Objectives. Of Information technology Audit

How to Make Mondays Productive

Here are some tips (out of many) that can help you be more productive on Mondays and make you hate them less.

1. Start the week on the right foot

Mondays can be tough but if you start off on the right foot, it can be great making your rest of the week successful. This is one of the simplest ways to make you Monday feeling good.

• Get up a little earlier

Please stop snoozing your alarm at least on Monday mornings. I never start my week rushing for office. It does great for my energy level for the rest of the day too. And most important, don’t grab your phone as soon as you open your eyes. Practice mindfulness, stop negative thoughts. Get positive thoughts and think about the excitement of the day.

• Pump those jams

Gather your power songs and play in a couple of fun oldies that will make you keep smiling by the time you reach the office. What Monday blues? No more!

• Reach your desk on time

I know it’s tough to be excited about working on Monday mornings, but when you wake up early, you’ll probably be on time. Arriving early to work on a Monday morning will make you ready for the day. It sets a good pace for the rest of your week.

• Get organized

And you are there on your desk. Does it seem a little disorganized? Clean it up! Is your inbox cluttered? Sort through it! Is your task list complicated? Move aside anything unimportant to set priorities right.

• Start off with a tough task

As you’re ready to start your day, make sure you are choosing the tough tasks. Be a little hard on yourself, trust me, it will do good for the rest of the day. You’ll be better able to handle other tasks and feel easy when you’re left with easy-to-do tasks by the end of the day.

While these may not seem like a lot, they’re all simple ways to kick off the new week on the right foot. You might make the best of your Mondays.

2. Get one thing done immediately

The time you lay your eyes on your system, keep one thing in mind, you are not going to switch between tasks. You know there is nothing more satisfying than knowing that you’ve accomplished one from the many tasks. Knock your tasks off your plate one by one. Do something that will get your soul in the right mode

3. Take ownership of your state of mind — physical and mental

Growing up happiness chemicals should be done as early as possible to kick start Monday. The way you perceive your Monday morning largely depends on your state of mind. If you are in a bad mood everything around you will be very disturbing. And how horrible do you feel when you feel drained off your physical energy?

“The kingdom of heaven is not a place but a state of mind.” ~John Burroughs

The physical state of mind

• Schedule the intense workout.
• Pre-set the healthy morning breakfast to get into ‘work mode’.
• Plan the morning dance party with your friends.

The mental state of mind

• Get aware of your thoughts and emotions.
• Refocus your mind on something empowering.
• Be sure of what you are about to do next.

When you are able to change your state of mind you more feel like you are in control of how efficiently your body and mind function, regardless of Monday. No longer will your brain wander around and you can bring back focus and productivity to your days.

4. Mind your time

Another bit of making your Mondays productive is to have a time tracking system to organize your time. How long do you take a complete task? Are you daydreaming? Are you taking longer than normal to accomplish a list of tasks? This is usually what happens on Monday. Therefore, having a time tracking system can do wonders. The other benefit is that it provides you a more accurate vision on how much free time you actually have and how long certain tasks actually take

5. Send out good vibes

When I think I am able to set myself up for a great Monday, I make sure I am motivating my team as well. Whether you play a managerial role like me or not, you can manage to motivate your team or people around you. Planning, organizing, managing time are not just enough for a productive and happy Monday, you should persevere with a positive attitude.

Mondays don’t have to be bad. That’s 52 days a year, about 15% of your days, which is a lot. Let’s not waste these days. Because Mondays can energize your week or jeopardize everything, do it right!

Ways to fight anxiety and stress

Thereare some ways that can help you to fight stress and anxiety. 

1. Communicate with the People Around You

Whenever you feel anxious about deadlines or a task that is taking longer to end, talk to people in your team or be around them. This is one great move to get rid of anxiety. When u express what’s going on inside me, u r more at peace with urself. In these situations, having a workplace buddy you can talk to can be a boon, with someone you won’t be afraid to communicate about whatever is giving you anxiety. It will help you get through the day.

2. Try Gentle Stretching

When stress affects the brain, the effect is perceived by the body as well. Sometimes v have days of back-to-back conference calls or a milestone to achieve. And u r  feeling too much discomfort. At this time, stretch out a little to manage anxiety at work.

one of favorite exercise is moving eyes around, moving neck and head, easy stretch that relieves tension. Relax by breathing, relax by visualization, stay calm and relax by interrupting your anxious thinking.

3. Avoid Triangles

A triangle is created when you speak to a third person about a problem you're having with someone else, it builds up a number of things and stress. Gossiping about coworkers, criticising someone on their back or venting about others will provide temporary relief but it builds up tension and stress. This causes negativity and that brings up anxiety. Work on the conflict by communicating the facts of the situation. Show that you’d like to reach a resolution to create an open and honest workplace. 

4. Set Realistic Deadlines

I know everyone has to deal with tough deadlines. Anxious people are mostly complaining about the deadlines that they cannot meet. So why not in the first place set it realistically. When u set managed at a manageable pace, making nobody feel anxious about it.

