Derivatives are an integral part of modern financial markets. Simply stated, a derivative instrument is a contract between two entities that specifies the values, dates, notional amounts and other conditions under which the transaction between them is to take place (usually at a future date). Derivates play an important role in streamlining economic activity, as well as to facilitate liquidity in the markets. Credit derivatives are an especially sought after instrument due to the legal exemptions afforded it. On the flip side, the inherent complexity and speculative element in derivatives make them a high-risk option. In the context of financial market booms and busts, derivatives are often criticized for artificially (yet inevitably) creating these cycles. For this reason, it is not unreasonable to claim that ‘derivatives are toxic instruments of financial mass destruction’, although they have their utility when employed prudently.
The role played by . . . Read More
- What do you understand by the term ‘employee welfare’?
Employee welfare refers to the array of benefits (either monetary or as services) salaried employees are entitled to during their term of association with a company. Usually employee welfare measures include contributions to the pension fund, health insurance coverage, offering stock options, providing paid leave, etc. Some modern employers even offer crèche or play areas for children of female employees. The purpose of these measures is to provide employees with a safety net against unexpected events and occurrences. Some of the measures are offered as a goodwill gesture on part of the management.
But unfortunately, the term ‘employee welfare’ is not readily associated with Walmart. Despite being voted the most admired corporation in America by its customers, the experience of its employees is learnt to be unsatisfactory. Perhaps there is a trade-off between . . . Read More
The concept of marketing products and services in a consumer market is often seen as ethically dubious by media analysts. On a broader perspective, the inherently weak moral imperative of capitalist culture makes this outcome inevitable. As a result, marketing strategies have attracted much flak and condemnation from the judicious sections of society. There is also a perception that marketers take advantage of people’s weaknesses and vulnerability. In this context, top managers will have to ponder over the following question: ‘When a delicate and disturbing situation leads to a viable business opportunity, how we can follow up without appearing exploitative?’ (Lears, 1995, p.78) It is only through a satisfactory and conscientious introspection that the often ethically dodgy marketing industry can make amends. According to a leading British management scholar, a good marketing approach would translate to the company “pursuing the new opportunity carefully and raising . . . Read More
“When the price of a stock can be influenced by a “herd” on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rational…in fact market prices are frequently nonsensical.”
The Efficient Market Hypothesis has been praised by some security analysts as an enduring truth about financial markets. Ever since Eugene Fama coined the theory of the efficient markets in 1970, it has held a prominent position in investment theory. According to him, “in an efficient market any new information would be immediately and fully reflected in equity prices. Consequently, a financial market quickly, if not instantaneously, discounts all available information. Therefore, in an efficient market, investors should expect an asset price to reflect its true fundamental value at all times.” (Stanley & Samuelson, 2009, . . . Read More
The article chosen for this exercise is titled ‘Beware Those ‘Beta Traps’’. Written by Ben Levisohn, it appeared in the Wall Street Journal on 29th October, 2011. The article cautions investors about the dangers of those stocks whose prices tend to behave with high volatility. The volatility of a stock’s price movement is mathematically represented by the Beta value. A Beta value of 1 indicates near synchronous alignment with the market index such as Dow Jones Industrial Average or NASDAQ. A value less than 1 is a sign of stability whereas a stock’s Beta value that has deviated much higher than the median 1 tends to be very volatile.
During a bull run, high-beta stocks tend to be an investor’s best friend, as the positive market momentum tends to push up the prices of these counters high. For example, during the market rally of October, the top 100 highest-beta stocks in the S&P 500 list have risen 12.4 % more than the index as a . . . Read More
With the flourishing of the Internet and vast improvements in network bandwidth capabilities, films produced in Hollywood have also been marketed and distributed through these channels. In the article in question, which was published in www.wired.com in June 2005, George Lucas was talking about a fundamental shift in movie consumption patterns. The film industry in the United States has been on a steady decline since the onset of the Second World War, and this trend is likely to continue in the future too. With the emergence of new avenues for marketing and distribution, including Television and DVD, viewership in theatres is bound to fall further. This point is alluded to by George Lucas.
Lucas further observes that although theatre-going will continue to be a social event in American society, they would no longer see big-budget epics. Despite being the producer of major epic blockbusters like Star Wars series and Indiana Jones, his own recent movie productions . . . Read More
A wholesaler can adopt a range of marketing tactics to promote its services. Event marketing is an especially useful idea to exploit market opportunity. Event marketing involves a list of activities that enhance brand visibility and brand identification for target consumers (in this case select retailers). Event marketing by wholesalers is usually a ‘push’ tactic, as awareness about products and services is brought to retailers, who in turn procure and promote it to end consumers. Wholesalers usually do not expend resources on promotion of their goods and services, yet, tactical event marketing can fetch impressive rewards.
One of the key elements to successful event marketing is to offer customers an ‘experience’ of the product/service. This is done through live demonstrations, audio/visual presentations, distributing samples and offering free trials. Wholesalers could also regroup products (bulk-breaking) so as to provide quantity and assortment customers . . . Read More
The article titled Rating Your Dimensional Data Warehouse is a concise piece of scholarship that outlines the key metrics in evaluating a Data Warehouse. Data Warehouse as a data storage concept and decision making aid has evolved a lot over the past two decades. Yet, no robust set of metrics were developed to analyse and evaluate the dimensions of a Data Warehouse. Author Ralph Kimball sets out to do the same, as he proposes a list of 20 criteria for what makes a system ‘dimensional’. Each criteria can be assigned a value of ‘0’ (bad) or ‘1’ (good) and then added up to arrive at the final rating. While a sum total score of 0 would indicate a system completely un-supportive of a dimensional approach, a score of 20 would indicate a system that is fully supportive of a dimensional approach.
The author outlays 12 of the 20 criteria in the article. Some of the criteria that pertain to the Architecture of the Data Warehouse are: Explicit Declaration, Conformed . . . Read More
It was the engineers of Motorola, who in the 1980s began to conceive of a project to drastically improve the organization’s quality monitoring processes. They believed that traditional methods employed so far, which measured manufacturing errors per thousand product units, were not sufficient. As a result they improvised the method to measure manufacturing defects per million opportunities. They termed this process innovation as the Six Sigma standard. In the years that followed, Six Sigma will play an instrumental role in propelling Motorola to a leadership position in the electronics industry, on back of saving the company billions of dollars in production costs and greatly improving production efficiency. Subsequently, Six Sigma was adopted by other industries and it evolved into a sophisticated and comprehensive Project Management tool for improving standards and processes of a business enterprise. The Six Sigma strategy is to integrate
“business . . . Read More
The total sum of funds represented by the financial markets can be classified under different segments, based on the characteristics of financial claims being traded and the imperatives of different participants. At a broad level, the financial system can be classified under money markets and capital markets. There are quite a few differences between the money and capital markets, but the primary difference is the maturity period of the securities traded in them. Money markets encompass a broad assortment of institutions and procedures that are related to and transact in short-term debt instruments (which have maturity periods of less than a year). These instruments are usually issued by borrowers that boast of high credit ratings. Good examples of instruments traded in money markets are U.S. Treasury bills, many federal agency securities, bankers’ acceptances, commercial paper and negotiable certificates of deposit. Common equities or shares of publically traded companies do not . . . Read More