What Drives Capital Flow In Business Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 2032 Downloads: 7 Date added: 2017/06/26 Category Business Essay Type Research paper Did you like this example? This capital inflow is also very helpful when it comes to rectifying the savings and investment gap for the capital-scarce economies like that of India. The capital is a very crucial part of the economy as it brings in the modern technology which enhance the development in the financial sectors through the capital inflow . Capital inflow is also crucial for the Capital flows that can bring in an increase in the growth and productivity of those countries which can get enough skilled workers along with a good infrastructure .Capital flows can bring in the governments support to follow the macroeconomic policies . Don’t waste time! Our writers will create an original "What Drives Capital Flow In Business Finance Essay" essay for you Create order Capital inflow is also crucial for the Capital flows in two major ways: -Portfolio equity investment: This is one parameter where the buying company shares, which have been taken form the stock markets, will be taken without a good control. Portfolio debt investment, is primarily dealing with the covers bonds and long-term borrowing that come form banks and multilateral institutions, such as the World Bank. Here the Capital inflow , takes into consideration the forging long-term ties with firms among the foreign countries. 1.1 Aim of the research: The basic aim of this research is the MA and related parameters understanding which has been done by the study of concepts and factors effecting of MA in the countries like the Indian economy. This has been done in the best possible way so as to relate the concept of MA to employment, inflation, GDP etc and see its effect on the Indian industry for the same. 1.2 Research objective The researcher is trying to work on the aspect of MA and related factor of the economy like employment, inflation, GDP etc in India. The main objectives of the research are given below: Study of the Indian economy and its growth at present FDI growth in India and that of other economies of the world Study of the parameters like employment ,inflation, GDP etc which effect the MA Role of government in the growth of MA The advantages and disadvantages of MA increase in a country like India Effect of MA in the economies of countries like India 1.3 Hypothesis: The major two hypothesis that we are assessing here are that : Deep Financial markets in the acquisition countries are positively associated with cross border Mergers Acquisitions. The difference among the Developed to Developed and Developed to Developing MA flows. 3. LITERATURE REVIEW How to get capital inflow:   When we take into consideration a well-developed and also the extensively surveyed empirical research of Caves 1996; Markusen 1995 which explains the reason of the multinational corporations which are brought up in the overseas in contrast to the export directly or other forms of collaborations like the license of their product or technology. Thus it has been seen as the most persuasive way of explaining given by Holger Gà ¶rg and David Greenaway who stress on the coexistence of proprietary knowledge and also the role of market failures for protecting that knowledge. Here it is understood that the firm internalizes some of its transactions for the protection of the brand, technology, and also that of its marketing advantages(Wang, Jian-Ye, and Magnus Blomstrà ¶m. 1992) . Here the main motives are based on the existence of a type of firm-specific asset, which could be some kind of technological advantage, which could also entail the innovative management along with the organizational processes and also the new production methods and technologies. Here the most important point then is the choice of a particular location, and its advantages as it is to the local economy by these firms in the same industry. Here the most important point then is the potential transmission channels which will play host economy and have similar characteristics which bring in benefits from spillovers . (Wang, Jian-Ye, and Magnus Blomstrà ¶m. 1992). FDI in china and India: Foreign direct investment in India could would be possible in many a ways. One way could be the parent companies bringing in the equity capital which can be done by purchasing shares of the foreign companies. Another way could be reinvesting the affiliates earnings. Yet another might be the short- or long-term lending which might happen among the parents company and the affiliates(David Besanko, David Dranove, Mark T. Shanley 1996).. Thus when one has to name a company as a multinational e nterprise to be in the category of FOREIGN DIRECT INVESTMENT data, the parent company will have to have a minimum equity stake in the company of about the range of 10 percent in the affiliate. (Levine, R., N. Loayza, and T. Beck. 2000) When we talk of making the foreign affiliates this would include the new production facilities which can also be addressed as Greenfield investments which entail the acquiring and control in the present entities by cross-border mergers or acquisitions(David Besanko, David Dranove, Mark T. Shanley 1996).. Recent years have seen a marked shift toward international mergers and acquisitions. One of them that is that of HP and Compaq have also been covered in the case study in the research. Thus in the case of the developing nations, the equity investments take place as per the percentage of gross national income seen in the present and past years.. Here one more parameter that is Debt flows, of the countries like India have increased since 2002 from zero as seen in the first two years. Also FOREIGN DIRECT INVESTMENT with respect to the GDP has increased so as to becomes the largest source of capital which comes form the developed nations to developing ones like Indian . (Levine, R., N. Loayza, and T. Beck. 2000) Diagram 1 Shown in the chart 1 above is the growing FDI of