...financial institution’s capital position and financial condition or have not been identified to the extent that the situation represents an unsafe and unsound banking practice. Determination of whether the institution’s risk-management system can measure and control its risks is of particular importance. The primary components of a sound risk-management process are a comprehensive risk-measurement approach; a detailed structure of limits, guidelines, and other parameters used to govern risk taking; and a strong management information system for monitoring and reporting risks. These components are fundamental to both trading and nontrading activities. Moreover, the underlying risks associated with these activities, such as market, credit, liquidity, operations, and legal risks, are not new to banking, although their measurement can be more complex for trading activities than for lending activities. Accordingly, the process of risk management for capitalmarkets and trading activities should be integrated into the institution’s overall riskmanagement system to the fullest extent possible using a conceptual framework common to the financial institution’s other business activities. Such a common framework enables the institution to consolidate risk exposure more effectively, especially since the various individual risks involved in capital-markets and trading activities can be interconnected and may transcend specific markets. The examiner must apply a multitude...
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...Do Professional Traders Exhibit Loss Realization Aversion? Peter R. Locke * The George Washington University Steven C. Mann ** Texas Christian University November 2000 * Finance Department, School of Business and Public Management, The George Washington University, Washington DC, 20052. plocke@gwu.edu, (202) 994-3669. ** M.J. Neeley School of Business, Texas Christian University. Fort Worth, Texas 76129 S.mann@tcu.edu ; (817) 257-7569. We wish to thank Peter Alonzi, Chris Barry, Rob Battalio, Gerald P. Dwyer, Avner Kalay, Paul Laux, Paula Tkac, Steve Manaster, Arthur Warga, and seminar participants at the 1998 FMA meetings, the 1999 Chicago Board of Trade Spring Research seminar, the 1999 Western Finance meetings, the 1999 Southern Finance meetings, the Commodity Futures Trading Commission, TCU, University of Texas at Dallas, and the First Annual Texas Finance Festival for discussions and comments helpful to the evolution of the paper. Pattarake Sarajoti provided valuable assistance. Mann acknowledges the support of the Charles Tandy American Enterprise Center. A good portion of this work was completed while Locke was on the staff of the U.S. Commodity Futures Trading Commission. However, the views expressed are the authors’ only and do not purport to represent the views of the Commodity Futures Trading Commission or its staff. Do Professional Traders Exhibit Loss Realization Aversion? Abstract Recent evidence (e.g. Odean, 1998a) describes investor behavior...
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...capital: Measure, Attribution of portfolio diversification benefit, Allocation key to portfolio components. Emmanuel Noblet Executive Summary Recent years have witnessed significant advances in the design, calibration and implementation of credit risk portfolio models. [BANK X] currently uses Moody’s KMV (Kealhofer, McQuown and Vasicek) Portfolio Manager ([PM]). Models enrich management’s ability to make informed decisions to identify concentrations of risk and opportunities for diversification within a disciplined and objective framework, and thus offer a more sophisticated, less arbitrary alternative to traditional lending limit controls. It is thus essential to make sure models are in line with management’s goals and vice versa to make sure management takes some perspective to understand how the central measure it returns, namely credit risk economic capital ([EC]), is constructed and what it means. This memo aims at explaining: A) how credit risk is measured; B) what the implications of attributing or not portfolio diversification effects are; C) how this portfolio measure is then allocated back to the portfolio components. A - How is credit risk measured? Back to basics, a credit risk portfolio model is a function that maps a set of facility-level characteristics and market-level parameters to a distribution of potential portfolio credit losses. This definition is better known as Value-at-Risk ([VaR]). The concept of VaR has become the standard risk measure used to...
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...Introduction 2- Financial Market Analysis and its effect on the retail market. 3- Analysis of TESCO financial position and performance2008-2010 Profitability Analysis: Profit Margin/ Sales trend/ ROCE Liquidity Analysis: Current ration/ Acid ratio/ Operation Cash Flow Ratio Activity/ Efficiency Analysis: Debtor Day, Creditors Day, Inventory turnover Leveraging Analysis: gearing Ratio/ Interest Cover Ratio/ Market Analysis: EPS, P/E 4- Expected Performance had the downturn not occurred Profitability Liquidity Efficiency Leverage Market 5- Conclusion 1- Introduction in this report I analyse TESCO's financial position and performance in the context of recent financial market crisis. In my analysis I will have a short review on the financial market development in the last 2 years and then I will consider TESCO's position and performance before and after this development. In reviewing TESCO's financial position and performance I will be using various financial ratios to evaluate its performance, market risk, liquidity as well as future prospect of the company. As with many other industries, grocery and food industry’s growth will be affected in a volatile market. However the effect of a economic recession in this industry could be limited compare to other industries as grocery and food is not considered, to some extend, a luxury industry and people will need to buy food and clothes even in the recession. 2- Financial Market Analysis and its effect...
