Credit Risk Is To A Company Essay Example Pdf - Free Essay Example

Sample details Pages: 5 Words: 1362 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Tags: Risk Essay Did you like this example? Definition: Credit Risk is the risk of loss arising from some credit event with counterparty. Who can be the possible counterparty? Counterpart can be Individuals, companies or the government of a country itself. In laymans terms credit risk is the risk that you wont be paid back your money or the the person whom you have lended money or given money for a contract defaults. Don’t waste time! Our writers will create an original "Credit Risk Is To A Company Essay Example Pdf" essay for you Create order There can be many types of obligations apart from the currency such as, customer credit to financial derivative transactions. Credit risk also referred to as default risk. In this the obligator does not honor the obligation. Another important term might be credit exposure. This is also known as exposure at default. This tells how much creditor will loose if the counterparty defaulted its obligation What are the models of managing the credit risk? The models are based on the two important concepts: 1. Default Probability 2. Recovery Rate And combiningly they are called credit spread Different types of credit risk Issuer Risk Counterparty Risk Default Risk Creditworthiness Risk The mutual combination creates different types of credit risk which can be placed in the box. Importance of Credit Risk in Capital markets In the absence of analytical information about a companys financial position, many investors in corporate credit markets would stay within the confinements with a lower returns of the banks and the government securities. If investors can be eligible to compare credit risk across companies, industries and countries, the capital market will get a lot of investors in corporate bond market. Reduction or proper evaluation of Credit Risk can help investors to access funds from a various instrument as well as reduces information risk, which eventually helps in efficient pricing. This reduces the cost of capital and allows a larger number of projects to be economically possible, hence enhancing growth of economy. More the number of projects, more is the liquidity in bond market. The banking system inefficiencies are not present in capital market. Hence, proper management of credit risk is very essential in capital markets. The proper evaluation also brings transparency and reduces in formation asymmetry in the Capital market. By this the people get proper incentive to invest in capital market. Also BASEL II requires that credit risk to be included in the definition of the market risk. Introduction to Credit Derivatives Credit derivatives help in transferring the risk of loss in a loan, bond, derivative or other financial obligation from one party to another. They allow institutions to transfer credit risk without buying or selling the underlying asset. Even if a very damaging operational risk is hitting the bank, the credit derivatives help in dispersing the risk. Payouts on credit derivatives depend in some way on the creditworthiness of companies or countries that borrow money either via loans or the issue of bonds. The credit worthiness is recognized by various credit rating agencies. The examples might be Moodys Investors Service or Standard Poors. Credit derivatives though may not appear to have an underlying asset, can be equated to a premium paid to transfer the risk to the third party. Credit Risk Mitigating Mechanisms There are a lot of methodologies for mitigating the risks. Some of them are stock index futures, letter of credits, insurance products, hedging by forward rate agreements, swaps and lot more. But the question now is why credit derivatives are special? Yes. They are special due to the fact that they are helpful in mitigating the risk when economy is in a very bad condition. The commercial risk reducing instruments, instead of offsetting each other, combine to increase the risk in overall. Have a look at the figure below. Mostly helpful in economic down turns, Hence helpful!! Mostly Helpful in economic up-turn Credit Derivatives Guarantees, Letter of Credit, Insurance Products etc Commercial Business Oriented risk mechanisms Financial Risk Mechanisms The credit derivative helps Transferring risk to third party Individual retail clients to invest in bonds and stocks previously unaffordable Individuals to invest in the foreign bonds with lower expenditure Indirect Investing in stock: Helpful for foreign investors who want to buy the domestic bond(Help them to bypass regulatory constraints) Reduce the risk of a start-up financing Split out the company specific risk from the market risk Some of the credit derivative instruments are mentioned below Credit Default Swap Protection Seller Protection Buyer Fee(monthly, quarterly, semi-annually, yearly) Payment contigent on credit event