning and end of the year, thus as shown in the following figure, A pays B $ 50 million whilst B pays A ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬40 million. Figure : Currency Swap (a) During the period both parties are assumed to pay interest on the loan to each other. The intervals of when interest payments are specified in the swap agreement, and let us consider that both parties agreed to pay fixed interest rates annually based on the following rates. Dollar-dominated interest rate is 8.25% Euro-dominated interest rate is 3.50% Company A is receiving a euro loan and thus is bound to pay ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ 40 million x 3.50% = ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ 1400000 in interest. Company B is receiving a dollar loan and thus is bound to pay A $ 50 million x 8.25% = $ 4125000 in interest. Due to hedging oneself from future fluctuations in exchange rates, at the termination of the contract, both parties would simply pay back the original principal amounts as shown in figure 10. B A Principal = ÃÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬40m Principal = $50m Figure : Currency Swap (b) Interest rate swap According to McCaffrey (2009), the most common and simplest swap is the plain vanilla interest rate swap. These types of swaps call for one party to pay interest at a fixed rate to a second party, whilst the latter pays the former a floating interest rate. In the types of swaps, the two cash flows are paid in the same currency. Muscat (2009, pg 34) explains that the cash flows being exchanged are not exchanged between the two parties, thus there is no need to borrow money. Consider that company A and B enter into a five year swap where A agrees to pay B a fixed rate of 5% on a notional principal of $ 10 million. On the other hand B agrees to pay A floating interest rate of LIBOR = 2 % to A on the notional principal of $ 10 million. Fixed 5% B A Floating LIBOR+2% Figure : Interest Rate Swap Both parties agreed to pay interest annually and thus at the end of the year A has to pay B $ 10,000,000 x 5% = $ 500,000 as interest. At the same date the one-year LIBOR rate was 5.7%, thus B has to pay A (5.7% + 2 %) x 10,000,000 = $ 770,000 as interest. In this case in order to eliminate unnecessary transactions, the amounts are off-set resulting B paying $ 22,000 to A only. 2.6 The Black-Scholes Model Pricing a derivative is relatively hard and complex. In fact many financial economists searched for years for a workable option-pricing model. In 1997, Scholes and Merton shared a Nobel Prize in Economics as they managed to come up with the Black-Scholes pricing formula. With the CAPM as a background, Black (1987, pg 637) said that I started working on a formula for the value of a warrant. The equation I wrote simply that the expected return on a warrant should depend on the risk of the warrant in the same way that it does for a common stock. The final formula for a call option is: C0 = S0 N(d1) X e-rT N(d2) Equation : Black-Scholes Pricing Formula Where d1= d2 = d1 and C0 = current call option value. S0 = current stock price. N(d) = the probability that the random draw from a standard normal distribution will be less than d. X = exercised price. r = risk-free interest rate. T = time of expiration of option. = standard deviation of the annualized continuously compounded rate of return of the stock. 2.6.1 Assumptions of the Black-Scholes Model The assumptions of the Black-Scholes Model are: Constant volatility: the stock chosen should be stable in constant terms in the short run. Efficient markets: this model suggests that people cannot consistently predict the direction of the market or an individual stock. Sholes and Merton assume that the markets, prices have equal probability of going up or down. This is called Random Walk. No dividends: during the options life no coupons will be paid out. Interest Rates are known: like volatility, this model also assumes that the interest rate are constant throughout. Such an example can include the risk-free rates such as the rate on a government treasury bill. Log normally distributed returns: the returns are assumed to be normally distributed. European-style options: the model is only based on the European stocks which can only be exercised on the pre-determined date. No commissions and transaction costs: it is assumed there are no fees paid for buying and se lling options and stocks and no barriers to trading. Liquidity: markets are assumed to be perfectly liquid. Chapter 3 Prior Literature about the Use of Derivatives Derivatives generate reported earnings that are often wildly overstated and based on estimates whose inaccuracy may not be exposed for many years. Warren Buffet BBC News Buffett warns on investment time bomb https://news.bbc.co.uk/2/hi/business/2817995.stm 4 March, 2003 3.1 Regulatory Regime Concerning Credit Derivative Markets The market of derivatives has undergone rapid growth in the last decade. According to figures issued by the Bank of International Settlements (BIS) report (2009), Over-the-Counter contracts stand at a national amount of $605 trillion up to the end of June 2009, which is 10% more than the previous six month period. Notional contracts are defined as the amount of contractual deals which has not yet been settled up to the reporting date. The question of an adequate regulatory regime which supports for derivative markets comes to mind. Miller (1991) states that regulatory arbitrage enhanced the early activity in derivative markets. In 1992, the