Financial services Essay Example | Topics and Well Written Essays - 1250 words

Financial services - Essay Example Transactions on derivative contracts occur between two parties in which a financial agreement is done whose payments depend on the value of the underlying assets and securities. Derivative contracts are broadly categorized into lock and option products. Lock category derivative contracts bind the two parties into an obligation of executing the contract according to the terms and conditions over the period for which the contract is agreed upon. Option product derivatives are contracts that provide the right to the buyer but not the obligation to execute the contract over the period of the contract (Whaley, 2007, p.121). The derivative contract includes an agreed upon price between the two parties to buy or sell the product within a specified period of time. The derivative contracts may be traded in the exchange in which case these are called exchange-traded-derivatives or may be privately traded in which case these are called Over-the-counter derivatives. Over the counter derivatives are not traded in specialized exchanges. Recent examples of banks and companies making heavy losses from using derivatives The financial meltdown of 2007 in US was largely due to the fall in the mortgage prices which served as underlying assets for loan products. Irresponsible lending, relaxed policies of the banks, corporate houses and happy-go-lucky attitude of the regulators in assessments of the derivative products led to the fall of big banks like Lehmann Brothers. After a meagre financial recovery from the support of the government, derivative market is again one of the biggest markets in today’s global financial scenario (Schwartz and  Smith, 1997, p.499). Banks today are carrying out transactions on derivative markets on a much larger scale than ever before. The banks are more opaque and are indifferent to the risky derivative products. Banks, however, are unwilling to disclose the face of the derivative contracts to their investors. It is understood that a change i n the underlying market factors would lead to massive losses of the world economy as a result of devaluation of the underlying assets. The size of the derivative markets has grown from $500 trillion in 2007 to $707 trillion in 2011. Lack of transparency in trading of derivative contracts reflect the risk involved as a result of probable fluctuation of underlying market factors. This can be observed in the light of recent examples. J P Morgan has registered a loss of $6 billion due to trading in risky derivatives. The increasing size of derivative markets and declining due diligence in investments in order to achieve higher profits imposes higher risk. Several high ranked officials from big companies like Meryl Lynch, Morgan Stanley, and Citigroup commented that the banking industry is vulnerable in the wake of huge losses in derivative markets. After the earthquake in Japan, J P Morgan decided to reverse their position in derivatives due to the huge losses to be incurred. In 2011, D eutsche Bank decided to reduce the foreign currency exposure of Post bank by â‚ ¬8.1 billion looking at the heavy losses in their investment in derivatives. Deutsche bank themselves lost $1.74 billion in US derivative markets. A huge foreign exchange option for Hewlett Packard was executed early in order to reduce the losses predicted out of market uncertainty. Due to lack of transparency on the investments in derivative ma

Ssocial media Essay Example | Topics and Well Written Essays - 1500 words

Ssocial media - Essay Example Social media refers to any of the many online tools that allow people to share information and learn from others through a communication network in an open process. Social media thus refers to online contents that are created and consumed by regular people for communication. As Singh and Diamond (10) noted, it may be comments a person adds at the end of a website- article or family photograph he uploaded to a photos-sharing site or a video he uploaded to a video-sharing site. From some years ago to now, business communication for most of the business had a huge impact, because social media brought tremendous changes in business and marketing communication. It has not only brought greater opportunities for many businesses, but also posed bigger challenges for many to survive in competing with others. It thus becomes very important for a small startup firm to also realize that it needs to utilize the power of the social media well in order to prosper against the big companies that are already established. The marketing and advertising needs to be very sharp; website interface must be very catchy and most importantly, it must be able to gather a large customer base. For a new business to be set up successfully, marketing communication is an extremely important function since its ultimate plan to reach its customers will be successful only if it can communicate with its people about the business and its goals. When introducing a new brand or the existing brand with new product or service to the market, it needs to be communicated to the general public in order to make them aware about it, to inform or persuade them to buy or to keep on reminding them about the goods or brand (Kitchen 21). This can be done by displaying catchy captions and promotional logos of the brand... The paper describes the social media in competitive business contexts. Almost all Fortune 500 and world’s largest multinational companies have established relatively much stronger stance in social media to use it for marketing communication purposes, and they proclaim that social media helped them a lot. A best example is Wal-Mart because as recent reports and studies revealed, social media played a significant role in Wal-Mart’s success. Large numbers of business organizations and government firms use private as well as public social networks. Turban, Bollojuand and Liang (203) found that almost all Fortune 500 firms keep on encouraging its employees to use an internet social media by creating its own applications and social discussions. It proves that social media helps businesses not only for marketing communication, but also to enhance knowledge and experiences of employees and other people by knowledge share of social media networks and thus to improve overall prod uctivity of its people. Websites like Twitter and Facebook allow companies to form their own forums and groups where they can keep in touch with one another and discuss important matters. Such an exchange of ideas is healthy and keeps employees at their toes. Moreover, since everybody checks their notifications from time to time, companies need not worry about the message not going across. For any new or existing business, consumers are the biggest concern. Almost all the businesses today are required to be consumer-centric.