Reference Asset (Bond, default swap or other) Reference: Credit Derivatives: By George Chacko, Anders Sjoman, Hitedo Motohashi, Vincent Dessain Credit Linked Note( Standard Debt Note+ a credit derivative such as credit default swap) Funded Protection Seller Note Issuer (Protection Buyer) Fee(Interest+ CDS Premium) Note Issuer- Seller Payment Bond MNO Proceeds from Note Sale Return on Bond MNO Reference: Credit Derivatives: By George Chacko, Anders Sjoman, Hitedo Motohashi, Vincent Dessain Credit Spread Option This is hedging as well as investment instruments that save against changes in credit spread. A broad Classification of the credit Derivatives is done as below Credit Event Options Swaps Forwards Structured Notes Changes in Credit Spread Credit Spread Option Credit Spread Swap Credit Spread Forward Credit Linked Note Change in Market Value/ Rating Credit Event Option Credit Event Swap Credit Event Forward Credit Linked Note Default Credit Default Option Credit Default Swap Credit Linked Note Traditional Method of Managing Risk other than credit derivative Letters of Credit: Bank guarantees that the buyer of the goods will pay the correct amount on time to the seller. In the case of a buyer fails to fulfil its obligation, bank takes the responsibility to pay in full or partially to the seller according to the norms and conditions. The letter of credit plays a very important role in international trade. Because, it is impossible for the seller to know the credentials of the buyer, which is staying abroad. Hence, a well-known bank takes this responsibility. Insurance Products: The insurance products helps people in mitigating credit risk. Credit Insurance product provides protection to the business, scope of growth, better credit terms and security for bank finacing. One of the examples of such products are Export Credit Insurance. Guarantees: Such instruments include bank guarantee, export credit guarantee, inter-corporate guarantee. Risk Based Pricing: Lenders charge more to borrowers who are more like to default. Lenders consider credit rating of the borrower, purpose of taking loan and the loan to value ratio of the loan. Tightening: Reduce the amount of loan or the time period to maturity of the loan. Diversification: Lenders choose a large number of borrowers with mixed credentials to pay back the borrowed amount. Deposit Insurance: Government establishes it secure the bank deposits in insolvent banks or bankrupt banks. Players in credit derivatives (Buyers and sellers, their role, incentives and risk involved) The players in credit derivative market are divided into two groups. It is interesting to note that the same types of the firms are on the both side, namely, banks, security houses, insurance companies and hedge funds. The most prominent players are the banks and the least prominent player is government. Participation of the corporate in credit derivative market is in mid range. It is noticed that the dominance of the banks in the credit derivative market is decreasing day by day, but they still remain the prominent players. In case of Buyers, Securities Houses and Hedge Funds are in 2nd and third position respectively. Whereas, in sellers, Insurance companies and the Securities Houses are in second and third position respectively. It is a good news that the number of small players are increasing day by day and hence resulting in increase in the liquidity in the credit derivative market. What are the underlying Assets? CorpSovereign Assets(Non-Emerging Markets) Other s Corporate Assets Financials Sovereign Assets(Emerging Markets) orate asset is most used underlying reference asset Risks associated with credit derivatives Jp-to-default risk in case of Credit Default Swap: This is the risk for the seller in case of the default of reference entity. Seller has to pay millions of dollar to the buyer who is protected Bankruptcy Risk: The risk that reference entity will go bankrupt Restructuring Risk: The risk that the reference entity will be restructuredum

Mary Shellys Frankenstein Essay - 1200 Words

Mary Shelly’s Frankenstein shows the life of an early scientist and the effects of uncovering a truth that has not been known or experimented by other scientist’s. The story of Frankenstein portrays mainly the characters Victor Frankenstein, Henry Clerval, Frankenstein’s creation, Captain Walton and Elizabeth Victor’s future wife and relative. When Victor animates a lifeless object he is horrified by the concept of what he had just done and how it looks. After running away Victor’s loved ones are affected greatly by his choices that he makes along the way, while also changing his relationship with his creation. Through his feelings of fear when approached by the monster, the trauma of multiple deaths and the arrest of Justin, Victor†¦show more content†¦Before Victor had achieved reanimating an object his plans and goals had been recognition and fame with his creation by his side, but now his goal is to get away from his creation. â€Å"My heart palpitated in the sickness of fear; and I hurried on with irregular steps, not daring to look about me.