...The Idea behind VAR The most popular and traditional measure of risk is volatility. The main problem with volatility, however, is that it does not care about the direction of an investment's movement: a stock can be volatile because it suddenly jumps higher. Of course, investors are not distressed by gains. For investors, risk is about the odds of losing money, and VAR is based on that common-sense fact. By assuming investors care about the odds of a really big loss, VAR answers the question, "What is my worst-case scenario?" or "How much could I lose in a really bad month?" Now let's get specific. A VAR statistic has three components: a time period, a confidence level and a loss amount (or loss percentage). Keep these three parts in mind as we give some examples of variations of the question that VAR answers. You can see how the "VAR question" has three elements: a relatively high level of confidence (typically either 95% or 99%), a time period (a day, a month or a year) and an estimate of investment loss (expressed either in dollar or percentage terms). Methods of Calculating VAR Institutional investors use VAR to evaluate portfolio risk, but in this introduction we will use it to evaluate the risk of a single index that trades like a stock: the Nasdaq 100 Index, which trades under the ticker QQQQ. The QQQQ is a very popular index of the largest non-financial stocks that trade on the Nasdaq exchange. There are three methods of calculating VAR: the historical...
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...Need for export credit insurance | | Payments for exports are open to risks even at the best of times. The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world. An outbreak of war or civil war may block or delay payment for goods exported. A coup or an insurrection may also bring about the same result. Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. In addition, the exporters have to face commercial risks of insolvency or protracted default of buyers. The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are aggravated due to the political and economic uncertainties. Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss. | At the same time one has to understand the limitations of SMEs, which are: • Low Capital base • Concentration of functions in one / two persons • Inadequate exposure to international environment • Inability to face impact of WTO regime • Inadequate contribution towards R & D • Lack of professionalism GENERAL FINDINGS OF FIELD SURVEY OF SMALL & MEDIUM INDUSTRIES / ENTERPRISES The study that was undertaken by contacting 23 small and medium scale industries from...
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...The Importance of Good Credit Have you ever been turned down for a loan or an apartment lease and wondered why? It could be due to your credit history. Let’s face it–our credit says a lot about who we are. It is our financial report card, and can affect many aspects of our lives. Professional credit counselors at ClearPoint Credit Counseling Solutions agree that having a good credit history is imperative to leading a financially fit life. What is Credit? Credit is defined as a contractual agreement between a lender and a borrower in which the borrower assumes something of value, and agrees to repay the lender on a future date. How does it work? When you apply for credit (say a loan or a credit card), the lender has to decide if you are a good candidate for receiving the loan. The lender’s decision is based heavily on your credit history. They have to assess the level of risk involved if they are to extend credit to you. If you have displayed a poor repayment history, it is less likely that you will be approved for the loan or a line of credit. The lower your credit score, the higher your interest rate. Over the life of a mortgage or auto loan, higher interest rates will cost you thousands and thousands of dollars. If you plan to take out either of these types of loans or a new credit card, it would be wise to pull your credit reports to see where you stand and start making improvements now. Who actually looks at your credit record? You may be surprised to learn that it...
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...that like to prey on the less fortunate or the naïve. Predatory people or organizations are eager to gain something out of someone else’s weakness or suffering. In the business world, these “predators” can take the form of those that the general public is supposed to be able to trust. Banks, finance companies, contractors, and any others that enter into contracts with consumers are generally to blame for this type of behavior. This behavior can come in many different forms. A few examples are: predatory lending, subprime mortgages, and unsolicited credit cards. Because these practices tend to harm consumers, more legislation has been put into place in recent years. Unsolicited credit cards are an example of a predatory practice. In this case, credit card companies would send out credit cards to consumers who had not applied for them. This led to an increase in identity theft. It is now illegal to send unsolicited credit cards through the mail. Predatory lending is probably the most common type of predatory business practice against consumers. According to Wikipedia, “an audit report on predatory lending from the office of inspector general of the FDIC broadly defines predatory lending as imposing unfair and abusive loan terms on borrowers” (Wikipedia, n.d.). Or the practice of a lender deceptively convincing borrowers to agree to unfair and abusive loan terms, or systematically violating those terms in ways to make it difficult for the borrowers to defend against...
