Monday, October 12, 2009

"CAT THE LIFE CHANGING EXAM"

CAT which is known as Common Admission Test is the common admission exam to enter IIMs, which comes under premier institutes of India, Every year more than 2.5 lakh students register for appearing in CAT exam, which keep on increasing year on year the test has a specific format ,which don’t change frequently ,three sections comprising English ,Quantitative aptitude, and Logical reasoning, the difficult part of the exam for most of the students is Quant , but actually the questions asked in this section are based on fundas that we read till our secondary class i.e. tenth class of C.B.S.E. ,many other institutes of India are taking CAT score in to consideration for there masters Program in management ,which they think are the parameters to qualify a persons ability to manage business, now here am going to put some fact which should come in every student’s mind who take CAT as the life changing exam. ....

FACTS

>The CAT exam is open for all, that any graduate can take it to enter in to INDIAN INSTITUTES OF MANAGEMENT, which certainly increase the competition for those students who has done bachelors in management and want to pursue masters in management. Not a single student is afraid of competition but we can expect the same behavior from the authority, because when it comes to enter in to IIT’s masters course in management which is done through JMET, the APPLICANT MUST BE ENGINEER OR EQUIVALENT DEGREE (B.TECH, B.Sc), which can be found on the link http://www.iitb.ac.in/academic/pgprgm.html, because they ONLY allow commerce and economics masters for appearing in JMET.
The Exam to enter in masters course of IIT is knows as GATE, and many other institute of accepts it as criteria for admission in masters program of technology ,but when we consider the admission in IITs and IISc ,which are also premier institutes of India ,the commerce ,arts and management bachelors are nowhere allowed to take this exam. I think the authority view is negative towards the intellectual ability of students other than science/technology background.

CONCLUSION

IN THE ENTRANCE TEST NAMED AS JMET COMMERCE AND MANAGEMENT GRADUATE STUDENTS ARE NOT ALLOWED TO APPEAR FOR EXAM WHICH WILL LEAD TO MASTERS PROGRAME IN MANAGEMENT.

AND IN CASE OF MASTERS IN TECHNOLOGY A STUDENT MUST HAVE TO BE GRADUATE IN TECHNOLOGY /SCIENCE.

IS IT A SENESIBLE DECISION?

> Now consider the pattern of exam, the CAT exam which is meant for admission in MANGEMENT program consists of three sections of QUANT, ENGLISH, and LOGICAL REASONING which has nowhere to deal with management ability of the candidate, and which don’t required anything that you read in your graduation.
But when it comes on GATE, it’s all about technology that you read in your graduation, it consist of what you are specialized of in your graduation?
So it’s pretty easy carved way for engineers and science graduates to enter in to their masters program and much difficult for management undergraduates (specially) and commerce undergraduate to enter in to their masters program.
Because a Bachelor in Technology can do Masters in Management but a BBM holder can’t do master in Technology.
BBM students don’t want to enter in tech field, but there should be something in CAT which is based on management, like if a person wants to do masters in economics say from DSE or MSE or ISI, he has to pass the entrance test which includes economics and mathematics. so why CAT left for engineers as a gift?

CONCLUSION
ENGINEERS HAVE TO APPEAR IN THE EXAM FOR MASTERS IN MANAGEMENT WHERE NO MANAGEMENT IS ASKED, AND STUDENTS WHICH ARE BACHELORS IN MANAGEMENT HAVE TO FIGHT FOR QUANT AND LOGICAL REASONING, AM NOT STATING BECAUSE COMMERCE STUDENTS NEED BENEFIT FROM AUTHORITY, BUT AM STATING THIS BECAUSE AUTHORITY IS MAKING THE ENGINEERS WAY EASY FOR ENTRANCE WHILE NOT ASKING ABOUT MANAGEMENT AND COMMERCE IN CAT.
NOW PEOPLE CLAIM THAT THE PATTERN FOR MANAGEMENT ENTRANCE IS WORLDWIDE ACCEPTED AS GMAT WHICH ALSO CONSIST SAME PATTERN AND SECTIONS, BUT I WOULD LIKE ASK, WHAT IS THE PATTERN FOR GRE GENERAL TEST WHICH IS THE BASIS OF ENTRANCE CRITERIA FOR MANY MASTERS PROGRAMS IN THE FIELD OF SCIENCE AND TECHNOLOGY IN WHOLE WORLD, THE ONE OF THE TOP INSTITUTE IN FIELD OF TECHNOLOGY NAMED AS “MASSACHUSETTS INSTITUTE OF TECHNOLOGY” ASK FOR GRE GENERAL TEST SCORE WHICH CONSIST OF VERBAL, QUANT, ANALYTICAL SKILLS.
SO IF YOU WANT TO COPY SOMETHING FROM THE GROWING WORLD THEN COPY IT IN BOTH WAYS, AND IF YOU WANT TO ADOPT DIFFERENT WAYS OF ENTRANCE THEN AGAIN IMPLIMENT IN BOTH WAYS.

