Introduction. A “Scientist Not Only Identified People

Introduction: A â€Å"scientist not only identified people as the most widespread, diverse and dangerous source of destabilizing impacts on protected information, but also revealed different categories of people that may have this impact, and developed a detailed classification of the threat on different grounds† (Astakhova, 2015). Employees are what can a make business a front-runner in the industry. They are also the one that with a click of the mouse can halt all production. Employees can be the best asset to your company. Staff responsible for the data need to be trained on basic security procedures to recognize deceptive techniques used by fraudsters and identity thieves, such as social engineering, and must report these techniques to†¦show more content†¦According to table 1. Summary of Findings from Annual Reports page 799 during that timeline, Widup reported that there were 721.9 million records breached (Collins, 2011). According to table 1. Summary of Findings from Annual Reports page 799, of the 721.9 million records leaked 507.2 million records were business related records (Collins, 2011). According to Nick Bradley, IBM’s Cyber Threat Research manager â€Å"55 percent of all attacks are carried out by malicious insiders or inadvertent actors, also known as insider threats (Bradley, 2015). Collins is able to state that 507.2 million business records were leaked (Collins, 2011). Bradley’s research states that over half of all records leaked are due to insiders or per sonnel. Bradley’s and Collins’s research is able to state that of the 721.9 million records leaked, 279 million records or 55 percent of the records were exposed due to the actions of insiders. That is a very scary statistic to think about. The people that you work with every day. The people that you trust to help run your company are highly likely to be the perpetrators to a breach in your security. Bradley then included further information in â€Å"Who are the bad guys?† that identifies malicious insiders as the majority offender at 31.5%, and inadvertent actors at 23.5%† (Bradley,2015). Theses statics show that we should be cautious of any insider. WhileShow MoreRelatedThe Ethical And Ethical Views Behind Computer Scientists1622 Words   |  7 PagesThere has been a legitimate distinction between the moral and ethical views behind computer scientists being responsible for the action that they take upon the problems that they can face from the systems that they design. They must be faced with the codes of ethics and the morality issues in order to acknowledge the user about the responsibility that they must encounter in order for the use of technology. In the case of the technological society, the IT technology must include security measuresRead MoreThe Consequences Of Technology On Mary Shelley s Frankenstein Essay1703 Words   |  7 Pagesto be written derives from Shelley herself, who explains in an introduction to the novel that she, her husband Percy Shelly, and Lord Byron set themselves the task of creating ghost stories during a short vacation at a European villa. According to Shelley, the short story she conceived was predicated of the notion as the eighteenth became the nineteenth century that electricity could be a catalyst of life. In her introduction she recalls the talk about Erasmus Darwin, who had preserved a Read MoreFrankenstein: Technology1728 Words   |  7 Pagescame to be written derives from Shelley herself, who explains in an introduction to the novel that she , her husband Percy Shelly, and Lord Byron set themselves the task of creating ghost stories during a short vacation at a European villa. According to Shelley, the short story she conceived was predicated of the notion as the eighteenth became the nineteenth century that electricity could be a catalyst of life. in her introduction she recalls the talk about Erasmus Darwin, who had preserved a pieceRead MoreThe Scientific Method Of Science1514 Words   |  7 Pagescannot be fully identified as all areas of the test have not been trailed. It is a process for experimentation which is used to explore and answer questions. When scientists cannot directly experiment (dinosaurs digesting food) the scientific method is slightly altered and therefore cannot fully answer their hypothesis. Throughout the experiment scientists may re-do some parts to gain backup evidence, they may also use others evidence to help along with their own work. Scientists follow the methodRead MoreNotes On Material Science Engineering1373 Words   |  6 PagesMSE 1111 Introduction to Material Science Engineering History of Materials Research Paper Low Hong Liang 903205859 Topic: Graphene In 1924, British Physicist John Desmond Bernal determined the structure of graphite at the Davy Faraday Laboratory at the Royal Institution in London. In his paper (Bernal, 1924) (1), Bernal wrote about how the carbon atoms are arranged in a honeycomb lattice with free electrons allowing graphite to conduct electricity. He also suspected that graphite canRead MoreDNA Profiling Essay example1376 Words   |  6 Pagesmassive scientific research and has undergone meticulous scientific evaluation (Innocence Project). DNA is a foolproof method of identifying a perpetrator of a crime. Like fingerprints, DNA is unique, with the exception of identical twins; no two people have the same DNA. DNA profiling is a technique that can identify the person responsible of a violent crime from the physical traces left at the scene. DNA can also exonerate those who were wrongly convicted. Judges and prosecutors proclaim thatRead MoreSeattle Times Report : Climate Change1266 Words   |  6 PagesSeattle Times Report: Climate-change effects are already apparent in NW Review by Laura Sanders INTRODUCTION Seattle Times reporter Sandi Doughton wrote an article about the impacts climate change is having and could potentially have in the future on the Pacific Northwest. The article outlines the findings in the third National Climate Assessment, published in 2014. The National Climate Assessment summarizes the impacts on climate change on the United States and is compiled by a team of moreRead More Frankenstein: The Impact of God-like Sciences Stemming from Modern Technology1317 Words   |  6 Pagesthe bed; and his eyes, if eyes they may be called, were fixed on me†¦ He might have spoken, but I did not hear; one hand was stretched out, seemingly to detain me, but I escaped and rushed downstairs (Shelley 43). The monster is reaching out to the only thing he knows thus far, his creator, and is met with disgust. Victor, being merely human, cannot offer this creature the unconditional love and guidance that God bestows on His creatures. This, in turn, leads to the imminent immoral actions of theRead MoreBenefits Of Genetically Modified Foods1647 Words   |  7 Pagescorn,† is genetically modified (Mercola, 2015, p. 4). Most people consume genetically modified, or GM, foods every day without even being aware. While some do avidly monitor their food consumption and avoid GM foods, others simply eat GM foods because, to them, GM foods seem safe to consume. In â€Å"Genetically Modified Foods Are Not Safe to Eat,† osteopath, Joseph Mercola, advocates his concerns of consuming GM foods and stresses that more people need to be aware of what they eat. Even though some mayRead MoreRainforest1253 Words   |  6 Pagesrainforests and tropical rainforests. The largest temperate rainfores ts are found on North Americas Pacific Coast and stretch from Northern California up into Canada. Temperate rainforests used to exist on almost every continent in the world, but today only 50 percent — 75 million acres — of these forests remain worldwide. Rainforests act as the worlds thermostat by regulating temperatures and weather patterns. One-fifth of the worlds fresh water is found in the Amazon Basin. Because the rainforest

Essay on Pips Relationship with Magwitch in Great...

