Cultural Differences between China and the U.S.A. Essay

China and the United States have different cultural backgrounds, different values and national conditions, it determines the Sino-US education idea, education mode and method is put in the difference with bigger. China’s basic education and basic education in the United States were compared, the majority of people believe that education is the foundation of China, the basic education,† learn more understanding and less†; American education is to cultivate innovation ability education, learning more than studying†Ã¢â‚¬ . What is the† science† or† Enlightenment†? In twentieth Century, the famous British mathematician, philosopher, educator Whitehead once said:† education is a complicated problem †¦ †¦ On this issue there is only a little I can be sure, that is not generally applicable and simple way.† Each student in the school ‘s development, it is not only the educational mode, education content, education system and method to decide, because in the growth of the students, society, family, school education and individual four together play. Therefore, we can not only with the part of the students development, to assert that the entire education system rationality, so it is unreasonable. Two the difference of basic education between China and America Basic education between China and America merits, different people hold no point of view. For example, if the comparison is the mathematical curriculum, China ‘s basic education must exceed the United States; but if the comparison of students’ practical ability especially the practice ability and innovation ability, the American basic education is certainly more than chinese. Elementary education between America and why there is this discrepancy? First, the two countries have very different educational tradition, Chinese basic education pay attention to the accumulation of knowledge and indoctrination, pay attention to the cultivation of students’ knowledge of their master, pay attention to the cultivation of students the same thinking. While the United States is to pay attention to the training of students to use the knowledge to solve the actual problem ability, pay attention to the cultivation of the students’ knowledge of development and innovation, pay attention to the cultivation of students’ critical thinking and divergent thinking. We can see, China Education focused on knowledge static acceptance, and the United States of America education focuses on knowledge of the dynamic control; China is a mode of education, while the United States is a kind of elite education. As the Nobel winner professor Chen Ning Yang said, China and the United States educational philosophy is quite different, the United States of America education philosophy on the former 30%-40% student is good, because they do not need to follow the prescribed order of learning, can jump in learning, the students through training can quickly achieve success. While Chinese education philosophy on 30%-40% student is good, because these students follow the prescribed order, has a solid foundation of the process, have become the opportunity. Secondly, different country on the foundation stage of Education Foundation has different understanding. Take mathematics as an example, the educational circles of China have historically considered, the basic concept and the basic operation is the foundation of mathematics in middle school, so we need to remember a lot of formulas and theorems. While the United States that know where to find these theorems and formulas are more important, they think that can be found in these formulas and theorems, there is no need to worry effort to memory, the brain can be saved to think about other things, such as the theorem has applications? If I need to learn? Wait. China’s education is the basis of that, the brain in a computer independent premise, the reserve knowledge as much as possible, as quickly as possible to extract knowledge, so Chinese students of the brain in these two aspects are fully trained ( on the end game wood, 2002). American education is the basis of that, the brain to make full use of the computer under the premise of development, give up those belonging to the computer work area required capacity, only those belonging to the computer cannot work areas required capacity ( on the end game wood, 2002). Therefore, when by virtue of classroom achievement scholarship, American students often than Chinese students, but can make full use of information tools, in specific practice areas, do some research work, Chinese students often than American students. Hence, in the development of brain underlying function, Chinese education better, but in the use of a variety of information tools to solve problems and make innovation, the United States educational advantage is self-evident. Moreover, from the value tropism, the American basic education from the perspective of individualism, individual supreme is the traditional value pursuit, American basic education of cultivating the students’ personality and creativity. Basic education in China is from social interests, collectivism and patriotism values is its tradition of the pursuit of value, which determines that China’s basic education carried by the individual ability and the training of creative ability are also and values related to. This and the American individualism education a fundamental distinction. For example, the concrete teaching activity, the United States to encourage students to have their own ideas, teachers in the teaching process, pay attention to the students’ independent personalized thinking habits, pay attention to the students’ divergent thinking and critical thinking of the culture, politics, religion, history and many other aspects of the many problems teachers are prohibited to provide the only correct the answer, encourage a variety of different views exist, against the teacher instead of students thinking. China education focusing on the same thinking, when the examination, assessment focus is often the student’s knowledge, objective test almost flooded in the sciences, inspects the student to answer whether the test standard and consistent answers, the side guide students and teachers to set the only answer to be consistent, so the result is the most students rely on Teachers’ thinking and teaching. This and the United States banned from providing the only answer is quite different. The United States of America education emphasizes individual, Chinese education emphasizes respect love others. The ancients cloud, respect for nature love herself, not nurture. So we think, Chinese basic education relative to the United States of America ‘s individualistic education, superior and more. Chinese basic education should be guaranteed in the standard of society under the premise of the pursuit of individual students and innovation ability the development of maximization. Finally, China ‘s basic education attaches importance to the sound of the United States, and a plurality of Chinese education; education pay attention to the longitudinal depth, while the United States Education attention span; the United States of America education pay attention to cultivate students’ self-confidence and self-reliance spirit, Chinese education pay attention to cultivate students’ strict and rigorous academic attitude. The United States of America corresponding, a loose, free atmosphere, can fully take care of every student interest and the hobby; while the Chinese basic education is dull. Basic education in China is characterized by fast speed, high degree of difficulty, knowledge of many points, the high degree of abstraction, often the United States a week about the content of China, ten minutes can be finished, and students have the pressure of the college entrance examination, relative to foreign countries, students by pressure, quoting professor Chen Ning Yang ‘s words Chinese education narrow stiff. From the above we can see, China, in the education idea, education mode and method, there is a great difference. China ‘s education is more a model of education; and the United States of America focuses on emphasizing the innovation spirit, individualism, is a kind of elite education. In essence, focusing on innovation or focus on the foundation is an American basic education and basic education in China the fundamental difference. As the Nobel winner professor Chen Ning Yang said, China and the United States of America Education Foundation, cannot tell which one is good, which one is not good, be it differs from man to man. In the teaching process, for Chinese students, they should have more innovation, for American students, should let them lay a good foundation, it can compensate for each other, is the most appropriate. Three thinking American education is to the East, began to seize a base. In 2001 June, the United States President Bush proposed an education reform bill, $24000000000 in primary and secondary schools to strengthen the education investment and management, requires that all schools must hold the reading test ( approximate Chinese examination ) and math exam, students must pass the examination before graduation, only students meet the eligibility requirements, the school to receive federal extra government funding. If 3 consecutive unqualified, principals and teachers to leave. The bill got through to absolute advantage. Comparison of reference only, can only draw lessons from, in order to improve. The United States has acted, we should also take action. As can be seen, the United States of America ‘s elementary education reform focuses on the basis of innovation in bridge foundation. China ‘s basic education traditionally focus too much on the cultivation of students’ Collectivism, patriotism and common thinking, without adequate attention to the cultivation of students’ personality and creativity, so the education of our country should be based on the basis of the increase in innovation. ( a ) curriculum and course requirements We should give full consideration to the child and adolescent students’ physical, mental and psychological development stage, progressive. Different students should have different learning tasks, can not be one-sided pursuit of knowledge and too many courses, to know that knowledge is endless, the source of knowledge is very rich, can’t put the eye only to lock in the textbook, should give students leave enough space for development, to those who have expertise students with adequate development of individualized freedom, as they provide sufficient superior conditions and the necessary learning guidance, so that more of Qian Zhongshu’s birth. The United States is not the national curriculum standards, but states, counties or districts can compile curriculum standard. From look on the whole, the United States of America curriculum is quite flexible, mainly including compulsory courses and elective classes two categories. Required courses for credit is more, content is wide but not deep, emphasize the students’ practical ability, thinking ability and awareness of the problem, to solve the question ability. Elective course of many types, are based mainly on students, employment and social life of the actual need, students according to their own interest in free to choose, to obtain the required credits. So we think, our country in the setting of curriculum time completely should learn from the American experience, emphasize the foundation of life, pay attention to life experience, guide multivariate development, more from the needs of society and students survival needs to consider, setting conforms to our country national curriculum standard. ( two) teaching material Chinese teaching material relative to the United States, is boring. Take the United States of† Literature†, the contents of the article are novels, short stories, essays and other kinds of themes, but, each subject by a number of different age, different types of styles of different articles. The article, with background reports, authors and other related content. In addition, each lesson has special column has associated the literature Web site, thereby facilitating students’ extracurricular reading. Many foreign genre, content is wide, it is domestic Chinese textbook can match. Therefore, we can draw lessons from the United States of America teaching material on knowledge widen, the contempt of the depth of knowledge of excessive mining; attach importance to the students’ practice ability, practical ability training, the contempt of the knowledge of the rote learning; pay attention to students’ learning autonomy, independence and creativity cultivation, despise the same thinking too much training, so as to our teaching materials, arrangement of reform. At the same time, the United States of America textbook illustrations, vivid image, in our textbook layout can also absorb it to this experience. ( three) the classroom teaching Our classroom teaching, classroom capacity, demand is high, the classroom atmosphere more serious. Although this gives students lay a solid system foundation, but also brought inactive classroom, teacher, student thinking less defects, typical teacher-centered teaching mode, and the United States of America free, relaxed classroom atmosphere, students can walk freely during the class, free discussion, to express own viewpoint, is a typical student centered teaching mode. Therefore, we can draw lessons from the United States of America ‘s absorption of education mode, form Chinese characteristic education pattern, which is put forward by Professor He Kekang dominated — subject education mode, to improve the traditional classroom teaching, improve the students’ enthusiasm and initiative, to cultivate the students’ creative thinking and divergent thinking. The specific measures are as follows: First of all, optimize the teaching goals. According to the needs of social development, developed to meet the needs of social development, meet the future employment needs of specific teaching objectives, and formulate the corresponding evaluation scheme, to ensure the teaching objectives of the implementation. Secondly, adjust the structure of classroom. Outstanding students as the main body, autonomous learning, free development idea, overcome students ‘† hello† eat teaching phenomenon. Then, strengthen teaching methods. To follow through induction, guide correctly, improve students’ questions, the practical ability to solve problems, teachers should change their roles from the traditional preaching, impart knowledge and solve doubts are transformed into organizer, promoter, by management as a guide, the relationship between teachers and students should be converted to partners. At the same time, the teacher in the teaching process, pay attention to the use of suitable for the courses of various teaching mode of application, such as inquiry-based learning, Blended Learning. Finally, to create a good teaching environment. To establish harmonious relationship between teachers and students, to the students to create a good, harmonious, free study atmosphere. To encourage the learning and the use of modern information technology, the research and production of computer auxiliary teaching courseware, improving the quality of teaching, at the same time, make full use of the school to provide the digital learning environment, in the teaching process can realize the information technology and curriculum integration. ( four) other aspects In strengthening the above aspects at the same time, but also to improve the treatment of teachers, strengthening the teachers team construction; increase the investment in education, improve school conditions; at the same time regular teacher training, improve the quality of teaching. Four summary Through the above on the United States and China basic education after comparing, we can see, actually the most ideal education is the two kind of education modes advantages of integration, this will have solid foundation and innovation. But as a result of these two kinds of educational models are based on different cultural traditions and social background, so together with considerable difficulty. China’s basic education and higher education, there exist some problems and shortcomings, the United States of America education it has many advantages and advanced education in China, worth learning. But this does not mean that the Chinese education reform must complete to American education as an example, the overall absorption, to know the Sino-US education system is rooted in the cultural tradition, historical background and value orientation, whoever can not fully absorb each other’s essence. To sum up, we can see, different education reflects the different social and cultural connotation of the United States now, suitable teaching methods may not be entirely suitable for the Chinese education. Therefore, China ‘s education must be based on suitable for China’s national conditions based on the, it reflects the Chinese social and cultural connotation. So, how to explore with Chinese characteristics, in line with China’s national education method and the education system, is our future education

