Truly Inspirational
Path through excellence is through runs and not rupees.
Excellence is to run at 100%.
What is Excellence, Luck ?
"Attitude Matter and not Talent".
"Raise yourself to such of level that before any decision god asks you your wish."
Thursday, February 25, 2010
Wednesday, February 10, 2010
Country risk
POLITICAL RISK
The stability, predictability, and transparency of a country's political institutions are important considerations in analyzing the parameters for economic policymaking, including how quickly policy errors are identified and corrected. It is the degree to which politics is contrary to interest and welfare, the frequency of changes in government and any public security concerns. Relations with neighbouring countries are studied. Military threats place a significant burden on fiscal policy.
INCOME AND ECONOMIC STRUCTURE
Lower scores are given to countries with relatively narrow economies, weak or less-developed financial systems, and wide income disparities. Lower rankings may also echo highly leveraged or undeveloped private sectors and large and relatively inefficient public sectors.
Higher scores to countries which are working for economic reforms like the reduction of fiscal imbalances in order to strengthen macroeconomic stability, labour market flexibility, to strengthen the domestic financial sector, and to open trade and services globally generally follow.
ECONOMIC GROWTH PROSPECTS
Important consideration are that a government in a country with a poor or stagnant economy can less readily support public sector debt and withstand unexpected economic and political shocks than government in a country with a growing standard of living and income distribution can more readily.
FISCAL FLEXIBILITY
It is measured by an assessment of government revenue, expenditure, and trade balance. Fiscal trends, along with methods of deficit financing and their inflationary impact are important indicators of country credit quality.
GENERAL GOVERNMENT DEBT BURDEN
A sovereign with an untarnished track record of honouring debt obligations and a strong domestic capital market receive a better score than country with lower debt-to-GDP ratios but higher and more variable debt-servicing burdens.
EXTERNAL LIQUIDITY
Balance-of-payments pressures generally can be traced back to flawed economic policies. A key quantitative measure in this criteria category is gross external financing needs as a percent of current account receipts (CAR) plus usable foreign exchange reserves.
EXTERNAL DEBT BURDEN
The main focus is on trends in the public sector external debt position, the size of the government's contingent liabilities, and the adequacy of foreign-exchange reserves to service both public and private sector foreign currency debt.
The stability, predictability, and transparency of a country's political institutions are important considerations in analyzing the parameters for economic policymaking, including how quickly policy errors are identified and corrected. It is the degree to which politics is contrary to interest and welfare, the frequency of changes in government and any public security concerns. Relations with neighbouring countries are studied. Military threats place a significant burden on fiscal policy.
INCOME AND ECONOMIC STRUCTURE
Lower scores are given to countries with relatively narrow economies, weak or less-developed financial systems, and wide income disparities. Lower rankings may also echo highly leveraged or undeveloped private sectors and large and relatively inefficient public sectors.
Higher scores to countries which are working for economic reforms like the reduction of fiscal imbalances in order to strengthen macroeconomic stability, labour market flexibility, to strengthen the domestic financial sector, and to open trade and services globally generally follow.
ECONOMIC GROWTH PROSPECTS
Important consideration are that a government in a country with a poor or stagnant economy can less readily support public sector debt and withstand unexpected economic and political shocks than government in a country with a growing standard of living and income distribution can more readily.
FISCAL FLEXIBILITY
It is measured by an assessment of government revenue, expenditure, and trade balance. Fiscal trends, along with methods of deficit financing and their inflationary impact are important indicators of country credit quality.
GENERAL GOVERNMENT DEBT BURDEN
A sovereign with an untarnished track record of honouring debt obligations and a strong domestic capital market receive a better score than country with lower debt-to-GDP ratios but higher and more variable debt-servicing burdens.
EXTERNAL LIQUIDITY
Balance-of-payments pressures generally can be traced back to flawed economic policies. A key quantitative measure in this criteria category is gross external financing needs as a percent of current account receipts (CAR) plus usable foreign exchange reserves.
EXTERNAL DEBT BURDEN
The main focus is on trends in the public sector external debt position, the size of the government's contingent liabilities, and the adequacy of foreign-exchange reserves to service both public and private sector foreign currency debt.
Tuesday, February 2, 2010
Reflection on the World of Finance
World has seen many financial sector turmoil in past, be it Black Friday (September 24, 1869), Wall Street Crash of 1929, Japanese asset price bubble, 1997 Asian Financial Crisis, 2008 Financial Crisis, or the latest Dubai debt crisis. Always financial sector turmoil has triggered a re-examination of the existing theories and metrics about the financial sector developments of the past. Questions are being asked and answers being sought to some of the key issues regarding leverage, transparency, and liquidity underlying at the heart of the crisis.
What the current crisis has done is to question the very fundamentals of the entire financial framework. Instead of looking at the long term perspective markets are driven more by the myopic behaviour such as greed and fear. There seems to be a high correlation in all assets class during the crash. Each crash has seen the herd behaviour driven by sentiments.
We live in age of turbulence and it is becoming a routine today. Today changes are accelerating and surprises are increasing, both unpleasant and pleasant ones. There are many risk which are causes of these turbulences and together they multi fold to become even large. One has to move fast with these changes by trying to understand them. One has to understand the risk like
* Country Risk: A collection of risk associated with investing in foreign countries.
* Systemic risk: Risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group or component of a system.
* Credit Risk: A Risk of counter party failure.
* Market risk: A small possibility of losing large.
* Liquidity risk: A risk growing from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss.
* Risk due to lack of transparency.
* Concentration risk: Risk of loss arising from heavy exposure of one asset class.
Due to all these the importance of containing risk which is under the control has been underlined. There is need for some reforms in financial sector to prevent such turmoil.
* Financial market reform measure must be headed by an assessment of the resultant leverage for the system in quantifiable terms.
* It is also necessary to understand the substance of a product and not merely the nomenclature.
* People should take risk on the basis of risk of unknown probability rather than known probability.
* There is a need for strengthening of capital adequacy norms.
* Avoid creating moral hazards which give speculators no incentive to avoid excessive risk.
* There is critical role of governments to provide good governance of banking institutions and a reliable legal and judicial environment
What the current crisis has done is to question the very fundamentals of the entire financial framework. Instead of looking at the long term perspective markets are driven more by the myopic behaviour such as greed and fear. There seems to be a high correlation in all assets class during the crash. Each crash has seen the herd behaviour driven by sentiments.
We live in age of turbulence and it is becoming a routine today. Today changes are accelerating and surprises are increasing, both unpleasant and pleasant ones. There are many risk which are causes of these turbulences and together they multi fold to become even large. One has to move fast with these changes by trying to understand them. One has to understand the risk like
* Country Risk: A collection of risk associated with investing in foreign countries.
* Systemic risk: Risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group or component of a system.
* Credit Risk: A Risk of counter party failure.
* Market risk: A small possibility of losing large.
* Liquidity risk: A risk growing from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss.
* Risk due to lack of transparency.
* Concentration risk: Risk of loss arising from heavy exposure of one asset class.
Due to all these the importance of containing risk which is under the control has been underlined. There is need for some reforms in financial sector to prevent such turmoil.
* Financial market reform measure must be headed by an assessment of the resultant leverage for the system in quantifiable terms.
* It is also necessary to understand the substance of a product and not merely the nomenclature.
* People should take risk on the basis of risk of unknown probability rather than known probability.
* There is a need for strengthening of capital adequacy norms.
* Avoid creating moral hazards which give speculators no incentive to avoid excessive risk.
* There is critical role of governments to provide good governance of banking institutions and a reliable legal and judicial environment
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