How does Dickens use Pips relationship with Magwitch to interest the reader? -------------------------------------------------------------------- The novel called ‘Great Expectations’ written by Charles Dickens, uses a very unique relationship between two characters to form the main ‘stem’ of the book. Pip’s relationship with Abel Magwitch is extremely interesting because it is so significant. It is at the heart of the book mainly for the reason that it is the closest and deepest relationship between any two characters in the whole novel. This forms a relevance to the title of ‘Great Expectations.’ After meeting with Pip for the first time, Magwitch begins to desire many expectations for Pip. Pip receives money from an†¦show more content†¦There are 59 chapters which were published in 3 parts. Chapter 19 ends Part 1, when Pip goes to London to become a gentleman; Chapter 39 ends Part 2 when Magwitch suddenly reappears. The structure highlights the relationship as each part ends when a new turn in Pip’s life occurs. Dickens makes Pips childhood relationship with Magwitch interesting for the reader because we can imagine it through Pip’s eyes. By using this style of writing, Dickens increase’s the emotional effects so we can identify and empathise with Pip. He also creates multiple suspense at the beginning of the novel, because the reader (and Pip) does not know whether Magwitch will get recaptured or whether he will find the other convict. When Pip first meets the convict in chapter 1, his dominant emotion is terror; â€Å"I pleaded in terror.† This is because Pip had been rudely shouted at and threatened by a man, when he believed that there was no one there. As well as being afraid we can tell that Pip is very imaginative, because of the descriptions he gives in the text. He makes a link between the convict and a pirate in a simile; â€Å"as if he were the pirate come to life.† This thought frightens Pip as he goes home and causes him to imagine the cattle agreeing with him as well. The settings on the marshes make it more interesting for the reader because there is a damp, gloomy and strong background. The text shows that it is a miserable and potentially frightening place,Show MoreRelated Great Expectations - A Cinderella Story Essay1276 Words   |  6 PagesGreat Expectations - A Cinderella Story In the profound novel, Great Expectations, written by Charles Dickens, the main character Pip is put through many tests that examine the type of man Pip strives to be and the type of man Pip really is. Pips relationships with two central characters, Tom and Magwitch, are examined closely in this essay, and through these relationships, Pips character is visible. Great Expectations is, in a sense, a Cinderella story in which Pips fairy godmotherRead MoreGreat Expectations: Analyzed Through A Marxist Criticism1113 Words   |  5 Pagesconsists of the political and economic theories of Karl Marx, in which class struggle is a central element in the analysis of social change in Western societies. Marxism applies to the novel Great Expectations in many ways. Dickens uses Pip’s complex and altering relationships with Estella, Joe, and Magwitch to show the subjugation of the working-class from the privileged. Estella is raised in a prosperous household and is judgmental of Pip because he is from the working class. She insults hisRead MoreOprah Winfrey and Pip from Great Expectation Stive for Self Improvement1039 Words   |  4 Pagestoday. Oprah Winfrey had the need for self-improvement. Pip, the main character in the novel Great Expectations, had that same need for self-improvement. The need for self-improvement is the most prevalent theme in Great Expectations. Pip’s need for self-improvement is depicted in his battles with three main conflicts: man versus society, man versus man, and man versus self. †¨ Throughout Great Expectations it is evident that Pip was the antagonist in his own life. The first time the audience seesRead MoreGreat Expectations: Secrets1315 Words   |  6 PagesBailey Baith Great Expectations Adv. English 11 March 9, 2013 Secrets A secret always has reasoning behind how long it is kept hidden and when it is revealed. There’s always a perfect time and place for one to share one’s secret. Uniquely books have secrets embedded within to keep the reader on edge. If used wisely by the author, a secrets purpose can affect a novel’s story line, character development, and theme. Every secret throughout Dickens’ novel Great Expectations is effectively keptRead MoreComparing Relationships in Romeo and Juliet and Great Expectations892 Words   |  4 PagesThe familial relationship between Juliet and her father, Lord Capulet, is quite ambivalent. It is very much affected by prominent views of the public such as patriarchy. In the medieval world of Verona in Elizabethan England, fathers were entirely in charge the household as they were viewed as dominate and more powerful. In the beginning, Lord Capulet is illustrated to be concerned that marriage to the â€Å"Gallant† and â€Å"noble† County Paris is too sudden for his daughter. My child is yet a strangerRead MoreEssay on Happiness and Social Status in Great Expectations1520 Words   |  7 Pages Charles Dickens uses his own opinions to develop the larger-than-life characters in Great Expectations. The novel is written from the point of view of the protagonist, Pip. Pip guides the reader through his life, describing the different stages from childhood to manhood. Many judgments are made regarding the other characters, and Pips views of them are constantly changing according to his place in the social hierarchy. For instance, Pip feels total admiration that, later, turns to totalRead MoreEssay on What Shapes Pip’s Character in Great Expectations?1682 Words   |  7 PagesWhat influences shape the character of young Pip in Great Expectations? â€Å"Great Expectations†, by Charles Dickens, is an enthralling tale of love and fortune. The story is set in the period of Dickens’ childhood, from 1810 to approximately 1830, and it is likely that memories of his own youth inspired Dickens to write the novel. The main character, Pip, is a gentle and humble boy whose character and personality undergo major transformations throughout the novel. He is influenced by many charactersRead MoreSocial Advancement Versus Affection, Loyalty, And Conscience1114 Words   |  5 Pagesto work hard to gain the respect of others or of their fellow citizens. In Charles Dickens Great Expectations, the main character Pip realizes this and longs to become a part of the upper class society to receive its perks. This bildungsroman of Pip’s life shows how social advancement is not more important than affection, loyalty, and self conscience through the use of details, symbols and motifs. Pip’s early life is detailed to show that it is not an ideal one. With both his parents deceased,Read MoreIdentity Development in Great Expectations Essay1383 Words   |  6 PagesGreat Expectations tells the ultimate rags to riches story of the Orphan Pip. Dickens takes his readers through life changing events that ultimately mold the identity of the main character. Dividing these events into sections will provide the basis for interpreting which events had the most profound effect on Pip’s identity towards the end of the novel. These life-changing events provide the catalyst for the development of Pip’s character from childhood, his adolescence, maturing into a socialRead MoreEssay Pips Great Expectations894 Words   |  4 Pages In the novel, â€Å"Great Expectations† by Charles Dickens, the main character Philip Pirrip, who is known as â€Å"Pip† throughout the novel, has a series of great expectations that he goes through. The title of the novel, as many other great book titles, comes with various meanings that are present in the story. In the literal sense Pip’s â€Å"great expectations† refer to the 19th century meaning, which involve receiving a large inheritance. Meanwhile, on a deeper level Pip sets goals that he hopes to accomplish

If I Were a …. Free Essays

Throughout life a person experiences many obstacles, challenges, and hardships; sometime we face them alone, afraid, and at times confused. However, there always seems to be one individual that we seek for guidance, for inspiration, or to simply to save us from our troubles. To some they are know as heroes, but to me they are known as my mom and dad, they were always by my side in any situation I was in and they always kept their best interest at heart. We will write a custom essay sample on If I Were a †¦. or any similar topic only for you Order Now No matter where I was in school, my parent’s were always behind me. Most noticeably in my high school career; my mother and father always push me to my limits to achieve better, but that’s Just the surface they always had time to listen to my problems no matter how minuet or massive these situations where. My dad always shared a time in his past where he surpassed a scene similar to mine; my mother with endless wisdom, giving me advice and a similar story to enlighten my path. Their stories no matter how sad or happy always inspires me to become more and take this opportunity in this in to study and make something of my life. These heroes of mine may not be the fairest or the coolest, but they are to me; they were always try to protect me no matter what. And my parent’s always help me in my time of needed even when they have things to do themselves. When most people think of a hero they think of their favorite actor or athlete. Some think of relatives or friends, and I cannot think of one person. It seems that in my life, every person I have come in contact with has left an impression on me. My family, my teachers or that random stranger that smiles at me as I walk down the street, they all leave an impact. To most people, a hero is someone who leaves an impact on them. Wicked it be safe to say that everyone is a hero to me? My parent’s are my hero’s, they taught me everything and raised me to be the person I am today. When one thinks of heroes, names such as Ghanaian, Martin Luther King, and Mother Theresa often come to mind. These people had done a lot of favors, courage, helps, ND more of things for the people who needed them. They have change the world. But, heroes can be in anyway, even in each of individuals in the world. I have the persons who I think is the best hero in my mind. They are my parent’s. My parent’s are brave; they will do anything for my happiness. Not only mine, but also their friends, and families. My father has many friends, and he always helps them whenever they need them most. Without my parent’s, I probably will not survive If I Were a †¦. By nonlinearly How to cite If I Were a †¦., Papers

Retail Operations Management of Mobile Phone Store

Question: Discuss about the Retail Operations Management of Mobile Phone Store. Answer: Introduction Retail operations management is a study of managing a retail store. The paper has been developed to present the ideas on retail operations that will be used to manage a mobile phone shop. The study presents retail operations, product, location and pricing strategy that must be considered while operating a mobile phone store. Retail operations Retail Sales Promotions Some of the sales promotion techniques that can be used to promote sales of mobile phones are discussed herein below: Prizes: Prize can be given with every purchase such as mobile headsets, Bluetooth headphones and other gift coupons. Leaflets: It is used to promote the retail store in the locality in which it is located. Coupons: It is a way of attracting customers and retains them to buy more products from the retail business. Contest: Contest is another retail sales promotion technique that can be used to increase the customer traffic in the store (Smith, 2007). Discount offers: Discount can be provided on the mobile phones to attract customers. People search for discount offers that makes the technique most effective. Elements of Retail Store Security The elements of retail store security that must be considered are presented herein below: The products must not be displayed at the door of the store. It is important to install cameras and CCTVs to keep watch on the customers. There must be a security guard to check what the customers are taking out of the store (Yeoman, Wheatley, McMahon-Beattie, 2016). It is important to see that the sales representatives handle the products carefully. There must be a generator to avoid blackouts due to power interruptions. The products must have security tags. Scope of Service Through the identification of all the requirements of the retail store, the fullest range of mobile phone-based service can be suitable for the outlet. The service scope of the retail business must list both sales and after sales service to the customer to make a significant impact on the target customers (Shockley, Plummer, Roth, Fredendall, 2014). Along with that, providing options, the service must be organised to estimate the cost of the retail business. Customer Service Offerings Customer services can be identified as one of the crucial features of retail sales in the mobile phone business. The retail store must design and develop direct services according to the demand of the purchasers. For instance, during product selling, the sales representatives should influence the purchasing behaviour of the customers by providing detailed information about the mobile phone (Gao Su, 2016). Along with that, after sales service of the device must be offered to support the sales. The retail store may offer on-site pickup of the mobile phone in case the user has faced any issues with the device during the warranty period (Jung Yoo, 2016). Such service offerings can impress the customers to a certain extent. Retail Selling Process In retail sales of the mobile phone, the store can follow seven step retail selling process to sell a product. First of all, sales executive must create an opening for sale through interaction with the incoming visitors. Next, probing is one of the crucial features in retail selling steps (Kang, Mun, Johnson, 2015). The salesperson must ask what sort of mobile will be required by the customer. After the probing step, demonstration of the product will be ideal to try out different products for the client. In the next phase of trial close, let the customer decide whether he is interested in buying the product or not. If not try something else. Afterwards, handling objections must be defended as customers may raise questions about pricing or technological concerns (Alexander Baker, 2012). The significant argument will be evident in this regard. Next, retail sales professional must ask the customer whether he has decided to buy the mobile. Meanwhile, closing the deal is the toughest st ep. Finally, if the customer has agreed to buy the product, go over the order and ask for a referral on a thankful note. Product The retail store must offer a variety of mobile phones such as Android devices, Windows Mobile and iPhones so that a large pool of target demographics can be set for the retail product selling. The products must include budget cell phones and hi-tech smartphones so that each type of clients can be attended (Ton Raman, 2010). In addition to that, the retail store must offer cell phone accessories and numerous online mobile application facilities for the meet the demand of the customers. The mobile accessories may provide additional selling scopes to the business to support the retail business. Retail Location The location of the retail store plays an essential role in the success of a retail business management. It is a unique factor that provides competitive edge to the company. Hence, the location of the store must be chosen after considering the long term results. The location must be situated in a trade area such as well known markets with proper transport facilities (Sampson Money, 2015). When planning for a mobile store, it must be situated in a core area such as shopping malls in the cities to attract more customers. Planned shopping areas have high visibility, excellent parking facilities and high customer traffic. Retail Pricing Competitive pricing model is an effective way of increasing competitive advantage. The price of the mobiles must be based on the price offered by other retailers in the market. It will help the company to increase its quantity of sales that will provide the company with higher profitability (Clark, 2013). A higher percentage of discounts on the mark-up price will attract huge number of customers and help the company earn profit on bulk sales. It will keep the inventory rolling on and increase the reputation of the retail business. Conclusion Brief overviews of the retail store and the product selling technique have been presented to draw the attention on the operations of the retail store. Herein, retail sales promotion and selling techniques of products can be identified as the crucial business factors. Meanwhile, retail pricing and location of the store will define the actual business probabilities for the retail store. References Alexander, R. Baker, B. (2012). Effective Retail Selling.Journal Of Marketing,6(3), 319. https://dx.doi.org/10.2307/1245881 Clark, E. (2013). The craft of selling in department stores.Retail And Distribution Mgt,11(1), 35-39. https://dx.doi.org/10.1108/eb018172 Gao, F. Su, X. (2016). Omnichannel Retail Operations with Buy-Online-and-Pick-up-in-Store.Management Science. https://dx.doi.org/10.1287/mnsc.2016.2473 Jung, J. Yoo, J. (2016). Customer-to-customer interactions on customer citizenship behavior.Serv Bus. https://dx.doi.org/10.1007/s11628-016-0304-7 Kang, J., Mun, J., Johnson, K. (2015). In-store mobile usage: Downloading and usage intention toward mobile location-based retail apps.Computers In Human Behavior,46, 210-217. https://dx.doi.org/10.1016/j.chb.2015.01.012 Sampson, S. Money, R. (2015). Modes of customer co-production for international service offerings.Journal Of Service Management,26(4), 625-647. https://dx.doi.org/10.1108/josm-01-2015-0033 Shockley, J., Plummer, L., Roth, A., Fredendall, L. (2014). Strategic Design Responsiveness: An Empirical Analysis of US Retail Store Networks.Production And Operations Management,24(3), 451-468. https://dx.doi.org/10.1111/poms.12241 Smith, W. (2007). Pricing unbundled retail services.Natural Gas,14(2), 22-24. https://dx.doi.org/10.1002/gas.3410140206 Ton, Z. Raman, A. (2010). The Effect of Product Variety and Inventory Levels on Retail Store Sales: A Longitudinal Study.Production And Operations Management,19(5), 546-560. https://dx.doi.org/10.1111/j.1937-5956.2010.01120.x Yeoman, I., Wheatley, C., McMahon-Beattie, U. (2016). Trends in retail pricing: A consumer perspective.Journal Of Revenue And Pricing Management. https://dx.doi.org/10.1057/rpm.2016.35