THE SCENE WHICH IS GETTING A SHAPE IS THAT, ENGINEERS AND SCIENCE GRADUATES HAVE MANY OPTIONS TO STUDY, THEY CAN GO WITH MBA AS WELL AS THEIR MASTERS PROGRAM AND IN SECOND FRONT BBM/B.Com STUDENTS HAVE ONLY ONE OPTION AND IN WHICH THEY ARE NOT ASKING ABOUT THEIR FIELD.

“DEMOCRATIC COUNTRY INDIA”

SO PEOPLE JUST THINK ABOUT IT ,MY VIEWS ARE ONLY TO GET FAVOUR THAT ENGINEER STUDENTS ARE GETTING EASILY .
BECAUSE IN THIS WAY, A DAY WILL COME .. WHEN COMMERCE AND MANAGEMENT GRADUATES WILL HAVE TO BE GADUATE FOR EVER AS THEY DON'T HAVE ENOUGH OPTIONS, AND THE AVAILABLE OPTIONS ARE HIGHLY COMPETATIVE, BUT FOR ENGINEERS TO ENTER IN TO MASTERS PROGRAME IS JUST A CAKE WALK.

AND COMMENTS ARE WELCOMED.


Tuesday, October 6, 2009

CREDIT DEFAULT SWAP

CREDIT DEFAULT SWAP is one of the famous instruments of credit derivative, as we can understand from the name itself; it is a derivative contract which covers the credit risk. Broadly speaking credit default swap are the derivative contracts which swaps the risk of credit default from the buyer of the contract to the seller of the contract and in return the buyer of the contract have to pay some amount on regular basis, the detail condition of which is decided on negotiation of both seller and buyer of the derivative contract. In this agreement, the party that shorts credit risk is the protection buyer and pays fixed periodic payments to the party taking on the credit risk, the protection seller. Credit risk can be defined as an event when the person show his inability to fulfill his debt obligation which includes failing to pay its coupon, defaulting, or filing for bankruptcy and, if applicable, restructuring its debt. There are several contracts which contains risk element, to increase the percentage of security most of the lenders or creditors who lends money to some company/entity or invested in some institutions bond prefer to adopt the way of CDS.

It was time of early 1990 when the shape of CDS comes to existence in United States of America, the purpose was to transfer credit exposure for commercial loans and to free up regulatory capital in commercial banks, By entering into CDS, a commercial bank shifted the risk of default to a third-party and this shifted risk did not count against their regulatory capital requirements. At that time there were limited number of buyers and sellers of the contract who know each other and had in depth knowledge of the credit risk. However in a decade nearly in mid 2000 the scenario start changing and many investors get attracted towards this concept and the total meaning of security started moving towards speculation, in late 1990s the percentage of actual owners of asset or investment was more in comparison to those who were only betting on occurrence of an event, but in mid 2000 the scenario reversed totally and now the number of people betting on the occurrence were more in comparison to those who were actually holding the asset or who actually lender of money

In case of India this concept still not implemented by central bank, RBI has introduced guidelines for CDS sometime in 2007 and then withdrawn this during the financial crisis, but with the view of recovery in the world economy and insulation to Indian economy on 30 June, 2009 The Economic Times reported that the Reserve Bank of India (RBI) had sent a questionnaire to some banks seeking their views on CDS.

CDSs in most part of the world are traded in OTC (Over the Counter) markets, where trades are done over phone, which means there is no organized exchange for derivative trading, because of which we are unable to calculate the actual valuation of CDS contracts. OTC markets tend to be opaque and it is relatively difficult for regulators to keep things under check. The finance ministry has said that the best market design to reduce the risk factor of derivatives is trading of standardized products on stock exchanges or on organized exchanges.
Working of Credit Default Swap,

CDS are the derivative contracts which swaps the risk of a credit default from one person to another person, and for which the protection buyer has to pay premium to the protection seller,
There are two cases, one of which is the basic concept behind CDS that is the need of security to a credit default risk in which the protection buyer is the actual holder of asset and the other is the new evolved concept of CDS which is totally based upon speculation, which means the betting concept based upon the occurrence of a credit default event in which the protection buyer do not actually hold the asset but only bet on the occurrence of event.