United States adopted the Futures Trading Practice Act which triggered growth in the global derivatives markets. This act enabled the derivative markets to be fostered with legal certainty and also allowed the Commodity Futures Trading Commission to issue OTC contracts from the Commodity Exchange Act. The existing regulatory regime is main ly based on self-regulatory initiatives as Ayadi and Behr (2009) explain that the latter could also be seen as market discipline as it seeks the standardisation of derivative transactions while at the same time accommodating the instruments inherent complexity. This was precisely recommended by the Basel Committee in the BIS report on Credit Risk Transfer (2005) where it is stated that All market participants need to continue paying careful attention to the legal documentation relating to credit derivatives, such as the range of credit events covered by the instruments and the clear and unambiguous identification of the underlying reference. Standardisation should also continue in a market where innovative financial instruments are mushrooming. Moreover, there is a need for market participants to encourage due diligence necessary to clearly identify their legal responsibilities to the counter party or customer. It is crucial to foster further transparency when marketing structure d and complex CRT products. Organisers and dealers should foster a complete understanding of the nature and material terms, conditions and risks involved and should not solely rely on external ratings as a measure of risk associated with the transaction. Before entering in a CRT transaction, investors should ensure their capacity both on the outset and on an on-going basis to obtain the necessary information to properly evaluate and manage the risks associated with their investment. Information on the risk profile of the investment should be accessible to them on a continuous basis. However, it is quite easy to write factors which are aimed at a hybrid regulatory regime but the recent financial crises has led to market disturbances which led to reduced liquidity and ultimately forcing central banks to act as lenders of last resort. This was proven by Elsinger (2008) who stated that JP Morgans invention of credit derivatives brought about a $58 trillion elephant in the room which she believes was the main cause of the autumn wreckage on Wall Street. Derivatives are still essential in the financial system as long as there is the implementation of effective self-regulatory regimes together with strict supervision in order to prevent harmful misusing which would ultimately destruct not only the liquid position of the institution but the universal financial system. 3.2 Use of Derivatives in Foreign Countries The use of derivatives can vary from either speculative purposes which aim for profit maximisation or else for hedging. The aim for the use of derivatives differs according to the nature of the firm as well as the size of the country. 3.2.1 Use of Derivatives by Foreign Non-Financial Companies The usage of derivatives plays an important role for non-financial firms. In a study conducted by Guay (2002), it is reported that non-financial firms also make use of derivatives due to the fact that firms also face currency, interest rate and commodity price fluctuations. Though, Guay (2002) also reported that the derivative position held by these firms is relatively small when compared to their overall risk exposure. Guay (2002) also argues that non-financial entities use derivatives only when the benefits exceed the costs, and thus are not used for the primary cause of hedging. Studies such as Judge (2002) investigated various aspects surrounding the use of derivatives by non-financial companies in United Kingdom. The information for this study was collected from the FT UK500, whic includes the largest 500 companies in the United Kingdom. The latter reported that 67% of non-financial businesses have derivative contracts listed on their annual reports whilst 78% responded a y es to the use of derivatives. When comparing these results to United States firms, many studies such as Phillips (1995), Gay and Nam (1998) and Howton and Perfect (1998) all report that more than 60% of non-financial firms in the United States use derivatives. An important point stated by Kedia and Mozumdar (2002), is that hedging practices by United States companies are mainly associated with foreign currency debt. This puts forward the idea that firms make use of strategies to manage risk which can include both on-balance sheet financial and operational policies as well as hedging based on derivatives. Thus as Judge (2002), explains if a company is stating that it does not make any use of derivative contracts it can imply that the firm has managed its exposure through an on-balance sheet method and thus the effect is netted. A paper issued by Brunzell et al (2009), reports that Nordic countries, mainly Denmark, Finland, Iceland and Sweden, potentially have smaller reasons to hedge interest rate risk and exchange rate risk due to their size. Though, the paper reported a 61.6%, which represents the use of derivatives of these Nordic countries, which is ultimately stands in equilibrium to the usage by the larger countries mentioned earlier. 