Service Learning Reflection

I chose to go to my home town to work with Kid's Klub for my service learning project. Kid's Klub is a ministry of Wesley United Methodist Church offering quality before and after school care and summer camp programs for children ages five to fourteen. The reason I chose to go to my home town for this project is because I regularly participate in this program when I am home for breaks. While I am there I assist the children in any area in which they may need extra help, as well as helping with preparations that need to be made for activities and field trips. This project relates to the passage of Matthew 25:31-40. This passage talks about children in reference to helping each other out when one is in need and doing the right thing. Another passage that I would like to mention is Proverbs 22:6. This states that a child should be raised in the way he should go, and even when he is old he will not depart from it. Kid's Klub is a program that offers care to children before and after school. Being that it acts similarly to a daycare it gives children the opportunity to work on homework or projects they might need to finish, or just to have time to interact with other children and enjoy games and activities. In addition, they are taught scripture in fun ways that they will enjoy. Being able to do such activities in this environment gives the children numerous opportunities to help one another. It is also great that the children are able to associate with different age groups; they are always able to teach each other new things and be able to ask advice from someone that they might feel more comfortable talking to since they are closer to their own age. While I was there, I acted as a teacher, or mentor, as well as a friend. It was my job to assist them with their homework, projects and to clarify what they were going over in bible classes. I also helped prepare dinner for them and played games with them until their parents were able to pick them up. I was also there to mediate and help the kids make the right decision when there were conflicts or arguments. By doing so, they are learning how they should deal with situations and what is the right or wrong way to handle them. It is really amazing to see this first hand when I see the kids oluntarily helping one another with assignments and resolving issues on their own in ways that benefit everyone involved positively. I chose to mention Proverbs 22:6 because it acts as a precursor to the main passage of relation to this service. This passage states that a child should be raised in the way that he should go, and even when he is old he will not depart from it. I think it is important to include when dealing with children because it is a top priority to teach them. Children must be taught right and wrong in the first place before they will be able to employ those tactics in their lives. It is important that they know what it means to help one another and how much it could mean for one in need as well as the one providing the service. This is why it is important that children receive help when they are in need. The probability that one might help another is much greater when they have been shown the same sort of assistance when they were in need. Once they are shown this, it will stick with them through their lives and they will always know what is right and wrong no matter what. It is not as simple to teach what is right and wrong in this day and age, which is another reason why it is so important. Because of today's society, it has become a standard to disregard morals that we should learn as children and keep with us through our lives. â€Å"In today’s tumultuous society, morality often gets brushed aside as just another part of the fairy tale, and those learning moments of our youth become just another ‘happily ever after' tale that seems unbelievable by today’s standards† (Lebeau). I think it is equally important to teach values so that children are sure to be able to employ them in their lives by helping others. The main passage that I chose is Matthew 25:31-41. This passage talks about treating one another right. Ultimately how we treat one another will determine whether we are saved. It's purpose is to decide whether or not one will be permitted to the eternal kingdom or will be consigned to eternal punishment (NIV, 25:41). The King will separate the children according to whether or not they have helped others when they were in need. This, in turn, makes the obvious point that we need to be taught and to teach others hat is right or wrong and that we need to help each other, regardless of who we are; we do not discriminate. This is shown in one of the verses as follows: â€Å"The King will reply, ‘I tell you the truth, whatever you did for one of the least of these brothers of mine, you did for me'† (25:40). When we do good to others, we are doing good to god. Even though we do not have to opportunity to show this directly, it is seen and is important. Both of these passages are of equal importance when addressing what is right and helping others. Children are the future of humanity, therefore it is essential that this is stressed during the early years of their lives. These situations are presented everyday in life, young and old, and it remains important through all of our years. That is why I enjoyed working with the kids and the fact that I was an influence on them. There is nothing I love more than helping children understand why we are to do what is expected. This was certainly a beneficial experience for me as well as the children and we can all take valuable information and learn from our time together.

APush History Term Paper Essay

Robert La Follette, the son of a small farmer, was born in Dane County, Wisconsin, on 14th June, 1855. He worked as a farm labourer before entering the University of Wisconsin in 1875. In 1876 La Follette met Robert G. Ingersoll. He later recalled: â€Å"Ingersoll had a tremendous influence upon me, as indeed he had upon many young men at the time. It was not that he changed my beliefs, but he liberated my mind. Freedom was what preached: he wanted the shackles off everywhere. He wanted men to think boldly about all things: he demanded intellectual and moral courage.† After graduating in 1879 he set up as a lawyer and the following year became District Attorney of Dane County. Elected to Congress as a Republican, La Follette was extremely critical of the behaviour of some of the party bosses. In 1891, La Follette announced that the state Republican boss, Senator Philetus Sawyer, had offered him a bribe to fix a court case. Over the next six years La Follette built up a loyal following within the Republican Party in opposition to the power of the official leadership. Proposing a programme of tax reform, corporation regulation and an extension of political democracy, La Follette was elected governor of Wisconsin in 1900. Once in power La Follette employed the academic staff of the University of Wisconsin to draft bills and administer the laws that he introduced. He later recalled: â€Å"I made it a policy, in order to bring all the reserves of knowledge and inspiration of the university more to the service of the people, to appoint experts from the university wherever possible upon the important boards of the state – the civil service commission, the railroad commission and so on – a relationship which the university has always encouraged and by which the state has greatly profited.† La Follette was also successful in persuading the federal government to introduce much needed reforms . This included the regulation of the railway industry and equalized tax assessment. In 1906 La Follette was elected to the Senate and over the next few years argued that his main role was to â€Å"protect the people† from the â€Å"selfish interests†. He claimed that the nation’s economy was dominated by fewer than 100 industrialists. He went on to argue that these men then used this power to control the political process. La Follette supported the growth of trade unions as he saw them as a check on the power of large corporations. In 1909 La Follette and his wife, the feminist, Belle La Follette founded the La Follette’s Weekly Magazine. The journal campaigned for women’s suffrage, racial equality and other progressive causes. Lincoln Steffens argued: â€Å"La Follette is the opposite of a demagogue. Capable of fierce invective, his oratory is impersonal; passionate and emotional himself, his speeches are temperate. Some of them are so loaded with facts and such closely knit arguments that they demand careful reading, and their effect is traced to his delivery, which is forceful, emphatic, and fascinating.† Art Young, The Masses (1917) La Follette supported Woodrow Wilson in the 1912 presidential election and approved his social justice legislation. However, he complained that he was under the control of big business and was totally opposed to Wilson’s decision to enter the First World War. Once war was declared La Follette opposed conscription and the passing of the Espionage Act. La Follette was accused of treason but was a popular hero with the anti-war movement. Lincoln Steffens was a great supporter of La Follette: â€Å"Governor La Follette was a powerful man, who, short but solid, swift and willful in motion, in speech, in decision, gave the impression of a tall, a big man†¦ what I saw at my first sight of him was a sincere, ardent man who, whether standing, sitting, or in motion, but the grace of trained strength, both physical and mental†¦ Rather short in stature, but broad and strong, he had the gift of muscled, nervous power, he kept himself in training all his life. His sincerity, his integrity, his complete devotion to his ideal, were indubitable; no one who heard could suspect his singleness of purpose or his courage.† La Follette became the candidate of the Progressive Party in the 1924 presidential election. Although he gained support from trade unions, individuals like Fiorello La Guardia and Vito Marcantonio, the Socialist Party and the Scripps-Howard newspaper chain, La Follette and his running partner, Burton K. Wheeler, only won one-sixth of the votes. Robert La Follette died on 18th June, 1925.

