Currency Cross

Investing Strategy

noreply@blogger.com (Unknown) — Tue, 04 May 2010 23:31:00 +0000

Investing Strategy You Should Learn

You don't have to have a strategy in order to invest. But with the right strategy, you can make investing a whole lot easier -- and more profitable.

The problem is that everywhere you turn, you see someone telling you that their strategy is the best one -- and in some cases, the only one that will make you successful. With so many different ways to profit from stocks, how do you decide which one is right for you?

Perhaps the most amazing thing about investing in stocks is how many different ways there are to make money. Let's take a brief look at some of the popular strategies many investors use:

Large-cap investors seek the stability of established companies with proven track records. Stocks like Wal-Mart (NYSE: WMT) and Microsoft (Nasdaq: MSFT) have their fastest growth phase behind them now, but shareholders don't have to worry about them going belly-up anytime soon.

Value investors look for stocks that trade at attractive prices. Like a Christmas shopper waking up at 4 a.m. on the day after Thanksgiving, value investors hope to snag bargains by buying out-of-favor stocks. While some beaten-down companies never recover, others, such as Fairfax Financial (NYSE: FFH), provide stellar returns when they come back.

Growth investors focus more on companies with strong prospects for the future. Although they prefer not to pay too much, growth investors are willing to pay up for the most promising businesses. Google (Nasdaq: GOOG) is a good example, with more than 75% annual earnings growth in the past five years.

Dividend investors value stocks that pay them back with generous income streams. Dividend-paying stocks like Duke Energy (NYSE: DUK), with its 4.8% yield, won't always show big price jumps. But over time, dividend investors hope to outpace their counterparts.

Small-cap investors look beyond the security of blue-chip stocks to find undiscovered companies, such as specialty chemical-maker Innophos (Nasdaq: IPHS), that have the potential to become the household names of tomorrow. While this strategy is somewhat riskier, small-cap investors expect the profits from their successes to outweigh the losses from failures.

International investors recognize that great companies exist throughout the world. You might not run into companies like Cemex (NYSE: CX) very much on the financial pages, but their relative obscurity can bring greater rewards as well.

You'll notice that as you read about these strategies, you can almost picture the typical investor who uses them. Stereotypical dividend investors are widows and orphans who count on quarterly dividend checks to pay bills, while international investors might bring to mind a jet-setting globetrotter with a faint British accent.

Resource depletion

noreply@blogger.com (Unknown) — Sat, 24 Apr 2010 07:28:00 +0000

Is an economic term referring to the exhaustion of raw materials within a region. Resources are commonly divided between renewable resources and non-renewable resources. Use of either of these forms of resources beyond their rate of replacement is considered to be resource depletion.

Resource depletion is most commonly used in reference to the farming, fishing, mining, and fossil fuels.

Climate change

noreply@blogger.com (Unknown) — Sat, 24 Apr 2010 07:27:00 +0000

Is a change in the statistical distribution of weather over periods of time that range from decades to millions of years. It can be a change in the average weather or a change in the distribution of weather events around an average (for example, greater or fewer extreme weather events). Climate change may be limited to a specific region, or may occur across the whole Earth.

In recent usage, especially in the context of environmental policy, climate change usually refers to changes in modern climate. It may be qualified as anthropogenic climate change, more generally known as "global warming" or "anthropogenic global warming" (AGW).

For information on temperature measurements over various periods, and the data sources available, see temperature record. For attribution of climate change over the past century, see attribution of recent climate change.

Government debt

noreply@blogger.com (Unknown) — Sat, 24 Apr 2010 07:26:00 +0000

Also known as public debt or national debt - is money (or credit) owed by any level of government; either central government, federal government, municipal government or local government. By contrast, annual government deficit refers to the difference between government receipts and spending in a single year.

A corporate bond

noreply@blogger.com (Unknown) — Sat, 24 Apr 2010 07:25:00 +0000

Is a bond issued by a corporation. It is a bond that a corporation issues to raise money in order to expand its business. The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date. (The term "commercial paper" is sometimes used for instruments with a shorter maturity.)

Consumer debt

noreply@blogger.com (Unknown) — Sat, 24 Apr 2010 07:25:00 +0000

Is consumer credit which is outstanding. In macroeconomic terms, it is debt which is used to fund consumption rather than investment.

