Found 1748 Articles for Growth & Empowerment

People who do business internationally should be aware of exchange rates and how they work exactly. Let’s try to understand about floating currency exchange rate and fixed currency exchange rate.Floating currency exchange rateFloating currency exchange rate depends on demand and supply. If demand for currency is high then value increases and if demand for currency is low then value decreases. This exchange rate affects a country’s trade position internationally.Advantages of the floating currency exchange rate are as follows −Change of internal policy.Large reserves are not needed.Central bank has less power.Disadvantages of the floating currency exchange rate are as follows −Uncertainty.Volatility ... Read More

Equity swaps is a derivative contract between parties, which involves exchange of future cash flows between two cash streams. Cash streams are also called “leg”. One cash stream/leg has equity based cash flows (return on equity index etc.) and the other cash stream has fixed income cash flows (LIBOR etc.)In this, exchange takes place on fixed dates and these cash flows have predetermined notional amounts. They do not imply exchange of principal amounts. They offer a high degree of flexibility and equity swap contracts are customised according to needs of parties.Advantages of equity swaps are as follows −Gain exposure to ... Read More

Let us learn about the fixed interest rate and floating interest rate before understanding the differences between them.Fixed interest rateIn fixed interest rate the lending rate is fixed. In fixed interest rate loan tenure and months installment are known before. Switching of fixed rates to floating rate (a few years) is called reset.Fixed interest rate is ideal when you want to pay fixed EMI and to meet deadlines without any difficulties. With fixed interest rates, people can plan their finances better and it helps in eliminating/decreasing market risk associated with interest rates. The main advantage of fixed interest rate is ... Read More

Both terms recession and slowdown affects the economy negatively. Cause, manner and degree in which they affect the economy differ.RecessionIt is the term used in general economic activity. In macroeconomics, recession is recognized when there is negative GDP growth rate after two consecutive quarters. Recession is the part of the economic cycle of expansion and contraction.Recession indicators are as follows −Gross Domestic product (negative GDP indicates sharp decline in productivity)Real income (purchasing power depends on real income, if real income decrease then purchasing power decreases)Manufacturing (exports/imports and trade surplus/deficits with other countriesstrength health of manufacturing sector)Wholesale/retail (measures market performance of ... Read More

In option trading there are different terms involved and different complexities are involved in choosing the best fit or strategy. Each term has its own advantages and limitations.Some of the aspects to look at are the current market position, investor risk appetite, investor trading experience, profit potential, trade breakeven point, investor intentions and expectations etc.Long putThis involves buying a put option which means choice to sell option at predetermined date at expiry time. This strategy gives buyers a put option on expiry but not obligation. Premium is paid to buy put options.In this strategy the investor will exercise his option ... Read More

In trading investors can take long positions and short positions, they can buy an asset or sell an asset. Long and short positions are further complicated into call and put. An investor can take any of the above positions, meaning they may enter in long put, long call, short put or short call.In terms of hedging strategies or complex trading an investor can combine any positions. In simple terms, a long position means buying a securities/stock/currency/commodity with expectation to make profit in future. Similarly, a short position means investors can sell their securities/commodity with intention to buy again at a ... Read More

Future contract is the contract that allows the buyer/seller to buy/sell a particular commodity at a strike price at a future date. Stock futures enable investors to buy a certain quantity of stocks at strike price on a future date. Stock futures contracts were introduced in 2000 which were index based.Traders in future index are divided into two types as follows−People interested in hedging against share price movementsSpeculatorIndex future typesS&P BSE Sensex (in this, 30 underlying securities makes BSE sensitive Sensex)Nifty 50 (in this, 50 underlying securities makes NSEs nifty index)Nifty IT (in this, information technology shares makes up underlying ... Read More

Hedged items are identified and designated at inception of hedge. Recognized asset or liability, unrecognized firm commitment, forecasted transaction (highly probable), exposures (aggregated), net investment (foreign operations) etc., are some of the hedged items (provided they are reliably measurable).Exposure (aggregated) − Combination of derivative and exposure.Risk components − Financial and non-financial items are separately identifiable and reliably measured.Nominal amount − A proportion of the entire item and a layer component.International Financial Accounting Standards 9 (IFRS 9)Initially, IFRS 9 is the part of joint convergence imitative of IASB and FASB. Later they stopped working except for some part as they were ... Read More

Changes in fair value or cash flows of designated financial instruments should offset the change in fair value/cash flow of designated hedged items. That instrument is called a hedging instrument.ExampleMost oil companies need to hedge their exposure to energy prices which are volatile in nature. Choosing a suitable hedging instrument for the market is a hectic task. For a bearish environment, purchasing a put option is a superior strategy.To determine which instrument suits you, first you need to determine at what time exposure is priced. After exposure is priced, then determine the choice of instrument based on region (American, Asian ... Read More

In hedge accounting, items being hedged are to be identified and designated at inception of hedge.Some of the examples of hedge items are assets, liability, forecasted transaction (highly probable), net investment (foreign operation), firm commitment or group of above items.Hedged items essentially expose the entity to risk that changes fair value or cash flows (future) and these changes may affect income statements in present or future periods.Risks mostly hedged are foreign currency risk, equity price risk, credit risk, interest rate risk and commodity price risk.Internal or own equity instrument is not considered as a hedged item. Exposures to general business, ... Read More