Ivanhoe Strengths Essays - Swashbuckler Films, Films, British Films

Ivanhoe Strengths The greatest strengths of Ivanhoe were the themes of the novel. All the characters in Ivanhoe were in some way affected by the major theme of the hatred between the Saxons and Normans. The novel also answers many of the great questions of life. It mainly is a love triangle and of betrayal. The love triangle is threaded all throughout the book in many places and ultimately closes the novel with Ivanhoe and Rowena get married. Betrayal is spoke in the beginning of the book when Ivanhoe betrays Cetric by going on crusades. Cedric disowns Ivanhoe because he betrayed his father. The theme of hatred towards another group of people is threaded throughout the novel. Many factors contributed to this being the theme that was treaded through the novel. Fighting was occurring in many key parts of the novel between the two groups of people. The fighting told the reader that people from each side didnt like each other and wanted to kill one another. Attacks were also common. Gurth was attacked for doing nothing, just because he was part of Cedrics group. In closing, the theme of hatred towards another group was the strength of this novel. It was threaded throughout the novel and kept the reader with knowing what was going on. English Essays

The Trials and Triumphs of Robert E. Hayden

The Trials and Triumphs of Robert E. Hayden The poem that I chose was Those Winter Sundays written by Robert Earl Hayden. This poem is about a man who reflects back on his troubled childhood. As an adult, Robert can see that the bad things he endured as a child were not entirely his father?s fault. He realized the positive things that his dad did for him and regrets not saying Thank-you. There are many influences in which could have played a part in Those Winter Sundays. Some of the influences were differential treatment between siblings, verbal and physical abuse, and the lack of physical affection from his parents.Robert Hayden was born as Asa Bundy Sheffey on August 4, 1913 in Detroit, Michigan. His parents were Asa and Gladys Sheffey. Asa and Gladys were experiencing marital problems; they separated before the birth of their son. Gladys Sheffey felt confused; she wanted to be involved in her son?s life but could not manage it alone.English: Ann Arbor as seen from the University of ...She decided to give her son up for adop tion. A couple named William and Sue Ellen Hayden took young Asa in. The couple then had Asa?s birth name changed to Robert Earl Hayden.American poet, Robert Earl Hayden, had a reputation for finely crafted and powerfully meditative poems. He was raised in a poor neighborhood in Detroit. He was shuttled between the homes of his mother and that of his foster family, who lived next door for most of his childhood. Robert was unable to participate in sports, because of impaired vision. Robert spent most of his time inside where he would do nothing but read. In 1932, Robert graduated from high school and, with the help of a scholarship, attended Detroit City College (now known as Wayne State University).Robert Hayden published his first book of poems, Heart Shape in the Dust,

Prince George's County Community Hazards Research Paper

Prince George's County Community Hazards - Research Paper Example The county has been affected by a number of hazards which has resulted of loss of property and even lives. Some of these hazards are related to weather which have caused injuries and deaths to the people. Moreover, it is evident that the public are not informed about certain hazards and how to manage the same in the places in which they live in. According to report released by FEMA higher percentage of people are likely to build in floodplains areas due to the fact that they are not aware of the risks associated with the same (Association of State Floodplain Managers, 2008). Therefore, it is important to inform the public about the risks associated with building in floodplain areas. However, it is has been noted that in some cases the public are not aware that they are residing in floodplain areas and they only become aware of the same after purchasing property in flood areas and suffer the effects of the floods (Federal Emergency Management Agency, 2005). In Prince George’s C ounty the risk level of the existing hazards are described as medium high. These hazards include drought, severe storm, streambank erosion and winter storm. However, the river of risks is high when it comes to coastal floods and the Riverine flood hazards. Based on this the damages caused by the aforementioned risks are calculated using damages caused to the buildings, in addition to the value of replacing the buildings and also the age of the building. However, studies have indicated that damages which are as a result of wildland fire or drought are caused by the way human population utilize land. It has been pointed out that drought as a hazard within the county impacts negatively on the planning of the place and more specifically the agricultural sector. Nevertheless, the less it is hard to mitigate the damages that are caused to crops (Federal Emergency Management Agency, 2005). Hazards such as wildland fires influence areas with grass fields, brush, crops and even tress. Apart from resulting into loss f crops the same results into economic loss not only at the personal level but also the county. Additionally, when forests are burnt the planning area of the county is interfered with and human population is likely to encroach in the land. Streambank erosion as a hazard affecting the county on an annual basis is as a result of constant and increased river discharge. This makes the hydrology of the county to change. Presently, the officials of the county have indicated that streambank erosion causes a variety of problems ranging from minor to major ones. The hazard has resulted into infrastructures an aspect that has resulted into human population encroaching land that is publicly owned. Additionally, the winter storm which is another hazard that occurs in the area on an annual basis is mostly characterized by three aspects. These are high amount of moisture, lift and cold air which not only results into precipitation but also formation of cloud. In most caus es the winter storms that affect the Maryland negatively are as a result of jet streams which are in the middle attitudes cross and move to the continental United States (Prince George's County Department of Environmental Resources, 2011). Additionally, the degree of the storm varies in addition to the impacts caused by the same. For instance within the county cases of property

Case study Example | Topics and Well Written Essays - 250 words - 3

Case Study Example Businesses such as Easy car, Easy cafà ©, Easyvalue.com etc. besides the airline business Easy jet are examples of the above mentioned growth strategy. Similarly, the group has also adopted effective pricing strategies to attract its existing customers towards its current products. In addition, the group has also made necessary innovations in its existing products to improve the quality as well as has developed new products to reap higher profits and observe growth in its businesses. Conglomerate refers to a group of companies acquired or owned by a business group, a person or an organization. Easy group is quite truly a genuine conglomerate because it owns several businesses such as Easy internet cafà ©, Easy car, Easy jet, online and hotel ventures and has now plans to add new ones such as Easy cinema in the group’s business portfolio to increase annual revenues of the group. Yes, I would recommend Easy Group to enter in Cinema industry and apply its effective business model. Also, easy group has ability to compete in tough market conditions and has been successful in its past ventures. Thirdly, easy group has a solid business plan with very few weak points for its cinema Case study Example | Topics and Well Written Essays - 750 words - 24 Case Study Example The other issue seeks to implore on whether there is life beyond Earth, and lastly, the program seeks to understand the future of life on Earth. Astrobiology is the common denominator in all NASA space science activities. It bridges research in astrophysics, heliophysics and earth science. To further understand the principle interests of astrobiology, this discourse will look at the discipline in line with the three established issues. This is in recognition of the fact that the credibility and relevance of astrobiology lies in its pursuit to answer the fundamental questions of our origin, establishing our identity, and whether man is alone in the cosmos. Scientists seem to still not come up with a clear definition of what life is; they are still not clear on what being alive means. In perhaps the simplest way, life on Earth swaps energy and material with the environment. The common characteristics of life being that life forms grow, excrete, reproduce and are made up of genes stored in DNA and RNA structures and passed on to the next generation. Life also changes. These changes result due to alterations in the environment. However, life also alters the environment. Finally, it is clear that life is based on the chemistry of carbon and needs liquid water. An extremely constrained layer exists near the surface of Earth; this layer contains life in abundance as evidenced by microorganisms, plants, and animals. Unfortunately, this layer represents the only identified area that supports life in the entire Universe. Everyone by now acknowledges that the laws and concepts of chemistry and physics are in action all over the cosmos. This has led to constant enquiries on whether there is anything like general biology. More critically, there have been unending inquiries on life beyond Earth. Advanced science has been able to reveal that there exist other surfaces beyond Earth which are represented by planets orbiting the Sun. In the past 15