CASE- I

An Investor named ‘A’ would like to invest 1 billion rupees in company B, which he feels suitable to use his reserved money, that will return him 10% per annum for 10 years as interest, the terms and conditions of the contract are based on negotiation of both protection buyer and seller .
The credit rating allotted to company B from a credit rating company say CRISIL is BB, which shows the below moderate level of credit default risk. But the investment policy of investor A is that he invests money only in those companies whose rating is AAA from CRISIL (example) a credit rating organization.
So to secure the risk he went to bank ‘C’ for a credit default swap contract, in which the bank will insure the risk of default of company B ,and will charge 2% per annum for the security,



In this flow chart the Bank ‘C’ is actually giving insurance to the contract between investor A and company ‘B’, Bank C is assuring the investor A about the credit payment ability of company B and charging 2% per annum as a premium amount. And after entering in to this contract bank B is now liable to pay the whole amount if any default occurs from company ‘B’.
These types of contracts are helpful for those investors who invest in moderate risk assets, investor like to pay a small amount for the safety of their investment, In this case the small amount of 2% of a billion rupees paid per year will cover the whole amount of one billion rupees, CDS basic principle is to reduce the amount of credit defaults risk, its giving a safety to the repayment of investors amount that he invested in a company.
After the initiation of the concept of credit derivatives, CDS gained highest attention among all other derivatives instruments, which resulted that the valuation of CDS in USA in year 2009 is nearly about $60 trillion dollar, which is more than the GDP of United States of America.
CASE II
Changes occur in every field, to some extent they are good but beyond some extent they are bad, here is the case of CDS which change its meaning from security to mere speculation, which means now people are betting on occurrence of some specific event, now most of the CDS contract are signed by those who actually do not hold the asset, but are only betting on some credit default event based on there research or analysis.
Now take the previous example in which the investor ‘A’ invested in company ‘B’, and CDS provide the security to investor A from the credit default of company B. But changes occur day by day and now the meaning of speculation arrived, now in CASE II the investor do not really invested in company B, but actually predicting a credit default based on the research and analysis of itself or from any other source.
Now in this case the Investor A went to Bank C to buy a CDS contract based on default of company C, he neither hold any asset in company B or nor invested any amount in the company B, but his speculation is the base of contract


 