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...A true marketing orientation requires orgs to focus on meeting the needs of customers. Few companies can supple one product for all eg water supply utility. Most companies face an increase in fragmented markets. SEGMENTATION is about identifying groups of buyers within a market place who have needs that are distinctive in the way they deviate from the ‘average’ customer. Def ‘the identification of sub-sets of buyers within a market who share similar needs and who have similar buying processes’. There are many possible factors that might influence an individual’s choice of product/car (personalisation). The critical approach involves breaking down the ‘problem’ (how to persuade the customer to buy) into sub-problems. Criteria for effective segmentation…What is an appropriate basis for segmenting one market may not be appropriate to all markets. We consider 4 criteria when assessing the effectiveness of any segmentation: *usefulness to a company’s marketing planning; size of the resulting segments; their measurability; and their accessibility. This exercise is only useful to a company if it allows them to penetrate a greater proportion of its market that was not possible before taking out the exercise. Companies must be careful not to homogenise segments, as buyer views are always varied and diverse. Segment size-as they segments become smaller, you are closer to achieving marketing philosophy of satisfying each customers needs, but if they become too small they become uneconomic...
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...CONTENTS BONDS 1 STOCKS 6 OPTIONS 10 FUTURES 16 PORTFOLIO PERFORMANCE EVALUATION 20 INTERNATIONAL INVESTING 26 BONDS Page 480 –CFA Problems Questions #1 1. Leaf Products may issue a 10-year maturity fixed-income security, which might include a sinking fund provision and either refunding or call protection. a) Describe a sinking fund provision. The sinking fund provision allows the firm to repurchase a fraction of the outstanding bonds at either the market price or the sinking fund price (usually set at par), depending on the structure of the provision. The provision may be for a specific number of bonds or a percentage of the bond issue. The bonds selected for repurchase are generally selected at random. b) Explain the impact of a sinking fund provision on: i. The expected average life of the proposed security. We would expect a fraction of the total bond issue to be retired before the stated maturity data under the sinking fund provision. Therefore, the sinking fund provision decreases the expected average life of the proposed security. ii. Total principal and interest payments over the life of the proposed security. The sinking fund provision does not affect the total principal payments that investors would receive. However, investors may receive their principal repayments earlier than expected if the firm invokes the sinking fund provision. The sinking fund provision could decrease the amount of interest payments investors would receive...
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... With dollar remaining as the major foreign currency for foreign trade and foreign reserve, the developing countries have limited options to control their respective currency. This same was experienced by many developing Asian countries in the recent financial rout. Determination of Exchange Rate and its Fluctuations Like other prices, exchange rate also changes with the changes in the state of market. Just as other prices depend on supply and demand, exchange rate also depends on the configuration of forces of supply and demand. However, two important facets have to be noted: (i) Unlike goods and services, foreign exchange has no direct cost of production. It has only opportunity cost (Walras.1874). Import bills have to be paid through export earnings. So cost of production of exportable surpluses may be taken to constitute the direct production cost of exports and indirect cost of imports (Aggarwal, R. (1981)). Opportunity cost is accounted by with drawl of exportable surplus from domestic consumption. Fluctuations are a natural characteristic of foreign exchange rate market, provided that the exchange rate is not an administered price. If exchange rate is an administered price, it is determined administratively by the central bank of the country. Administered foreign exchange rate is generally endowed with stability as both demand for and supply of foreign currency is under the control of central bank. Exchange rate, on the whole, fluctuates like other prices, which...
