Over-the-counter (OTC) Market

Over-The-Counter Market

Over-The-Counter Market

In contrast to exchange, Over-the-counter (OTC) Market i.e. off-market trading happens electronically. Over-the-counter markets structured in a way as a fundamental component of worldwide money, OTC derivatives have uncommon significance. The more prominent adaptability gave to advertise market participants to modify derivative contracts to all as per the suitability to their risk exposure. (more…)
Comparative Advantage

Comparative Advantage

Comparative Advantage

Introduction: In a world that’s more connected than ever before, surely a country producing everything by itself is not the most efficient way forward. How then does a country decide what to produce domestically and what to import? Resources are limited, and there’s an opportunity cost involved in the production of anything and everything. Is the Specialization of production a viable concept for countries to follow? This time, we’ll take a look at the theory of Comparative Advantage and how it holds up in a world with increasing Globalization, connectivity, trade liberalization, and technological innovation. (more…)

Debt Securities vs Equity Securities

Debt Securities vs Equity Securities

Debt securities are financial assets that define the terms of a loan between an issuer (the borrower) and an investor (the lender). Equity securities are financial assets that appear to be the shares of a corporation. (more…)
Foreign Exchange Risk

Foreign Exchange Risk – Full Details

What is Foreign Exchange Risk?

Foreign exchange risk refers to the risk that an investment value will change due to change in two different currencies. It is also known as currency risk or exchange rate risk. Exposure to foreign exchange risk is the natural result of the globalization of financial institutions. This risk arises when foreign exchange currency trading and/or foreign asset-liability positions are mismatched in individual currencies. Unexpected volatility could result in significant losses for the firm, which could threaten profitability or even solvency. (more…)
Swift System

Swift System – How does Messaging System work?

Swift System - How does Messaging System work?

SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is the world’s largest electronic payment messaging system. Though it gets lumped in with electronic funds transfer systems, it doesn’t do any of the funds transfers itself. In fact, it doesn’t even touch money. At its core, SWIFT is basically just a bank-to-bank messaging system. It supplies a standardized language that institutions use to communicate payment instructions and other info to each other. (more…)

Duration & Convexity – Full Understanding

Duration & Convexity - Full Understanding

The wide impact that interest rate changes have on business performance, the fact that all market participants are, to a higher or lesser degree, exposed to interest rate risk, as well as high volatility in interest rates during the recent years, make interest rate risk one of the most significant risks. Therefore, it is of the utmost importance to manage this kind of risk adequately. It is difficult to completely neutralize interest rate risk, however, in regard to the great impact that interest rate changes have on business performance, it is necessary to reduce it to a minimum. (more…)
Treasury Bills Quotation

Treasury Bills  Quotation  – How T-bill is quoted in the market

Treasury Bills Quotation  - How T-bill is quoted in the market

Treasury bills, or T-bills, are short-term debt instruments issued by the U.S Treasury. T-bills are issued for a term of one year of less. Three types of Treasury bills (T-bills) are issued with the following short maturities: 13 weeks (91 days), 26 weeks (182 days), and 52 weeks (365 days). The 13 and 26 week T-bills are auctioned by the Treasury every week on Mondays and issued on the following Thursday. (more…)
Implied Volatility

Implied Volatility – How Traders use it

What is Implied Volatility (IV)?

The option premium is made up of two basic components I.e. Intrinsic value and time value. Intrinsic value is influenced by the underlying spot price against the option's strike price. Time value is an additional premium which option buyer pays and it keeps on declining as expiration date comes closer. The price of time value is influenced by multiple factors such as the time until expiry, interest rates but it is majorly influenced by implied volatility. (more…)