† (Shelly p.30) By running away he changes his initial goal of fame and recognition to now not wanting to be associated with his creation, out of this experience Victor also learns about commitment and responsibility. Victor learns that if he had taken responsibility and fully committed to helping the creation live he might not have lost the lives of his loved ones due to the creations lack of knowledge and social skills. The quotes that I have chosen are said by Captain Walton and Dr. Frankenstein in a letter to Walton’s sister. The context for this quote takes place when the ship they are on is emerged in ice as Walton is approached by his crew about what to do if the ice breaks when Victor interrupts. â€Å"They desired, therefore, that if I should engage with a solemn promise, that if the vessel should be freed, I would instantly direct my course southward.† (Shelly, p.149) This quote is said by Walton while the next is said in response by Victor. â€Å"Are you then so easily turned from your design? Did you not call this the glorious expedition? And wherefore was it glorious? Not because the way was smooth and placid as a southernShow MoreRelatedMary Shelly’s Frankenste in Essay1266 Words   |  6 PagesMary Shelly’s Frankenstein Mary Shelly’s Frankenstein is designed as a gothic horror novel but deals with serious moral issues. 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Women and Minorities in Psychology Free Essays

Before the call war women and minorities were not allowed to pursue higher education and were discouraged to study the sciences because of their lack of Intelligence. However, Margaret Washburn was the first woman to graduate with a doctorate In psychology studying with Ethylene In the area of visual Imagery on tactile sensitivity, (Goodwin, 2008). Dry. We will write a custom essay sample on Women and Minorities in Psychology or any similar topic only for you Order Now Washburn went on to become the president of the American Psychology Association in 1921 (Goodwin, 2008). African Americans were referred to as a â€Å"beast of burden† as was thought of as being even more inferior than the lowly female and it was the life that that if African Americans were educated it would encourage them to think about freedom ( Goodwin, 2008). During the post-civil war era African American’s were allowed to attend a limited number of separate but equal schools, most attained teaching degrees and returned to their communities as teachers. Those African American’s who did earn an advanced degree in psychology according to Goodwin (2008), had a very limited opportunity to use their degrees other than teaching at a â€Å"black college†. Francis Sumner was the first African American to earn a doctorate degree in psychology in 1920 (Goodwin, 2008). Because of the school of thought at the time in the 19th century of the superiority of the white male’s women and people of color were not granted the opportunity to pursue a higher education in the case of African American no education at all. They were treated marginally and living on the fringe of society as having no value as a human being at all. Women and people of color were disenfranchised and deem to have little or nothing to offer. Many African Americans credit W. E. Dubious as being the first African American psychology because he wrote so eloquent about the psychological struggles of African American in his classic work entitled The Souls of Black Folk’s. The omission of women and people of color from the field of psychology, any psychology results would not have been an accurate because of the blabs of the studies; over half of the population was not included. Reference: Contributions of African Americans to the Held of Psychology Shells R. Black, Susie A. Spence and Gasify R. Omar Journal of Black Studies Volvo. 35, No. 1 (Seep. , 2004), up. 40_64 Goodwin, C. (2008). A History of Modern Psychology, 3rd Deed. USA: John Wiley Sons, By Sandy beyond simple reading and writing it would have a dangerous effects would be not e good for a women health ( Goodwin, 2008). How to cite Women and Minorities in Psychology, Papers

Measurement and Management Challenges