SEZ

Objectives of Special Economic Zones in India

• Generation of additional economic activity
• Promotion of exports of goods and services
• Promotion of investment from domestic and foreign sources
• Creation of employment
• Development of infrastructure facilities
• Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business
• Single window clearance for setting up of a SEZ and an unit in SEZ
• Single window clearance on matters relating to Central as well as State Governments
• Easy and simplified compliance procedures and documentations with stress on self certification

Key Advantages of SEZ Units in India

• 10-year tax holiday in a block of the first 20 years
• Exemption from duties on all imports for project development
• Exemption from excise / VAT on domestic sourcing of capital goods for project development
• No foreign ownership restrictions in developing zone infrastructure and no restrictions on repatriation
• Freedom to develop township in to the SEZ with residential areas, markets, play grounds, clubs and recreation centers without any restrictions on foreign ownership
• Income tax holidays on business income
• Exemption from import duty, VAT and other Taxes
• 10% FDI allowed through the automatic route for all manufacturing activities
• Procedural ease and efficiency for speedy approvals, clearances and customs procedures and dispute resolution
• Simplification of procedures and self-certification in the labor acts
• Artificial harbor and handling bulk containers made operational through out the year
• Houses both domestic and international air terminals to facilitate transit, to and fro from major domestic and international destinations
• Has host of Public and Private Bank chains to offer financial assistance for business houses
• A vibrant industrial city with abundant supply of skilled manpower, covering the entire spectrum of industrial and business expertise
• Well connected with network of public transport, local railways and cabs
• Pollution free environment with proper drainage and sewage system
• In-house Customs clearance facilities
• Easy access to airport and local Railway Station
• Full authority to provide services such as water, electricity, security, restaurants and recreational facilities within the zone on purely commercial basis
• Abundant supply of technically skilled manpower
• Abundant supply of semi-skilled labor across all industry sector

Some of the Established Important Special Economic Zones in India are :

• Falta food processing unit, West Bengal
• Salt Lake Electronic City, West Bengal
• Manikanchan - Gems and jewelry, West Bengal
• Calcutta Leather Complex, West Bengal
• Karnataka Biotechnology and Information Technology Services - SEZ on biotechnology sector in Bangalore's Electronics City, over an area of 43 acres
• Shree Renuka Sugars Limited - SEZ on sugarcane processing complex covering 100 hectares, comprising a sugar plant, power station and distillery, at Burlatti in Belgaum district
• Ittina Properties Private Limited and three other - SEZs in IT sector, covering electronics, hardware and software sectors in
• Bangalore, over an area of 15.732 hectares
• Divyasree Infrastructure - SEZ in the IT/ITES sector over an area of 20.234 hectares in Bellandur Amani Kane near Bangalore
• Chaitanaya Infrastructure Private Limited - SEZ in the IT/ITES sector in Bangalore over an area of 20.24 hectares
• Bagmane Developers Private Limited - SEZ in the IT/ITES sector in Raman Nagar in Bangalore North over an area of 15.5 hectares
• Shipco Infrastructure Private Limited - Free Trade Ware Housing Zone in Karnataka over an area of 120 hectares
• Hinduja Investments Private Limited - SEZ in the textile and apparel sector at Doddamannugudde in Bangalore Rural district, over an area of 100 hectares
• Wipro Infotech - SEZ on IT / ITES at Electronics City, Sarajpur Bangalore
• Hewlett Packard India Software Operation Pvt. Ltd. - SEZ on IT
• Food processing and related SEZ services in Hassan, over an area of 157.91 hectares.
• SEZs on pharmaceuticals, biotechnology and chemical sectors in Hassan, covering of 281.21 hectares.
• SEEPZ - Andheri (East), Mumbai
• Khopata - Multi-product, Mumbai
• Navi Mumbai - Multi-product, Mumbai

Life is 10% what happens to you and 90% how you react to it”.

Facing adversity is inevitable. It is the biggest reality of human life. We all face difficulties in our endeavors—which may seem like a problem, however, they bring opportunities to grow and learn as never before. To be honest, it is up to us how we interpret them. 

Turning an idea named “ProofHub” to a reality known as “The #1 project management software” wasn’t easy. In fact, my team and I survived the most difficult times and challenging adversity to steer our marketing efforts in the right direction. We learned how to spot the silver lining between adversity and improvement.

I always see people blaming their circumstances for their shortcomings—but I never understood the science behind it. I understand that its difficult to accept the harsh reality of a situation, especially when you've worked so hard to make it all work. Of course, bad thingsare hard to ignore. 

However, to be remarkable, you need to learn to thrive in the oddest circumstances. In life, it is not what has happened to you that matters, but the manner in which you react to it. The way you decide to respond to certain occurrences (particularly the bad ones) decide whether you will reach for the sky or hit rock bottom. As Charles R. Swindoll said—“Life is 10% what happens to you and 90% how you react to it”. 

Here’s the thing you need to understand—we may not be able to prevent the worst from happening, but we can always act responsibly for our attitude toward the inevitable misfortunes. 

Don’t know how to get your emotions under control? Here are a few strategies to get you started. 

#1 Collect yourself.

Before you start reacting in a situation, pause for a moment and let your initial emotions to pass. After that, address the opportunity again, and see how you respond differently. The trick here is to give yourself time to work through your emotions, relax and settle your thoughts. 

Do you need help to avoid burnout? Start planning and delivering your projects with ProofHub. Sign up for FREE!

#2 Tune in to your feelings.

Clarity is important, especially when you’re under pressure. It's important because it helps you to make important decisions without feeling anxious. Remember, if you’re not up to a task (physically/emotionally), you must avoid making any move until you’re in the right state of mind.