Organizational Behavior Research Paper Example | Topics and Well Written Essays - 1000 words

Organizational Behavior - Research Paper Example Therefore, only the rich could afford such a luxury. Ford set out to make an affordable car so as to target the middle class population. Also, the car’s flexible suspension system helped it to run better on the bad roads in the U.S at the time. Besides its 20-horse power engine, the car was lighter than most of the previous models. Through these additions, Henry Ford started the journey to change the status of the automobile from that of a luxury to necessity (Dodge & Casey, 2010). Some of Fords greatest achievements in my view are those not afforded due public attention. Given the difference in the state of pollution that time and now, it is critical to examine environmental saving strategies conscious or otherwise. In 1940, Ford produced a car whose body was plastic, to a large extent. This plastic, made from soy meal whose 50% protein content linked with formaldehyde, was light, and biodegradable. The car only got to prototype stage because of its biodegradable nature (Moon ey, 2009). Fordism: Henry Ford receives credit for pioneering and efficiently practicing Fordism ergo making this concept his third most noted achievement. This idea originally encompassed timely and efficient mass production of vehicle parts. Mass assembly is now applicable to other industries such as pharmaceutical production and food processing. Granted, Ford did not himself invent the conveyor belt system but his contribution stands out among the industrialist who saw this idea through. Mass production of affordable cars changed the American transport system to a considerable extent. Fordism saw Ford increase the wages of his employees by a whooping 50%. Also, this concept formed the basis for most of the decisions he made for the company. Leadership: Based on the concept of Fordism, Henry ford is a true leader. Field Marshal Slim clearly distinguishes management from leadership. He indicates that leadership encompasses personality and vision in which case he alludes to, people focus, innovation, personal power and influence. People focus: production of inexpensive or affordable goods was part of his consumer employee attitude. He was of the view that the customer’s needs are vital; therefore, he produced affordable cars that met the needs of the customers. His emphasis on satisfying the customer and the worker rather than gain profits is an excellent instant of people focus. Ford was an idealist to this he relates that this is the only way to get people, referring to his workers, to be prosperous. His view of employees was different given the period. In his opinion, employees were also customers in which case the affordability of the cars enabled them to not only purchase but also market the car. Fords focus on the employee as an asset develops from his opinion of reward and in this case monetary reward. Through welfare capitalism, Ford was able to abet labour turnover in his industries. He christened this policy, profit sharing (a tactic employed by managers in recent times to motivate employees). He is also among the first employers who successfully applied shift working, thereby, reducing the number of working hours of employees by close to half. Innovation: the trait of innovation stands out in Fords success for instance, in the Model T and subsequent automobiles such as the plastic car. Personal power and influence: Ford gave up his official, executive title early but

The most significant events in the decades following World War II Essay

The most significant events in the decades following World War II - Essay Example On one hand, the United States tried desperately hard not to let communism spread across the borders. On the other hand, the Soviet Union, having risen to the position military ascendancy, wanted to make sure it had a hold over other countries’ foreign, military and defense strategies. Additionally, the threat of a nuclear warfare became imminent with the respective centralizations of power in two regions that were geographically far apart. Europe became a focal point of contention for both the nations as neither of them was ready to forsake the advantages gained during the Great War. The Soviet Union assumed control of Eastern Europe courtesy of German’s defeat. The United States had political ambitions far greater than any other western countries in that it wanted to extend its military laterality to far and wide. Under these circumstances, developments on the political upfront following World War II were closely interlinked with one another. One event somehow heralde d and legitimized its succeeding chain of events. Moreover, each major event was conditioned by the situation leading up to it. This essay is going to elaborate on the major political events that took place in the next five decades following World War II. The events to be discussed are the rise of consumerism in the 1950s, the Vietnam War in the 1960s, Iranian revolution in the 1970s, the fall of Berlin Wall in the 1980s and global terrorism in the 1990s. Differences of opinion between the Soviet Union and the United States had existed for a long time, much before the Great War broke out in 1939. The great economic depression in the 1930s following the labor movements in Canada had already had a detrimental effect on American political idealism. An overwhelming sense of disillusionment and despair hovered upon the general psyche in the country. However, this difference of opinion did not surface much as both the nations formed allies to defeat the Axis forces. But once the War was

General Questions for Marketing Essay Example | Topics and Well Written Essays - 1500 words

General Questions for Marketing - Essay Example Therefore, a marketing orientation that covers all four directions and the best barometer of success, have been introduced that include product, price, place and promotion. 1. Product (customer solution). Before companies initiate the products in their minds, they should consider if these are desired or needed by their target market. For instance, General Electric is always conversing with their customers with regard to what product they should offer to make certain that the customers would buy their product, or else they will suffer horrible losses. A product perceived by a customer as a unique, different, and much better compared to competitors has a big opportunity to be successful. It is important that customers will get attracted with the features and benefits they can get, and most importantly are the attributes, performance and consistency of the product. The customer is the one who will purchase and use the product; therefore companies should give them priority with regard to what they should be offering. 2. Price (customer cost). The company should also set a specific place or position in the marketplace and in the minds of their target market to be competitive, and one of those, is getting their price right. Today, pricing is not just lay-outing the selling price to the customers because if they find it unjust or not worthy, they might turn down the product. Traditional pricing is not anymore appropriate today wherein customers are becoming price cautious. Therefore, before a company begins to design its product work, they should see to it that their target price range is made available to the general public, and the cost would not be a too much burden to them. For example, JetBlue and Southwest airlines are offering low-cost fares to freight customers in order to compete with legacy airlines, and consequently they have been successful and gain more market share. 3. Place (customer convenience). A quality product offered at a fair price should be dist ributed in a channel that is accessible to the target market. Companies of today are now using high technologies in order to reach their customers at ease. The internet and other software distribution tools are among the new distribution channels used by various companies. For instance, Wal-Mart adopted several systems like RFID (Radio-frequency Identification) and retail link in order to meet customers’ needs and make their product available to them. Customers should be given emphasized by the company in looking for product location because they are the one who will purchase, and their satisfaction matters. 4. Promotion (customer communication). Good promotion means giving the right information to the right person at the right time through advertising, public relation, personal selling, etc. that could help in gaining more customers; just like the sales promotion activities of Dr. Peppers against Mountain Dew and Sprite which are considered to be the company’s secret to have a solid market share increase. It is a basic fact that if the target market did not know the availability of the product or the information is not enough, then it is expected that they would not purchase the product. On the other hand, if they are aware on the existence of the product as well as its features and benefits, then they are likely to purchase. Promotion is expensive and crucial to the

Emerging Technology -Facebook's Timeline Essay Example | Topics and Well Written Essays - 1500 words

Emerging Technology -Facebook's Timeline - Essay Example Ever since this emerging technology was introduced, Facebook has made some significant improvements in its market orientation, which is largely focused on advertisement and marketing. Currently, the corporation attributes 85% of its revenues to advertisements, a situation that has shot the company’s revenues to an all time high in the high in the past five years. Facebook’s Timeline continues to bring the company profits because of the level of dedication that the company has for research and development, which makes it possible for it to provide user-centered service that accounts for the ever growing number of users of Facebook. Currently, there is a massive monthly active user base of 85 million people worldwide. This number, with the data collected through the Timeline makes the company the holder of most personal data than any other ad seller online can have access to. Keywords – advertisements; revenue; marketing; timeline; number game; Timeline; metadata; updates; information mining; research and development; cloud; social media network I. INTRODUCTION As technology advances and the internet become more and more useful, entrepreneurs, especially those whose business orientation is directed at information technology continues to take advantage, depending on their business strategies. More specifically, social media network has come to add up an entirely new paradigm to the concept of internet surfing (Arnould, Albert and Schau, 2009). Bickart, and Robert (2011) note that the total number of internet users have quadrupled since the introduction of social media networking. Clearly Facebook dominates when it comes to the concept of social media networking. But even so, the corporation continues to introduce very ideas and emerging technologies that ensures that it does not only become a global leader in the provision of social networking services but also well tailored advertising services to marketing departments of various multinationa l corporations. In its early days, no one really understood why Facebook will be so much committed to offering free social networking service that brought everyone on board from all over the world but now that the corporation has access to over 625,000 terabytes of compressed data on a daily basis and working hard as online ad sellers, much more sense is being made of the initial moves of the company to be committed to the provision of high quality social media networking service (Brown, Amanda and Nick, 2007). In this paper, there is a critical scrutiny at Facebook’s emerging technology in the form of Timeline to see how this emerging technology makes the corporation more competitive as an online ad seller. II. SURVEY FINDINGS A. Facebook’s Motivation No corporation undertakes a major business strategic program such as what Facebook did without having a core motivation that pushes it to do so (Shirky, 2008). In the case of the Facebook timeline, the motivation has bee n found as the need to have a better focus on advertisement as adverts account for as much as 85% of the corporation’s annual revenue (Surowiecki, 2012). In line with the need for companies to build competitive advantage for themselves in line with their market exposure and the search for customers, a lot more companies are putting emphasis on the 5P marketing mix (Terranova, 2000). But within the 5 strategic scenarios under the 5Ps, promotion has been found to be a very vital component because it has the power of directly targeting consumers or customers to get them to do business with

