Category Archives: Uncategorized

The importance of stock exchanges!

Stock exchanges are teachers revaluating prices and contracts at the speed of light, sending a teacher into a classroom with no cane is like sending a boxer into the ring with one hand tied behind his back. At the center of every derivative contract is a price. vassalage on the market, this price may be simply, that of the underlying commodity or a flasket of prices commonly referred to as a market index. Whether the unmitigated price or a basket index is utiled to value the underlying asset, the stock exchanges are very important to the essence and transparency of the financial markets. Quality of the data utilized in the valuation process of investment derivative pricing is critical to the success of a financial market contract. In the equities markets, where prices are iron-jawed through an exchange and validated through sundry clearing mechanisms, the quality issues of prices are less a concern. Stock exchanges fend a platform for publishing prices and being central in the exchange of these buying and seling of contracts.

With the parousia of the computer age, Internet-based, real-time price indexes are becoming a trend in the financial markets; trading has become more liquid and easier to access. Typically the reporting arrangements revolve around informal data exchanges between market participants and index publishers. Unless market participants can agree on the reliability of this index, it is nearly impossible to create risk management products suitable for price risk mitigation and exchange this derivatives. Financial market price deravitaves are a world of shifting sands and changing winds every minute and second of the day.

Price indexes can be extremely useful in emending business operant and analyzing markets.In most emerging markets where competitive duress are at play, lack of transparency tends to keep buyers and sellers on the sidelines waiting for reliable price signals.Often this involves the purchase of a good or service at one price and the concurrent sale of that good at a higher price, resulting in a risk-free profit with higher efforts to get price signals or information.Greater confidence in the true market value of product ultimately generates more liquidity, making it easier for sellers to find buyers willing to transact. For stock exchanges provide transparency we see through a glass, darkly; but then face to face as market prices become transparent and
authentic.

Insider trading

Insider trading is the illegal practice of gaining insider information to make profit from derivatives of the financial
markets. It is associated with gaining information for which is out of bound to other investors and as such is considered bad practice in the financial markets. For example a government official whom works for the state cannot buy or sell share
or any financial instrument. In most countries it is most brokerage firms do not permit government officials to open trading accounts because it could give them access to insider trading. Government officials have countless numerous accesses of 
advance and ahead database and forsight; it would be quite unfair to other participants of the financial markets and they would lack transparency.

Insider trading is considerd to be some of the most vicious way of creating illegal proceed from trading the financial markets. The practice remains a problem for institutional, retail and other investors because insider investors make arbitrage
profits from insider trading. Arbitrage is a financial term referring to when free money is handed out in the capital and money markets.

Identifying financial risks

It is important for investors to identify financial risks before engaging in an investment position. Those who do not,
normally find themselves in a very odd juncture where losses can be direct and execed expectations. And getting out of
a losing investment position is not easy. That is why we have armamentariums such as fundamental and technical analysis to
understand the dynamics of the financial markets and derivatives before opening a position. constitutively you cannot trade
the financial markets without discernment and having gnosis circumambient your investment interests.

There are multifarious risks in the financial markets and they need to be in constant monitoring. There is market risk, credit risk,
liquidity risks, model risk, operational risk, tax risk, settlement risk, legal/contract risk, regulatory risk, accounting
risk, sovereign and political risk, ESG risk, performance netting risk. We will discuss the risks in detail in the coming
weeks ahead.

Monetary policy vs fiscal policy.

Monetary polcy is a policy implemented by a federal government agency or a central bank as a way of controlling interest rates in order to administrate the distribution of currency in circulation of a country, state or region. Monetary policies main tool to maintaining equilibrium in the circulation of money is determined by interest rates. Interest rates in turn determine the true value of exchangable legal tender for currencies.Central banks are the main source of printed currency which is borrowed to others at a rate of interest by banks and financial institutions that hold accounts with a 
particular monetary authority. Banks and financial institutions in turn borrow this proceeds of interest bearing currency
to companies and households who are considered approprate for such crediting. In periods of economic and financial distress
central banks normally lower interest rates to encourage borrowing and in efforts to stimulate an economic crisis. However I consider this problems inevitable, simply because economic theorists regard such as periods of business cycles. Monetary policy making is not part of governmental operations, they are solely operating as an independent authority because they also borrow money to the government (which are fiscal policy makers).