#3 Move around.

A healthy break never hurts. In fact, it gives you time to think and helps to get rid of all the anxious energy. There are even studies that prove - professionals who take regular breaks between work have reduced feelings of hopelessness, depression, anger, stress, or failure. 

There is always a choice of how you are going to respond to what’s happening around you. You can either let the circumstances dictate your judgment or you can choose to see the bright side and regain your power to make things happen the way you want. 

Author

Vartika kashyap

Linked in

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Bad days will happen, its what you do on a bad day thats matters

You are slowly walking away from enough finances, a boss that ignores you or a team that doesn't love you anymore, and you’re losing any opportunity to rise. This unfulfilling working condition might be slowly killing you! 

Your work is draining you completely. You’d want to break up with your unfulfilling work, but, this is not the solution. You feel difficult to concentrate, find yourself getting sick, struggle to focus and to start difficult projects. But you don't have to stay stuck in this rut. 

Here’s how you can stay motivated and not take a step back. 

1. Find positives in your role

No matter what your role is, you love it or not, there are always positives to the job. You’ll find something positive in your profession that you’ll be happy about. Whether it’s bringing value to the business or generating ideas. 

Do this activity. Write down any 3 things that you are happy about in your job, put it on your desk, and whenever you feel you are being unvalued at work, get the motivation back by looking back the list of things that you enjoy at work. When you are keenly observing the positives of your position, you can focus on growing and staying happy, despite not being happy (at times).

2. Break overwhelming tasks up into smaller pieces

What’s keeping you from being unfulfilled? Find the problem. This is a great approach if you feel unfulfilled when actually you are not doing well. This approach works with many daunting tasks. The sooner you start breaking the large project into smaller discrete pieces that you and your team can handle, you can start crossing items off. And that’s motivating to grow. You can add your tasks to ProofHub’s task list, where you can create sub-tasks, add custom labels to organize tasks, and set time estimates to complete a task. 

To manage tasks and achieve goals, try ProofHub for free.

3. Visualize your Success

Visualization is about creating detailed pictures in your mind. The famous quote, ‘see it to believe it’ tells exactly what visualization is about. It helps you move in a positive direction whenever you feel unfulfilled at work and achieve your goal quicker. 

Just focus and bring all your energies on the little details that will take you to where you want to be - you’ll either quit the goal or you’ll be able to figure out how to make it happen. 

 4. Exude good vibes

It can be frustrating to see no lasting results and no big wins. Sometimes the hard work of your team won’t pay off, it will never feel like enough. Bringing good energy to the office and adopting a let’s-make-this-happen attitude will energize the people around you—and perhaps you’ll be energized. 

Author

Vartika kashyap

Linkedin

Do something today that your future self will thank you for

You are slowly walking away from enough finances, a boss that ignores you or a team that doesn't love you anymore, and you’re losing any opportunity to rise. This unfulfilling working condition might be slowly killing you! 

Your work is draining you completely. You’d want to break up with your unfulfilling work, but, this is not the solution. You feel difficult to concentrate, find yourself getting sick, struggle to focus and to start difficult projects. But you don't have to stay stuck in this rut. 

Here’s how you can stay motivated and not take a step back. 

1. Find positives in your role

No matter what your role is, you love it or not, there are always positives to the job. You’ll find something positive in your profession that you’ll be happy about. Whether it’s bringing value to the business or generating ideas. 

Do this activity. Write down any 3 things that you are happy about in your job, put it on your desk, and whenever you feel you are being unvalued at work, get the motivation back by looking back the list of things that you enjoy at work. When you are keenly observing the positives of your position, you can focus on growing and staying happy, despite not being happy (at times).

2. Break overwhelming tasks up into smaller pieces

What’s keeping you from being unfulfilled? Find the problem. This is a great approach if you feel unfulfilled when actually you are not doing well. This approach works with many daunting tasks. The sooner you start breaking the large project into smaller discrete pieces that you and your team can handle, you can start crossing items off. And that’s motivating to grow. You can add your tasks to ProofHub’s task list, where you can create sub-tasks, add custom labels to organize tasks, and set time estimates to complete a task. 

To manage tasks and achieve goals, try ProofHub for free.

3. Visualize your Success

Visualization is about creating detailed pictures in your mind. The famous quote, ‘see it to believe it’ tells exactly what visualization is about. It helps you move in a positive direction whenever you feel unfulfilled at work and achieve your goal quicker. 

Just focus and bring all your energies on the little details that will take you to where you want to be - you’ll either quit the goal or you’ll be able to figure out how to make it happen. 

 4. Exude good vibes

It can be frustrating to see no lasting results and no big wins. Sometimes the hard work of your team won’t pay off, it will never feel like enough. Bringing good energy to the office and adopting a let’s-make-this-happen attitude will energize the people around you—and perhaps you’ll be energized. 

Alone we can do little but togather we can do much

There is no greater weapon in an organisation's arsenal than a great team. To genuinely achieve success, it is necessary for an organisation to embrace teamwork and the Power of We. However, the process of getting a group of people to work together towards a common goal isn’t always easy.

Many of you must have been managing people for a long time. Tell me what do you fear the most? I’ll tell you what it is - you fear collision. As the person “in charge”, your biggest concern is what will happen when a group of equally competitive yet completely different personalities starts working - dissecting and debating - on a project.