Comparing elements Essay Example | Topics and Well Written Essays - 500 words

Comparing elements - Essay Example "To love him so deeply still; and yet I'm here,"-an excerpt from William Trevor’s â€Å"The Room†, were words uttered by Katherine as a vivid evidence of her will to be free from her smoldering curiosity about the notion of deceit. Her fervor-less affair with an unnamed lover satisfied her curiosity as she finally said, â€Å"So, this is what it felt like for Phair†. Her primary aims were completed, however, she resumed her sexual ventures with her lover and made it as an alibi for her to gain entrance to her lover’s room in which she found a haven that will shield her from her dynamic fears. On the contrary, the entities in â€Å"The Storm† authored by Kate Chopin seemed to take adultery as an archway to cherish freedom. Monsieur Alcee Laballiere  and his wife Clarisse decided to set apart for some time. They esteemed freedom brought about by their provisional separation in different manners. â€Å"Devoted as she was to her husband, their intima te conjugal life was something which she was more than willing to forego for a while† this quote taken from Chopin’s text refers to freedom that served as Clarisse’s respite as she is fervently yearning to have another feel of her lighthearted moments as an unmarried woman.

Impact of Credit Default Swaps (CDS)

Impact of Credit Default Swaps (CDS) Chapter 1 : Introduction A Swap is a derivative in which two counterparties agree to exchange one stream of cash flow against another stream. Swaps can be used to create unfunded exposures to an underlying asset, since counterparties can earn the profit or loss from movements in price without having to post the notional amount in cash or collateral. It can be used to hedge certain risks such as interest rate risk, or to speculate on changes in the expected direction of underlying prices. The main objective of the project is to understand about Credit Default Swaps (CDS), its global footprint, its role in subprime crisis, its settlement in global arena and to check the feasible settlement of CDS in India, after its introduction in India, by understanding about Indian Credit Derivatives market. Research is concerned with the systematic and objective collection, analysis and evaluation of information about specific aspects to check the feasible settlement of CDSs in India. The development of financial derivatives in recent past is astounding when we consider its volume globally. But at the same time the product once created for hedging the risk currently allows you to bear more risk sometimes making the whole financial system to tremble. May be thats why Warren Buffet called it a financial weapon of mass destruction. Whatever it may be but derivatives have grown exponentially and are necessary for the market to flourish. The credit derivatives are nothing but the logical extension to the family of derivatives and have already made its presence felt globally. The credit derivatives have played a significant role in the development of debt market but also share a blame for the proliferation of subprime crisis. A credit default swap which constitutes the major portion of credit derivatives is similar to an insurance contract which allows you to transfer your risk to third party in exchange of a premium. Right from its origin as plain vanilla product for hedging purpose it has grown to very complex products and now has posed a question mark on its credibility. The subprime crisis started in what were regarded as the worlds safest and most sophisticated markets and spread globally, carried by securities and derivatives that were thought to make the financial system safer. The subprime crisis brings the complexity of securitized products and derivatives products, the human greedy nature, inability of rating agencies to gauge the risk, inefficiency of regulatory bodies, etc. to the fore. Although CDS was not the cause of the subprime crisis but it had cascading effect on the market and was considered as the reason for the collapse of American International Group (AIG). The lessons from the consequences of subprime crisis have helped in creating awareness about the regulatory frameworks to be in place which has increased the transparency, standardization, and soundness in the market. The various measures include formation of central counterparty for CDS, hardwiring of auction protocol and ISDA determination committee. On the backdrop of global crisis the movement of CDS is being watched carefully. The various data sources now provide data even on weekly basis. The efforts are being paid off and the market size of CDS has reduced considerably. And now with the central counterparties in place the CDS market will have more transparency and better control. After opening up of the economy the equity market of India have grown significantly bringing in more transparency. But the corporate bond market is still in undeveloped mode and the efforts being taken on developing it have not provided expected returns. Under this light, India is now all set to launch Credit Default Swaps which are expected to ignite the spark which will flourish the corporate bond market. Considering the cautious nature of RBI and the havoc created by CDS in global market the move by RBI is significant. From the move of RBI one can say as the knife itself is not harmful but it depends whether its in doctors hand or a robbers hand. Similarly CDS as a product is certainly not harmful but its utility will depend on the judicious use of the same. Chapter 2: Literature Review Derivatives The global economic order that emerged after World War II was a system where many less developed countries administered prices and centrally allocated resources. Even the developed economies operated under the Bretton Woods system of fixed exchange rates. The system of fixed prices came under stress from the 1970s onwards. High inflation and unemployment rates made interest rates more volatile. The Bretton Woods system was dismantled in 1971, freeing exchange rates to fluctuate. Less developed countries like India began opening up their economies and allowing prices to vary with market conditions. Price fluctuations made it hard for businesses to estimate their future production costs and revenues. Derivative securities provide them with a valuable set of tools for managing this risk. Financial markets are, by nature, extremely volatile and hence, the risk factor is an Important concern for financial agents. To reduce this risk, the concept of derivatives comes into the picture. Derivatives are products whose values are derived from one or more basic variables called bases. These bases can be underlying assets (for example forex, equity, etc), bases or reference rates. It is afinancial instrument(or more simply, an agreement between two people/two parties) that has a value determined by the future price of something else. Derivatives can be thought of as bets on the price of something.Itis the collective name used for a broad class offinancial instrumentsthatderivetheir value from other financial instruments (known as the underlying), events or conditions. Essentially, a derivative is a contract between two parties where the value of the contract is linked to the price of another financial instrument or by a specified event or condition. Asecurity whose price is dependent upon or derived fromone or more underlying assets.The derivative itself is merely a contract between two or more parties. Itsvalue is determinedby fluctuationsin the underlying asset.The most common underlying assets includestocks, bonds,commodities,currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.Derivatives are generally used as an instrument to hedgerisk, but can also be used forspeculative purposes. For example, wheat farmers may wish to sell their harvest at a future date to eliminate the risk of a change in prices by that date. The transaction in this case would be the derivative, while the spot price of wheat would be the underlying asset. Derivatives have probably been around for as long as people have been trading with one another. Forward contracting dates back at least to the 12th century, and may well have been around before then. Merchants entered into contracts with one another for future delivery of specified amount of commodities at specified price. A primary motivation for pre-arranging a buyer or seller for a stock of commodities in early forward contracts was to lessen the possibility that large swings would inhibit marketing the commodity after a harvest. The need for a derivatives market The derivatives market performs a number of economic functions: They help in transferring risks from risk averse people to risk oriented people They help in the discovery of future as well as current prices They catalyze entrepreneurial activity They increase the volume traded in markets because of participation of risk averse people in greater numbers They increase savings and investment in the long run The participants in a derivatives market Hedgers use futures or options markets to reduce or eliminate the risk associated with price of an asset. Speculators use futures and options contracts to get extra leverage in betting on future movements in the price of an asset. They can increase both the potential gains and potential losses by usage of derivatives in a speculative venture. Arbitrageurs are in business to take advantage of a discrepancy between prices in two different markets. If, for example, they see the futures price of an asset getting out of line with the cash price, they will take offsetting positions in the two markets to lock in a profit. Types of Derivatives Forwards: A forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at todays pre-agreed price. Futures: A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense that the former are standardized exchange-traded contracts Options: Options are of two types calls and puts. Calls give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date. Puts give the buyer the right, but not the obligation to sell a given quantity of the underlying asset at a given price on or before a given date. Warrants: Options generally have lives of upto one year, the majority of options traded on options exchanges having a maximum maturity of nine months. Longer-dated options are called warrants and are generally traded over-the-counter. LEAPS: The acronym LEAPS means Long-Term Equity Anticipation Securities. These are options having a maturity of upto three years. Baskets: Basket options are options on portfolios of underlying assets. The underlying asset is usually a moving average or a basket of assets. Equity index options are a form of basket options. Swaps: Swaps are private agreements between two parties to exchange cash flows in the future according to a prearranged formula. They can be regarded as portfolios of forward contracts. The two commonly used swaps are : Interest rate swaps: These entail swapping only the interest related cash flows between the parties in the same currency. Currency swaps: These entail swapping both principal and interest between the parties, with the cash flows in one direction being in a different currency than those in the opposite direction. Swaptions: Swaptions are options to buy or sell a swap that will become operative at the expiry of the options. Thus a swaption is an option on a forward swap. Rather than have calls and puts, the swaptions market has receiver swaptions and payer swaptions. A receiver swaption is an option to receive fixed and pay floating. A payer swaption is an options to pay fixed and receive floating. Uses of Derivatives Derivatives may be traded for a variety of reasons. A derivative enables a trader to hedge some pre-existing risk by taking positions in derivatives markets that offset potential losses in the underlying or spot market. In India, most derivatives users describe themselves as hedgers (Fitch Ratings, 2004) and Indian laws generally require that derivatives be used for hedging purposes only. Another motive for derivatives trading is speculation (i.e. taking positions to profit from anticipated price movements). In practice, it may be difficult to distinguish whether a particular trade was for hedging or speculation, and active markets require the participation of both hedgers and speculators. A third type of trader, called arbitrageurs, profit from discrepancies in the relationship of spot and derivatives prices, and thereby help to keep markets efficient. Jogani and Fernandes (2003) describe Indias long history in arbitrage trading, with line operators and traders