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...Part: FOUR Credit Management of The premier bank ltd. Part: Four Credit Management Credit Management: Credit management is a term used to identify accounting functions usually conducted under the umbrella of Accounts Receivables. Essentially, this collection of processes involves qualifying the extension of credit to a customer, monitors the reception and logging of payments on outstanding invoices, the initiation of collection procedures, and the resolution of disputes or queries regarding charges on a customer invoice. When functioning efficiently, credit management serves as an excellent way for the business to remain financially stable. The process of credit management begins with accurately assessing the credit-worthiness of the customer base. This is particularly important if the company chooses to extend some type of credit line or revolving credit to certain customers. Proper credit management calls for setting specific criteria that a customer must meet before receiving this type of credit arrangement. As part of the evaluation process, credit management also calls for determining the total credit line that will be extended to a given customer. Several factors are used as part of the credit management process to evaluate and qualify a customer for the receipt of some form of commercial credit. This includes gathering data on the potential customer’s current financial condition, including the current credit score. The current ratio between income and...
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...Brief Ashleigh Diehl MANGT 525 Commercial Law and Project Procurement Professor William H Volz Case Name: Jones v Star Credit Corp Court Delivering Opinion: Supreme Court, Special Term, Nassau County Citation No. 59 Misc 2d 189 (1969) Facts: On August 31st, 1965, the Jones’ (welfare recipients) purchased a home freezer unit from a Shop at Home Services, Inc representative for the price of $900. After taxes and time credit charges, credit life insurance, and credit property insurance were added to the price, the total came to $1234.80. At the time of the trial, the Jones’ had paid $619.88 and still owed $819.81. The retail price of the freezer was also determined at trial to be $300. The defendant argues that the contract on June 15th, 1966 is a financing contract and not a sales contract. The finance agreement states” Refinance of Freezer A/x #6766 and Food A/c #56788”. This agreement requests for refinancing and signed by the seller (Star Credit Corp) and purchaser (Jones’) The June 15th, 1966 contract is exactly the same as the original Aug 31st, 1965 contract and constitutes a novation and replacement of the original contract. Plaintiff/Appellant’s Contention [Clifton Jones et al.]: That they have amply compensated the defendant for the purchase of the freezer unit. Defendant/Appellee’s Contention [Star Credit Corp.]: That the June 15th, 1966 contract was a financing agreement and not a sales contract. Issue: Was the plaintiff taken advantage...
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...CONSUMER CREDIT IN AUSTRALIA DURING THE 20TH CENTURY Pierre van der Eng School of Management, Marketing and International Business College of Business and Economics Copland building 24 The Australian National University Canberra ACT 0200 Australia Fax +61 2 6125 8796 E-mail: pierre.vandereng@anu.edu.au Working Paper No: 489 ISBN: 0 86831 489 7 January 2008 JEL codes: D14, E21, E51, G23, N27 Keywords: Consumer Credit, Finance, Household Expenditure, History, Australia Consumer credit in Australia during the 20th century Pierre van der Eng1 School of Management, Marketing and International Business, Australian National University, Canberra, Australia Abstract This article surveys the growth of consumer credit in Australia during the 20th century, particularly after World War II. Until the 1970s, the regulation of Australia’s financial market caused formal consumer credit to be provided mainly by finance companies under hire-purchase contracts, largely for the purchase of cars and household durables. Deregulation of the financial market since the 1960s allowed banks to gain a dominant share in the market for personal loans. Quantification of long-term trends is difficult, but broad estimates suggest sustained growth in per capita indebtedness during 19452007. JEL classifications: D14, E21, E51, G23, N27 Key words: consumer credit, finance, household expenditure, history, Australia Introduction Living standards improved considerably in Australia during the 20th century...