Considering the fact that we (humans) are not so good at giving up our earthly point-of-view about anything and everything, your fear is justified. But did you ever try looking at the situation from a positive perspective? Well, I did.

The team I have here at ProofHub is no different than yours. We don’t start off on the same page in every matter. We have a variance of opinions. We share disagreements with each other. We collide on ideas and perspectives. And do you know why it works for us? Well, that’s because we manage to keep things constructive and cohesive. Honestly, if it wasn’t for those collisions in team discussions, I am very certain that we wouldn’t have emerged as the unconventional, bold team as we are today.

I prefer to let those brilliant minds collide rather than holding them back. That’s how we develop new ideas, make decisions faster, foster collaboration, and find new solutions to tough challenges.

Wait! If you’re interested in adapting this approach, I've got a few tips that will help you do it the right way.

Set the tone from the top

Demonstrate that even your (the project manager’s) ideas and decisions are open for discussions. Ask your employees for their honest feedback. Collide with your team for the best results. This way, you’ll set an example for your team and they’re more likely to do the same.

Nurture a growth mindset

People with a growth mindset value learning and development. They don't get offended or show grievance when you question their opinion. Instead, they see every question and feedback as an opportunity to improve. This is the kind of mindset that will make collisions productive at work.

Create a feedback-safe environment

Nurture a work culture where employees are willing to give their honest opinions and are sure that there won't face any negative repercussions. Create a level of trust and comfort between team members so that they feel safe to share their views.

Use different communication channels

A collaborative culture doesn’t only have one way to give or receive ideas. Here at ProofHub, I offer opportunities to collaborate in a way that people are most comfortable with in different situations. For quick office conversations we use one-on-one Chat, for sharing ideas and updates we use Discussions, for review and feedback sharing we have online Proofing, and so on.

Make #RealTalk a routine

As the saying goes, practice makes perfect. When positive debate and discussion happens routinely, it becomes expected. It integrates into your everyday work process and eventually, your team gets better at it.

As a manager, you're focused on finding the ideal group dynamic. You want to embrace teamwork. I get that. I get that big time.

But that doesn’t mean that your team can’t collide constructively while sharing new ideas or making important decisions. In today's world of relentless volatility, uncertainty, complexity, and ambiguity – challenging each others opinion and interrogating the reality can produce amazing results.

Author Bio:

Vartika Kashyap is the Marketing Manager at ProofHub and has been one of the LinkedIn Top Voice

INSURANCE NOTES

IC-33 Key Notes Combined by Ravneet Kaur on Scribd

FOREX NOTES

302370_1007476_2_forex_question_cci by Ravneet Kaur on Scribd

SWAPS

Swap – Meaning
 A Swap is an agreement between two counter parties to exchange cash flows in the future.
 Terms like the dates when the cash flows are to be paid, the currency in which to be paid and the mode of payment are determined and finalized by parties.
 Calculation of cash flows involves the future values of one or more market variables. Evolution of swap market
 Financial experts agree that the origin of the swap markets can be traced back to 1970s when many countries imposed exchange regulations and restrictions in order to control cross border capital flows.  Experts are of the opinion that swap markets owe their origin to the exchange rate instability that followed the demise (failure) of Bretton Wood System during the years 1971 to 1973.
 Most of the borrowers and investors at the international level wishing to diversify their assets and liabilities compositions in varied currencies in order to control losses arising due to fluctuations in exchange rate.
 In 1980s a few countries liberalize their exchange regulatory measures, as a result, some of the MNCs treasurers structured their portfolios and brought out a new financial product, known as swaps.  Replaced their existing contracts like parallel(similar, comparable) and back-to-back loans ,with the swap deals which found them more flexible and suitable due to simpler documentation and single jurisdiction. (authority, power).
 Swap were found to lower financing cost and tax differences.
 In 1980s, most of the MNCs and other corporate borrowers were approaching to the investors directly rather than through banks, also encourage them to make financial arrangement through swaps.
 First swap contract was negotiated in 1981 between Deutsche Bank and an undisclosed counter party.
 Bankers were only acting as brokers in the swap markets to match the complimentary requirement of the counter parties.
 Emergence of the large bank and performed as aggressive market makers specifically in dollar interest rate swaps.
 Provide bid/ offer quotes for both interest rate and currency swaps.
 The banks started to find out a counter party with exactly or nearly matching requirement to hedge the original swap by entering into a matching swap.
 The formation of the international Swap Dealers Association (ISDA) in 1984 was a significant development to speed up the growth in the swap market by standardizing swap documentation.
 In 1985, the ISDA published the first standardized swap code.. This code was revised in 1986 and in 1987, published its standard form agreements.
 Currency swaps were first introduced in late 1970s, and then interest rate swap in 1981, equity and commodity swap in mid 1980s and credit derivatives in 1990, were floated. Features of Swaps
 Counter parties:
 Swap involve the exchange of a series of periodic payment between at least two parties.
 Example, a firm having a loan of ten crore payable at ten percent fixed coupon rate for five years, wants to exchange for a floating interest rate with that party who is also interest to exchange its liability from floating to fixed.
 Facilitators:
 Swap agreements are arranged through an intermediary which is usually a large international financial institution/ bank having network of its operation in major countries.
 These intermediaries plays a significant role in bringing closer the various parties for such deals.
 Facilitator will note down the requirement of the parties and try to match and fulfill these with other parties.
 Swap facilitators can be classified into two :
 Brokers -- -function as agent that identify and bring the counter parties on the table for the swap deal.
 Initiate the counter parties to finalize the swap deal according to their respective requirement.
 Swap dealers – they themselves become counter parties and takeover the risk.
 Swap dealer are the part of the swap deal, they face two problems .
 First, how to price swap to provide for his service. Second problem is to manage this portfolio.
 Cash flows:
 Swap deal is an exchange of two financial obligation in future, both the parties would desire to have same financial liabilities as before the swap deal.
 In swap deal, the present value of future cash streams are examined, and then appropriate decision is taken.
 Documentations:
 Swap transaction may be set up with great speed , their documentations and formalities are much less in comparable to loan deals.
 It is an evaluation of various future cash stream arisen out in various contract done in past.
 The terms of different contract suit the interested firms requirements, the deal will be enacted.
 Transaction cost:
 It is observed that the transaction cost are relatively low in swap in comparison to loan agreement.  Unlikely to exceed half percent of the total sum involved in the swap agreement.
 Benefits to parties:
 Swap agreement will be done only when the parties will be benefited by such agreement, otherwise such deals will not be excepted.
 Termination:
 Swap is an agreement between two parties, it cannot be terminated at one’s instance.
 Termination also requires to be accepted by counter parties.
 Default risk:
 Swap deals are bilateral agreement, the problems of potential default by either of the counter party exist.

