Value At Risk Measurement Of Market Risk Finance Essay - Free Essay Example

Sample details Pages: 3 Words: 1047 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? A credit rating tells the lender or investor the probability of a subject being able to pay back the loan. In the U.S the ratings are widespread, 94% of the SP 500 are rated, so this approach are thought to improve capital allocation.In Europe, only 53% of DAX-30 firms obtained a credit rating.Therefore credit ratings definitely will not work in this setting. Moreover, firms of lower credit ratings such as BB- and below, require 150% for the risk weight whereas unrated firms only incur a 100% risk weight. Don’t waste time! Our writers will create an original "Value At Risk Measurement Of Market Risk Finance Essay" essay for you Create order This creates an incentive for firms who believes they will achieve a lower credit rating to remain unrated in order to achieve cheaper financing. Credit rating agency has been subjected to many criticisms themselves. One of the most important criticisms which partly led to the financial crisis is the errors in their method for rating structured products, particularly in assigning AAA ratings to structured debt, which in a large number of cases has subsequently been downgraded or defaulted.Many argued that it is because rating complex structured products is very difficult. However,if it is just difficult there should be a balance of overrated and underrated structured products. There had been persistent bias which shows the rating seems to systematically over-estimate the creditworthiness of the rated instrument.  [2]  One of the reasons that SEC found out in their 10 month investigation is because of conflict of interest as they were paid by investment banks and other firms th at organize and sell structured securities to investors.  [3]  This has cause problems for financial institiutions as shown in financial crisis when ratings dramatically fall from AAA to below investment grade during the subprime crisis. Under Basel II, banks who initially only required capital allocation of only 0.6% due to an AAA rated securitization now requires 52% capital allocation as it downgrades to BB- rated securitization. Financial institiutions who did not hold enough money in reserves to safeguard themselves from downgrades would have to be bailed out by governments. Credit agencies do not downgrade the companies promptly enough. For example, Enrons rating remained at investment grade four days before the company went bankrupt, despite the fact that credit rating agencies had been aware of the companys problems for months.  [4]  This lag can be explained by the agencies reliance on accounting data, their inability to monitor all issuers continuously and their willingness to change only when they know the decision on the issuer will not change in the near future.However to forecast risk under Basel II, banking supervisors should not use past months ratings to rate their own credit risk as it will be inaccurate. Therefore credit rating agencies had to improve by constantly updating their rating system and improve their credibility before being able to be used to evaluate credit risk for firms effectively. Value at Risk measurement inapprorpriate to measure market risk Basel II requires financial institutions to use the 10 day VaR at 99% confidence interval as a risk metric to measure market risk. VaR is communicated as the maximum loss of a particular portfolio at a particular point (confidence interval) in an underlying asset returnsà ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¾Ãƒâ€šÃ‚ ¢ distribution, over a given timeframe (the holding period).Since it is only measured to 99% confidence interval, losses beyond the region will not be accounted for in the minimum capital requirement.. Our group believes bank shareholders and managers uses this measurement as they do not bear losses above and beyond bankà ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¾Ãƒâ€šÃ‚ ¢s capital. However this is not appropriate for bank regulators, as the losses in excess are funded by public authorities. Critics believe not incorporating the tail VaR destabilizes the economy and induced the crashes in the financial system  [5]  . However we fee ls that if tail VaR is accounted for, the capital requirement for the banks will be too large and this will slow down the economy as investments will decrease. Ineffective implementation of own risk models Under the Basel II framework, regulators allow large banks with sophisticated risk management systems to do risk assessment based on their own models to determine the minimum amount of regulatory capital. This is allowed because Basel II regulators believe own bank supervisors know their bank best. However the recent financial crisis proves otherwise. The need of recapitalization reveals that the internal risk models of many banks performed poorly and greatly under-estimated risk exposure, forcing banks to reassess and reprice their credit risk. This happens because there are no independent measures to assess the bank risk model. The banks could do what they thing is reasonable and it would be hard for anyone to fault them. By underestimating risk exposure, it allows the bank to increase their lending limits and thus earn more revenue for the company. However, we have to take note that mathematical models have limited predictive power in finance and the difficulties in accounting f or low probability but high losses events. Procyclical Basel II is being criticized of being procyclical. During the boom times, credit ratings will be better as their probability of default is lower. This allows the bank to have lower capital requirements under Basel II thus even the badly managed banks with inadequate capital and provisions initially can expand their business, resulting in overlending . However during the bad times, banks require a higher capital requirement as the credit ratings dropped due to increased risk. Difficulties in raising new capital further add on to their capital constraints during downturns. This causes institutions to reduce credit to firms and households and thus forced to cut lending when it is most needed. Faced with higher interest rates and lack of alternative sources of finance, firms will cutback on investment spending thereby aggravating the downturn. This is evident during the global economic recession whereby international trade has been severely affected, with trade volumes actually contrac ting by about 12% in 2009.This is associated due to the massive decline in trade financing  [6]  . Inconsistency in implementation of Basel II Basel II is being applied inconsistently around the world, and even within individual markets, leading to very different risk weights and capital charges for identical assets. Basel II is too accommodating on certain risk categories, especially trading risk and sub-prime mortgage. It fails to recognize that the enforcement of a common approach to risk management enhances the homogeneity of the behavior of market participants and hence exacerbates financial crisis.

