To Dr. Khadija Bari
Analysis of Pakistani Industries
PORTERS MODEL ANALYSIS.12
This play is also often called "Synthetic Fixed Rate
This arises in an asymmetric information environment. Firms
have a better idea of their credit risk levels, and often need a
credible way to convey this to the market. This is cal
It is evident that a swap is equivalent to an exchange of bonds.
Given the fact that swaps are carried out between corporate
entities, they should display all the features of corporate
bonds. However, this is usually not the case. Li
RISK AND SWAPS
Since principal is not swapped, maximum loss much less
than on bond.
Therefore, if risky corporation would normally need to pay
3% over Treasuries for swap, need to pay much less.
Loss is value of swap at default.
If floating pa
Embedded option to extend maturity - analogous to an
option on a forward bond.
When the rates at which the two legs are closed are off
market. Reason: Usually for rearrangement of income
flows (tax purpose
Why use swaps to manage Duration Risk?
Many institutions such as federal agencies are
restricted or disallowed to trade in futures.
Swap costs are low.
Swaps can be tailored to meet needs where futures
are more standardized.
Floating/Floating Rate Swap
(LIBOR + 3/4%
T-bill + 1/2%
(T-bill - 1/4%)
(LIBOR - 1/4%)
In a floating/floating rate swap, the bank raises funds in the Tbill rate market and promises to pay
CURRENCY SWAP (Eliminating Currency Risk)
- Exchange fixed for fixed in different currencies.
- Comparative advantage:
Note 1% difference.
Assume A wishes to borrow in pounds, B in dollars.
Example of Lowering Fixed Rate Costs:
Baa corporate borrows at floating rate = T-bill + 0.5%
Aaa corporate borrows at floating rate = T-bill + .25%
Quality spread for five years maturity = 1.5%
Baa corporate borrows at fixed rate = 13.0%
Aaa corporate bor
To find the price profit-maximization for the general public and students we have divide our
calculations in three parts: Thursday, Friday and Saturday.
Total market quantity for Thursday does not exceed the total capacity of 70 seats, therefore
Depreciation of asset
vs total asset depreciated
Revaluation of fixed assets
Revaluation or no
Development costs are
expensed as incurred.
costs related to c
Akshay was a partner in a large consulting firm based out of Mumbai. He was a specialist in the FMCG industry
with an experience of around 15 years.
Sipping his favorite cup of coffee, he glanced at the sheets lying on his
Senior Manager in Boise Automation Canada Ltd. was disappointed
by the news that he had just lost $ 1.2 million with the ability to
Northern Paper Inc (North), pulp and paper mill in Rocky Falls,
Ontario.The opportunity lies in the development, delivery a
Continuous Compound Interest Formula
An amount of $3,000.00 is deposited in a bank paying an
annual interest rate of 3 %, compounded continuously.
(a) Find the balance after 4 years.
(b) How long would it take for the money to double?
MANAGING BASIS RISK
Basis risk arises from unequal changes in floating rates in two
separate markets, e.g., LIBOR vs. CD rates.
Here we used a floating-floating swap to hedge away this risk.
A bank has an asset yie
The average quality spreads between Aaa and Baa in the
fixed rate corporate bond market are 50-100 basis points.
Spread in the floating rate markets = 50 bps.
Why do such differences in spreads exist? This is because
credit risk is
Following are the major highlights of Budget 2009
1. Income tax slabs increased marginally.
The basic exemption limit has been increased by Rs. 10,000 for men and ladies and by
Rs. 15,000 for senior citizens. This would translate into a tax benefit for Rs
What Are Charts?
A price chart is a sequence of prices plotted over a specific time frame. In statistical terms,
charts are referred to as time series plots.
On the chart, the y-axis (vertical axis) represents the price scale and the x-axis (horizontal
Besides lower margin requirements, a principal difference between purchasing Single Stock
Futures and shares of stock concerns interest rates and dividends. If you buy a stock (on margin),
you receive the dividend (if any), but have to pay or forego inter
National Stock Exchange of India Limited
Regulations (F&O Segment)
RISK DISCLOSURE DOCUMENT
(THIS DOCUMENT SHOULD BE READ BY EACH AND EVERY PROSPECTIVE
CONSTITUENT BEFORE ENTERING INTO DERIVATIVES TRADING AND
SHOULD BE READ IN CONJUNCTION WITH
Money Market and its Instruments
Money Market: Money market means market where money or its equivalent can be traded.
Money is synonym of liquidity. Money market consists of financial institutions and dealers in
money or credit who wish to generate liquid
1 ICICI Prudential Asset Management Company Limited
Revision and Practice Test Kit Version 3
For AMFI Mutual Fund (Advisors) Certification Examination
ICICI PRUDENTIAL ASSET MANAGEMENT COMPANY LTD.
Revision and practice test kit 3
2 ICICI Pruden
Certificates of Deposit: - CDs are negotiable money market instrument issued
in Demat form or as a Usance Promissory Notes. CDs issued by banks should
not have the maturity less than seven days and not more than one year.
Financial Institutions are allowe