Tax policy

noreply@blogger.com (Unknown) — Sat, 24 Apr 2010 07:24:00 +0000

Is the government's approach to taxation, both from the practical and normative side of the question.

The Index Options

noreply@blogger.com (Unknown) — Wed, 21 Apr 2010 23:22:00 +0000

When you invest in only one or two stocks, you are taking the chance that they might not go up when the market does. Most people cannot afford to buy variety of stocks wide enough to fluctuate with the entire market. But now there is a relatively new investment. They are designed to let investors profit from the rise or fall of the total market.

Index option s are like stocks options. they give you the right to buy or sell securities at a predetermined price anytime before the option expires. an option to buy a call , the right to sell is a put.

When you buy such an option from a broker, you merely place a bet that some broad index of stocks will rise or fall. usually within the next 90 days. an index option usually cost only a few hundred dollars, but you could reap the same profits as if you had invested.

That is because a small move up or down in the index can cause a much bigger change in the value of the options trading. and the chills. Because if you wager wrongly you lose everything you had invested.

Secret of Savings?

noreply@blogger.com (Unknown) — Wed, 14 Apr 2010 21:34:00 +0000

What is the secret of saving more?

Simply this:

Pay yourself first.

When you collect your paycheck, do not rush out and spend it all. Lay away a fix amount every week or every month for your own savings or investments. That is paying yourself first - and it is smart.

Where to Put Your Savings?

noreply@blogger.com (Unknown) — Wed, 14 Apr 2010 21:09:00 +0000

Where is the best place to put your savings?

This is no time to be taking needless chances with your money. But it is possible to put your cash into institutions or instruments offering returns that are safe, big and guaranteed.

Among the many safe and rewarding places are money-market funds, bank money-market deposit accounts, bank certificates of deposits,. Bonds hold out tempting yields, too, but they are riskier because their face value - the price that you buy or sell them for rises and falls along with the gyrations of interest rates.

Determining where to put your savings, you have to weigh and balance off three traditional concerns.

*Yield - how much am I earning on my money?
*Liquidity - how quickly can I withdraw my money if I need it?
*Safety - am i sure to get back every penny I put in?

Financial Futures

noreply@blogger.com (Unknown) — Thu, 08 Apr 2010 00:46:00 +0000

Even for the experts, the commodities futures market has always been gamble. But now there are futures contracts for people who don't know beans about soybeans. The so-called in this case are good old stocks and bonds, and they are traded in the fast and furious financial futures market.

The financial futures include contracts in Treasury bills, bonds and notes, bank certificates of deposit and a variety of other interest-bearing securities. when you buy one of this contracts, you are betting that, for example, interest rates will go down in the future and thus the prices of the bills, bonds or notes covered by the contract will go up.

You can buy financial futures through commodity firms or through brokers who specialized in commodities are large stock brokerage houses. But if you are a would-be buccaneer in the financial futures market, take a tip from the experts and do your trading on paper for a while, until you get your sea legs.

If and when you are ready to start wheeling and dealing for real, then pick active markets, such as those trading in Treasury bill and Treasury bond futures. the more trading that is going on, the more likely you are to to find a buyer or a seller for your contract at the price you want. And don't forget to place stop orders with your broker. They instruct him to close out your position when the price reaches a certain level and they can help you limit any losses.

But any way you can play it, futures is a highly leveraged business. So this kind of investment - while increasingly popular - is not for those who aren't prepared to take substantial risk.

noreply@blogger.com (Unknown) — Sat, 03 Apr 2010 02:16:00 +0000

Pricing of Futures

"
When the deliverable asset exists in plentiful supply, or may be freely created, then the price of a futures contract is determined via arbitrage arguments."

This is typical for stock index futures, treasury bond futures, and futures on physical commodities when they are in supply (e.g. corn after the harvest). However, when the deliverable commodity is not in plentiful supply or when it does not yet exist.

For example on wheat before the harvest or on Eurodollar Futures or Federal funds rate futures (in which the supposed underlying instrument is to be created upon the delivery date).

The futures price cannot be fixed by arbitrage. In this scenario there is only one force setting the price, which is simple supply and demand for the asset in the future, as expressed by supply and demand for the futures contract.