 Now we can see that there isn’t any line between investor and company, which shows that investor have no contracts with company B, but he is still coming under CDS contract mode only to gain expected amount which he predicted on the basis of research and analysis.
The whole working of contract is same as case I ,but in this case the investor A is not the actual holder of the asset or had invested in company A but even then he would like to enter in CDS based on speculation on company B’s valuation, for which the investor will like to pay 2% of the contract value per year as premium and then if company B becomes bankrupt or become default or what it may be the specific event of the contract then the bank C is liable to pay the specific amount of CDS contract.
The terms and conditions of the contract is based upon the quality of valuation team of both investor and bank, after calculating the valuation they negotiate with each other to land on the terms and condition of contract . Every institution, investor or a common individual want to maximize there profit , so the whole profit or we can say the result is depend upon the valuation team and the negotiation skills while dealing with the other party of contract .
ANALYSIS OF CREDIT DEFAULT SWAP
Every Concept has its positive and negative side both, the dealing manner of these contracts is creating an issue in front of all economist and market researchers, because of OTC trading method we can not calculate the actual amount of CDS working in the market, so it will create hurdles in valuation of an asset. Let’s take the above example, we do not have any idea about how many CDS contracts are running with the Company B, suppose the valuation committee of Bank C valued company B worth around 15 Billion rupees and many other banks which are at present in CDS contract with company B valued same in past and signed CDS contract because they are not aware of how many banks are at present in contract with company B, and now the company B declare the bankruptcy, now which bank can claim on its assets, At last the whole chain of banks and institution which were connected with the default company will have to bear a loss of amount of CDS contract.
Not only the OTC is a negative part of CDS but also the policy of banks dealing in CDS also define the risk factor in this market, Even if a bank who usually sign CDS contracts, without taking care of its liabilities start signing more and more CDS contracts will come under the problem in near future if some CDS contracts file defaults.
When a Bank comes under a CDS contract, usually have to put the CDS amount in spare to overcome the future expected liability. But most of the banks usually don’t opt this principle and sign more and more contracts without making reserves of contract amount, which will in turn give more problems in near future, for example Bank C signed 30 CDS contracts in a year, which include both assets holder (security) and non holder (speculation) contracts, and in the period of 2 years 15 CDS contracts which were signed by bank C filed bankruptcy then the loss that should be bear by bank C will be huge and can create the Bank C ‘s bankruptcy. So not only the OTC but the policies of bank matter very much, and can say that the workforce who are engaged in the process of valuation are also matter indirectly in case of credit default swaps market, there vision can make or destroy the whole structure of bank who engaged in CDS market.
INDIAN CASE OF CREDT DEFAULT SWAP MARKET
India is famous in the whole world for her financial policies, Reserve bank of India which is the central bank of India had taken various measures to keep Indian economy insulated from the financial crisis, and succeeded to some extent, which resulted the GDP growth of India for year 2008-09 at 6.7% which was quite better as compare to other countries.
The lending policy of Indian banks are free from credit ratings, most of the lending is done on the basis of past records or valuation of balance sheet, which may vary from bank to bank .Now with the introduction of CDS the lending policy will going to shift towards the organized policies based on credit points awarded to the company which will help to synchronize the whole lending market of the country.
In India CDS market will going to create a new sector of trading, where a person can swap his credit default risk to other person on the basis of negotiated conditions, In India CDS are planned to be traded in organized exchanges, which will reduce some amount of risk of CDS contracts, as we can put an eye on the number of contracts from a particular bank and also to a particular company, it will be helpful in both the actual valuation of the company and liquidity of bank. While trading in OTC mode no one can judge the amount of contracts signed by one bank, and also it is difficult to calculate the actual valuation of the company, because in OTC mode we don’t have any idea about how many contracts are running on one company or on one asset.
That’s the only good point in Indian scenario that all the CDS contracts can be checked easily and efficiently, which will help to increase the accuracy in Valuation of any asset or any company, and also by CDS contracts there will be a suitable and organized lending market for India.
The idea of introducing derivatives in an exchange-traded format has support from independent experts as they say it will mitigate the risk to the system. The presence of the clearing house will act as a pillar for all transactions which will help to keep volume in synchronized with the risk the system can take.
But the chain default threat is still there, that if a one company claim bankruptcy then the whole chain related to that company will have to face problem. In our previous example, if company B files bankruptcy than the bank C has to pay the amount to investor A and it will reduce the liquidity of bank C, which in return reduces the financial strength of the company and bank C may have to fill bankruptcy.
Now we can see that there is a risk for Indian economy with CDS contracts but they are also new methods to create and maintain the organized lending sector in India, Indian banking sector is now started moving towards changes and started adopting new modes of growth and creating new ways to increase the banking business, CDS contract to some extent will be highly beneficial for the banking sector with this banks will explore untapped methods of earnings, not only for the banking sector but also for the investors of the country CDS’s are going to reduce the credit risk factor of investments .
The risk factor of OTC will not be the case with India because the central bank has decided to open derivative exchanges for CDS and all other derivative instruments. Which will reduce most of the demerits related to CDS contracts, and that’s the reason that most of the economists and market researcher are giving green signal to the CDS opening in India.
Submitted By:
ASHISH VAZIRANI



Saturday, September 19, 2009

Break India, says China think-tank

NEW DELHI: India may have survived doomsday predictions — once a favourite pastime of the West — of its balkanization but that does not seem to have deterred the Chinese. On Tuesday, New Delhi took exception to anarticle on a quasi-official Chinese website, which boasted that the “great Indian federation” was ripe for dismemberment if Beijing tried just a little.

Wake up! China wants to break up India

Posted on April 8 on the website iiss.cn (International Institute for Strategic Studies), the article detailed a roadmap for breaking up India. “To split India, China can bring into its fold countries like Pakistan, Nepal and Bhutan, support Ulfa in attaining its goal for Assam’s independence, back aspirations of Indian nationalities like Tamils and Nagas, encourage Bangladesh to give a push to the independence of West Bengal and lastly recover the 90,000 sq km territory in southern Tibet,” the write-up said.

The article claimed that India as a nation never really existed in history. It was held together by “decadent” Hinduism which “encouraged caste and exploitation”.

“...China in its own interest and the progress of whole Asia, should join forces with different nationalities like Assamese, Tamils, and Kashmiris and support the latter in establishing independent nation-states of their own, out of India,” the article said.

