Archive for the ‘loans’ Category
Wednesday, April 14th, 2010
As the previous section has shown, some price effects of trading are temporary, and in an efficient market, in the long run, prices are expected to return to their fundamental values. However, the equilibrium price itself is not a fixed value, but moves with public news and information revealed by the trading process. In this section, we develop models that separate the equilibrium price dynamics from short-term price fluctuations around the equilibrium. Such models can be used, for example, to assess the speed of convergence to the equilibrium after a shock (e.g. a large transaction). The variance of the short-term deviations from the equilibrium price are a measure of market liquidity.
Finally, in a setting where one asset is traded on several different markets (fragmented trading), the models can be used to assess how informative the trading process is in each market (the contribution to price discovery); this last topic will be dealt with in section 9.4.
Tags: business competition, CEO, merger, pricing policy, shareholders, shares
Posted in financial risks, funds, global market, innovative marketing, loans | Comments Off
Friday, October 30th, 2009
Whenever the equity risk premium falls below current spread levels, there is a quasi-arbitrage opportunity between corporate bonds and equities. After a long period with a positive equity credit premium, the picture changed in 1999, signaling the height of the equity bubble. The interpretation of this was that expected returns on corporate bonds versus equities were extremely attractive. While corporate bonds actually outperformed equities by far between 2000 and 2002, those years were characterized by a massive widening of credit spreads. Due to the bursting of the tech bubble and the credit spread tightening since fall 2002, the gap has closed.
Tags: bad debt, business objectives, car loans, compare credit, currency trading, debt consolidation, debt settlement, forex, funds, home equity, investment opportunities, loans guide, portfolio, refinancing
Posted in budget analysis, business goals, finances, financial principles, financial risks, loans, management, merchandise | Comments Off
Tuesday, October 27th, 2009
Remember that corporate bonds can be replicated by the combination of a riskless bond and a short put on the assets of the company. Since lower rated bonds generally are closer to at-the-money than higher rated bonds, it can be expected that the increase of equity-market volatility leads to a widening of the spread differential between issues of different rating classes. This is due to the fact that the sensitivity of the bonds to changes in volatility is different. Options that trade close to at-the-money levels react more strongly given a change in volatility compared with options, which trade far out-of-the-money. The above-described relationships can be witnessed particularly well during crash scenarios in equity markets. In 1990/91, the rise in equity volatility, which was initiated by numerous profit warnings by companies, was a leading indicator of credit spreads.
The subsequent rise in implied equity-market volatility led to a steepening of the yield differential between high and lower rated credits. Baa and Aa rating classes are chosen to illustrate this relationship because for these rating classes the bond universe offers sufficient breadth and liquidity.
Tags: bonds, business, business tips, credit, credit cards, economy, finances, making money, money management, payday loans
Posted in global market, innovative marketing, loans, management, merchandise, money spending, negotiationg | Comments Off
Saturday, October 24th, 2009
Credit spreads historically have been negatively correlated with 3-year rolling equity-market returns, as we would have expected from the Merton model. Indeed, there seems to be a longer term debt–equity cycle. But the chart also reveals a significant decoupling of equity and credit during the 1990s. Since equity-market performance alone is only temporarily able to explain variations of credit spreads, we will now analyze the impact of equity volatility on spreads. However, most of the time equity prices and implied volatility tell the same story. When stock prices are falling, demand for protection increases, and thus volatility, which is simply the price of protection, rises. The result is a strong negative correlation between equity prices and option-implied volatility. Yet the times, when both markets tell different stories, are the most interesting.
Tags: market cycles, money, Partnership, payment, price, Private Annuities, property, purchase real estate, shares, tax
Posted in finances, financial principles, financial risks, funds, global market, innovative marketing, loans | Comments Off
Monday, August 3rd, 2009
A business plan helps you achieve your goals. It also helps discipline the way you think about what you’re doing. But business plans have another important purpose.
Companies need business plans to apply for loans, grants, or other forms of funding to start or expand the business. Lenders and financial managers like to see something in writing that shows a firm is committed to its objectives and knows how it’s going to accomplish those objectives. Without a plan, serious outside funding—or any funding, for that matter— might not be available. After all, if you were in the business of investing money, how would you select the companies that would be the best risks?
But that means you need to write your business plan in different ways for different financial participants:
Plans used to attract equity investors—financial partners who will prosper as the business prospers—must be written to show how investors will gain from the company’s success. Investors expect a high rate of return, so they will be looking at growth and profit projections. Plans that project a successful profile are what equity investors are seeking.
Plans designed to appeal to lenders must demonstrate methodologies for repaying loans. At the risk of being simplistic, lenders have little financial stake in the success or failure of the company. They’re interested in how the company plans to repay the principle and its interest. And lenders are more likely than equity investors to be
concerned about cash flow. Your business plan should provide a timetable with repayment amounts the lenders believe your company will be able to make.
Tags: benchmark, business plans, marketing schedule, methodology, sales
Posted in developers, equity, expenses, innovative marketing, loans, online bank | Comments Off
Wednesday, July 29th, 2009
First and foremost, cash flow is not the profit you make from sales or the difference between expenses and revenue. Cash flow is the flow of money in and out of a business. That’s all.
Cash is accounted for as an asset, and there are a lot more challenges related to cash flow than accounting provides. Fortunately, there are also solutions, or at least strategies, to maximize the inflow and minimize the outflow.