arbitraging prices between exchanges located in different cities, and between two exchanges in the same city. Their study of Indian equity derivatives markets in 2002 indicates that markets were inefficient at that time. They argue that lack of knowledge; market frictions and regulatory impediments have led to low levels of capital employed in arbitrage trading in India. However, more recent evidence suggests that the efficiency of Indian equity derivatives markets may have improved (ISMR, 2004). Development of derivatives market in India Derivatives markets have been in existence in India in some form or other for a long time. In the area of commodities, the Bombay Cotton Trade Association started futures trading in 1875 and, by the early 1900s India had one of the worlds largest futures industry. In 1952 the government banned cash settlement and options trading and derivatives trading shifted to informal forwards markets. In recent years, government policy has changed, allowing for an increased role for market-based pricing and less suspicion of derivatives trading. The ban on futures trading of many commodities was lifted starting in the early 2000s, and national electronic commodity exchanges were created. In the equity markets, a system of trading called badla involving some elements of forwards trading had been in existence for decades.6 However, the system led to a number of undesirable practices and it was prohibited off and on till the Securities and Exchange Board of India (SEBI) banned it for good in 2001. A series of reforms of the stock market between 1993 and 1996 paved the way for the development of exchange-traded equity derivatives markets in India. In 1993, the government created the NSE in collaboration with state-owned financial institutions. NSE improved the efficiency and transparency of the stock markets by offering a fully automated screen-based trading system and real-time price dissemination. In 1995, a prohibition on trading options was lifted. In 1996, the NSE sent a proposal to SEBI for listing exchange-traded derivatives. The report of the L. C. Gupta Committee, set up by SEBI, recommended a phased introduction of derivative products, and bi-level regulation ( i.e., self-regulation by exchanges with SEBI providing a supervisory and advisory role). Another report, by the J. R. Varma Committee in 1998, worked out various operational details such as the margining systems. The first step towards introduction of derivatives trading in India was the promulgation of the Securities Laws(Amendment) Ordinance, 1995, which withdrew the prohibition on options in securities. The market for derivatives, however, did not take off, as there was no regulatory framework to govern trading of derivatives. SEBI set up a 24-member committee under the Chairmanship of Dr.L.C.Gupta on November 18, 1996 to develop appropriate regulatory framework for derivatives trading in India. The committee submitted its report on March 17, 1998 prescribing necessary pre-conditions for introduction of derivatives trading in India. The committee recommended that derivatives should be declared as securities so that regulatory framework applicable to trading of securities could also govern trading of securities. SEBI also set up a group in June 1998 under the Chairmanship of Prof.J.R.Varma, to recommend measures for risk control in derivatives market in India. The report, which was submitte d in October 1998, worked out the operational details of margining system, methodology for charging initial margins, broker net worth, deposit requirement and real-time monitoring requirements. The Securities Contract Regulation Act (SCRA) was amended in December 1999 to include derivatives within the ambit of securities and the regulatory framework was developed for governing derivatives trading. The act also made it clear that derivatives shall be legal and valid only if such contracts are traded on a recognized stock exchange, thus precluding OTC derivatives. The government also rescinded in March 2000, the three- decade old notification, which prohibited forward trading in securities. Derivatives trading commenced in India in June 2000 after SEBI granted the final approval to this effect in May 2001. SEBI permitted the derivative segments of two stock exchanges, NSE and BSE, and their clearing house/corporation to commence trading and settlement in approved derivatives contracts . To begin with, SEBI approved trading in index futures contracts based on SP CNX Nifty and BSE-30(Sensex) index. This was followed by approval for trading in options based on these two indexes and options on individual securities. The trading in BSE Sensex options commenced on June 4, 2001 and the trading in options on individual securities commenced in July 2001. Futures contracts on individual stocks were launched in November 2001. The derivatives trading on NSE commenced with SP CNX Nifty Index futures on June 12, 2000. The trading in index options commenced on June 4, 2001 and trading in options on individual securities commenced on July 2, 2001. Single stock futures were launched on November 9, 2001. The index futures and options contract on NSE are based on SP CNX Trading and settlement in derivative contracts is done in accordance with the rules, byelaws, and regulations of the respective exchanges and their clearing house/corporation duly approved by SEBI and notified in the official gazette. Foreign Institutional Investors (FIIs) are permitted to trade in all Exchange traded derivative products. The following are some observations based on the trading statistics provided in the NSE report on the futur es and options (FO): †¢ Single-stock futures continue to account for a sizable proportion of the FO segment. It constituted 70 per cent of the total turnover during June 2002. A primary reason attributed to this phenomenon is that traders are comfortable with single-stock futures than equity options, as the former closely resembles the erstwhile badla system. On relative terms, volumes in the index options segment continues to remain poor. This may be due to the low volatility of the spot index. Typically, options are considered more valuable when the volatility of the underlying (in this case, the index) is high. A related issue is that brokers do not earn high commissions by recommending index options to their clients, because low volatility leads to higher waiting time for round-trips. Put volumes in the index options and equity options segment have increased since January 2002. The call-put volumes in index options have decreased from 2.86 in January 2002 to 1.32 in June. The fall in call-put volumes ratio suggests that the traders are increasingly becoming pessimistic on the market. Farther month futures contracts are still not actively traded. Trading in equity options on most stocks for even the next month was non-existent. Daily option price variations suggest that traders use the FO segment as a less risky alternative (read substitute) to generate profits from the stock price movements. The fact that the option premiums tail intra-day stock prices is evidence to this. Calls on Satyam fall, while puts rise when Satyam falls intra-day. If calls and puts are not looked as just substitutes for spot trading, the intra-day stock price variations should not have a one-to-one impact on the option premiums. SWAP In finance, a SWAP is a derivative in which two counterparties agree to exchange one stream of cash flow against another stream. These streams are called the legs of the swap. Conventionally they are the exchange of one security for another to change the maturity (bonds), quality of issues (stocks or bonds), or because investment objectives have changed. A swap is an agreement to exchange one stream of cash flows for another. Swaps are most usually used to:- Switch financing in one country for financing in another To replace a floating interest rate swap with a fixed interest rate (or vice versa) (Litzenberger, R.H)In August 1981 the World Bank issued $290 million in euro-bonds and swapped the interest and principal on these bonds with IBM for Swiss francs and German marks. The rapid growth in the use of interest rate swaps, currency swaps, and swaptions (options on swaps) has been phenomenal. Currently, the amount of outstanding interest rate and currency swaps is almost $3 trillion. Recently, swaps have grown to include currency swaps and interest rate swaps. It can be used to hedge certain risks such as interest rate risk, or to speculate on changes in the expected direction of underlying prices. If firms in separate countries have comparative advantages on interest rates, then a swap could benefit both firms. For example, one firm may have a lower fixed interest rate, while another has access to a lower floating interest rate. These firms could swap to take advantage of the lower rates. Different types of swaps:- Currency Swaps Cross currency swaps are agreements between counterparties to exchange interest and principal payments in different currencies. Like a forward, a cross currency swap consists of the exchange of principal amounts (based on todays spot rate) and interest payments between counterparties. It is considered to be a foreign exchange transaction and is not required by law to be shown on the balance sheet. In a currency swap, these streams of cash flows consist of a stream of interest and principal payments in one currency exchanged for a stream, of interest and principal payments of the same maturity in another currency. Because of the exchange and re-exchange of notional principal amounts, the currency swap generates a larger credit exposure than the interest rate swap. Cross-currency swaps can be used to transform the currency denomination of assets and liabilities. They are effective tools for managing foreign currency risk. They can create currency match within its portfolio and minimize exposures. Firms can use them to hedge foreign currency debts and foreign net investments. Currency swaps give companies extra flexibility to exploit their comparative advantage in their respective borrowing markets. Currency swaps allow companies to exploit advantages across a matrix of currencies and maturities. Currency swaps were originally done to get around exchange controls and hedge the risk on currency rate movements. It also helps in Reducing costs and risks associated with currency exchange. They are often combined with interest rate swaps. For example, one company would seek to swap a cash flow for their fixed rate debt denominated in US dollars for a floating-rate debt denominated in Euro. This is especially common in Europe where companies shop for the cheapest debt regardless of its denomination and then seek to exchange it for the debt in desired currency. Credit Default Swap Credit Default Swap is a financial instrument for swapping the risk of debt default. Credit default swaps may be used for emerging market bonds, mortgage backed securities, corporate bonds and local government bond. The buyer of a credit default swap pays a premium for effectively insuring against a debt default. He receives a lump sum payment if the debt instrument is defaulted. The seller of a credit default swap receives monthly payments from the buyer. If the debt instrument defaults they have to pay the agreed amount to the buyer of the credit default swap. The first credit default swap was introduced in 1995 by JP Morgan. By 2007, their total value has increased to an estimated $45 trillion to $62 trillion. Although since only 0.2% of Investment Companys default, the cash flow is much lower than this actual amount. Therefore, this shows that credit default swaps are being used for speculation and not insuring against actual bonds. As Warren Buffett calls them financial weapons of mass destruction. The credit default swaps are being blamed for much of the current market meltdown. Example of Credit Default Swap An investment trust owns  £1 million corporation bond issued by a private housing firm. If there is a risk the private housing firm may default on repayments, the investment trust may buy a CDS from a hedge fund. The CDS is worth  £1 million. The investment trust will pay an interest on this credit default swap of say 3%. This could involve payments of  £30,000 a year for the duration of the contract. If the private housing firm doesnt default. The hedge fund gains the interest from the investment bank and pays nothing out. It is simple profit. If the private housing firm does default, then the hedge fund has to pay compensation to the investment bank of  £1 million the value of the credit default swap. Therefore the hedge