3.2.2 Use of Derivatives by Foreign Financial Companies Commercial banks are said to enter into derivative contracts in order to hedge thier position. The extent of speculation is more difficult to determine becuase specualtive-type risks may arise from certain dealer activities which may not be reported. Financial companies make up the foundation of the OTC derivative market. This is becuase their derivative desk caters to customers, trading between one another to elimiante risks as well as to be innovative by developing new instruments. As mentioned earlier, the introduction of credit derivatives in the late 1990s brought about a new dimensions in portfolio credit assessment. The principle use of credit derivatives, as noted by Minton et al (2006), is that it enables banks to manage efficiently the credit risk portfolio. This is because they can use these contracts to transfer a part or all of the credit risk to another party. During a speech, Greenspan (2004) stated that The new instruments of risk dispersion have enabled th e largest and most sophisticated banks in their credit-granting role to divest themselves of much credit risk by passing it to institutions with far less leverage. The figures issued by the BIS, mentioned earlier, show that the market of derivatives has experienced a dramatic growth over the past years. This is also in line with what the Comptroller of the Currency Administrator of National Banks report which states that large countries such as the United States hold $203.5 trillion notional amount of derivatives in the second quarter of 2009. This report also proclaims that the largest sector of credit derivatives is in the credit default swap which represents 98%. Wharmby (2005) reports that the United Kingdom has an average daily turnover of $580 billion in OTC derivatives whilst Mallin et al (2001) reports that the United Kingdom is exposed to approximately 60%. 3.3 Conclusion Derivatives are the widest financial innovation of the last thirty years. As seen forwards, futures, options and also swaps can be used by anyone who is interested to hedge risk. With the help of the Black-Scholes Pricing Model investors can price options easily. Though they seem easy to conduct; they are actually complex to maintain. This is why in the following chapters we will be comparing the results obtained from local banks and non-financial companies with what the literature has provided about the amount and the main reasons behind the use of derivatives.

Essay about Should Marijuana be Legalized - 968 Words

Should marijuana be legalized for recreational or medical use? This is a debate that has been happening for quite some time and this is not just a debate that is happening among people. There are many that have taken sides including medical personal and government officials. Currently in the United States there are two states in which recreational use of marijuana is legal; Colorado and Washington. There are three states currently that have pending legislation to legalize recreational use; California, Maine, and Oregon. On the other hand there are 21 states in which medical use of marijuana is legal; Alaska, Arizona, California, Colorado, Connecticut, DC, Delaware, Hawaii, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New†¦show more content†¦Let’s also assume that marijuana costs $15 a gram and of those 75,000,000 people smoking they smoke 5 grams a week. After calculations of 5 grams a week at $15 a gram times the 75,000,000 people that use, the t otal revenue would be $5,625,000,000, most of which if regulated by the government would be profit. Would it be more beneficial to society for this substantial amount of money to continue to be made by the illegal drug trade or the economy? Legalizing marijuana would also create jobs. The government would need to employ many Americans to produce and regulate the sales and distribution of the product. Facilities to grow and sell the product would be required and therefore people to run the facilities would be required. Another bonus is the fact that law enforcement can focus on other more serious crime issues within the community, instead of utilizing time and resources on marijuana. The number of people arrested yearly for marijuana offenses outweighs the total number arrested for violent crimes including murder, manslaughter, rape, robbery, and aggravated assault. This also puts a strain on the prison systems that house these offenders which are mostly hard working Americans who simply smoke to relax. While these are all good points those who oppose the legalization state that marijuana is still a drug that alters perception, it is addictive, and long term useShow MoreRelatedShould Marijuana Be Legalized?849 Words   |  4 Pageswhether marijuana should be legalized. Around 23 states have legalized marijuana for medical and recreational use. In the state of Illinois, medicinal use of marijuana has been passed on April 17, 2013. Since January 2014, patients are able to obtain marijuana with a doctor s recommendation. The new debate is whether marijuana should be legalized for the general public as a recreational drug. Although some believe that marijuana is harmless, and that it has beneficial medicinal uses, marijuana shouldRead MoreShould Marijuana Be Legalized?1715 Words   |  7 PagesMarijuana in Society Cannabis, formally known as marijuana is a drug obtained from the tops, stems and leaves of the hemp plant cannabis. The drug is one of the most commonly used drugs in the world. Only substances like caffeine, nicotine and alcohol are used more (â€Å"Marijuana† 1). In the U. S. where some use it to feel â€Å"high† or get an escape from reality. The drug is referred to in many ways; weed, grass, pot, and or reefer are some common names used to describe the drug (â€Å"Marijuana† 1). Like mostRead MoreShould Marijuana Be Legalized?1489 Words   |  6 Pagescannabis plant or marijuana is intended for use of a psychoactive drug or medicine. It is used for recreational or medical uses. In some religions, marijuana is predominantly used for spiritual purposes. Cannabis is indigenous to central and south Asia. Cannabis has been scientifically proven that you can not die from smoking marijuana. Marijuana should be legalized to help people with medical benefits, econo mic benefits, and criminal benefits. In eight states, marijuana was legalized for recreationalRead MoreShould Marijuana Be Legalized?1245 Words   |  5 PagesMarijuana is a highly debatable topic that is rapidly gaining attention in society today.   