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Flexible
Insurance for Separate Accounts
-- Ludwig Chincarini
With
the advances in technology and lower costs to trading, separate
account platforms and online brokers should be able to offer
customized portfolio protection to their clients with the
click of a button. This paper uses basic concepts from the
option literature to show how this insurance could be offered
in two convenient forms. In one form, it would represent a
straight cash payment by customers, and in another form, investors
would exchange a portion of the upside of their returns for
the protection. The paper uses the Black-Scholes model to
show the benchmark costs associated with this type of protection,
as well as performs a simulation with an actual portfolio
over various sub-periods from 2000 to 2006.
©
2008 IUP . All Rights Reserved.
Risk
Management Practices Among the Gems and Jewelry Dealers in
Bangalore
-- Padma Srinivasan
and R Subramaniam
The
Indian gems and jewelry industry has been a money spinner
for many centuries. Though the prices of the precious metals
and stones are soaring, the sales have not stagnated. Newer
Indian retailers and foreign players have entered the market
with an international demand for quality standards and fashion
trends. The Indian gems and jewelry sector is largely unorganized
at present. There are over 15,000 players across the country
in the gold processing industry of which only about 80 players
have a turnover of over $4.15 mn (Rs. 200 mn). There are about
450,000 goldsmiths spread throughout the country. This paper
deliberates on the risk factors that arise due to the impact
of volatility of the global metal and oil prices. The major
trade risks are: the unorganized market structure, lack of
technology and low profitability. The retailers and family
jewelers have a set of practices that match the dynamics of
trade. This paper answers the questions related to gems and
jewelry trade, the evolving practices due to the increasing
volatility of metal prices, the best practices of the traders
who trade in wholesale and retail and the need for a paradigm
shift in the risk aptitudes and practices in Bangalore.
©
2008 IUP . All Rights Reserved.
Analyzing
the Medical Costs for Motor Vehicle Accident: Experience of
Hospital Universiti Kebangsaan Malaysia
-- Noriza Majid, Saiful Hafizah Jaaman, Noriszura Ismail
and Nor' Aisah Mahmud
The
medical costs incurred by motor vehicle accident patients
who receive treatment at the Hospital Universiti Kebangsaan
Malaysia (HUKM) is estimated using multiple regression analysis.
The contributing factors such as age, gender, type of treatments
and patient's status (inpatient or outpatient) are analyzed
and studied in order to determine their effects on charges
that HUKM imposed. This study determines the relationship
between the charges imposed by the hospital (amount paid by
the patient) and the contributing factors. The results of
this study indicate that the contributing factors considered
have positive influences and are significantly related to
the treatment charges imposed at the 90% confidence level.
In addition, the findings show that multiple linear model
with transformation towards to be the best model.
©
2008 IUP . All Rights Reserved.
Long
Persistence Volatility in
the Financial Corporate Bond Spreads
-- Mehmet
Turk and Alper Ozun
The
recent swings in financial markets resulted in sharp increases
in the borrowing costs of corporates. After steep losses in
2000-2002, as financial markets found their footing, prices
on virtually all traded financial claims rose as the economic
outlook improved. This pattern was particularly true in the
corporate bond market. Especially, the higher-rated companies'
ratings are relatively more important since during the last
recession, recovery was fairly modest though swings in financial
markets were quite large. If this is the case, this turnaround
is worth examining. As the risk of spillover from financial
sector to others is significant, corporates will find it especially
useful to determine how much the volatility would last in
higher-rated spreads. The empirical analysis shows the conditional
standard deviation, permanent component and transitory component
in recent high volatility.
©
2008 IUP . All Rights Reserved.
Book
Review
Risk
Management & Derivatives
-- Author:
Rene M Stulz Reviewed by Padma Srinivasan
The
book opens with a question on the importance of risk management,
"Why risk management?" and goes on to quantify financial
risks and their optimal management to enhance the firm's competitive
advantage. Derivatives are now increasingly being used to
deflect financial risks, and to take advantage of growth opportunities,
the managers have to adopt suitable derivative intervention
to facilitate the firm's growth sustainability. It cites Merck's
example, which devised five steps: to understand the distribution
of exchange rates; to estimate the impact of adverse exchange
rate movements on the strategic plan; to decide whether to
hedge, depending on external and internal considerations;
to choose the appropriate financial instruments; and to determine
how much to hedge.
©
2008 IUP holds the copyright for the
review. All Rights Reserved.
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