fund takes on a larger risk and could end up paying  £1million The higher the perceived risk of the bond, the higher the interest rate the hedge fund will require. Credit default swaps are used not only by investment banks, but also by other financial institutions. Corporate entities use credit default swaps either for protection purposes, to hedge or to sell. Investment banks are primarily affected by the buyers. If a number of major corporate entities have bought protection from the same investment bank, and all of them fail simultaneously, this will put pressure on the investment bank to pay out. Moreover, the credit risk caused by the above failure may lead to other risks, such as liquidity risk, market risk and operational risk. Therefore, most of the investment banks re-sell the sold protection on the market to other market participants. Edwards (2004) argues that derivatives do not reduce credit risk, but rather transfer it from banks to other banks or entities. Therefore, most of the investment banks re-sell the sold protection on the market to other market participants. Edwards (2004) argues that derivatives do not reduce credit risk, but rather transfer it from banks to other banks or entities. Some of the top banks in America are carrying unknown gambling risks that no one has warned about, and they are all tied up in U.S. bank derivative portfolios (Edwards M, 2004). Commodity Swap A commodity swap is an agreement whereby a floating (or market or spot) price is exchanged for a fixed price over a specified period. The vast majority of commodity swaps involve oil. A swap where exchanged cash flows are dependent on the price of an underlying commodity. This swap is usually used to hedge against the price of a commodity. Commodities are physical assets such as precious metals, base metals, energy stores (such as natural gas or crude oil) and food (including wheat, pork bellies, cattle, etc.). In this swap, the user of a commodity would secure a maximum price and agree to pay a financial institution this fixed price. Then in return, the user would get payments based on the market price for the commodity involved. They are used for hedging against Fluctuations in commodity prices or Fluctuations in spreads between final product and raw material prices. A company that uses commodities as input may find its profits becoming very volatile if the commodity prices become volatile. This is particularly so when the output prices may not change as frequently as the commodity prices change. In such cases, the company would enter into a swap whereby it receives payment linked to commodity prices and pays a fixed rate in exchange. There are two kinds of agents participating in the commodity markets: end-users (hedgers) and investors (speculators). Commodity swaps are becoming increasingly common in the energy and agricultural industries, where demand and supply are both subject to considerable uncertainty. For example, heavy users of oil, such as airlines, will often enter into contracts in which they agree to make a series of fixed payments, say every six months for two years, and receive payments on those same dates as determined by an oil price index. Computations are often based on a specific number of tons of oil in order to lock in the price the airline pays for a specific quantity of oil, purchased at regular intervals over the two-year period. However, the airline will typically buy the actual oil it needs from the spot market. Equity Swap The outstanding performance of equity markets in the 1980s and the 1990s, have brought in some technological innovations that have made widespread participation in the equity market more feasible and more marketable and the demographic imperative of baby-boomer saving has generated significant interest in equity derivatives. In addition to the listed equity options on individual stocks and individual indices, a burgeoning over-the-counter (OTC) market has evolved in the distribution and utilization of equity swaps. An equity swap is a special type of total return swap, where the underlying asset is a stock, a basket of stocks, or a stock index. An exchange of the potential appreciation of equitys value and dividends for a guaranteed return plus any decrease in the value of the equity. An equity swap permits an equity holder a guaranteed return but demands the holder give up all rights to appreciation and dividend income. Compared to actually owning the stock, in this case you do not have to pay anything up front, but you do not have any voting or other rights that stock holders do have. Equity swaps make the index trading strategy even easier. Besides diversification and tax benefits, equity swaps also allow large institutions to hedge specific assets or positions in their portfolios The equity swap is the best swap amongst all the other swaps as it being an over-the-counter derivatives transaction; they have the attractive feature of being customizable for a particular users situation. Investors may have specific time horizons, portfolio compositions, or other terms and conditions that are not matched by exchange-listed derivatives. They are private transactions that are not directly reportable to any regulatory authority. A derivatives dealer can, through a foreign subsidiary in the particular country, invest in the foreign securities without the withholding tax and enter into a swap with the parent dealer company, which can then enter a swap with the American investor, effectively passing on the dividends without the withholding tax Interest Rate Swap An interest rate swap, or simply a rate swap, is an agreement between two parties to exchange a sequence of interest payments without exchanging the underlying debt. In a typical fixed/floating rate swap, the first party promises to pay to the second at designated intervals a stipulated amount of interest calculated at a fixed rate on the notional principal; the second party promises to pay to the first at the same intervals a floating amount of interest on the notional principle calculated according to a floating-rate index. The interest rate swap is essentially a strip of forward contracts exchanging interest payments. Thus, interest rate swaps, like interest rate futures or interest rate forward contracts, offer a mechanism for restructuring cash flows and, if properly used, provide a financial instrument for hedging against interest rate risk The reason for the exchange of the interest obligation is to take benefit from comparative advantage. Some companies may have comparative advantage in fixed rate markets while other companies have a comparative advantage in floating rate markets. When companies want to borrow they look for cheap borrowing i.e. from the market where they have comparative advantage. However this may lead to a company borrowing fixed when it wants floating or borrowing floating when it wants fixed. This is where a swap comes in. A swap has the effect of transforming a fixed rate loan into a float Impact of Credit Default Swaps (CDS) Impact of Credit Default Swaps (CDS) Chapter 1 : Introduction A Swap is a derivative in which two counterparties agree to exchange one stream of cash flow against another stream. Swaps can be used to create unfunded exposures to an underlying asset, since counterparties can earn the profit or loss from movements in price without having to post the notional amount in cash or collateral. It can be used to hedge certain risks such as interest rate risk, or to speculate on changes in the expected direction of underlying prices. The main objective of the project is to understand about Credit Default Swaps (CDS), its global footprint, its role in subprime crisis, its settlement in global arena and to check the feasible settlement of CDS in India, after its introduction in India, by understanding about Indian Credit Derivatives market. Research is concerned with the systematic and objective collection, analysis and evaluation of information about specific aspects to check the feasible settlement of CDSs in India. The development of financial derivatives in recent past is astounding when we consider its volume globally. But at the same time the product once created for hedging the risk currently allows you to bear more risk sometimes making the whole financial system to tremble. May be thats why Warren Buffet called it a financial weapon of mass destruction. Whatever it may be but derivatives have grown exponentially and are necessary for the market to flourish. The credit derivatives are nothing but the logical extension to the family of derivatives and have already made its presence felt globally. The credit derivatives have played a significant role in the development of debt market but also share a blame for the proliferation of subprime crisis. A credit default swap which constitutes the major portion of credit derivatives is similar to an insurance contract which allows you to transfer your risk to third party in exchange of a premium. Right from its origin as plain vanilla product for hedging purpose it has grown to very complex products and now has posed a question mark on its credibility. The subprime crisis started in what were regarded as the worlds safest and most sophisticated markets and spread globally, carried by securities and derivatives that were thought to make the financial system safer. The subprime crisis brings the complexity of securitized products and derivatives products, the human greedy nature, inability of rating agencies to gauge the risk, inefficiency of regulatory bodies, etc. to the fore. Although CDS was not the cause of the subprime crisis but it had cascading effect on the market and was considered as the reason for the collapse of American International Group (AIG). The lessons from the consequences of subprime crisis have helped in creating awareness about the regulatory frameworks to be in place which has increased the transparency, standardization, and soundness in the market. The various measures include formation of central counterparty for CDS, hardwiring of auction protocol and ISDA determination committee. On the backdrop of global crisis the movement of CDS is being watched carefully. The various data sources now provide data even on weekly basis. The efforts are being paid off and the market size of CDS has reduced considerably. And now with the central counterparties in place the CDS market will have more transparency and better control. After opening up of the economy the equity market of India have grown significantly bringing in more transparency. But the corporate bond market is still in undeveloped mode and the efforts being taken on developing it have not provided expected returns. Under this light, India is now all set to launch Credit Default Swaps which are expected to ignite the spark which will flourish the corporate bond market. Considering the cautious nature of RBI and the havoc created by CDS in global market the move by RBI is significant. From the move of RBI one can say as the knife itself is not harmful but it depends whether its in doctors hand or a robbers hand. Similarly CDS as a product is certainly not harmful but its utility will depend on the judicious use of the same. Chapter 2: Literature Review Derivatives The global economic order that emerged after World War II was a system where many less developed countries administered prices and centrally allocated resources. Even the developed economies operated under the Bretton Woods system of fixed exchange rates. The system of fixed prices came under stress from the 1970s onwards. High inflation and unemployment rates made interest rates more volatile. The Bretton Woods system was dismantled in 1971, freeing exchange rates to fluctuate. Less developed countries like India began opening up their economies and allowing prices to vary with market conditions. Price fluctuations made it hard for businesses to estimate their future production costs and revenues. Derivative securities provide them with a valuable set of tools for managing this risk. Financial markets are, by nature, extremely volatile and hence, the risk factor is an Important concern for financial agents. To reduce this risk, the concept of derivatives comes into the picture. Derivatives are products whose values are derived from one or more basic variables called bases. These bases can be underlying assets (for example forex, equity, etc), bases or reference rates. It is afinancial instrument(or more simply, an agreement between two people/two parties) that has a value determined by the future price of something else. Derivatives can be thought of as bets on the price of something.Itis