Interest rate swaps -- Meaning
 An interest rate swap is a financial agreement between the two parties who wish to change the interest payment or receipts in the same currency on assets or liabilities to a different basis.
 No exchange of principal amount in this swap.
 This is also known in the market as plain vanilla swap.
 Principal amount applies only for the purpose of calculating the interest to be exchanged under interest rate swap.
 Maturities range from a year to over 15 years.
 Feature of interest rate swaps:
 Notional principal:
 Interest amount whether fixed or floating is calculated on a specified amount borrowed or lent.
 Parties do not exchange this amount at any time., it remains constant throughout the life of the swap.
 Fixed rate:
 This is the rate, which is used to calculate the size of the fixed payment.
 Banks or financial institutions who make market in interest rate swap quote the fixed rate, they are willing to pay if they are fixed rate payers in a swap (bid swap rates) , they are willing to receive if they are floating rate player in a swap (ask swap rate). Fixed payment =( P ) x (Rfp) x (Ffp) Where P is the notional payment, Rfp is the fixed price, Ffp is the fixed day count fraction.
 Floating rate:
 Floating rate as one of the market indexes like LIBOR (London Inter Bank Offer Rate).
 Treasury Bill rate, primary rate, etc. on which basis the floating interest rate is determined in the swap agreement.
 Floating payment = (P) x (Rfe) x (Ffe)
 Where P is notional payment, Rfe is the floating rate set on the reset date, Ffx is the floating rate day count fraction.
 Trade date, effective date, reset date, payment date:
 Trade date:
 Fixed rate payment are normally paid semi-annually or annually. For example, it may be March 1, September 1 etc.
 Trade date may be defined as such date on which the swap deal is concluded.
 Effective date:
 Effective date is that date from which the first fixed and floating payment start to accrue.
 For example, a 5- year swap is traded on August 30, 2002 the effective date may be September 1, 2002, and ten payment dates from March 1, 2003 to September 1, 2007.
 Example for calculation of fixed and floating interest rate: Let us assume Party X on a semi-annual basis, pays 7 per cent rate of interest on the notional amount and receives from the Party Y LIBOR + 30 basis points . The current six- month LIBOR rate is 6.30 per cent per annum. The notional principal is Rs. 35 crore. Amount to be paid as per fixed rate: Notional principal x (Days in period/365) ( Interest rate/100) 350000000 x (182/365) x ( 7/100) = Rs. 1221644 Amount to be paid as per floating rate: Notional principal x (Days in period/365) ( Interest rate + base/100) 350000000 x (182/365) x ( 6.30 + .30/100) = Rs. 1167833 In a swap, the payments are netted. In this case, Party X pays Party Y the net difference. Rs. 1221644 - Rs. 1167833 = Rs.53810
 Types of interest rate swaps:
 Plain vanila swap:
 It is also known as fixed-for-floating swap.
 One party with a floating interest rate liability is exchanged with fixed rate liability.
 Period ranges from 2 years to over 15 years for a predetermined notional principal amount.
 Zero coupon to floating:
 Holders of zero-coupon bonds get the full amount of loan and interest accrued(accumulate) at the maturity of the bound.
 The fixed rate player makes a bullet payment at the end and floating rate player makes the periodic payment through out the swap period.`
 Alternative floating rate:
 Floating reference can be switched to other alternatives as per the requirement of the counter party.  These alternatives include three-month LIBOR, one-month commercial paper, T-Bill rate etc.
 Alternative floating interest rates are charged in order to meet the exposure of other party.
 Floating-to-floating:
 One party pays one floating rate, say, LIBOR while the other counter party pays another, say, prime for a specified time period.
 These swap deals are mainly used by the non-US banks to manage their dollar exposure.
 Forward swap:
 This swap involves an exchange of interest rate payment that does not begin until a specified future point of time.
 Swaptions:
 Swaptions are combination of the features of two derivative instruments i.e. option and swap.
 Option interest rate swaps are referred as swaptions.
 Buyer of the swaption has the right to enter into an interest rate swap agreement by some specified date in the future.
 Swaption will specify whether the buyer of the swaption will be a fixed rate receiver or a fixed rate payer.
 Buyer exercises the option then the writer of the option will become the counter party.
 Equity swap:
 Equity swap involves the exchange of interest payment linked to the change in the stock index.