Analysis Of Disney s Disney - 1907 Words

Research Paper: Disney Sami Danielson Hour: 3 â€Å"Between 1931 and 1968, Walt Disney won 32 Academy Awards and still holds the record for the most individual Academy Awards won.† (Walt Disney(1901-1966) ,2013 para. 25) Walt Disney has made an incredible amount of fantastic movies, music and characters that we will always remember. But what were the impacts of these to society? How does Disney affect children, adults and the LGBT community all around the world? Over the years, Walt Disney has changed lives of millions all around the world whether it may be his catchy music, beautiful animation, or his memorable characters. Although Walt Disney was a successful man, it didn’t come easy to him. Walt grew up in a rural area, and†¦show more content†¦Instead, Walt joined the Red Cross and was sent overseas to France, where he spent a year driving an ambulance and chauffeuring Red Cross officials. His ambulance was covered stem to stern, not with camouflage, but with Disney cartoons.† ( Disney Changed History?, para. 2) In 1918 Walt joined Red Cross, and drove Red Cross officials around with his ambulance which was covered with cartoons. October 29th, 1929 was the start of the Great Depression. People needed a distraction, a laugh, and most importantly, they needed hope. Not only did The Great Depression affect Disney, it actually helped him. He created movies, characters, and music to cheer people up during this time. Including Mickey Mouse, Cinderella, and Olaf. Everyone was affected from the great depression and one way Walt helped everyone was by helping America with the depression. Mickey was the mascot. â€Å"This little personage literally pulled America up from despair and gave it hope and vision for better times ahead. Mickey Mouse was said to be given his physical form by ‘ub iwerks’, but his personality and inner self was given to him by Walt Disney. Every fan knows that Mickey is Walt’s son.† ( Mickey Mouse: A Cure For Depression?, 2006, para. 2) Mickey Mouse was created to help people forget about the Depression and to give them joy, hope and giggles.† America related to Mickey and his problems because they were mirrored in theirs. He came to the rescue when no politician, actor, or