the collective name used for a broad class offinancial instrumentsthatderivetheir value from other financial instruments (known as the underlying), events or conditions. Essentially, a derivative is a contract between two parties where the value of the contract is linked to the price of another financial instrument or by a specified event or condition. Asecurity whose price is dependent upon or derived fromone or more underlying assets.The derivative itself is merely a contract between two or more parties. Itsvalue is determinedby fluctuationsin the underlying asset.The most common underlying assets includestocks, bonds,commodities,currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.Derivatives are generally used as an instrument to hedgerisk, but can also be used forspeculative purposes. For example, wheat farmers may wish to sell their harvest at a future date to eliminate the risk of a change in prices by that date. The transaction in this case would be the derivative, while the spot price of wheat would be the underlying asset. Derivatives have probably been around for as long as people have been trading with one another. Forward contracting dates back at least to the 12th century, and may well have been around before then. Merchants entered into contracts with one another for future delivery of specified amount of commodities at specified price. A primary motivation for pre-arranging a buyer or seller for a stock of commodities in early forward contracts was to lessen the possibility that large swings would inhibit marketing the commodity after a harvest. The need for a derivatives market The derivatives market performs a number of economic functions: They help in transferring risks from risk averse people to risk oriented people They help in the discovery of future as well as current prices They catalyze entrepreneurial activity They increase the volume traded in markets because of participation of risk averse people in greater numbers They increase savings and investment in the long run The participants in a derivatives market Hedgers use futures or options markets to reduce or eliminate the risk associated with price of an asset. Speculators use futures and options contracts to get extra leverage in betting on future movements in the price of an asset. They can increase both the potential gains and potential losses by usage of derivatives in a speculative venture. Arbitrageurs are in business to take advantage of a discrepancy between prices in two different markets. If, for example, they see the futures price of an asset getting out of line with the cash price, they will take offsetting positions in the two markets to lock in a profit. Types of Derivatives Forwards: A forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at todays pre-agreed price. Futures: A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense that the former are standardized exchange-traded contracts Options: Options are of two types calls and puts. Calls give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date. Puts give the buyer the right, but not the obligation to sell a given quantity of the underlying asset at a given price on or before a given date. Warrants: Options generally have lives of upto one year, the majority of options traded on options exchanges having a maximum maturity of nine months. Longer-dated options are called warrants and are generally traded over-the-counter. LEAPS: The acronym LEAPS means Long-Term Equity Anticipation Securities. These are options having a maturity of upto three years. Baskets: Basket options are options on portfolios of underlying assets. The underlying asset is usually a moving average or a basket of assets. Equity index options are a form of basket options. Swaps: Swaps are private agreements between two parties to exchange cash flows in the future according to a prearranged formula. They can be regarded as portfolios of forward contracts. The two commonly used swaps are : Interest rate swaps: These entail swapping only the interest related cash flows between the parties in the same currency. Currency swaps: These entail swapping both principal and interest between the parties, with the cash flows in one direction being in a different currency than those in the opposite direction. Swaptions: Swaptions are options to buy or sell a swap that will become operative at the expiry of the options. Thus a swaption is an option on a forward swap. Rather than have calls and puts, the swaptions market has receiver swaptions and payer swaptions. A receiver swaption is an option to receive fixed and pay floating. A payer swaption is an options to pay fixed and receive floating. Uses of Derivatives Derivatives may be traded for a variety of reasons. A derivative enables a trader to hedge some pre-existing risk by taking positions in derivatives markets that offset potential losses in the underlying or spot market. In India, most derivatives users describe themselves as hedgers (Fitch Ratings, 2004) and Indian laws generally require that derivatives be used for hedging purposes only. Another motive for derivatives trading is speculation (i.e. taking positions to profit from anticipated price movements). In practice, it may be difficult to distinguish whether a particular trade was for hedging or speculation, and active markets require the participation of both hedgers and speculators. A third type of trader, called arbitrageurs, profit from discrepancies in the relationship of spot and derivatives prices, and thereby help to keep markets efficient. Jogani and Fernandes (2003) describe Indias long history in arbitrage trading, with line operators and traders arbitraging prices between exchanges located in different cities, and between two exchanges in the same city. Their study of Indian equity derivatives markets in 2002 indicates that markets were inefficient at that time. They argue that lack of knowledge; market frictions and regulatory impediments have led to low levels of capital employed in arbitrage trading in India. However, more recent evidence suggests that the efficiency of Indian equity derivatives markets may have improved (ISMR, 2004). Development of derivatives market in India Derivatives markets have been in existence in India in some form or other for a long time. In the area of commodities, the Bombay Cotton Trade Association started futures trading in 1875 and, by the early 1900s India had one of the worlds largest futures industry. In 1952 the government banned cash settlement and options trading and derivatives trading shifted to informal forwards markets. In recent years, government policy has changed, allowing for an increased role for market-based pricing and less suspicion of derivatives trading. The ban on futures trading of many commodities was lifted starting in the early 2000s, and national electronic commodity exchanges were created. In the equity markets, a system of trading called badla involving some elements of forwards trading had been in existence for decades.6 However, the system led to a number of undesirable practices and it was prohibited off and on till the Securities and Exchange Board of India (SEBI) banned it for good in 2001. A series of reforms of the stock market between 1993 and 1996 paved the way for the development of exchange-traded equity derivatives markets in India. In 1993, the government created the NSE in collaboration with state-owned financial institutions. NSE improved the efficiency and transparency of the stock markets by offering a fully automated screen-based trading system and real-time price dissemination. In 1995, a prohibition on trading options was lifted. In 1996, the NSE sent a proposal to SEBI for listing exchange-traded derivatives. The report of the L. C. Gupta Committee, set up by SEBI, recommended a phased introduction of derivative products, and bi-level regulation ( i.e., self-regulation by exchanges with SEBI providing a supervisory and advisory role). Another report, by the J. R. Varma Committee in 1998, worked out various operational details such as the margining systems. The first step towards introduction of derivatives trading in India was the promulgation of the Securities Laws(Amendment) Ordinance, 1995, which withdrew the prohibition on options in securities. The market for derivatives, however, did not take off, as there was no regulatory framework to govern trading of derivatives. SEBI set up a 24-member committee under the Chairmanship of Dr.L.C.Gupta on November 18, 1996 to develop appropriate regulatory framework for derivatives trading in India. The committee submitted its report on March 17, 1998 prescribing necessary pre-conditions for introduction of derivatives trading in India. The committee recommended that derivatives should be declared as securities so that regulatory framework applicable to trading of securities could also govern trading of securities. SEBI also set up a group in June 1998 under the Chairmanship of Prof.J.R.Varma, to recommend measures for risk control in derivatives market in India. The report, which was submitte d in October 1998, worked out the operational details of margining system, methodology for charging initial margins, broker net worth, deposit requirement and real-time monitoring requirements. The Securities Contract Regulation Act (SCRA) was amended in December 1999 to include derivatives within the ambit of securities and the regulatory framework was developed for governing derivatives trading. The act also made it clear that derivatives shall be legal and valid only if such contracts are traded on a recognized stock exchange, thus precluding OTC derivatives. The government also rescinded in March 2000, the three- decade old notification, which prohibited forward trading in securities. Derivatives trading commenced in India in June 2000 after SEBI granted the final approval to this effect in May 2001. SEBI permitted the derivative segments of two stock exchanges, NSE and BSE, and their clearing house/corporation to commence trading and settlement in approved derivatives contracts . To begin with, SEBI approved trading in index futures contracts based on SP CNX Nifty and BSE-30(Sensex) index. This was followed by approval for trading in options based on these two indexes and options on individual securities. The trading in BSE Sensex options commenced on June 4, 2001 and the trading in options on individual securities commenced in July 2001. Futures contracts on individual stocks were launched in November 2001. The derivatives trading on NSE commenced with SP CNX Nifty Index futures on June 12, 2000. The trading in index options commenced on June 4, 2001 and trading in options on individual securities commenced on July 2, 2001. Single stock futures were launched on November 9, 2001. The index futures and options contract on NSE are based on SP CNX Trading and settlement in derivative contracts is done in accordance with the rules, byelaws, and regulations of the respective exchanges and their clearing house/corporation duly approved by SEBI and notified in the official gazette. Foreign Institutional Investors (FIIs) are permitted to trade in all Exchange traded derivative products. The following are some observations based on the trading statistics provided in the NSE report on the futur es and options (FO): †¢ Single-stock futures continue to account for a sizable proportion of the FO segment. It constituted 70 per cent of the total turnover during June 2002. A primary reason attributed to this phenomenon is that traders are comfortable with single-stock futures than equity options, as the former closely resembles the erstwhile badla system. On relative terms, volumes in the index options segment continues to remain poor. This may be due to the low volatility of the spot index. Typically, options are considered more valuable when the volatility of the underlying (in this case, the index) is high. A related issue is that brokers do not earn high commissions by recommending index options to their clients, because low volatility leads to higher waiting time for round-trips. Put volumes in the index options and equity options segment have increased since January 2002. The call-put volumes in index options have decreased from 2.86 in January 2002 to 1.32 in June. The fall in call-put volumes ratio suggests that the traders are increasingly becoming pessimistic on the market. Farther month futures contracts are still not actively traded. Trading in equity options on most stocks for even the next month was non-existent. Daily option price variations suggest that traders use the FO segment as a less risky alternative (read substitute) to