 Example , an equity swap agreement may allow a company to swap a fixed interest rate of 6 per cent in exchange for the rate of appreciation on a particular index say BSE or NSE index. Currency Swap -- Meaning
 In currency swap, the two payment streams being exchanged are denominated in two different currencies.
 Example , a firm which has borrowed Japanese yen at a fixed interest rate ‘can swap’ away the exchange rate risk by setting up a contract whereby it receives yen at a fixed rate in return for dollars at either a fixed or a floating interest rate.
 In currency swap three basic step are involved
 1.Initial exchange of principal amount – at an agreed rate of exchange. This rate is based on the spot exchange rate.
 2.Ongoing exchange of interest – after establishing the principal amount, the counter parties exchange interest payment on agreed date based on the outstanding principal amount at the fixed interest rates agreed at the outset of the transaction.
 3.Re-exchange of principal to principal – agreement on this enables the counter parties to re-exchange the principal sums at the maturity date. Types of currency swaps
 Fixed-to-fixed currency swap:
 Currencies are exchanged at fixed rate.
 One firm raises a fixed rate liability in currency X, say US dollar while the other firm raises fixed rate funding in currency Y say pound.
 Principal amount are equivalent at the current market rate of exchange.
 In swap deal, first party will get pound where the second party gets dollars.
 The first party will make periodic get (pound) payment to the second, in turn gets dollar computed at interest at a fixed rate on the respective principal amount of both currencies.
 Floating-to-floating:
 The counter parties will have payments at floating rate in different currencies.
 Fixed-to-floating currency swap:
 It is a combination of a fixed-to-fixed currency swap and floating swap.
 One party makes the payment at a fixed rate in currency, say, X while the other party makes the payment at a floating rate in currency, say Y.
 Contract without the exchange and re-exchange of principals do exist.
 A financial intermediary (a swap bank) structures the swaps deal and routes the payment from one party to other party. Debt-Equity swap
 In debt-equity swap, a firm buy’s a county debt on the secondary market at a discount and swaps it into local equity.
 Debts are exchanged for equity by one firm with the other.
 Enable the investors to purchase the external debts of such underdeveloped countries to acquire equity or domestic currency in those same countries.
 For example, a multinational firm wants to invest in, say, brazil, hires an intermediary (normally a bank) to buy brazil loans in the secondary market.
 MNC (again through a middleman) presents the loans, denominated in dollar as, to the brazil central bank, which redeems them for brazil currency. The central bank, which redeems them at face value more than the loans trade in the secondary markets. Motivation underlying swaps
 Swap are important techniques or technology for transforming the characteristics of financial claim.
 There is a different risk perception between markets. Example, bond market and bank credit market evaluate the companies differently because their credit assessment is subjective.
 A company can raise the fund in particular market at lower cost where it receives better evaluation, which it can swap into the desired type of instrument.
 I t relates with regulation of issuers and investors concerning the respective governments.
 Government regulation that seeks to limit the amount of debt issue by the foreign companies to protect domestic investors from increased risks and preventing to borrow from local markets.
 Government regulation makes certain markets more attractive to particular companies (usually domestic) than others.
 There is subsidized financing available in certain type of business , for example export financing.  A currency swap may allow a company to take advantage of such situation.
 The availability of funds in different markets changes due to temporary supply/ demand imbalances.
 Lowering reserve requirement for bank will result in increase of supply of funds in the bank credit and rates fall down.
 The borrower will desire to go in such market where the supply is in excess.
 It is related to balance-sheet position of the counter parties.
 Swapping provides better opportunities to determine the type of assets and liabilities it wants to carry.
 Example, a banking company’s assets are the loans issued to the customers.
 I t is observed that changes overtime may effect the differences between markets and the prevailing rates may be changes.