The ardent hope has been sought to be justified by using the rhetoric of change. “Only after India has been broken up into 20-30 pieces will there be any real reform or social change in the country,” stressed the article meant for Chinese audience.

Hopes of a rebellion by Tamils may appear outlandish, but the article serves to corroborate fears in India about Beijing’s gameplan to encircle India in alliance with regimes in Pakistan, Bangladesh and Nepal, of its support for Ulfa and other insurgent groups in northeast and its designs on Arunachal Pradesh which the Chinese insist on referring to as south Tibet. Not amused, India’s foreign ministry cautioned China, asking it to express opinions “after careful judgments based on the long-term interests of building a stable relationship”.

Seeking to hold Beijing to its official statements, an MEA spoksperson said the article “appears to be an expression of individual opinion and does not accord with the officially stated position of China on India-China relations conveyed to us on several occasions, including at the highest level, most recently by state councillor Dai Bingguo during his visit to India last week”.


Source :http://timesofindia.indiatimes.com/news/india/Break-India-says-China-think-tank/articleshow/4883573.cms



Thursday, September 17, 2009

Rule 49-O

Rule 49-O

49-O Elector deciding not to vote:-If an elector, after his electoral roll number has been duly entered in the register of voters in Form-17A and has put his signature or thumb impression thereon as required under sub-rule (1) of rule 49L, decided not to record his vote, a remark to this effect shall be made against the said entry in Form 17A by the presiding officer and the signature or thumb impression of the elector shall be obtained against such remark.


Present Implications of Rule 49-O

Since the ballot paper / Electronic voting machine (EVM) contains only the list of candidates, a voter cannot record his vote under Section 49-O directly. He must inform the presiding officer at the election booth. This violates the secrecy of the ballot. However, with paper ballot a different method is used to "waste" ones vote, which is stamping on multiple candidates. In fact this was the standard method of giving null votes without violating secrecy before the advent of the EVM.

At present, in an election, a winner will be declared irrespective of the number of 'non-votes'. However, a note of every 'non-vote' will be made with the Election Officer, and the total number of non-voters will, presumably, be available under the Right to Information Act.

Proposals by the Election Commission of India

Among the proposed electoral reforms submitted in 2004 to the then Prime Minister, Dr. Manmohan Singh the then Chief Election Commissioner of India, T.S. Krishnamurthy, suggested the following:

NEGATIVE / NEUTRAL VOTING

The Commission has received proposals from a very large number of individuals and organizations that there should be a provision enabling a voter to reject all the candidates in the constituency if he does not find them suitable. In the voting using the conventional ballot paper and ballot boxes, an elector can drop the ballot paper without marking his vote against any of the candidates, if he chooses so. However, in the voting using the Electronic Voting Machines, such a facility is not available to the voter. Although, Rule 49 O of the Conduct of Election Rules, 1961 provides that an elector may refuse to vote after he has been identified and necessary entries made in the Register of Electors and the marked copy of the electoral roll, the secrecy of voting is not protected here inasmuch as the polling officials and the polling agents in the polling station get to know about the decision of such a voter.

The Commission recommends that the law should be amended to specifically provide for negative / neutral voting. For this purpose, Rules 22 and 49B of the Conduct of Election Rules, 1961 may be suitably amended adding a proviso that in the ballot paper and the particulars on the ballot unit, in the column relating to names of candidates, after the entry relating to the last candidate, there shall be a column None of the above, to enable a voter to reject all the candidates, if he chooses so. Such a proposal was earlier made by the Commission in 2001 (vide letter dated 10.12.2001).

Disqualification hoax

A hoax has been circulating which claims that if the '49-O' votes more than those of the winning candidate, then that poll will be canceled and will have to be re-polled. Furthermore, it claims that the contestants will be banned and they cannot contest the re-polling for their life time. This is false and has no basis whatsoever.


Criticism of proposals regarding negative voting and annulment of polling due to neutral votes

The proposals of negative voting by the election commission and annulment of polling if neutral votes exceed those of the winning candidate have been criticised by experts.

It is the duty of every citizen to educate himself / herself about the agenda of the candidates and to vote conscientiously for the candidate they think is better. The very purpose of an election is that the representatives should be chosen by the people. Encouraging people not to express their preferred candidate goes against the intended purpose. For this reason, voting is compulsory by law in Australia. Also, annulling an election would result in much waste of public funds spent to conduct polls.

An argument in favour of provision of neutral voting is that it ensures the individual's freedom to choose whether or not to vote.