Strategic analysis of a company and its competitive environment Essay - 2

Strategic analysis of a company and its competitive environment - Essay Example The company capitalises in the distribution high quality, stylish and great value home products and clothing. The business is also popular in selling food products, fashioned clothes, gifts, and home furnishing. The company has also establishment in financial service segment. In addition to coming up with effective means that can support its development, the business success can also be linked to its affordable prices of its products. In addition, the business vision is to offer great quality value and services. The business popularity is largely enhanced by its quality products as well as its ability to distribute products that meets international standards. The current success of Marks & Spencer can also be attributed to its effective and operational management strategies as well as it reliable and affordable promotion strategies (Burns, 2008, p. 12). Internal Analysis of the Firm Political stability in United Kingdom has proved to be effective in facilitating the success of Marks & Spencer. However, the Iraq civil conflict largely affects the activities and operations in Marks & Spencer. This is owing to the fact that, the business has several branches in Iraq. The political changes in United Kingdom have also affected the activities and operations of the business. ... The existing social situation in United Kingdom has also changed the customer concept in the market. This has forced the company to figure out and come up with new fashions that will meet the interest of its customers. In addition, the price sensitivity has produced a more competitive environment. Although a good number of the business products are old fashioned, the company has adopted new strategies of increasing its sales with limited loss. The new technology has also been vital in communicating new products to its customers. The company is currently relying on online services to promote its products in new markets. The new technology is also useful in identifying products that can meet the demands of its customers. Just like any other business in global market, Marks & Spencer has also been significantly affected by global warming. To counter the impact of environmental challenges, the company has introduced mechanisms that could be used to advance business operations. For instan ce, the business has embarked on a mechanism that aims at recycling plastic products. Marks & Spencer also sell legally acceptable products to its customers. In addition, the business sells high quality products that meet the set international and local standards (King, 2007, p.21). Compared to other competitors in the market, Marks & Spencer competitive rivalry is high. Studies have confirmed that Marks & Spencer faces high rivalry in clothing sector from new entrance in the market. The company is also facing huge competition in food industry for Sainsbury and Tesco. The company bargaining power of buyers is also high. This is owing to the fact that other huge retailers in their area of coverage surround the

Ballistics Research Paper Example | Topics and Well Written Essays - 2000 words

Ballistics - Research Paper Example o empirical evidence to back up this claim that criminal cases have been affected because the jurors are now more well-versed in Forensic Science through these television series—making it more difficult to get a guilty verdict as jurors require more forensic evidence—a study has been conducted on 1027 jurors that show that â€Å"46 % expected to see some kind of scientific evidence in every criminal case† (Barak, Kim and Shelton, 2006 as cited in Shelton, 2008, p. 5). Now, because gun-related crimes continue to rise since 2002, with 68% of murders in the United States in the year 2006 being committed with the use of a firearm, it can be said that much of the scientific evidence being expected by jurors relate to ballistics, which is a specialized area in the field of Forensics (National Institute of Justice, 2010, para. 2). In fact, the study on â€Å"the CSI Effect† found that â€Å"32 % expected to see ballistic/firearms laboratory evidence in every criminal case† (p. 5). This introduction into Forensic Science and Ballistics does not only highlight their key role in crime-solving, but also emphasizes the role of scientific evidence in serving justice. It can be said, then, that no matter how the television series may have exaggerated some aspects of crime scene investigation, like the time the evidence is processed, it cannot be refuted that the field of Forensics and Ballistics play crucial roles in the criminal justice systemâ €”CSI Effect or not. Having established the importance of Forensic Science and Ballistics, I will now outline what this paper will contain. In the course of my paper I will provide background and history of the field and I will then examine the many changes undergone by ballistics in the 20th century. Case studies will be examined to highlight the points that I will be making. I will then conclude with some thoughts as to where the field may go in the future. Forensic Science, most commonly known by its shortened name of Forensics, is

Individual Person Essay Example for Free

Individual Person Essay 1.1 Person centred is about providing care and support that is centred or focused on the individual and their needs. We are all individual and just because two people might have the same medical condition, for eg.Dementia, it does not mean that they require the same care and support. As a care worker I need to understand what the values are. There are eight person centred values: individuality rights choice independency dignity respect partneship equal opportunities I need to listen to S/U, they know themselves best, even if disagree, the care plan is theirs unless the capasity to understand is diminished and then advice must be sought from other person involved in an S/U‘s support plan,even legal advice should be sought in some ases. 1.2  Explain why person centred values must influence all aspects of social care work. The why is because it is embedded in social policy and legislation eg Putting People First, Valuing People Now and the Essential Standards. 1.3  Explain how person centred values should influence all aspects of social care work It’s important to respect the rights of the individual to be at the centre of their own care. This means that workers must focus on what the individual wants and how they want it to be provided. 1.2/1.3 vvv Person-centred care values must influence all aspects of health and social care work. Health and social care should be based on person-centred values, and should be individualised as this is a law requirement (Human Rights Act 1998, Health and Social care Act 2012, Codes of practice for Social Care Workers, etc). If person-centre values that underpin all work in the health and social care sector are followed as they should be then all individuals should feel that and health and social workers ensure that: †¢ the individual is supported in accessing their rights †¢ the individual is treated has an individual †¢ the individual is supported to exercise choice †¢ ensure the individual have privacy if they want it †¢ support the individual to be as independent as possible †¢ treat all individuals with dignity and respect To ensure the above is followed will influence all aspect of health and social care it is important to ensure that all individuals are treated as such and person- centred care should ensure this.