FOREIGN EXCHANGE PLUS

Q.1 : Define Foreign Exchange and Explain the Functions of Foreign

Exchange Market. (M.2011)

Ans. A) FOREIGN EXCHANGE

                Foreign Exchange refers to foreign currencies possessed by a country for making payments to other countries. It may be defined as exchange of money or credit in one country for money or credit in another. It covers methods of payment, rules and regulations of payment and the institutions facilitating such payments.

A.       FOREIGN EXCHANGE MARKET

        A foreign exchange market refers to buying foreign currencies with domestic currencies and selling foreign currencies for domestic currencies. Thus it is a market in which the claims to foreign moneys are bought and sold for domestic currency. Exporters sell foreign currencies for domestic currencies and importers buy foreign currencies with domestic currencies.

            According to Ellsworth, "A Foreign Exchange Market comprises of all those institutions and individuals who buy and sell foreign exchange which may be defined as foreign money or any liquid claim on foreign money". Foreign Exchange transactions result in inflow & outflow of foreign exchange.

B.       FUNCTIONS OF FOREIGN EXCHANGE MARKET

            Foreign exchange is also referred to as forex market. Participants are importers, exporters, tourists and investors, traders and speculators, commercial banks, brokers and central banks.

            Foreign bill of exchange, telegraphic transfer, bank draft, letter of credit etc. are the important foreign exchange instruments used in foreign exchange market to carry out its functions.

            The Foreign Exchange Market performs the following functions.

1.             Transfer Of Purchasing Power I Clearing Function

            The basic function of the foreign exchange market is to facilitate the conversion of one currency into another i.e. payment between exporters and importers. For eg. Indian rupee is converted into U.S. dollar and vice-versa. In performing the transfer function variety of credit instruments are used such as telegraphic transfers, bank drafts and foreign bills. Telegraphic transfer is the quickest method of transferring the purchasing power.

2.             Credit Function

            The foreign exchange market also provides credit to both national and international, to promote foreign trade. It is necessary as sometimes, the international payments get delayed for 60 days or 90 days. Obviously, when foreign bills of exchange are used in international payments, a credit for about 3 months, till their maturity, is required.

            For eg. Mr. A can get his bill discounted with a foreign exchange bank in New York and this bank will transfer the bill to its correspondent in India for collection of money from Mr. B after the stipulated time.

3.             Hedging Function

A third function of foreign exchange market is to hedge foreign exchange risks. By hedging, we mean covering of a foreign exchange risk arising out of the changes in exchange rates. Under this function the foreign exchange market tries to protect the interest of the persons dealing in the market from any unforseen changes in exchange rate. The exchange rates under free market can go up and down, this can either bring gains or losses to concerned parties. Hedging guards the interest of both exporters as well as importers, against any changes in exchange rate.

Hedging can be done either by means of a spot exchange market or a forward exchange market involving a forward contract.

Q. 2 : Explain the dealers or participants in foreign exchange market. (M.2011)

Ans. A) PARTICIPANTS I DEALERS IN FOREIGN EXCHANGE MARKET

            Foreign exchange market needs dealers to facilitate foreign exchange transactions. Bulk of foreign exchange transaction are dealt by Commercial banks & financial institutions. RBI has also allowed private authorised dealers to deal with foreign exchange transactions i.e buying & selling foreign currency. The main participants in foreign exchange markets are

1.        Retail Clients

            Retail Clients deal through commercial banks and authorised agents. They comprise people, international investors, multinational corporations and others who need foreign exchange.

2.        Commercial Banks

            Commercial banks carry out buy and sell orders from their retail clients and of their own account. They deal with other commercial banks and also through foreign exchange brokers.

3.    Foreign Exchange Brokers

            Each foreign exchange market centre has some authorised brokers. Brokers act as intermediaries between buyers and sellers, mainly banks. Commercial banks prefer brokers.

4.        Central Banks

            Under floating exchange rate central bank does not interfere in exchange market. Since 1973, most of the central banks intervened to buy and sell their currencies to influence the rate at which currencies are traded.

            From the above sources demand and supply generate which in turn helps to determine the foreign exchange rate.

B.            TYPES OF FOREIGN EXCHANGE MARKET

            Foreign Exchange Market is of two types retail and wholesale market.

1.        Retail Market

            The retail market is a secondary price maker. Here travellers, tourists and people who are in need of foreign exchange for permitted small transactions, exchange one currency for another.

2.    Wholesale Market

The wholesale market is also called interbank market. The size of transactions in this market is very large. Dealers are highly professionals and are primary price makers. The main participants are Commercial banks, Business corporations and Central banks. Multinational banks are mainly responsible for determining exchange rate.

3.        Other Participants

a)        Brokers

         Brokers have more information and better knowledge of market. They provide information to banks about the prices at which there are buyers and sellers of a pair of currencies. They act as middlemen between the price makers.

b)        Price Takers

                     Price takers are those who buy foreign exchange which they require and sell what they earn at the price determined by primary price makers.

c)        Indian Foreign Exchange Market

         It is made up of three tiers

     i.        Here dealings take place between RBI and Authorised dealers (ADs) (mainly   

      commercial  banks).

    ii.        Here dealings take place between ADs

   iii.        Here ADs deal with their corporate customers.

Q. 3 : Define I Explain I Write note on spot and forward exchange rates.

Ans. A)  EXCHANGE RATE

                     Transactions in exchange market are carried out at what are termed as exchange rates. In foreign exchange market two types of exchange rate operations take place. They are spot exchange rate and forward exchange rate.

1)             Spot Exchange Rate :-

            When foreign exchange is bought and sold for immediate delivery, it is called spot exchange. It refers to a day or two in which two currencies are involved. The basic principle of spot exchange rate is that it can be analysed like any other price with the help of demand and supply forces.

            The exchange rate of dollar is determined by intersection of demand for and supply of dollars in foreign exchange. The Remand for dollar is derived from country’s demand for imports which are paid in dollars and supply is derived from country’s exports which are sold in dollars.

            The exchange rate determined by market forces would change as these forces change in market. The primary price makers buy (Bid) or sell (ask) the currencies in the market and the rates continuously change in a free market depending on demand and supply. The primary dealer (bank) quotes two-way rates i.e., buy and sell rate.