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 22:59:00 +0000

Currency Swap

"This type of swap is also known as a cross-currency interest rate swap, or cross-currency swap.
"

Currency swap is a foreign-exchange agreement between two parties to exchange aspects (namely the principal and/or interest payments) of a loan in one currency for equivalent aspects of an equal in net present value loan in another currency.

There are three different ways in which currency swaps can exchange loans:

The most simple currency swap structure is to exchange the principal only with the counterparty, at a rate agreed now, at some specified point in the future. Such an agreement performs a function equivalent to a forward contract or futures.

The cost of finding a counterparty (either directly or through an intermediary), and drawing up an agreement with them, makes swaps more expensive than alternative derivatives (and thus rarely used) as a method to fix shorter term forward exchange rates. However for the longer term future, commonly up to 10 years, where spreads are wider for alternative derivatives, principal-only currency swaps are often used as a cost-effective way to fix forward rates. This type of currency swap is also known as an FX-swap.

Another currency swap structure is to combine the exchange of loan principal, as above, with an interest rate swap. In such a swap, interest cash flows are not netted before they are paid to the counterparty (as they would be in a vanilla interest rate swap) because they are denominated in different currencies. As each party effectively borrows on the other's behalf, this type of swap is also known as a back-to-back loan.

Last here, but certainly not least important, is to swap only interest payment cash flows on loans of the same size and term. Again, as this is a currency swap, the exchanged cash flows are in different denominations and so are not netted. An example of such a swap is the exchange of fixed-rate US Dollar interest payments for floating-rate interest payments in Euro.

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 06:19:00 +0000

Warrants Option

Is a security that entitles the holder to buy stock of the issuing company at a specified price, which is usually higher than the stock price at time of issue.

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Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or dividends. They can be used to enhance the yield of the bond, and make them more attractive to potential buyers. Warrants can also be used in private equity deals. Frequently, these warrants are detachable, and can be sold independently of the bond or stock.

Warrants are actively traded in some financial markets such as Deutsche Börse and Hong Kong. In Hong Kong Stock Exchange, warrants accounted for 11.7% of the turnover in the first quarter of 2009, just second to the callable bull/bear contract.

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 06:09:00 +0000

Put Option

A put option (usually just called a "put") is a financial contract between two parties, the writer (seller) and the buyer of the option. The buyer acquires a short position by purchasing the right to sell the underlying instrument to the seller of the option for specified price (the strike price) during a specified period of time.

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If the option buyer exercises their right, the seller is obligated to buy the underlying instrument from them at the agreed upon strike price, regardless of the current market price. In exchange for having this option, the buyer pays the seller or option writer a fee (the option premium).

By providing a guaranteed buyer and price for an underlying instrument (for a specified span of time), put options offer insurance against excessive loss. Similarly, the seller of put options profits by selling options that do not become exercised. Such is the case when the ongoing market value of the underlying instrument makes the option unnecessary; i.e. the market value of the instrument remains above the strike price during the option contract period.

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noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 06:06:00 +0000

Option Styles

The style or family of an option is a general term denoting the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options - as well as others where the payoff is calculated similarly - are referred to as "vanilla options". Options where the payoff is calculated differently are categorized as "exotic options". Exotic options can pose challenging problems in valuation and hedging.

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noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 06:02:00 +0000

Fixed Income

Refers to any type of investment that yields a regular (or fixed) return.

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Governments issue government bonds in their own currency and sovereign bonds in foreign currencies. Local governments issue municipal bonds to finance themselves. Debt issued by government-backed agencies is called an agency bond.

Companies can issue a corporate bond or get money from a bank through a corporate loan ("preferred stock" is also sometimes considered to be fixed income).

"iIf you lend money to a borrower and the borrower has to pay interest once a month, you have been issued a fixed-income security."

Securitized bank lending (e.g. credit card debt, car loans or mortgages) can be structured into other types of fixed income products such as ABS - asset backed securities which can be traded on exchanges just like corporate and government bonds.

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 05:57:00 +0000

Employee Stock Option

Is a call option on the common stock of a company, issued as a form of non-cash compensation. Restrictions on the option (such as vesting and limited transferability) attempt to align the holder's interest with those of the business' shareholders. If the company's stock rises, holders of options generally experience a direct financial benefit. This gives employees an incentive to behave in ways that will boost the company's stock price.