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...Demica Report Series April 2009 Issue no.10 Research Report Strengthening the Links issue no. 10 Supply Chain Finance A Third Report from Demica Demica Report Series April 2009 Issue no.10 Summary Continuing tight credit conditions have made liquidity scarce. Corporations want to extend payment terms for their supply chain, but suppliers are finding it difficult or impossible to accommodate this requirement. Demica’s latest research report into Supply Chain Finance (SCF) compares the situation in the UK and Germany and reveals that 88% of UK firms and 55% of German companies have identified that key suppliers are unable to sustain further lengthening of payment periods. As a solution to this situation SCF is generating much enthusiasm amongst banks and their corporate customers as a means of substituting for lower credit availability. Supply Chain Finance structures not only allow large corporations to extend their credit terms with suppliers, but their suppliers can also use the credit quality of their receivables debtors to finance their receivables at favourable rates based on the individual debtor credit profile. Some 43% of German companies and 61% of British firms are planning to monetise their receivables/payables to provide liquidity within their supply chain. This report updates Demica’s first two Supply Chain Finance research projects from 2007 and 2008 and reveals that the majority of Germany and UK firms believe their banking relationships...
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...below: 1. Trade credit 2. Bank credit – Loans and advances – Cash credit – Overdraft – Discounting of bills 3. Customers’ advances 4. Installment credit 5. Loans from co-operatives ------------------------------------------------- 1 . Trade Credit Trade credit refers to credit granted to manufactures and traders by the Suppliers of raw material, finished goods, components, etc. Usually business enterprises buy supplies on a 30 to 90 days credit. This means that the goods are delivered but payments are not made until the expiry of period of credit. This type of credit does not make the funds available in cash but it facilitates purchases without making immediate payment. This is quite a popular source of finance. ------------------------------------------------- 2 . Bank Credit Commercial banks grant short-term finance to business firms which is known as bank credit. When bank credit is granted, the borrower gets a right to draw the amount of credit at one time or in instalments as and when needed. Bank credit may be granted by way of loans, cash credit, overdraft and discounted bills. ( i ) Loans When a certain amount is advanced by a bank repayable after a specified period, it is known as bank loan. Such advance is credited to a separate loan account and the borrower has to pay interest on the whole amount of loan irrespective of the amount of loan actually drawn. Usually loans are granted against security of assets. ( i i ) Cash Credit It is an arrangement...
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...Import Services | HSBC | Krungsri | L/C Opening Commission | • 0.25% per quarter or minimum THB1,200.- | • ¼% Amount credited to importer’s account multiply by the times of current with a minimum THB 1,000.- | Cable / Swift charges for LC opening | •THB1,000.- •Plus an addition of THB500.- for cable over 4 pages | •THB1000.- per page •More than 3 pages were counted THB500.- per page | L/C amendment | •THB500.- | •¼% of Amount credited to importer’s account added or depend on period renewal (3 months for one period or 90 days) | Cable / Swift changes for LC amendment | •THB600.- | •THB500.- per page | Revolving L/C commission | •0.25% per quarter (applies to reinstatement unit maturity) | • ¼% Amount credited to importer’s account multiply by the times of current with a minimum THB 1,000.- | Standby L/C commission | •2.50% per annum or minimum THB1,200.- | • ¼% Amount credited to importer’s account multiply by the times of current with a minimum THB1,000.- | Back to Back L/C | - | •¼% Amount credited to importer’s account multiply by the times of current with a minimum THB1,000.- | Import Bills for Collection (not under LC) | •0.25% up to THB1,000,000.- plus 0.125% thereafter or minimum THB1,200.- | •⅛% of transfer amount | Engagement Commission for Usance LC(bill under Usance LC) | •2.50% per annum or minimum THB1,200.- | •2.5% per annum of the amount in bill collection to obtain the documents | Engagement Commission for Sight LC(bill under Sight LC)...
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...Credit Risk Management of Prime Bank Limited University of Liberal Arts Bangladesh Internship Report Credit Risk Management of Prime Bank Limited Submitted to Sumaiya Zaman Senior Lecturer ULAB School of Business Submitted by Sadia Ferdous ID # 092011014 Date of submission 21 August 2013 Acknowledgements I would like to thank my supervisor, Sumaiya Zaman, Senior Lecturer, ULAB, for her guidance and feedback during this internship, without which I would have been unable to complete this task. I also express my gratitude to Prime Bank Limited for permitting me to do my internship in their organization. Special thanks to Credit Department of Shat Masjid Road Branch of prime Bank Limited for spending their valuable providing me with information, supervision and feedback during the course of my internship. I also like to thank the whole team of PBL for their help during my internship tenure. Page | 1 Letter of Transmittal August 21, 2013 Sumaiya Zaman Senior Lecturer ULAB School of Business University of Liberal Arts Bangladesh (ULAB) Subject: Submission of internship report on topic of ‘Credit Risk Management of Prime Bank Limited’. Dear Madam, This is my internship report on ‘Credit Risk Management of Prime Bank Limited’. I tried my best to work sincerely to cover all aspects regarding credit risk management at Prime Bank Limited. I hope you will find this report acceptable and thank you for allowing me to proceed with ...