Evaluating Derivatives Market in India

Evaluating Derivatives Market in India Introduction to Derivatives Market The emergence of the market for derivative products, most notably forwards, futures and options, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors. Derivative products initially emerged, as hedging devices against fluctuations in commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred years. The financial derivatives came into spotlight in post-1970 period due to growing instability in the financial markets. However, since their emergence, these products have become very popular and by 1990s, they accounted for about two-thirds of total transactions in derivative products. In recent years, the market for financial derivatives has grown tremendously both in terms of variety of instruments available, their complexity and also turnover. In the class of equity derivatives, futures and options on stock indices have gained more popularity than on individual stocks, especially among institutional investors, who are major users of index-linked derivatives. Even small investors find these useful due to high correlation of the popular indices with various portfolios and ease of use. The lower costs associated with index derivatives vies-versa derivative products based on individual securities is another reason for their growing use. The following factors have been driving the growth of financial derivatives: Increased volatility in asset prices in financial markets, Increased integration of national financial markets with the international markets, Marked improvement in communication facilities and sharp decline in their costs, SCOPE OF THE STUDY The study is limited to â€Å"Derivatives with special reference to futures and option in the Indian context and the Networth Stock Broking Ltd., data for this study is from 27-DEC -2007 to 31-JAN- 2008 which represent sample for the study. The study cant be said as totally perfect. This study is only a humble attempt at evaluating derivatives market in Indian context. The study is not based on the international perspective of derivatives markets, which exists in NASDAQ, CBOT etc. HYPOTHESIS The Market data that has been used to see whether the Break Even Point (BEP) calculated can be used has an indicator to the investor to maximize the returns on its investment. OBJECTIVES OF THE STUDY 1. To understand the concept of derivatives in a more appropriate way. 2. To study various trends in derivative market. 3. To understand the scope and growth of derivatives in India. 4. To study the role of derivatives in Indian financial market 5. To study in detail the role of the future and options. METHODOLOGY 1. Data Collection : For this study the date collected is of secondary nature, The data of the Nifty index have been collected from â€Å"Economic Times† and internet. The data collected for January contract and the date consist from period 27th December, 2007 to 31st January, 2008. 2. Analysis: The analysis consist of the tabulation of the data assessing the profitability positions of the futures buyer and seller and also option holder and the option writer, representing the data with s and making the interpretation using data. TIME PERIOD Data collected for analyzing this study is from 27-DEC 2007 to 31-JAN-2008. Time taken to complete this project is 45 days LIMITATIONS OF THE STUDY The study is conducted in short period, due to which the study may not be detailed in all aspect. Lack of time on performing the project in detail study. Unavailability of software package which will help in calculation Lack of software knowledge to determine the correct future estimations. The data collected is completely restricted to 31st January, 2008; hence this analysis cannot be taken universal. CHAPTER II INTRODUCTION TO CAPITAL MARKET COMPANY PROFILE Introduction To Indian Capital Market Indias financial market began its transformation path in the early 1990s. The banking sector witnessed sweeping changes, including the elimination of interest rate controls, reductions in reserve and liquidity requirements and an overhaul in priority sector lending. Persistent efforts by the Reserve Bank of India (RBI) to put in place effective supervision and prudential norms since then have lifted the country closer to global standards. Around the same time, Indias capital markets also began to stage extensive changes. The Securities and Exchange Board of India (SEBI) was established in 1992 with a mandate to protect investors and improvements into the microstructure of capital markets, while the repeal of the Controller of Capital Issues (CCI) in the same year removed the administrative controls over the pricing of new equity issues. Indias financial markets also began to embrace technology. Competition in the markets increased with the establishment of the National Stock Exchange (NSE) in 1994, leading to a significant rise in the volume of transactions and to the emergence of new important instruments in financial intermediation. For over a century, Indias capital markets, which consist primarily of debt and equity markets, have increasingly played a significant role in mobilizing funds to meet public and private entities financing requirements. The advent of exchange-traded derivative instruments in 2000, such as options and futures, has enabled investors to better hedge their positions and reduce risks. In total, Indias debt and equity markets were equivalent to 130% of GDP at the end of 2005. This is an impressive stride, coming from just 75% in 1995, suggesting issuers growing confidence in market based financing. However, the size of the countrys capital markets relative to the United States, Malaysias and South Koreas remains low, implying a strong catch-up process for India. While some form of financial derivatives trading in India dates back to the 1870s, exchange traded derivative instruments started only in 2000. Then, stock index futures, with the Sensex 30 and the SP CNX Nifty indices as the underlying, began trading at the BSE and NSE. Since their inception, the basket of instruments has expanded and now features individual stock futures, and options for stock index and individual stocks. NATIONAL STOCK EXCHANGE (NSE) The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. NSE Mission 1. NSEs mission is setting the agenda for change in the securities markets in India. The NSE was set-up with the main objectives of: 2. Establishing a nation-wide trading facility for equities, debt instruments and hybrids, 3. Ensuring equal access to investors all over the country through an appropriate communication network, 4. Providing a fair, efficient and transparent securities market to investors using electronic trading systems, 5. Enabling shorter settlement cycles and book entry settlements systems, and 6. Meeting the current international standards of securities markets. The standards set by NSE in terms of market practices and technologies have become industry benchmarks and are being emulated by other market participants. NSE is more than a mere market facilitator. Its that force which is guiding the industry towards new horizons and greater opportunities. Equity shares By investing in shares, investors basically buy the ownership right to the company. When the company makes profits, shareholders receive their share of the profits in the form of dividends. In addition, when company performs well and the future expectation from the company is very high, the price of the companys shares goes up in the market. This allows shareholders to sell shares at a profit, leading to capital gains. Investors can invest in shares either through primary market offerings or in the secondary market. The primary market has shown abnormal returns to investors who subscribed for the public issue and were allotted shares. Stock Exchange: In a stock exchange a person who wishes to sell his security is called a seller, and a person who is willing to buy the particular stock is called as the buyer. The rate of stock depends on the simple law of demand and supply. If the demand of shares of company x is greater than its supply then its price of its security increases. In Online Exchange the trading is done on a computer network. The sellers and buyers log on to the network and propose their bids. The system is designed in such ways that at any given instance, the buyers/sellers are bidding at the best prices. The transaction cycle for purchasing and selling shares online is depicted below: TRANSACTION CYCLE Role of Clearing House The clearing house of the exchange interposes itself between the buyer(the long position) and the seller (the short position).this mean clearing house becomes seller to buyer and the buyer to seller. Because the clearing house is obliged to perform on its side of each contract, it is the only party that can hurt if any trader fail to fulfill his obligation. The clearing house protects its interest by imposing margin requirements on traders. Ever since its inception in 1993, Networth Stock Broking Limited (NSBL) has sought to provide premium financial services and information, so that the power of investment is vested with the client. We equip those who invest with us to make intelligent investment decisions, providing them with the flexibility to either tap into our extensive knowledge and expertise, or make their own decisions. NSBL made its debut in to the financial world by servicing Institutional clients, and proved its high scalability of operations by growing exponentially over a short period of time. Now, powered by a top-notch research team and a network of experts, we provide an array of retail broking services across the globe spanning India, Middle East, Europe and America. Currently, we are a Depository participant at Central Depository Services India (CDSL) and aim to become one at National Securities Depository (NSDL) by the end of this quarter. Our strong support, technology-driven operations and busines s units of research, distribution and advisory coalesce to provide you with a one-stop solution to cater to all your broking and investment needs. Our customers have been participating in the booming commodities markets with our membership at Multi Commodity Exchange of India (MCX) and National Commodity Derivatives Exchange (NCDEX) through Networth Stock.Com Ltd. NSBL is a member of theNational Stock Exchange of India Ltd (NSE) andthe Bombay Stock Exchange Ltd (BSE)on the Capital Market and Derivatives (Futures Options) segment. It is also a listed company at theBSE. Corporate Overview †¢ Networth is a listed entity on the BSE since 1994 †¢ The company is professionally managed with experience of over a decade in broking and advisory services †¢ Networth is a member of BSE, NSE, MCX, NCDEX, AMFI, CDSL †¢ Current network in Southern and Western India with 107 branches and franchise. Presence in major metros and cities †¢ Empanelled with prominent domestic Mutual Funds, Insurance Companies, Banks, Financial Institutions and Foreign Financial Institutions. †¢ Strong experienced professional team †¢ 20000+ strong and growing client base †¢ Average daily broking turnover of around INR 1 billion †¢ AUM with Investment Advisory Services of around INR 3 billion Products and services Portfolio v Retail and institutional broking v Research for institutional and retail clients v Distribution of financial products v Corporate finance v Net trading v Depository services v Commodities Broking Infrastructure †¢ A corporate office and 3 divisional offices in CBD of Mumbai which houses state-of-the-art dealing room, research wing management and back offices. †¢ All of 107 branches and franchisees are fully wired and connected to hub at corporate office at Mumbai. Add on branches also will be wired and connected to central hub †¢ Web enabled connectivity and software in place for net trading. †¢ 60 operative IDs for dealing room †¢ State of the Art accounting and billing system, on line risk management system in place with 100% redundancy back up. †¢ In house technology back up team to ensure un-interrupted connectivity. Online Trading There is nothing more exhilarating, more daring and more rewarding than making the right trade at the right time. Welcome to our Internet trading platform which brings you a world class experience of online trading. Clicknetworth is a software application suite that offers comprehensive facilities so users can watch Market Prices while they trade. The application is highly integrated which enables the user to place orders in live environment. The user screen is fully customizable by the user to display information based upon his/her own preferences Trading Platform Networth offers advanced and convenient online trading facility with N-easy and N-swift which are completely safe and secure. N-easy: A Powerful and user friendly browser based platform ideally suited for Investors N-swift: An Advanced EXE based application suite that is ideally suited for Traders Features:- * Clients can trade in NSE Cash, NSE FO and BSE Cash. * Single screen order / trade entry as you can add NSE-Cash, Derivative BSE scripts in the same Market Watch. * Features such as Lock the Screen, TOP 20 by Most Active Volume, Value, Gainers, Losers, Market Movement and more will help you customise your trading platform according to your specific focus. * Facility for Online Funds Transfer. Your credit limit increases instantaneously on completion of a successful transfer. Total holdings with NSBL and NSBL CDSL DP (POA) can be viewed and delivery sale can also be made. * Needless to mention other standard features as Real-Time market data, live order status, Real time position updates etc. CHAPTER III REVIEW OF LITERATURE DEFINATION OF DERIVATIVE Derivative is a product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner. There are two types of derivatives that are trades on NSE; namely Futures and Options. The underlying asset can be equity, forex, commodity or any other asset. 