generate profits from the stock price movements. The fact that the option premiums tail intra-day stock prices is evidence to this. Calls on Satyam fall, while puts rise when Satyam falls intra-day. If calls and puts are not looked as just substitutes for spot trading, the intra-day stock price variations should not have a one-to-one impact on the option premiums. SWAP In finance, a SWAP is a derivative in which two counterparties agree to exchange one stream of cash flow against another stream. These streams are called the legs of the swap. Conventionally they are the exchange of one security for another to change the maturity (bonds), quality of issues (stocks or bonds), or because investment objectives have changed. A swap is an agreement to exchange one stream of cash flows for another. Swaps are most usually used to:- Switch financing in one country for financing in another To replace a floating interest rate swap with a fixed interest rate (or vice versa) (Litzenberger, R.H)In August 1981 the World Bank issued $290 million in euro-bonds and swapped the interest and principal on these bonds with IBM for Swiss francs and German marks. The rapid growth in the use of interest rate swaps, currency swaps, and swaptions (options on swaps) has been phenomenal. Currently, the amount of outstanding interest rate and currency swaps is almost $3 trillion. Recently, swaps have grown to include currency swaps and interest rate swaps. It can be used to hedge certain risks such as interest rate risk, or to speculate on changes in the expected direction of underlying prices. If firms in separate countries have comparative advantages on interest rates, then a swap could benefit both firms. For example, one firm may have a lower fixed interest rate, while another has access to a lower floating interest rate. These firms could swap to take advantage of the lower rates. Different types of swaps:- Currency Swaps Cross currency swaps are agreements between counterparties to exchange interest and principal payments in different currencies. Like a forward, a cross currency swap consists of the exchange of principal amounts (based on todays spot rate) and interest payments between counterparties. It is considered to be a foreign exchange transaction and is not required by law to be shown on the balance sheet. In a currency swap, these streams of cash flows consist of a stream of interest and principal payments in one currency exchanged for a stream, of interest and principal payments of the same maturity in another currency. Because of the exchange and re-exchange of notional principal amounts, the currency swap generates a larger credit exposure than the interest rate swap. Cross-currency swaps can be used to transform the currency denomination of assets and liabilities. They are effective tools for managing foreign currency risk. They can create currency match within its portfolio and minimize exposures. Firms can use them to hedge foreign currency debts and foreign net investments. Currency swaps give companies extra flexibility to exploit their comparative advantage in their respective borrowing markets. Currency swaps allow companies to exploit advantages across a matrix of currencies and maturities. Currency swaps were originally done to get around exchange controls and hedge the risk on currency rate movements. It also helps in Reducing costs and risks associated with currency exchange. They are often combined with interest rate swaps. For example, one company would seek to swap a cash flow for their fixed rate debt denominated in US dollars for a floating-rate debt denominated in Euro. This is especially common in Europe where companies shop for the cheapest debt regardless of its denomination and then seek to exchange it for the debt in desired currency. Credit Default Swap Credit Default Swap is a financial instrument for swapping the risk of debt default. Credit default swaps may be used for emerging market bonds, mortgage backed securities, corporate bonds and local government bond. The buyer of a credit default swap pays a premium for effectively insuring against a debt default. He receives a lump sum payment if the debt instrument is defaulted. The seller of a credit default swap receives monthly payments from the buyer. If the debt instrument defaults they have to pay the agreed amount to the buyer of the credit default swap. The first credit default swap was introduced in 1995 by JP Morgan. By 2007, their total value has increased to an estimated $45 trillion to $62 trillion. Although since only 0.2% of Investment Companys default, the cash flow is much lower than this actual amount. Therefore, this shows that credit default swaps are being used for speculation and not insuring against actual bonds. As Warren Buffett calls them financial weapons of mass destruction. The credit default swaps are being blamed for much of the current market meltdown. Example of Credit Default Swap An investment trust owns  £1 million corporation bond issued by a private housing firm. If there is a risk the private housing firm may default on repayments, the investment trust may buy a CDS from a hedge fund. The CDS is worth  £1 million. The investment trust will pay an interest on this credit default swap of say 3%. This could involve payments of  £30,000 a year for the duration of the contract. If the private housing firm doesnt default. The hedge fund gains the interest from the investment bank and pays nothing out. It is simple profit. If the private housing firm does default, then the hedge fund has to pay compensation to the investment bank of  £1 million the value of the credit default swap. Therefore the hedge fund takes on a larger risk and could end up paying  £1million The higher the perceived risk of the bond, the higher the interest rate the hedge fund will require. Credit default swaps are used not only by investment banks, but also by other financial institutions. Corporate entities use credit default swaps either for protection purposes, to hedge or to sell. Investment banks are primarily affected by the buyers. If a number of major corporate entities have bought protection from the same investment bank, and all of them fail simultaneously, this will put pressure on the investment bank to pay out. Moreover, the credit risk caused by the above failure may lead to other risks, such as liquidity risk, market risk and operational risk. Therefore, most of the investment banks re-sell the sold protection on the market to other market participants. Edwards (2004) argues that derivatives do not reduce credit risk, but rather transfer it from banks to other banks or entities. Therefore, most of the investment banks re-sell the sold protection on the market to other market participants. Edwards (2004) argues that derivatives do not reduce credit risk, but rather transfer it from banks to other banks or entities. Some of the top banks in America are carrying unknown gambling risks that no one has warned about, and they are all tied up in U.S. bank derivative portfolios (Edwards M, 2004). Commodity Swap A commodity swap is an agreement whereby a floating (or market or spot) price is exchanged for a fixed price over a specified period. The vast majority of commodity swaps involve oil. A swap where exchanged cash flows are dependent on the price of an underlying commodity. This swap is usually used to hedge against the price of a commodity. Commodities are physical assets such as precious metals, base metals, energy stores (such as natural gas or crude oil) and food (including wheat, pork bellies, cattle, etc.). In this swap, the user of a commodity would secure a maximum price and agree to pay a financial institution this fixed price. Then in return, the user would get payments based on the market price for the commodity involved. They are used for hedging against Fluctuations in commodity prices or Fluctuations in spreads between final product and raw material prices. A company that uses commodities as input may find its profits becoming very volatile if the commodity prices become volatile. This is particularly so when the output prices may not change as frequently as the commodity prices change. In such cases, the company would enter into a swap whereby it receives payment linked to commodity prices and pays a fixed rate in exchange. There are two kinds of agents participating in the commodity markets: end-users (hedgers) and investors (speculators). Commodity swaps are becoming increasingly common in the energy and agricultural industries, where demand and supply are both subject to considerable uncertainty. For example, heavy users of oil, such as airlines, will often enter into contracts in which they agree to make a series of fixed payments, say every six months for two years, and receive payments on those same dates as determined by an oil price index. Computations are often based on a specific number of tons of oil in order to lock in the price the airline pays for a specific quantity of oil, purchased at regular intervals over the two-year period. However, the airline will typically buy the actual oil it needs from the spot market. Equity Swap The outstanding performance of equity markets in the 1980s and the 1990s, have brought in some technological innovations that have made widespread participation in the equity market more feasible and more marketable and the demographic imperative of baby-boomer saving has generated significant interest in equity derivatives. In addition to the listed equity options on individual stocks and individual indices, a burgeoning over-the-counter (OTC) market has evolved in the distribution and utilization of equity swaps. An equity swap is a special type of total return swap, where the underlying asset is a stock, a basket of stocks, or a stock index. An exchange of the potential appreciation of equitys value and dividends for a guaranteed return plus any decrease in the value of the equity. An equity swap permits an equity holder a guaranteed return but demands the holder give up all rights to appreciation and dividend income. Compared to actually owning the stock, in this case you do not have to pay anything up front, but you do not have any voting or other rights that stock holders do have. Equity swaps make the index trading strategy even easier. Besides diversification and tax benefits, equity swaps also allow large institutions to hedge specific assets or positions in their portfolios The equity swap is the best swap amongst all the other swaps as it being an over-the-counter derivatives transaction; they have the attractive feature of being customizable for a particular users situation. Investors may have specific time horizons, portfolio compositions, or other terms and conditions that are not matched by exchange-listed derivatives. They are private transactions that are not directly reportable to any regulatory authority. A derivatives dealer can, through a foreign subsidiary in the particular country, invest in the foreign securities without the withholding tax and enter into a swap with the parent dealer company, which can then enter a swap with the American investor, effectively passing on the dividends without the withholding tax Interest Rate Swap An interest rate swap, or simply a rate swap, is an agreement between two parties to exchange a sequence of interest payments without exchanging the underlying debt. In a typical fixed/floating rate swap, the first party promises to pay to the second at designated intervals a stipulated amount of interest calculated at a fixed rate on the notional principal; the second party promises to pay to the first at the same intervals a floating amount of interest on the notional principle calculated according to a floating-rate index. The interest rate swap is essentially a strip of forward contracts exchanging interest payments. Thus, interest rate swaps, like interest rate futures or interest rate forward contracts, offer a mechanism for restructuring cash flows and, if properly used, provide a financial instrument for hedging against interest rate risk The reason for the exchange of the interest obligation is to take benefit from comparative advantage. Some companies may have comparative advantage in fixed rate markets while other companies have a comparative advantage in floating rate markets. When companies want to borrow they look for cheap borrowing i.e. from the market where they have comparative advantage. However this may lead to a company borrowing fixed when it wants floating or borrowing floating when it wants fixed. This is where a swap comes in. A swap has the effect of transforming a fixed rate loan into a float