Question: Discuss about the Measurement and Management Challenges. Answer: Introduction: The goals of a company should be realistic and well defined because they influence a companys decisions. Having clear goals and objectives assist in creating guidelines that become the pillar of a companys planning (Robbins et al., 2015). Business objectives should incorporate profitability, productivity and customer service as pillars. The current generation of people thrives through the use of technology and reliance on the media. For this reason, businesses that deal with telecommunication and the media services have a lot to offer to satisfy the appetite of the anticipating market (Fletcher, Bell and B McNaughton, 2004) . This section focuses on objectives Telstra which is an Australian based telecommunication and media company. Telstra relays an array of services that is not limited to mobile and broadband internet services and a cable television. It is imperative to note that Telstra is a government own monopoly in communication services and has recently received a lot of strong competition. Telstras first and prime objective is to maximize its return on investment (Barrile, Bini and Cameron, 2004). This is a strong first objective for Telstra because the sole purpose of operating a business to create profit. Telstra has proven to note that the customer is number one stakeholder in any business by ensuring tha t they create a brilliant customer experience as one of its objectives. The long-lasting objective for Telstra is to realize a connected future for Australians. Discuss marketing orientation concepts (i.e. the marketing concept, the selling concept or production concept) Explain with examples which concept your organisation follows. Marketing orientation is a business model that is designed in ensuring that products are produced to be in tandem with the customers needs and specification. Initially, businesses focused on operations that aimed maximizing sales so as to realize bigger profits. This concept changed after business realized that consumers are very important. Currently, Telstra Telecommunication and Media Company is utilizing the social marketing concept. The social marketing concept is where a business consider what the customers needs now and in the future (mymarketingcloud, 2017). This concept of marketing is for businesses which has a vision of a long stay in an industry by looking at the long term interest of the customers. Case in point, Telstra wishes a future where there is quality customer experience to enable the customers and shareholders see a creating value. Social marketing concept addresses the issue of the environment. This is where the business ought to be environmentally friendly. Acc ording to Narasimha Reddi, (2009) Telstra believes that they are determined to reduce negative environmental impact by having technologies that will give solutions to environmental problems. The social marketing concept is the hardest to achieve but also the best market orientation. Just like Telstras social marketing concept, social marketing concept aims to ensure that there is gained profit, satisfied customers and it issocially viable. What is your organisation's core marketing strategy? Discuss the strengths and weaknesses of the current marketing strategy and explain how this strategy will help your organisation reach its corporate objectives. Since Telstra is the largest telecommunication industry in Australia, its market strategy aims at ensuring that the customers are satisfied with their products. Its market strategy is to provide better services that will assist them to realize great customer experience to help increase its revenue. One of the strengths of this market strategy includes the fact that they have created a strong customer foundation. This is because Telstra was the first Telecommunication Company to provide 3G and 4G services. Telstras extensive promotional activities have helped them achieve great customer recognition (John H, Pamela D and Charles, 2004). This has helped them retain the loyalty of their customers and also attract new customers. Consequently, Telstra has a very strong network infrastructure. Unlike other telecommunication companies, Telstra network can function even in remote rural areas. Telstra is accessible with over two hundred branded stores and shops strategically located across Aus tralia. One of the weaknesses of Telstra market strategy is inability of its strategy to encourage international growth. The price of its mobile and broadband plans are extremely high than that of its competitors. The fact that Telstra focuses on the postpaid plan rather than the prepaid plan is affecting low-income customers. References Barrile, S., Bini, M. and Cameron, T. (2004).Excel revise in a month VCE. 1st ed. Glebe, N.S.W.: Pascal Press, p.90. Fletcher, R., Bell, J. and B McNaughton, R. (2004).International E-business Marketing. 1st ed. Cengage Learning EMEA. John H, R., Pamela D, M. and Charles, N. (2004). Implementing a Prelaunch Diffusion Model: Measurement and Management Challenges of the Telstra Switching Study. 23(2), pp.186-191. Narasimha Reddi, C. (2009).Effective public relations and media strategy. 1st ed. PHI Learning Pvt. Ltd, p.181. Robbins, S., Bergman, R., Stagg, I. and Coulter, M. (2015).Management. 1st ed. Australia: Pearson, p.80. mymarketingcloud. (2017).The 5 Marketing Concepts Marketing Management Orientations. [online] Available at: https://mymarketingcloud.wordpress.com/2015/01/21/the-5- marketing-concepts-marketing-management-orientations/ [Accessed 25 Mar. 2017].