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. Such a transaction is an example of a derivative. The price of this derivative is driven by the spot price of wheat which is the â€Å"underlying†. In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R) A) defines â€Å"equity derivative† to include A security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security. A contract, which derives its value from the prices, or index of prices, of underlying securities.The key to understanding derivatives is the notion of a premium. Some derivatives are compared to insurance. Just as you pay an insurance company a premium in order to obtain some protection against a specific event, there are derivative products that have a payoff contingent upon the occurrence of some event for which you must pay a premium in advance. Example: When one buys a cash instrument, for example 100 shares of ABC Inc., the payoff is linear (disregarding the impact of dividends). If we buy the shares at Rs50 and the price appreciates to Rs75, we have made Rs2500 on a mark-to-market basis. If we buy the shares at Rs50 and the price depreciates to Rs25, we have lost Rs2500 on a mark-to-market basis. Instead of buying the shares in the cash market, we could have bought a 1 month call option on ABC stock with a strike price of Rs50, giving us the right but not the obligation to purchase ABC stock at Rs50 in 1 months time. Instead of immediately paying Rs5000 and receiving the stock, we might pay Rs700 today for this right. If ABC goes to Rs75 in 1 months time, we can exercise the option, buy the stock at the strike price and sell the stock in the open market, locking in a net profit of Rs1800. If the ABC stock price goes to Rs25, we have only lost the premium of Rs700. If ABC trades as high as Rs100 after we have bought the option but before it expires, we can sell the option in the market for a price of Rs5300. Classification of Derivatives Types of Derivatives The most commonly used derivatives contracts in NSE are ,FUTURES and OPTIONS which we shall discuss in detail later. Here we take a brief look at various derivatives contracts that have come to be used. 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. 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. 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. Participants and Functions v Hedgers face risk associated with the price of an asset. They use futures or options markets to reduce or eliminate this risk. v Speculators wish to bet on future movements in the price of an asset. Futures and options contracts can give them an extra leverage; that is, they can increase both the potential gains and potential losses in a speculative venture. v 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. The derivative market performs a number of economic functions. First, prices in an organized derivatives market reflect the perception of market participants about the future and lead the prices of underlying to the perceived future level. The prices of derivatives converge with the prices of the underlying at the expiration of derivative contract. Thus derivatives help in discovery of future as well as current prices. Second, the derivatives market helps to transfer risks from those who have them but may not like them to those who have appetite for them. Third, derivatives, due to their inherent nature, are linked to the underlying cash markets. With the introduction of derivatives, the underlying market witnesses higher trading volumes because of participation by more players who would not otherwise participate for lack of an arrangement to transfer risk. Fourth, speculative trades shift to a more controlled environment of derivatives market. In the absence of an organized derivati ves market, speculators trade in the underlying cash markets. Margining, monitoring and surveillance of the activities of various participants become extremely difficult in these kind of mixed markets. Fifth, an important incidental benefit that flows from derivatives trading is that it acts as a catalyst for new entrepreneurial activity. The derivatives have a history of attracting many bright, creative, well-educated people with an entrepreneurial attitude. They often energize others to create new businesses, new products and new employment opportunities, the benefit of which are immense. Sixth, derivatives markets help increase savings and investment in the long run. Transfer of risk enables market participants to expand their volume of activity. Derivatives thus promote economic development to the extent the later depends on the rate of savings and investment. The first stock index futures contract was traded at Kansas City Board of Trade. Currently the most popular index futures contract in the world is based on SP 500 index, traded on Chicago Mercantile Exchange. During the mid eighties, financial futures became the most active derivative instruments generating volumes many times more than the commodity futures. Index futures, futures on T-bills and Euro-Dollar futures are the three most popular futures contracts traded today. Other popular international exchanges that trade derivatives are LIFFE in England, DTB in Germany, SGX in Singapore, TIFFE in Japan, MATIF in France, etc. Indian Derivatives Market Starting from a controlled economy, India has moved towards a world where prices fluctuate every day. The introduction of risk management instruments in India gained momentum in the last few years due to liberalisation process and Reserve Bank of Indias (RBI) efforts in creating currency forward market. Derivatives are an integral part of liberalisation process to manage risk. NSE gauging the market requirements initiated the process of setting up derivative markets in India. In July 1999, derivatives trading commenced in India CHRONOLOGY OF INSTRUMENTS 1991 Liberalisation process initiated 14-Dec-1995 NSE asked SEBI for permission to trade index futures. 18-Nov-1996 SEBI setup L.C.Gupta Committee to draft a policy framework for index futures. 11-May-1998 L.C.Gupta Committee submitted report. 7-July-1999 RBI gave permission for OTC forward rate agreements (FRAs) and interest rate swaps. 24-May-2000 SIMEX chose Nifty for trading futures and options on an Indian index. 25-May-2000 SEBI gave permission to NSE and BSE to do index futures trading. 9-June-2000 Trading of BSE Sensex futures commenced at BSE. 12-June-2000 Trading of Nifty futures commenced at NSE. 25-Sep-2000 Nifty futures trading commenced at SGX. 2-June-2001 Individual Stock Options Derivatives SWAPS A contract between two parties, referred to as counter parties, to exchange two streams of payments for agreed period of time. The payments, commonly called legs or sides, are calculated based on the underlying notional using applicable rates. Swaps contracts also include other provisional specified by the counter parties. Swaps are not debt instrument to raise capital, but a tool used for financial management. Swaps are arranged in many different currencies and different periods of time. US$ swaps are most common followed by Japanese yen, sterling and Deutsche marks. The length of past swaps transacted has ranged from 2 to 25 years. Swaps Pricing: There are four major components of a swap price. v Benchmark price v Liquidity (availability of counter parties to offset the swap). v Transaction cost v Credit risk Benchmark Price:Swap rates are based on a series of benchmark instruments. They may be quoted as a spread over the yield on these benchmark instruments or on an absolute interest rate basis. In the Indian markets the common benchmarks are MIBOR, 14, 91, 182 364 day T-bills, CP rates and PLR rates. Liquidity: which is function of supply and demand, plays an important role in swaps pricing? This is also affected by the swap duration. It may be difficult to have counter parties for long duration swaps, specially so in India Transaction costs include the cost of hedging a swap. Transaction cost: Say in case of a bank, which has a floating obligation of 91 days T. Bill. Now in order to hedge the bank would go long on a 91 day T. Bill. For doing so the bank must obtain funds. The transaction cost would thus involve such a difference. Yield on 91 day T. Bill 9.5% Cost of fund (e.g.- Repo rate) 10% The transaction cost in this case would involve 0.5% Credit risk: Credit risk must also be built into the swap pricing. Based upon the credit rating of the counterparty a spread would have to be incorporated. Say for e.g. it would be 0.5% for an AAA rating. Introduction to Futures Future contract is the simplest of all financial assets. A future contract is just an agreement between two parties to buy and sell an asset at a fixed price in the future. Futures markets were originally designed to solve the problems of forward markets. Future contracts are managed through an organized future exchange Future contracts are a type of derivative security because the value of the contract is derived from an underlying instrument. The exchange specifies standard features of future contract to facilitate liquidity in the futures contracts. The net value of a future contract is zero because future contract represents a zero sum game between a buyer and a seller. Future contracts are standardized to facilitate convenience in trading and price reporting. A futures contract may be offset before maturity by taking opposite position which means that future trading can be closed by entering into equal into an equal and opposite transaction. Future contract must specify at least five terms of the contract and they are: 1) The identity of the underlying commodity or financial instrument. 2) The future contract size. 3) The future maturity date. 4) The delivery or settlement procedure. 5) The future price. TYPES OF FUTURES A commodity future is a future contract in a commodity like cocoa, aluminum etc. A financial future is a futures contract in a financial instrument like Treasury bill, currency or stock index. Futures contracts are: v Futures contracts are organized/ standardized contracts, which are traded on the exchanges. v These contracts, being standardized and traded on the exchanges are very liquid in nature. v In futures market, clearing corporation/ house provides the settlement guarantee. v Every futures contract is a forward contract traded on exchange and clearing corporation/house provides the settlement guarantee for trades. v Are of standard quantity; standard quality (in case of commodities). Have standard delivery time and place. What Does Future Trading Apply to Indian Stocks? Future trading is a type of investments which involves speculating on the prices of securities in the future. Securities traded in future contract can be a stock (Reliance India Limited, TISCO, etc), Stock Index (NSE Nifty Index), commodity (Gold, Silver, Agricultural Products, etc) Unlike stocks and bonds, when we involve in future trading then we do not buy or own anything but we speculate the future direction of the price in the security we are trading. Suppose we speculate on Stock Index (NSE Nifty index). If we speculate that the future price of Stock Index can go up in the future then we would buy a future contract. If we speculate that the future price of Stock Index can go down then we would sell a future contract. Futures Trading accounts A future exchange allows only exchange members to trade on the exchange floor. There are various things to know about future trading accounts. The first thing is that a margin is always required. A margin is the amount of money that we put up to control a future contract. http://www.tradingpicks.com/futures.htm How to Trade in SP CNX NIFTY Futures? http://www.nse-india.com/content/press/futidx_invguide.pdf Trading on CNX Nifty futures is just like trading in other security. Before buying or selling we use to predict the direction of the market and based on that prediction we buy or sell the index. A profit is made when the closing price on the expiration day is higher than the value at which we had bought the index. If we had predicted a bearish market, and had sold the index then we make a profit. Trading cycle for SP CNX Nifty Futures The trading cycle for SP CNX Nifty future contracts is 3 months. On the trading day a new contract is introduced. This contract will be introduced for three month duration. As a result there will be 3 contracts available for trading in the market ( i.e., first contract is in near month, second in mid month and third in far month duration) Example If Trading in NIFTY Starts from January 2002 then following chart gives us the beginning and expiry date of the contract. Contract/Month Expiry/Settlement January 2002 January 28th February 2002 February 20th March 2002 March 19th After January 28th, the first trading day will be on January 29th. Contract/Month Expiry/Settlement February 2002 February 24th March 2002 March 30th April 2002 April 20th To trade futures in NSE, traders have to open an account with a future brokerage firm known as Future Commission Merchant (FCM). FCM records the trades, monitors them and advice