Keep in mind Maxim 1 of modern business:
Everything a business does takes longer and costs more than managers could possibly anticipate even in their most liberal scenario. Adjust your thinking accordingly.
What is cmhl For the sake of this discussion, consider it the company’s most valuable asset, the one you need to protect with all your might.
Tags: cash flow, profit, sales
Posted in accounting, global market, loans, online bank, payments | Comments Off
Wednesday, July 29th, 2009
If your company’s greatest concern is excess funds, not excess time, the A/P system can signal the availability of excess and investable funds that won’t hurt cash flow or threaten financial security. These are called disbursement options and can be managed in three ways: presentment reporting, balance reporting, and sweep accounts. Well describe them here, although you don’t need to understand them completely. But you certainly should better appreciate what your accounting department does!
Presentment reporting refers to the amount of checks presented to the bank for payment each day, an amount impossible to predict due the various floats applied by each individual vendor. Your firm establishes a separate disbursement account at the bank for the payment of those checks. The bank then reports to your company before noon the number of checks and amounts presented for payment, funds are then applied to that account to satisfy those checks. No extra funds are required on deposit for that day, allowing more for investment.
If your company’s greatest concern is excess funds, not excess time, the A/P system can signal the availability of excess and investable funds that won’t hurt cash flow or threaten financial security. These are called disbursement options and can be managed in three ways: presentment reporting, balance reporting, and sweep accounts. Well describe them here, although you don’t need to understand them completely. But you certainly should better appreciate what your accounting department does!
Presentment reporting refers to the amount of checks presented to the bank for payment each day, an amount impossible to predict due the various floats applied by each individual vendor. Your firm establishes a separate disbursement account at the bank for the payment of those checks. The bank then reports to your company before noon the number of checks and amounts presented for payment, funds are then applied to that account to satisfy those checks. No extra funds are required on deposit for that day, allowing more for investment.
Tags: bank payment, floats, vendor
Posted in global market, loans, payments | Comments Off
Tuesday, July 21st, 2009
I was watching one of those funniest home video shows a while back. There was an adorable video of a dad digging this big hole in the backyard. Right behind him, just out of his line of sight, was a little kid with a shovel, throwing the dirt right back in the hole.
That’s what it’s like trying to get out of debt sometimes, when you share your finances with another person. In fact, it can be the source of a lot of tension in your relationships.
You may be the most determined person in the world when it comes to getting out of debt. But if someone else refuses to slow down their spending, or even worse, continues to incur new debts, you’re going to get nowhere. If change is going to occur, you’re going to need to sit down and have a serious talk with them about the changes that you think need to take place.
Here are some points to consider when having this less-than-fun discussion with someone you care about:
Don’t place blame. The moment you make someone else the whipping post for your frustrations is the moment he or she will probably stop listening. Even if you know you’re right, you may need to swallow a little pride to get your plan moving.
Take a lot of blame. Heck, take all of it if you can. The more you make this about you, the less defensive and resistant to change someone else will be.
Use “I” statements. As you talk about your money stress, be sure to speak in the first person. Chances are, the other person cares about you a lot, too. When he or she sees the true extent of your stress and anxiety over your finances, the part of him or her that cares for you will want to step up and help!
Posted in credit cards, finances, global market, loans | Comments Off
Tuesday, July 7th, 2009
As you battle to get out of debt and to use debt wisely, it’s of the utmost importance to realize how your credit scores affect your situation. In fact, there is nothing that may affect the money that flows in and out of your household more than your credit score.
I’ll discuss the importance of salvaging your credit score in Chapter 20, but suffice it to say, you’ve got to start guarding that thing like it’s the president! Your credit score is a rating of how “safe” you appear to be to a potential lender (i.e., how likely you are to pay off the money that you borrow). The higher your score, the safer you are. The safer you are, the more friendly your interest rate and repayment terms are going to be.
In fact, two people with different credit scores will be required to pay a noticeably different monthly payment on the same loan. The following table contains six different credit scores along with what the corresponding mortgage ends up costing them. For this example, I’ve used a 30-year fixed-rate mortgage on $250,000. As you can see, the failure to show tender loving care to your credit score results in some major money disappearing from your life. In fact, the difference in total interest paid between the best credit score and worst is over $200,000. This is money that could be used to pay off your other debt and save for your other goals. Heck, that’s enough money to buy a second home!
Posted in finances, global market, loans, real estate | Comments Off
Friday, June 12th, 2009
The fourth source of poor economic performance may derive from failures, often based on ignorance, in the management of risk. It involves concepts equally as sophisticated and complex as the economic concept of value.
Bernstein begins his book on risk with the provocative question, “Why is the mastery of risk such a uniquely modern concept?” He views risk as the concept that defines the boundary between modern times and the past.8 Prosperity, like risk management, is a new thing. So is it just a coincidence that wealth creation began about the time that the tools to manage risk began to take form?
It is an intriguing hypothesis, but it is clouded by the fact that many other types of progress accelerated at the same time. Nevertheless, a likely suspect for past economic stagnation might have been a general failure to manage risk. Clearly, there was no way prior to 1500, or likely prior to 1750, to develop scientific risk-management techniques. The mathematical tools were not there, the concept of probability was just evolving, and the notion of statistical sampling had not been developed. Risk management was still heavily tied into theology—pray for rain.
Posted in global market, loans, real estate, taxes | Comments Off