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... Received January 1988, final version received April 1989 This paper performs a financial statement analysis that combines a large set of financial statement items into one summary measure which indicates the direction of one-year-ahead earnings changes. Positions are taken in stocks on the basis of this measure during the period 1973-1983, which involve cancelling long and short positions with zero net investment. The two-year holding-period return to the long and short positions is in the order of 12.5%. After adjustment for 'size effects' the return is about 7.0%. These returns cannot be explained by nominated firm risk characteristics. 1. Introduction F i n a n c i a l s t a t e m e n t analysis identifies aspects of financial statements that a r e r e l e v a n t to investment decisions. O n e goal of the analysis is to assess firm value from financial statements. M u c h empirical a c c o u n t i n g research has a t t e m p t e d to discover value-relevant accounting attributes in o r d e r to enhance financial s t a t e m e n t analysis. T h e a p p r o a c h taken in this work assumes that m a r k e t price is sufficient for d e t e r m i n i n g firms' values a n d thus serves as a b e n c h m a r k against which to evaluate the i n f o r m a t i o n in a c c o u n t i n g measures. A c c o u n t i n g a t t r i b u t e s are inferred to be value-relevant because they are c o n t e m p o r a n e o u s l y statistically associated with stock prices. F o r example...
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...a general idea of a company's financial position can be determined through the use of ratio analysis. Financial performance ratios can be calculated from the balance sheet and income statement. These ratios can be classified into five different subgroups: profit ratios, liquidity ratios, activity ratios, leverage ratios, and shareholder-return ratios. These ratios should be compared with the industry average or the company's prior years of performance. It should be noted, however, that deviation from the average is not necessarily bad; it simply warrants further investigation. For example, young companies will have purchased assets at a different price and will likely have a different capital structure than older companies. In addition to ratio analysis, a company's cash flow position is of critical importance and should be assessed. Cash flow shows how much actual cash a company possesses. Profit Ratios Profit ratios measure the efficiency with which the company uses its resources. The more efficient the company, the greater is its profitability. It is useful to compare a company's profitability against that of its major competitors in its industry. Such a comparison tells whether the company is operating more or less efficiently than its rivals. In addition, the change in a company's profit ratios over time tells whether its performance is improving or declining. A number of different profit ratios can be used, and each of them measures a different aspect of...
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...on women’s segment, because their clothing has a major market value of 50 % and the remaining 50% is shared by men’s wear (37%) and children’s wear (13%).Other than this market share is divided by price point.65 percent of market share is value price clothing industry, other 35 per cent is occupied by higher price items. With the help of 5 force analysis we will study the US family clothing industries competition in detail. i. Threat of rivals As per the above conditions we can say that US clothing industry is highly fragmented. In this market there are many small firms which are fighting to improve their market share along with customer base to have higher margins. However, the four largest (Gap, TJX, A & F, Ross) national chains acquired 39.4% of US market share. In this atmosphere every firm is offering discounts to compete with the discount retailers, because of this the profit margins are becoming thinner. Other than this firms need to customize their designs with regular intervals as per fashion and should be up to date to capture the customer attention and satisfaction. ii. Threat of new entrants. Because of high competition existing firm’s laid new methods for cost cut down and established easy availability of resources. Due to this entry cost became low and there is no need to spend much on R &D initially. For this reason the entry barriers are narrowed and it is easy to enter into the market, but it is very hard to have sustainable growth in the long...
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...Strategic Moves 3. Scope of Operations along the Industry’s Value Chain The above three choices will be explored throughout this paper. There are multiple measures to enhance the decision for maximizing the power of strategy. These include: • Whether and when to go on the offensive. • Whether and when to employ defensive strategies. • Whether to merge with or acquire another firm. • Which value chain activities, if any, should be outsourced. There are many other multiple measures to enhance the decision for maximizing the power of strategy. A company may decide to integrate backward or forward within the company or industry’s activity chain, or may decide to enter into agreements or partnerships within the industry. OFFENSIVE AND DEFENSIVE COMPETITIVE ACTIONS First a company must decide on where to go on the offense or defense. Some offense actions may already be employed with the general strategy of competing with other businesses. These include such things as focusing on building competitive edge, appropriating assets where competitors are found to be weak and protect their investments, or using a surprise tactic. Occasionally the firm’s best option is to be the first to use the strategy, and commence an offensive to advance and increase it’s market share. If a company decides to undertake a defensive position, then multiple strategies must be observed to have a successful conclusion. There are many purposes for a firm to take a defensive approach, these include: ...