New Trend in Global Environment Authenticity

Question: Write about theNew Trend in Global Environmentfor Authenticity. Answer: Leadership: The Authenticity Paradox pp. Authenticity is a word that is used to describe any original work and not a copy. When leadership is used in describing leadership, it provides other areas of leadership that are usually seen as challenges. For example, the idea of becoming true to oneself when it comes to leadership with regard to work experience, discovering the self-qualities and disclosing thoughts and feeling. All of these areas are usually risky and require various qualities of the leader. In this manner, an authentic leader is one that is more interested in the empowerment of employees and does not only look at money and personal power(Ibarra, 2015). They are also guided by the compassion and the heard to do just about everything. As much as many authentic leaders may be having their self-made abilities, it is important to note that anyone in the right environment is able to be an authentic leader as much as they put more effort in it and practices the different forms of leadership(Gunderman Maas, 2014). This type leader need to be more dedicated to the continued personal growth and committed to establishing a lasting relationship among organisations. Authenticity in Leadership In todays world of management , authenticity is necessary for various reasons. First it enables people to make a more radical and frequent change in the way that people work. As people strive to improve in the game, it becomes clear that they need to be firm with themselves, this enables people to manage their choices and progress towards managerial goals(Champy, 2009). However, when looking at ways to change the way work is done, a very rigid concept about oneself becomes a major anchor which keeps people from sailing ahead. Also when it comes to the global environment, many people work with people that do not share the different expectations and cultural norms on how they need to behave(Walumbwa, et al., 2008). It can also seem as if people have chosen between what they expect and thus look at what feels to be authentic and what is not. Also, when it comes to the global environment, identities of people is always full of ubiquitous connectivity and the social media. It looks at the ways that we present ourselves in the global business, this does not only look at the leaders as executives but as people working with people who are in need of their experiences and interests. This is very vital in the issue of leadership. In addition, when curating a persona which is out there for all in order to meet the needs of the self. Other characteristics entail being able to aim higher event in situations where they face criticism. An authentic leader should be able to convince oneself that dysfunctional aspects of the nature of leadership often come with the prices of being effective in different ways. This for example a person working in a food company as a production manager received direct reports that gives him the lowest of marks in a 360 review with regard to his emotional intelligence when handling other employees, empowering others and team building(Gardiner, et al., 2005). One of the reasons for this might be the person was hard in accepting criticism. For example, causing and outburst every time they are faced with challenges at work, destabilization effect of his mood changes for the people who are around him. This makes this kind of leader a failure i n authenticity. Characteristic of Authentic Leadership Insight In most cases, people look at insight as a vision, that has its reference to the future. As much as leaders have a vision for the organisation, the need more to effectively perform. in a passage of the bible, there is a discussion about King David and his army. Where the men of Issachar, said they understood the times and knew what it was needed from them for Israel ( 1 chronicles 12.32). this is the brief meaning of insight. In addition, it is important for leaders to have a lot of wisdom in the changing global environment, the also need to be discerning for the present. The should be able to gain clarity, look at complex situation and determine the right course of action(Gardiner, et al., 2005). One such leader was Steve jobs who showed authentic leadership in the recent decades as he returned as the CEO of Apple. During this time the Apple company was in a total administrative mess, however he used his insight to rejuvenate the business and dominate the computer industry. Initiative As a leader in the modern business, it is important be on the front. This means that leaders are not people who sit on the sidelines. They will not be seen to ask other people what they need to do or what they are not willing to do themselves. Instead, a good leader is the one that leads by example(Gardiner, et al., 2005). In this manner, good leaders are distinguished from those who lead by theories and while sitting. Influence A real leader should be one that has the power to influence people with what they have. It is natural for people to always be drawn to values and vision as they usually have the ability to gather a following or be able to take people to one direction. In addition, this influence should be able to create difference(Champy, 2009). These people are usually instrumental in creating a lasting change and real. If this does not happen from them then they cannot be said to be leaders. One leader that was able to create an impact in the society was Martin Luther King Jr. who took over the Dexter Avenue Baptist Church in Montgomery Alabama in 1954. After just about 10 year, he was able to turn the nation to a new philosophy. All through his years he was able to mobilize other organized leaders, activists, rallied more support for his cause and enable the civil rights recognition of people of all races. Up to this moment, King continues to have an impact of peoples lives(Walumbwa, et al., 2008) . Integrity According to the article, most leader are usually not benevolent. A leader is always a leader no matter being a political leader, a business leader or a church leader. They all need to have initiatives, the should influence, they should have an insight and impact(Gardiner, et al., 2005). However, when people look at their legacies and ways of life, they will be able to see that integrity is always an issue. Leaders whos professional lives are not integrated with the highest value, will always have a negative impact in the ways that they conduct their business. Growth of Authentic Leadership The growth of authentic leadership will always entail a shift from good ideas and putting them to various stakeholders. Having leaders that are inexperienced, and especially those who are self-righteous, will often find them process of getting the buy-in as distasteful since it will always be political and artificial as they believe that their work needs to stand on its merit(Ibarra, 2015). According to Ibarra (2015) a lot of managers usually know that their ideas and potential will often go unnoticed especially when they are not doing a better job of selling themselves. In addition, they may not be in a position to do it by themselves. It is important for a leader to keep on building a network that is based on professionalism in what they are able to deliver and how they know. As much as this might not be so smart in the point of building careers, it is able to lift authentic leadership to another level of management. In this manner, authentic leaders should thus be able to draw ins piration from their lives(Walumbwa, et al., 2008). For example, the founder of star buck Howard Schultz was always inspired by the struggles of his fathers poor health that he was able to make Starbucks one of the first American company that provides healthcare options to the part time employees. As an inspired leader, he was also able to used his experience to building a company which was a reflection of his personal value. With it comes to personal growth in authentic leadership, this should be seen on the ground that the leader does not shy off from their own mistakes. They will always work to overcome their shortcomings in every way(Gardiner, et al., 2005). Also when they are facing their weakness and when they refuse to compromise with them, an authentic leader should be one that finds ways that overcome their weaknesses, in the end this makes them as being strong leaders. Conclusion In conclusion, it is always good that an authentic leader is able to depict his or her how style of leadership. However they also need to remember that authentic leadership is about adapting change with regard to the changing circumstances and situations. One should be in a position to delegate issues when necessary and also should not be afraid to change the way that they do things when they are in different situations. Walumbwa, et al., (2008) suggests that it is important for managers to begin developing authentic leadership style by assessing themselves with the above qualities of a an authentic leaders. They qualities are important as they are able to make one understand the practice in their lives, the purpose of leadership, being able to lead in their heart and establish a strong connection with employees. References Champy, J., 2009. Authentic leadership. Leader to Leader, Issue 54, pp. 39-44. Gardiner, W., Avolio, B. Walumba, F., 2005. Authentic leadership theory and practice: origins, effects and development. Elsevier JAI: Oxford. Gunderman, R. Maas, M., 2014. Authentic leadership. Journal of the American College of Radiology : JACR, 11(5), p. 518. Ibarra, H., 2015. The Authenticity Paradox. [Online] Available at: https://hbr.org/2015/01/the-authenticity-paradox [Accessed 2 May 2017]. Walumbwa, F. et al., 2008. Authentic Leadership: Development and Validation of a Theory-Based Measure. Journal of Management, 34(1), pp. 89-126.