t Evaluating Derivatives Market in India Evaluating Derivatives Market in India Introduction to Derivatives Market The emergence of the market for derivative products, most notably forwards, futures and options, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors. Derivative products initially emerged, as hedging devices against fluctuations in commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred years. The financial derivatives came into spotlight in post-1970 period due to growing instability in the financial markets. However, since their emergence, these products have become very popular and by 1990s, they accounted for about two-thirds of total transactions in derivative products. In recent years, the market for financial derivatives has grown tremendously both in terms of variety of instruments available, their complexity and also turnover. In the class of equity derivatives, futures and options on stock indices have gained more popularity than on individual stocks, especially among institutional investors, who are major users of index-linked derivatives. Even small investors find these useful due to high correlation of the popular indices with various portfolios and ease of use. The lower costs associated with index derivatives vies-versa derivative products based on individual securities is another reason for their growing use. The following factors have been driving the growth of financial derivatives: Increased volatility in asset prices in financial markets, Increased integration of national financial markets with the international markets, Marked improvement in communication facilities and sharp decline in their costs, SCOPE OF THE STUDY The study is limited to â€Å"Derivatives with special reference to futures and option in the Indian context and the Networth Stock Broking Ltd., data for this study is from 27-DEC -2007 to 31-JAN- 2008 which represent sample for the study. The study cant be said as totally perfect. This study is only a humble attempt at evaluating derivatives market in Indian context. The study is not based on the international perspective of derivatives markets, which exists in NASDAQ, CBOT etc. HYPOTHESIS The Market data that has been used to see whether the Break Even Point (BEP) calculated can be used has an indicator to the investor to maximize the returns on its investment. OBJECTIVES OF THE STUDY 1. To understand the concept of derivatives in a more appropriate way. 2. To study various trends in derivative market. 3. To understand the scope and growth of derivatives in India. 4. To study the role of derivatives in Indian financial market 5. To study in detail the role of the future and options. METHODOLOGY 1. Data Collection : For this study the date collected is of secondary nature, The data of the Nifty index have been collected from â€Å"Economic Times† and internet. The data collected for January contract and the date consist from period 27th December, 2007 to 31st January, 2008. 2. Analysis: The analysis consist of the tabulation of the data assessing the profitability positions of the futures buyer and seller and also option holder and the option writer, representing the data with s and making the interpretation using data. TIME PERIOD Data collected for analyzing this study is from 27-DEC 2007 to 31-JAN-2008. Time taken to complete this project is 45 days LIMITATIONS OF THE STUDY The study is conducted in short period, due to which the study may not be detailed in all aspect. Lack of time on performing the project in detail study. Unavailability of software package which will help in calculation Lack of software knowledge to determine the correct future estimations. The data collected is completely restricted to 31st January, 2008; hence this analysis cannot be taken universal. CHAPTER II INTRODUCTION TO CAPITAL MARKET COMPANY PROFILE Introduction To Indian Capital Market Indias financial market began its transformation path in the early 1990s. The banking sector witnessed sweeping changes, including the elimination of interest rate controls, reductions in reserve and liquidity requirements and an overhaul in priority sector lending. Persistent efforts by the Reserve Bank of India (RBI) to put in place effective supervision and prudential norms since then have lifted the country closer to global standards. Around the same time, Indias capital markets also began to stage extensive changes. The Securities and Exchange Board of India (SEBI) was established in 1992 with a mandate to protect investors and improvements into the microstructure of capital markets, while the repeal of the Controller of Capital Issues (CCI) in the same year removed the administrative controls over the pricing of new equity issues. Indias financial markets also began to embrace technology. Competition in the markets increased with the establishment of the National Stock Exchange (NSE) in 1994, leading to a significant rise in the volume of transactions and to the emergence of new important instruments in financial intermediation. For over a century, Indias capital markets, which consist primarily of debt and equity markets, have increasingly played a significant role in mobilizing funds to meet public and private entities financing requirements. The advent of exchange-traded derivative instruments in 2000, such as options and futures, has enabled investors to better hedge their positions and reduce risks. In total, Indias debt and equity markets were equivalent to 130% of GDP at the end of 2005. This is an impressive stride, coming from just 75% in 1995, suggesting issuers growing confidence in market based financing. However, the size of the countrys capital markets relative to the United States, Malaysias and South Koreas remains low, implying a strong catch-up process for India. While some form of financial derivatives trading in India dates back to the 1870s, exchange traded derivative instruments started only in 2000. Then, stock index futures, with the Sensex 30 and the SP CNX Nifty indices as the underlying, began trading at the BSE and NSE. Since their inception, the basket of instruments has expanded and now features individual stock futures, and options for stock index and individual stocks. NATIONAL STOCK EXCHANGE (NSE) The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. NSE Mission 1. NSEs mission is setting the agenda for change in the securities markets in India. The NSE was set-up with the main objectives of: 2. Establishing a nation-wide trading facility for equities, debt instruments and hybrids, 3. Ensuring equal access to investors all over the country through an appropriate communication network, 4. Providing a fair, efficient and transparent securities market to investors using electronic trading systems, 5. Enabling shorter settlement cycles and book entry settlements systems, and 6. Meeting the current international standards of securities markets. The standards set by NSE in terms of market practices and technologies have become industry benchmarks and are being emulated by other market participants. NSE is more than a mere market facilitator. Its that force which is guiding the industry towards new horizons and greater opportunities. Equity shares By investing in shares, investors basically buy the ownership right to the company. When the company makes profits, shareholders receive their share of the profits in the form of dividends. In addition, when company performs well and the future expectation from the company is very high, the price of the companys shares goes up in the market. This allows shareholders to sell shares at a profit, leading to capital gains. Investors can invest in shares either through primary market offerings or in the secondary market. The primary market has shown abnormal returns to investors who subscribed for the public issue and were allotted shares. Stock Exchange: In a stock exchange a person who wishes to sell his security is called a seller, and a person who is willing to buy the particular stock is called as the buyer. The rate of stock depends on the simple law of demand and supply. If the demand of shares of company x is greater than its supply then its price of its security increases. In Online Exchange the trading is done on a computer network. The sellers and buyers log on to the network and propose their bids. The system is designed in such ways that at any given instance, the buyers/sellers are bidding at the best prices. The transaction cycle for purchasing and selling shares online is depicted below: TRANSACTION CYCLE Role of Clearing House The clearing house of the exchange interposes itself between the buyer(the long position) and the seller (the short position).this mean clearing house becomes seller to buyer and the buyer to seller. Because the clearing house is obliged to perform on its side of each contract, it is the only party that can hurt if any trader fail to fulfill his obligation. The clearing house protects its interest by imposing margin requirements on traders. Ever since its inception in 1993, Networth Stock Broking Limited (NSBL) has sought to provide premium financial services and information, so that the power of investment is vested with the client. We equip those who invest with us to make intelligent investment decisions, providing them with the flexibility to either tap into our extensive knowledge and expertise, or make their own decisions. NSBL made its debut in to the financial world by servicing Institutional clients, and proved its high scalability of operations by growing exponentially over a short period of time. Now, powered by a top-notch research team and a network of experts, we provide an array of retail broking services across the globe spanning India, Middle East, Europe and America. Currently, we are a Depository participant at Central Depository Services India (CDSL) and aim to become one at National Securities Depository (NSDL) by the end of this quarter. Our strong support, technology-driven operations and busines s units of research, distribution and advisory coalesce to provide you with a one-stop solution to cater to all your broking and investment needs. Our customers have been participating in the booming commodities markets with our membership at Multi Commodity Exchange of India (MCX) and National Commodity Derivatives Exchange (NCDEX) through Networth Stock.Com Ltd. NSBL is a member of theNational Stock Exchange of India Ltd (NSE) andthe Bombay Stock Exchange Ltd (BSE)on the Capital Market and Derivatives (Futures Options) segment. It is also a listed company at theBSE. Corporate Overview †¢ Networth is a listed entity on the BSE since 1994 †¢ The company is professionally managed with experience of over a decade in broking and advisory services †¢ Networth is a member of BSE, NSE, MCX, NCDEX, AMFI, CDSL †¢ Current network in Southern and Western India with 107 branches and franchise. Presence in major metros and cities †¢ Empanelled with prominent domestic Mutual Funds, Insurance Companies, Banks, Financial Institutions and Foreign Financial Institutions. †¢ Strong experienced professional team †¢ 20000+ strong and growing client base †¢ Average daily broking turnover of around INR 1 billion †¢ AUM with Investment Advisory Services of around INR 3 billion Products and services Portfolio v Retail and institutional broking v Research for institutional and retail clients v Distribution of financial products v Corporate finance v Net trading v Depository services v Commodities Broking Infrastructure †¢ A corporate office and 3 divisional offices in CBD of Mumbai which houses state-of-the-art dealing room, research wing management and back offices. †¢ All of 107 branches and franchisees are fully wired and connected to hub at corporate office at Mumbai. Add on branches also will be wired and connected to central hub †¢ Web enabled connectivity and software in place for net trading. †¢ 60 operative IDs for dealing room †¢ State of the Art accounting and billing system, on line risk management system in place with 100% redundancy back up. †¢ In house technology back up team to ensure un-interrupted connectivity. Online Trading There is nothing more exhilarating, more daring and more rewarding than making the right trade at the right time. Welcome to our Internet trading platform which brings you a world class experience of online trading. Clicknetworth is a software application suite that offers comprehensive facilities so users can watch Market Prices while they trade. The application is highly integrated which enables the user to place orders in live environment. The user screen is fully customizable by the user to display information based upon his/her own preferences Trading Platform Networth offers advanced and convenient online trading facility with N-easy and N-swift which are completely safe and secure. N-easy: A Powerful and user friendly browser based platform ideally suited for Investors N-swift: An Advanced EXE based application suite that is ideally suited for Traders Features:- * Clients can trade in NSE Cash, NSE FO and BSE Cash. * Single screen order / trade entry as you can add NSE-Cash, Derivative BSE scripts in the same Market Watch. * Features such as Lock the Screen, TOP 20 by Most Active Volume, Value, Gainers, Losers, Market Movement and more will help you customise your trading platform according to your specific focus. * Facility for Online Funds Transfer. Your credit limit increases instantaneously on completion of a successful transfer. Total holdings with NSBL and NSBL CDSL DP (POA) can be viewed and delivery sale can also be made. * Needless to mention other standard features as Real-Time market data, live order status, Real time position updates etc. CHAPTER III REVIEW OF LITERATURE DEFINATION OF DERIVATIVE Derivative is a product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner. There are two types of derivatives that are trades on NSE; namely Futures and Options. The underlying asset can be equity, forex, commodity or any other asset. 