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...Chapter 5 – Strategic Position Assessment Strategic position assessment: provides the basic information about the sources of value in the business and the drivers that create value in the business. The SPA should be done at two levels: The corporate level should focus on the value potential of the company’s portfolio of businesses. The unit level should focus on the value and drivers of the individual markets and products. Each business is assigned one for the five strategic objectives: 1. Divest: closed or sold 2. Harvest: capable of generating healthy CF with limited growth opps. 3. Maintain: mature markets with acceptable share and further share-building activities do not generate a (+) NPV. 4. Growth: positioned in attractive market where they posses competitive advantage 5. Enter: new growth opps. Assessing the current position: 1. Weaknesses of financial measures: do not give reliable indicators on whether current performance is creating long-term value a. Company-level: most measures fall short in providing an indicator of long-term performance. b. Unit-level: can be even more misleading because they encourage deceptive comparisons across business units 2. Strategic value drivers: those organizational capabilities that have the most significant impact on the firm’s ability to create SV. These drivers shape a company’s ability to create and retain competitive advantage. a. To measure whether value is...
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...Institutional holding and market friction Ping-Wen Sun Louisiana State University psun1@lsu.edu Abstract This study investigates the relationship between the institutional holding and the stock’s market friction measure. According to Sun’s (2007) findings, I use Hou and Moskowitz’s (2005) price delay measure (D1) and Liu’s (2006) liquidity measure (LM12) to proxy for a stock’s market friction. I find that a higher total institutional holding tends to decrease a stock’s price delay measure, but institutional holding exhibits a U-shaped relationship with a stock’s LM12 measure. However, as the number of institutions increases, the stock’s market friction decreases. In terms of different types of institutional holdings, higher total block holding or higher top five institutional holding of a stock increases a stock’s market friction level. Furthermore, in contrast to Agarwal’s (2007) findings, higher independent long term institutional holding and risk averse institutional holding tends to decrease a stock’s market friction level. Institutional holding and market friction Abstract This study investigates the relationship between the institutional holding and the stock’s market friction measure. According to Sun’s (2007) findings, I use Hou and Moskowitz’s (2005) price delay measure (D1) and Liu’s (2006) liquidity measure (LM12) to proxy for a stock’s market friction. I find that a higher total institutional holding tends to decrease a stock’s price delay measure, but institutional...
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...MAKING RELATED TO CREATION OF ADMINISTRATIVE STRUCTURE 17. DECISION MAKING RELATED TO CREATION OF TECHNICAL STRUCTURE 18. EVALUATION OF ADMINISTRATIVE PAY STRUCTURE 19. EVALUATION OF TECHNICAL PAY STRUCTURE 20. EXHIBITS R JOB MATCHES FOR ADMINISTRATIVE STRUCTURE S JOB MATCHES FOR TECHNICAL STRUCTURE T MARKET ANALYSIS ADMINSTRATIVE/TECHNICAL U STATISTICAL ANALYSIS FOR ADMINISTRATIVE STRUCTURE V STATISTICAL ANALYSIS FOR TECHNICAL STRUCTURE W PAY STRUCTURE ADMINISTRATIVE X PAY STRUCTURE TECHNICAL Y COMPANY SURVEY DATA Z SUMMARY OF JOB RATINGS ADMINISTRATIVE/TECHNICAL EXECUTIVE SUMMARY FASTCAT EXECUTIVE SUMMARY Introduction FastCat is a Business to Business software company that operates in a highly specialized and technological advanced industry. FastCat has been a pacesetter in this industry and is looked upon as the leader in the advancement of sales and marketing of software solutions. The company’s main objective is to maintain this leading edge which will only be accomplished through the attracting, acquiring, and retaining of top talent. In order to succeed in this rapidly changing economic environment, FastCat needs to position itself advantageously in the marketplace. To...
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...when it strengthens in price in response to market demand. Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets Ask (Offer) Price - The price at which the market is prepared to sell a specific currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs. At Best - An instruction given to a broker to buy or sell at the best rate that can be obtained. At or Better - An order to deal at a specific rate or better. B Balance of Trade - The value of a country's exports minus its imports. Bar Chart - A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar. Base Currency - The first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215 In the FX markets, the US Dollar is normally considered the...
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