Technology Is A Great Thing, It Aids Man In The Exploration Of The Uni

Technology is a great thing, it aids man in the exploration of the universe, and himself. But there are times when technology can be the greatest downfall of man. One such time was when the creation of the nuclear bomb. Which was to be used in the Was in efforts to end it. In 1939, a group of scientists, including Albert Einstein, wrote a letter to President Roosevelt to warn of the Nazi's effort to purify Uranium-235, which would be used in the creation of a bomb of mass-destruction. This prompted the president to create the Manhattan Project, the code-name for a top-secret project which would put the world's most brilliant scientists together to create a bomb. In 1942 General Leslie Grove was chosen to lead the project. He purchased a site at Oak Ridge, Tenn. For facilities to work on extracting Uranium 235. For the next 3 years nearly 200,000 people, working in 40 factories, worked 6 days a week, usually for 18 hour days in order to finish the project. In 1945, President Truman had received some unsettling news, the bombs had been finished. 3 bombs had been produced, and it was time to test them to see if they had been successful in creating a nuclear weapon. The government had chosen a site in New Mexico called the ?Trinity Testing Site? in Alamogordo. On July 16th, They conducted the first Nuclear Bomb testing. They had proved that the bombs were usable, now the had to decide whether or not to drop the bomb. The scientists who created the bomb, started to realize that the had created something that would change the world as they knew it. The began to urge the president not to drop the bomb in Japan, but instead to show Japanese officials what would happen if the bomb was to be dropped on their country. Truman was against this because he had no idea if the other two bombs would work if the were to be dropped. So, Truman had to chose whether to drop the bomb, or show the effects of it. Truman knew that a full-scale invasion of Japan, in order to end the war, was to dangerous because of the possibility for severe American casualties. Truman had weighed the issues and decided to drop the 1st bomb on Hiroshima, Japan. On August 6th 1945, a plane named the Enola Gay, flew over Hiroshima and at 8:15 am one minute after the Little Man was dropped the plane, 2,000 feet above the ground, the 1st casualties of the Nuclear Age were becoming statistics. Within milli-seconds anyone within a mile of the blast was vaporized. Large Buildings and human beings around the city were being destroyed by extremely high temperatures and winds produced from the explosion (The Atom Bomb, Internet). "A bright light filled the plane," wrote Lt. Col. Paul Tibbets, the pilot of the Enola Gay. "We turned back to look at Hiroshima. The city was hidden by that awful cloud...boiling up, mushrooming." For a moment, no one spoke. Then everyone was talking. "Look at that! Look at that! Look at that!" exclaimed the co-pilot, Robert Lewis, pounding on Tibbets's shoulder. Lewis said he could taste atomic fission; it tasted like lead. Then he turned away to write in his journal. "My God," he asked himself, "what have we done It is believed that more than 140,000 people died by the end of the year (Ohba, Benson) One girl, whos opinion was shared by other Japanese, said ?No matter how much I think of it, what a nasty horrible atom bomb! What was the war fought for? Many Were Killed, ?For Peace,' they said, but where is this peace (Osada) The massive effects of the bomb was not enough for the emperor of Japan to sign a peace treaty. So Truman ordered the second bomb, named ?Fat Man? to be dropped on Nagasaki, Japan. The blast produced a blast greater than the one in Hiroshima, but due to the geographic structure of the city, the bomb did less damage. It was less damage, but it still managed to kill an estimated 70,000 people by the end of the year(Ohba, Benson). The second bombing prompted Emperor Hirohito to sign