(Bid) Buy Rate 1 US $ = ` 45.50

(Ask) Sell Rate 1 US $ =  ` 45.75

            The bank is ready to buy 1 US $ at Rs. 45.50 and sell at Rs. 45,75. The difference of Rs.0.25 is the profit margin of dealer.

2)             Forward Exchange Rate

            Here foreign exchange is bought or sold for future delivery i.e., for the period of 30, 60 or 90 days: There are transactions for 180 and 360 days also. Thus, forward market deals in contract for future delivery. The price for such transactions is fixed at the time of contract, it is called a forward rate.

            Forward exchange rate differs from spot exchange rate as the former may either be at a premium or discount. If the forward rate is above the present spot rate, the foreign exchange rate is said to be at a premium. If the forward rate is below the present spot rate, the foreign exchange rate is said to be at a discount. Thus foreign exchange rate may be at forward premium or at forward discount.

            For Eg. an Indian importer may enter into an agreement to purchase US $ 10,000 sixty days from today at 1 US $ = Rs. 48. No amount is paid at the time of agreement, except for usual security margin money of about 10% of the total amount. 60 days form today, the importer will get 10,000 US $ in exchange for Rs. 4,80,000 irrespective of the Spot exchange rate prevailing on that date.

a)        Factors Influencing Forward Exchange Rate

i)         Interest rates.

ii)        Degree of speculation in foreign exchange market.

iii)       Inflation rate.

iv)       Foreign investor’s confidence in domestic country.

v)        Economic situation in the country.

vi)       Political situation in the country.

vii)     Balance of payments position etc.

b)        Need For Forward Exchange Rate Contracts

            To overcome the possible risk of loss due to fluctuations in exchange rate, exporters, importersand investors in other countries may enter in forward exchange rate contracts.

                     In floating or flexible exchange rate system the possibility of wide fluctuation in exchange is more. Thus, both exporters and importers safeguard their position through a forward arrangement. By entering into such an arrangement both parties minimize their loss.

Q. 4 : Write note on Arbitrage.                                         O R

         Write note on Interest rate and Arbitrage.

Ans. A.  ARBITRAGE

                        Arbitrage is the act of simultaneously buying a currency in one market and selling it in another to make a profit by taking advantage of exchange rate differences in two markets. If the arbitrages are confined to two markets only it is said “two-point” arbitrage. If they extend to three or more markets they are known as “three-point” or “multi-point” arbitrage. Those who deal with arbitrage are called arbitrageurs.

            A Spot sale of a currency when combined with a forward repurchase in a single transaction is called “Currency Swap". The Swap rate is the difference between spot and forward exchange rates in currency swap.

            Arbitrage opportunities may exist in a foreign exchange market.. Suppose the rate of exchange is 1 US $ = `. 50 in US market and 1 US $ = `. 55 in Indian Markets, then an arbitrageur can buy dollars in US market and sell it in Indian market and get a profit of `. 5 per dollar..

            In today’s modern well connected and advanced markets, arbitrageurs (which are mainly banks) can spot it quickly and exploit the opportunity. Such opportunities vanish over a period of time and equilibrium is again maintained.

For Eg.

                     Bank A       ` / $ = 50.50 / 50.55

                     Bank B       ` / $ = 50.40 / 50.45

The above rates are very close. The arbitrageur may take advantage and he can purchase $ 1,00,000 from Bank B at `. 50.45 / a dollar and sell to it to Bank A at `. 50.50, thus making a profit of 0.05. The total profit would be (1,00,000 x 0.05) = `. 5,000. The profit is earned without any risk and blocking of capital.

B.   ARBITRAGE.AND INTEREST RATE

            Interest arbitrage refers to differences in interest rates in domestic market and in overseas markets. If interest rates are higher in overseas market than in domestic market, an investor may invest in overseas market to take the advantage of interest differential.

Interest arbitrage may be covered and uncovered.

1)             Uncovered Arbitrage

            In this system, arbitrageurs would take a risk to earn profit by investing in a high interest bearing risk free securities in a foreign market. His earnings would be according to his calculations if the currency of foreign market where he invested does not depreciate. If depreciation is equal to the difference in interest rate, the investor would not incur loss. However, if depreciation is more than interest rate, then the arbitrageur will incur loss.

            For Eg. In New York interest rate on 6 month Treasury Bill is 6% and in Spain it is 8%. An US investor may convert US dollars in EURO and invest in Spain, thereby taking an advantage of +2% interest rate. Now when bill matures, US investor will convert EURO into dollars. However, by that time EURO may have depreciated the US investor will get less dollars per EURO. If EURO depreciates by 1%, US investor will gain only +1% (+2 – 1%). If EURO depreciates by 2% or more, US investor will not gain anything or incur loss. If EURO appreciates, US investor will gain, +2% and interest rate differential

2)             Covered Arbitrage

International investors would like to avoid the foreign exchange risk, thus interest arbitrage is usually covered. The investor converts the domestic currency for foreign currency at the current spot rate for the purpose of investment. At the same time, investor sells forward the amount of foreign currency which he is investing plus the interest that he will earn so as to coincide with maturity of foreign investment.

The covered interest arbitrage refers to spot purchase of foreign currency to make investment and offsetting simultaneous forward sale of foreign currency to cover foreign exchange risk. When treasury bills mature, the investor will get the domestic currency equivalent of foreign investment plus interest without a foreign exchange risk.