Legalizing marijuana can benefit the economy of this nation through the creation of jobs, increased tax revenue, and a decrease in taxpayer money spent on law enforcement.   Ã‚  Many people would outlaw alcohol, cigarettes, fast food, gambling, and tanning beds because of the harmful effects they have on members of a society, but this is the United States of America; the land of the free and we should give peopleRead MoreShould Marijuana Be Legalized?1010 Words   |  5 PagesThe legalization of marijuana became a heated political subject in the last few years. Twenty-one states in America have legalized medical marijuana. Colorado and Washington are the only states where marijuana can be purchased recreationally. Marijuana is the high THC level part of the cannabis plant, which gives users the â€Å"high† feeling. There is ample evidence that supports the argument that marijuana is beneficial. The government should legalize marijuana recreationally for three main reasonsRead MoreShould Marijuana Be Legalized?1231 Words   |  5 Pagesshows the positive benefits of marijuana, it remains illegal under federal law. In recent years, numerous states have defied federal law and legalized marijuana for both recreational and medicinal use. Arizona has legalized marijuana for medical use, but it still remains illegal to use recreationally. This is absurd, as the evidence gathered over the last few decades strongly supports the notion that it is safer than alcohol, a widely available substance. Marijuana being listed as a Schedule I drugRead MoreShould Marijuana Be Legalized?1350 Words   |  6 Pagespolitics in the past decade would have to be the legalization of marijuana. The sale and production of marijuana have been legalized for medicinal uses in over twenty states and has been legalized for recreational uses in seven states. Despite the ongoing support for marijuana, it has yet to be fully legalized in the federal level due to cultural bias against â€Å"pot† smoking and the focus over its negative effects. However, legalizing marijuana has been proven to decrease the rate of incrimination in AmericaRead MoreShould Marijuana Be Legalized? Essay1457 Words   |  6 PagesSHOULD MARIJUANA BE LEGALIZED? Marijuana is a drug that has sparked much controversy over the past decade as to whether or not it should be legalized. People once thought of marijuana as a bad, mind-altering drug which changes a person’s personality which can lead to crime and violence through selling and buying it. In the past, the majority of citizens believed that marijuana is a harmful drug that should be kept off the market and out of the hands of the public. However, a recent study conductedRead MoreShould Marijuana Be Legalized?1145 Words   |  5 PagesLegalizing Marijuana Marijuana is a drug that has been actively used for centuries. This drug can be traced back to 2737 BC by the Chinese emperor Shen Nung. He spoke about the euphoric effects of Cannabis and even referred to it as the â€Å"Liberator of Sin.† Since early on, marijuana was seen as a medicinal plant that was recommended for medical uses. Marijuana is currently in schedule I, which means that physicians are not allowed to prescribe it in the United States (Hart, Ksir 2013). This drugRead MoreShould Marijuana Be Legalized?1596 Words   |  7 Pages But what needs to be known before a user can safely and completely make the decision if trying Marijuana is a good idea? Many do not want the drug to be legalized because they claim that Cannabis is a â€Å"gateway drug†, meaning it will cause people to try harder drugs once their body builds up a resistance to Marijuana, because a stronger drug will be needed to reach a high state. This argument is often falsely related to the m edical side of the debate over legalization. It is claimed that this would

International Logistics Planning And Implementation- Professor Notes

Question: Create a clear identity for your organisation, including its commercial activities and locations of core operations, Clearly identify the products/services involved, Clearly map out its international logistics activities, including procurement, production, distribution, etc., Identify and discuss the challenges (potential and actual) associated with its international logistics activities, Identify and discuss the opportunities associated with the same, Clearly discuss how you would plan, implement, control and improve your organisation's international logistics activities for successful business operations taking into account the above mentioned challenges and opportunities. Answer: Planning of Logistics Activities The planning process of the logistics activities should take into account various factors for an uninterrupted flow of the logistics operation. Firstly, the planning process of WE should involve gathering of the information in