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...Financial Management Is the process of managing the financial resources, including accounting and financial reporting, budgeting, collecting accounts receivable, risk management. Three areas of Financial Management: First is.. Personal Financial Management is mandatory in today’s world. It provides the means of keeping track of personal expenses, personal debt and subsequently helps the calculation of a person's net worth financially. The following are some of the tools used for personal financial management: Expense sheet: Preparation of expense sheet is the key to personal financial management. If one is left with no savings at the end of the month, then the best way to curb the situation is to prepare an expense sheet or make a budget plan. The expense sheet includes the following elements: 1. Calculation of income level: This is the sum of the post tax income or disposable income, spouse's income, investment income, rental income and other sources of income if any like alimony. 2. Calculation of expenses: Expenses on grocery, medical help, house help, laundry, basic amenities, phone, mobile, transportation and cable add up to household expenses. Lifestyle expenses include expenses on books, newspaper, clothing, personal care, entertainment, travel, holiday, eating out, and club or gym membership. Fixed expenses include expenses on house rent, children's fees, home loan, auto loan installments, other loan installments andinsurance premium...
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...The Function of Commercial Bank (A Class Bank) Commercial banks are responsible for adding customer deposits in a safe and liquid form and lending the proceeds to worthy commercial, industrial, governmental and nonprofit institutions. Commercial banks also provide market making activities in municipal, government and corporate bonds. Banks provide consulting and advisory services to customers as well as safekeeping and trust services. The function of commercial bank is categorized by primary and secondary function. The main functions of commercial banks are accepting deposits from the public and advancing them loans. Besides these functions there are many other functions which these banks perform. All these functions can be divided under the following heads: 1. Accepting deposits 2. Giving loans 3. Overdraft 4. Discounting of Bills of Exchange 5. Investment of Funds 6. Agency Functions 7. Miscellaneous Functions 1. Accepting Deposits: The most important function of commercial banks is to accept deposits from the public. Various sections of society, according to their needs and economic condition, deposit their savings with the banks. For example, fixed and low income group people deposit their savings in small amounts from the points of view of security, income and saving promotion. On the other hand, traders and businessmen deposit their savings in the banks for the convenience of payment. Therefore, keeping the needs and interests of various sections of society...
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...activities depend a great deal on the availability of loans/advances from commercial banks. The term ‘loan’ refers to the amount borrowed by one person from another. The amount is in the nature of loan and refers to the sum paid to the borrower. Thus from the view point of borrower, it is ‘borrowing’ and from the view point of bank, it is ‘lending’. Loan may be regarded as ‘credit’ granted where the money is disbursed and its recovery is made on a later date. It is a debt for the borrower. While granting loans, credit is given for a definite purpose and for a predetermined period. Interest is charged on the loan at agreed rate and intervals of payment. ‘Advance’ on the other hand, is a ‘credit facility’ granted by the bank. Banks grant advances largely for short-term purposes, such as purchase of goods traded in and meeting other short-term trading liabilities. There is a sense of debt in loan, whereas an advance is a facility being availed of by the borrower. However, like loans, advances are also to be repaid. Thus a credit facility-repayable in installments over a period is termed as loan while a credit facility repayable within one year may be known as advances Merits of Granting Loans and Advances Loans and...
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...Financial Management for a Small Business Participant Guide Table of Contents Welcome ................................................................................................................................................................................. 3 What Do You Know? Financial Management for a Small Business ................................................................................ 4 Pre-Test .................................................................................................................................................................................. 5 Benefits of Financial Management ...................................................................................................................................... 7 Budgeting ............................................................................................................................................................................... 7 Discussion Point #1: Budgeting............................................................................................................................................ 7 Bookkeeping .......................................................................................................................................................................... 8 Cash Flow ................................................................................................................................................................................
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