"Employee stock options are mostly offered to management as part of their executive compensation package. "

They may also be offered to non-executive level staff, especially by businesses that are not yet profitable, insofar as they may have few other means of compensation. Alternatively, employee-type stock options can be offered to non-employees: suppliers, consultants, lawyers and promoters for services rendered. Employee stock options are similar to warrants, which are call options issued by a company with respect to its own stock.

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 05:46:00 +0000

Call Option

"Call options are most profitable for the buyer when the underlying instrument is moving up, making the price of the underlying instrument closer to the strike price. "

Is a financial contract between two parties, the buyer and the seller of this type of option. It is the option to buy shares of stock at a specified time in the future. Often it is simply labeled a "call". The buyer of the option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument (the underlying instrument) from the seller of the option at a certain time (the expiration date) for a certain price (the strike price). The seller (or "writer") is obligated to sell the commodity or financial instrument should the buyer so decide. The buyer pays a fee (called a premium) for this right.

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The buyer of a call option wants the price of the underlying instrument to rise in the future; the seller either expects that it will not, or is willing to give up some of the upside (profit) from a price rise in return for the premium (paid immediately) and retaining the opportunity to make a gain up to the strike price

The call buyer believes it's likely the price of the underlying asset will rise by the exercise date. The risk is limited to the premium. The profit for the buyer can be very large, and is limited by how high underlying's spot rises. When the price of the underlying instrument surpasses the strike price, the option is said to be "in the money".

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 05:43:00 +0000

Bond Option

Is an OTC-traded financial instrument that facilitates an option to buy or sell a particular bond at a certain date for a particular price. It is similar to a stock option with the difference that the underlying asset is a bond. Bond options can be valued using the Black model or with a lattice based short rate model such as Black-Derman-Toy, Ho Lee or Hull–White.

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 05:39:00 +0000

Vanilla Options

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Is a contract between a buyer and a seller that gives the buyer of the option the right, but not the obligation, to buy or to sell a specified asset (underlying) on or before the option's expiration time, at an agreed price, the strike price.

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 05:31:00 +0000

Foreign Exchange Option

(commonly shortened to just FX option or currency option) is a derivative financial instrument where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date.

"The global market for exchange-traded currency options was notionally valued by the Bank for International Settlements at $158,300 billion in 2005.
"

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The FX options market is the deepest, largest and most liquid market for options of any kind in the world. Most of the FX option volume is traded OTC and is lightly regulated, but a fraction is traded on exchanges like the International Securities Exchange, Philadelphia Stock Exchange, or the Chicago Mercantile Exchange for options on futures contracts.

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 05:27:00 +0000

Foreign Exchange Derivative

Is a financial derivative where the underlying is a particular currency and/or its exchange rate. These instruments are used either for currency speculation and arbitrage or for hedging foreign exchange risk. For detail see:

* Foreign exchange option
* Forex swap
* Currency future
* Currency swap
* Foreign exchange hedge
* Binary option

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 05:23:00 +0000

Real Options Analysis

ROA (not to be confused with return on assets) applies put option and call option valuation techniques to capital budgeting decisions. A real option itself, is the right — but not the obligation — to undertake some business decision; typically the option to make, abandon, expand, or shrink a capital investment.

"The opportunity to invest in the expansion of a firm's factory, or alternatively to sell the factory, is a real option."

ROA, as a discipline, extends from its application in Corporate Finance, to decision making under uncertainty in general, adapting the mathematical techniques developed for financial options to "real-life" decisions. For example, R&D managers can use Real Options Analysis to help them determine where to best invest their money in research; a non business example might be the decision to join the work force, or rather, to forgo several years of income and to attend graduate school. Thus, in that it forces decision makers to be explicit about the assumptions underlying their projections, ROA is increasingly employed as a tool in business strategy formulation.

noreply@blogger.com (Unknown) — Fri, 02 Apr 2010 04:00:00 +0000

Real Estate Derivatives

The market for US real estate derivatives, while in a nascent stage, made significant progress in 2007[citation needed]. There are now a diverse set of indices and methodologies being used to create and structure real estate derivatives, for both residential and commercial real estate.