the differential weight limits for the different provinces in China and knowing the specific rates. Secondly the company should plan the selection of cargo fleets based on the port capacity of different ports in China. The third important components is inventory planning strategies for estimating the fluctuations in demand and ensure good use of working capital thereby minimizing both storage and holding costs of the items. The selection of appropriate cold storage unit is important as dairy products are perishable in nature. The planning process should also keep a check on the sustainability goals, which involves selection of appropriate transportation vehicles. WE, should also plan recycling policies and incorporate green logistics into its various supply chain operations. It should also plan its supply chain activities through information technology and Global Trade management systems (Bichou 2014). Implementation strategy The implementation strategies are the set of action plans followed by the preliminary planning of the activities. In order the address the issue for differential weight limits, the containers should follow a minimum weight policy for avoiding frequent loading and unloading of cargo at different terminals. If the cargo is loaded as per the lowest weight requirement of a particular province then it can avoid the cost of weight penalty and reduce transport times. Based on the information available on the capacity of the ports WE should select its size of cargo vessels. This is important in order to accommodate with the lower capacity to dock in the harbor and avoidance of delay. The list given below shows the capacity of the top ten seaports based on the container volume. Source: (Cargofromchina.com 2016) For example we can see that port Lianyugang is having the lowest capacity in terms of volume so WE should assign smaller vessels at port Lianyugang and larger vessels in Ports Shenzen and Shanghai. It should also make necessary arrangement to notify the Chinese port authorities prior to seven days prior before making an entry into the port and getting an approval of the same from Superintendent Department of China. The company should implement inventory control techniques based on economic ordering quantities of its dairy containers. It should also categorize various dairy products as per ABC analysis, which involves segregating the products from most valuable to least valuable ones. In this way the company would be able to incorporate an efficient inflow and outflow of materials at stores and able to minimize its costs. (Torabi et al. 2012). In order to implement a sustainable action plan the company should introduce green logistics. The company should maintain a fleet of low carbon emission vehicles so that it is able to minimize air pollution and other environmental concerns. It should also redesign its reverse logistics system and recycle its glass milk bottles to reduce wastage and dumping activities. WE should make necessary arrangement for optimizing the logistics network thorough information technology. The Global trade management (GTM) can support cross border transaction in China by various software applications which can automate the process of international documentation and customs formalities. With the help of GTM, the dairy products can be integrating with core functional areas of logistics through enterprise resource planning. This will help the organization in cutting down the costs of both importers and exporters. Controlling In order ensure the consistency in performance of the logistics operations control systems play a crucial role. The various methods of controlling the logistics activities involve monitoring service level delivered to the customer, The company should ensure order cycle time is maintained as per the requirement. Service aspect also includes condition on arrival of the dairy products, availability of inventory and accuracy in invoicing and customs procedures as per the rules of Chinese Government. Controlling of warehouse activities involve proper selection of the warehouse sites. The climate condition at Chengdu is ideal for setting up the main distribution point. Continued improvement The continued growth of the company can be achieved through cost cutting in supply chain activities. This is particularly useful if the company concentrates its procurement activities from near shoring sourced. The company should focus on lean supply chain principles by relying on Chengdu Port and port of Chongqing. It should focus on minimizing wastewater as a result of cleaning operations of its containers. The customer satisfaction in terms to meeting the demand chain in shortest time is another important factor for improving the present services level of the company. In order to incorporate virtual logistics system the company should collaborate with companies such as VL Omni, which offers the Virtual logistics facility at a competitive market price (Cardoso 2013). Reference List Bichou, K., 2014. Port operations, planning and logistics. CRC Press Cardoso, S.R., Barbosa-Pvoa, A.P.F. and Relvas, S., 2013. Design and planning of supply chains with integration of reverse logistics activities under demand uncertainty. European Journal of Operational Research, 226(3), pp.436-451 Cargofromchina.com. (2016). Sea Freight Shipping from China: A Complete Guide. Torabi, S.A., Hatefi, S.M. and Pay, B.S., 2012. ABC inventory classification in the presence of both quantitative and qualitative criteria. Computers Industrial Engineering, 63(2), pp.530-537.