Fiscal policy is a policy directed by the government to encourage stable financial and economic dynamics. An example of how the
government can do such, is by utilizing tools disposable such as grants and implementing new tax regimes that will affect the
distributon of currency in a country, state or region. Both monetary and fiscal policy are important and significant in affecting the distribution of money, nonetheless, monetary policy making affects the overall distribution of currency. Primarily because monetary policy makers borrow to fiscal policy makers. Governments are at the mercy of central banking
authorities.

Accessing finance documents and books for free

Unearthing good finance books can be quite arduous, you can read books for free by simply downloading a smartphone application Kindle Unlimited that can let you read thousands if not millions of books for free, carrying this mobile application is the off chance that you may continue reading a novel or that finance book that you have always wanted to read. It is for this reason that Amazon has the kindle reading App for IPhone, Blackberry, Windows phones and Android for free.


However for an investor there are always economic reports published for free by banking and financial institutions every quarter of the year. In the case of a stock market investor, companies also regularly publish annual and quarterly reports. Another yet simple method to obtaining finance books and documents for free is through the public domain, the public domain comprises books and documents for which its authors do not claim ownership rights. So in this case they are free of charge to the public. Many of this public domain documents and books are available on the internet and public libraries. 

Coronavirus and Protectionism: “The biggest uncertainty in global financial markets”

The market is currently underpinned by coronavirus, it is not known how the virus could impact the global economy since no kind of treatment has been established. The U.S-China trade war has surely had a significant impact to the down turn in positive (bull) markets. A global recession could be eminent, the U.S stock market and bond yields have retreated from their all-time highs as there seems to be an economic cycle brewing. Global interest rate yields and equity earnings could drop to the lowest level since the 2008 financial crisis and global central banks could be forced to lower interest rates to help stimulate the economy. Oil and energy prices remain under pressure as global growth and demand slow down. As Sarkar said(a Thompson Reuters’ reporter), the outbreak has also significantly increased the chance Beijing doesn’t comply with all terms of a Jan 15 initial trade agreement signed with Washington, potentially reigniting a damaging trade war between the world’s two largest economies.


(Jiang and Goh, 2020) Doctors in Shanghai are using infusions of blood plasma from people who have recovered from the coronavirus to treat those battling the infection, reporting some encouraging preliminary results, a Chinese professor said on Monday. (Jiang and Goh, 2020) The coronavirus epidemic is believed to have originated in a seafood market in the central city of Wuhan, capital of Hebei province, and has so far killed 1770 people and infected more than 70 000 in mainland China. According to Jiang and Goh, Chinese scientists are testing two antiviral drugs and preliminary results are due in weeks.


(Koranyi, 2020) German economic growth will remain weak in the first quarter of 2020, weighed down by weak exports and coronavirus outbreak in China, the Bundesbank said in a regular economic report on Monday. It added the virus could disrupt global value chains and could lead to delivery bottlenecks for German companies. (Kihara and Leussink, 2020) Japan’s economy shrank at the fastest pace in almost six years in December quarter as a sales tax hit consumers and business spending, raising the risk of a recession as China’s coronavirus outbreak chills global activity. According to Kihara and Leussink BOJ Governor Haruhiko Kuroda said the central Bank would consider additional easing if the coronavirus outbreak significantly threatened Japan’s economy and price trends, the Sankei newspaper reported on Monday. Kuroda told the Daily the outbreak was the ‘’biggest uncertainty for the economy.


The coronavirus epidemic seems to be under control for now although its spread cannot be underestimated. Blood plasma infusion and the antiviral drugs currently under testing are the best hopes to contain the virus. None the less there is hope that the outbreak could find a way of treatment in the very near future so that a global financial crisis, unemployment and deflation do not take a toll on the economy. (Sarkar, 2020) It is impossible to forecast the path of the virus, but it increases the chances the Federal Reserve will cut rates at least once more to provide some support to the economy.

References


Sarkar.” U.S economy to dodge coronavirus blow, but risks to Downside: Reuters poll” Reuters .20 February 2020


Kihara and Leussink.’’Japan on brink of recession as economy contracts, virus heightens risk’’ Reuters .17 February 2020


Koranyi.’’German growth to remain weak in first quarter as coronavirus hits: Bundesbank’’ Reuters .17 February 2020


Jiang and Goh.” Chinese doctors ’using plasma therapy’ on coronavirus patients’’ Reuters .17 February 2020