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. Such a transaction is an example of a derivative. The price of this derivative is driven by the spot price of wheat which is the â€Å"underlying†. In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R) A) defines â€Å"equity derivative† to include A security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security. A contract, which derives its value from the prices, or index of prices, of underlying securities.The key to understanding derivatives is the notion of a premium. Some derivatives are compared to insurance. Just as you pay an insurance company a premium in order to obtain some protection against a specific event, there are derivative products that have a payoff contingent upon the occurrence of some event for which you must pay a premium in advance. Example: When one buys a cash instrument, for example 100 shares of ABC Inc., the payoff is linear (disregarding the impact of dividends). If we buy the shares at Rs50 and the price appreciates to Rs75, we have made Rs2500 on a mark-to-market basis. If we buy the shares at Rs50 and the price depreciates to Rs25, we have lost Rs2500 on a mark-to-market basis. Instead of buying the shares in the cash market, we could have bought a 1 month call option on ABC stock with a strike price of Rs50, giving us the right but not the obligation to purchase ABC stock at Rs50 in 1 months time. Instead of immediately paying Rs5000 and receiving the stock, we might pay Rs700 today for this right. If ABC goes to Rs75 in 1 months time, we can exercise the option, buy the stock at the strike price and sell the stock in the open market, locking in a net profit of Rs1800. If the ABC stock price goes to Rs25, we have only lost the premium of Rs700. If ABC trades as high as Rs100 after we have bought the option but before it expires, we can sell the option in the market for a price of Rs5300. Classification of Derivatives Types of Derivatives The most commonly used derivatives contracts in NSE are ,FUTURES and OPTIONS which we shall discuss in detail later. Here we take a brief look at various derivatives contracts that have come to be used. 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. 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. 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. Participants and Functions v Hedgers face risk associated with the price of an asset. They use futures or options markets to reduce or eliminate this risk. v Speculators wish to bet on future movements in the price of an asset. Futures and options contracts can give them an extra leverage; that is, they can increase both the potential gains and potential losses in a speculative venture. v 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. The derivative market performs a number of economic functions. First, prices in an organized derivatives market reflect the perception of market participants about the future and lead the prices of underlying to the perceived future level. The prices of derivatives converge with the prices of the underlying at the expiration of derivative contract. Thus derivatives help in discovery of future as well as current prices. Second, the derivatives market helps to transfer risks from those who have them but may not like them to those who have appetite for them. Third, derivatives, due to their inherent nature, are linked to the underlying cash markets. With the introduction of derivatives, the underlying market witnesses higher trading volumes because of participation by more players who would not otherwise participate for lack of an arrangement to transfer risk. Fourth, speculative trades shift to a more controlled environment of derivatives market. In the absence of an organized derivati ves market, speculators trade in the underlying cash markets. Margining, monitoring and surveillance of the activities of various participants become extremely difficult in these kind of mixed markets. Fifth, an important incidental benefit that flows from derivatives trading is that it acts as a catalyst for new entrepreneurial activity. The derivatives have a history of attracting many bright, creative, well-educated people with an entrepreneurial attitude. They often energize others to create new businesses, new products and new employment opportunities, the benefit of which are immense. Sixth, derivatives markets help increase savings and investment in the long run. Transfer of risk enables market participants to expand their volume of activity. Derivatives thus promote economic development to the extent the later depends on the rate of savings and investment. The first stock index futures contract was traded at Kansas City Board of Trade. Currently the most popular index futures contract in the world is based on SP 500 index, traded on Chicago Mercantile Exchange. During the mid eighties, financial futures became the most active derivative instruments generating volumes many times more than the commodity futures. Index futures, futures on T-bills and Euro-Dollar futures are the three most popular futures contracts traded today. Other popular international exchanges that trade derivatives are LIFFE in England, DTB in Germany, SGX in Singapore, TIFFE in Japan, MATIF in France, etc. Indian Derivatives Market Starting from a controlled economy, India has moved towards a world where prices fluctuate every day. The introduction of risk management instruments in India gained momentum in the last few years due to liberalisation process and Reserve Bank of Indias (RBI) efforts in creating currency forward market. Derivatives are an integral part of liberalisation process to manage risk. NSE gauging the market requirements initiated the process of setting up derivative markets in India. In July 1999, derivatives trading commenced in India CHRONOLOGY OF INSTRUMENTS 1991 Liberalisation process initiated 14-Dec-1995 NSE asked SEBI for permission to trade index futures. 18-Nov-1996 SEBI setup L.C.Gupta Committee to draft a policy framework for index futures. 11-May-1998 L.C.Gupta Committee submitted report. 7-July-1999 RBI gave permission for OTC forward rate agreements (FRAs) and interest rate swaps. 24-May-2000 SIMEX chose Nifty for trading futures and options on an Indian index. 25-May-2000 SEBI gave permission to NSE and BSE to do index futures trading. 9-June-2000 Trading of BSE Sensex futures commenced at BSE. 12-June-2000 Trading of Nifty futures commenced at NSE. 25-Sep-2000 Nifty futures trading commenced at SGX. 2-June-2001 Individual Stock Options Derivatives SWAPS A contract between two parties, referred to as counter parties, to exchange two streams of payments for agreed period of time. The payments, commonly called legs or sides, are calculated based on the underlying notional using applicable rates. Swaps contracts also include other provisional specified by the counter parties. Swaps are not debt instrument to raise capital, but a tool used for financial management. Swaps are arranged in many different currencies and different periods of time. US$ swaps are most common followed by Japanese yen, sterling and Deutsche marks. The length of past swaps transacted has ranged from 2 to 25 years. Swaps Pricing: There are four major components of a swap price. v Benchmark price v Liquidity (availability of counter parties to offset the swap). v Transaction cost v Credit risk Benchmark Price:Swap rates are based on a series of benchmark instruments. They may be quoted as a spread over the yield on these benchmark instruments or on an absolute interest rate basis. In the Indian markets the common benchmarks are MIBOR, 14, 91, 182 364 day T-bills, CP rates and PLR rates. Liquidity: which is function of supply and demand, plays an important role in swaps pricing? This is also affected by the swap duration. It may be difficult to have counter parties for long duration swaps, specially so in India Transaction costs include the cost of hedging a swap. Transaction cost: Say in case of a bank, which has a floating obligation of 91 days T. Bill. Now in order to hedge the bank would go long on a 91 day T. Bill. For doing so the bank must obtain funds. The transaction cost would thus involve such a difference. Yield on 91 day T. Bill 9.5% Cost of fund (e.g.- Repo rate) 10% The transaction cost in this case would involve 0.5% Credit risk: Credit risk must also be built into the swap pricing. Based upon the credit rating of the counterparty a spread would have to be incorporated. Say for e.g. it would be 0.5% for an AAA rating. Introduction to Futures Future contract is the simplest of all financial assets. A future contract is just an agreement between two parties to buy and sell an asset at a fixed price in the future. Futures markets were originally designed to solve the problems of forward markets. Future contracts are managed through an organized future exchange Future contracts are a type of derivative security because the value of the contract is derived from an underlying instrument. The exchange specifies standard features of future contract to facilitate liquidity in the futures contracts. The net value of a future contract is zero because future contract represents a zero sum game between a buyer and a seller. Future contracts are standardized to facilitate convenience in trading and price reporting. A futures contract may be offset before maturity by taking opposite position which means that future trading can be closed by entering into equal into an equal and opposite transaction. Future contract must specify at least five terms of the contract and they are: 1) The identity of the underlying commodity or financial instrument. 2) The future contract size. 3) The future maturity date. 4) The delivery or settlement procedure. 5) The future price. TYPES OF FUTURES A commodity future is a future contract in a commodity like cocoa, aluminum etc. A financial future is a futures contract in a financial instrument like Treasury bill, currency or stock index. Futures contracts are: v Futures contracts are organized/ standardized contracts, which are traded on the exchanges. v These contracts, being standardized and traded on the exchanges are very liquid in nature. v In futures market, clearing corporation/ house provides the settlement guarantee. v Every futures contract is a forward contract traded on exchange and clearing corporation/house provides the settlement guarantee for trades. v Are of standard quantity; standard quality (in case of commodities). Have standard delivery time and place. What Does Future Trading Apply to Indian Stocks? Future trading is a type of investments which involves speculating on the prices of securities in the future. Securities traded in future contract can be a stock (Reliance India Limited, TISCO, etc), Stock Index (NSE Nifty Index), commodity (Gold, Silver, Agricultural Products, etc) Unlike stocks and bonds, when we involve in future trading then we do not buy or own anything but we speculate the future direction of the price in the security we are trading. Suppose we speculate on Stock Index (NSE Nifty index). If we speculate that the future price of Stock Index can go up in the future then we would buy a future contract. If we speculate that the future price of Stock Index can go down then we would sell a future contract. Futures Trading accounts A future exchange allows only exchange members to trade on the exchange floor. There are various things to know about future trading accounts. The first thing is that a margin is always required. A margin is the amount of money that we put up to control a future contract. http://www.tradingpicks.com/futures.htm How to Trade in SP CNX NIFTY Futures? http://www.nse-india.com/content/press/futidx_invguide.pdf Trading on CNX Nifty futures is just like trading in other security. Before buying or selling we use to predict the direction of the market and based on that prediction we buy or sell the index. A profit is made when the closing price on the expiration day is higher than the value at which we had bought the index. If we had predicted a bearish market, and had sold the index then we make a profit. Trading cycle for SP CNX Nifty Futures The trading cycle for SP CNX Nifty future contracts is 3 months. On the trading day a new contract is introduced. This contract will be introduced for three month duration. As a result there will be 3 contracts available for trading in the market ( i.e., first contract is in near month, second in mid month and third in far month duration) Example If Trading in NIFTY Starts from January 2002 then following chart gives us the beginning and expiry date of the contract. Contract/Month Expiry/Settlement January 2002 January 28th February 2002 February 20th March 2002 March 19th After January 28th, the first trading day will be on January 29th. Contract/Month Expiry/Settlement February 2002 February 24th March 2002 March 30th April 2002 April 20th To trade futures in NSE, traders have to open an account with a future brokerage firm known as Future Commission Merchant (FCM). FCM records the trades, monitors them and advice t