India since the past 10 years. In the year 1990 to 2005, many a developing economies like that of India and like countries saw a vast FOREIGN DIRECT INVESTMENT inflows which increased form about 18 % to 36%.. Also with this the geographical composition in the structuring of the FOREIGN DIRECT INVESTMENT took a turnover in the past 40 yrs.. Here it can be noticed that Latin Americas share in the FOREIGN DIRECT INVESTMENT fell with a huge margin of 52 percent as it was in the 1970s to 33 percent in 1990s.If we talk of the continent of Asia, its share of inflows increased from 25 % to 60 % in that same time period. (Levine, R., N. Loayza, and T. Beck. 200 0) Privilege given to countries like China and India in terms of FOREIGN DIRECT INVESTMENT shows that there is a shift on the higher side of the source of development finance. Thus the capital inflows make an effect on the economy of the receiving countries and their economic performance which will entail their trade, savings, stability, investment along with their growth. FDI in developing Nations: Korea is another country which has shown tremendous progress in its FDI. In the Republic of Korea the FDI got raised from $5.2 billion in 1998 to $10.2 billion in 2000. This country that is Republic of Korea has done well in the field of FDI where it is ahead of many developing in the ASEAN arena.It but could not leave behind in progress countries like Hong Kong (China) and China. According to FDI figures the Korean economy, has made a good performance.. It but still is lagging behind form Malaysia, Thailand, China, Hong Kong (China), and Singapore .Most of the FDI is due to the currency devaluation which brought in a good business environment.( World Investment Report 2002) Viet Nam also is improving in foreign direct investment (FDI) with a figure of 5.8 billion USD in 2005.this is the highest in last eight years. Here the huge four billion USD is a result of the 771 recently licensed FDI projects .In 2005 Viet Nams foreign investors saw a whooping , revenue of , 20 billion US D . 4.   METHEDOLOGY  Here the methodology of the research is based on the gravity model as is relation to the factors of   GDP, Employment, Inflation (WPI), Industrial Production and Market Capitalization of stocks and FDI as major factors of capital inflow. 3.1Research Design Here this approach of the research design which will be based on the aim the FDI research will be crucial for the study. This will help the researcher to clearly define the aim of the research and then base the research design, on that basis as and when required. . Here I have taken up the research on a particular topic which is the MA and its effects on the Indian economy capital inflow which has been in many ways been important and needs the best and suitable methods for its analysis and progression. 3.2 Research Purpose Here one factor is very important. This parameter is the Time Horizon which is critical for the researcher for the knowledge of the right type of research which has to be done in a fixed time limit . . When we list the research ,it could be of primarily two types which pertain to the factor of time horizon studies .These are the cross-sectional and longitudinal studies. When we take the Cross-sectional it entails a situation of time ,at the same time the longitudinal study looks at the series of events in a long period of time. Survey: The strategy of survey has been resorted to study the different industries in India where capital inflow is coming from the MA. 3.3 Case Study: It has been seen and critically analyzed that case study of India and its economy was a vital part to be studied here. Robson (2002) explains the case study as a strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence. 3.4 Data collection : Here the relevance of and the importance of the factors like the primary and secondary data also becomes important form the different sources: 1. Primary Data : It has been seen and critically analyzed that the primary data was collected form the employees of various industries which have been giving crucial information for the further quantitative analysis of the factors of   GDP, Employment, Inflation (WPI), Industrial Production and Market Capitalization of stocks and FDI as major factors of capital inflow. 2. Secondary research: The secondary data has been taken form many a sources like journals internet and books. 3.5 Validity and Reliability: Validity is defined as the degree to which the researcher has measured what he has set out to measure. Here when we talk of the quantitative data one also has to see to it that its is the valid data. The regression analysis had to take factors which were relevant to the aim of the research for making this research a research with validity of the information . Here the relevance of and the importance of the factors like the reliability and validity of the research has been taken into account carefully. (Yin. R.K (2003) 3.6 Limitation of the research There is no major problems as such except for the fact that some of the Macro economic factors like employment etc. did not cover the whole period of study i.e. from 1990-91 to 2008 09. 6. CONCLUSION  When we talk of the distance between or the gap of the globe in terms of the rich and poor countries this would basically entail to the financial along with the physical assets that bring in the countrys wealth.. Many a countries with developed economies have a larger amount of the capital as compared to countries like India ,Pakistan etc. This is also because countries like Japan and Korea are economics which have more advanced technologies. Thus when we have to judge a country on the parameter of economic advancement the counties which are under developed are the ones who have to get more capital and thus enhance themselves technologically. Many a emerging economies which have tried to enhance the capital formation have been unsuccessful. This is also because the globalization, is today very much reliant on the foreign capital. When we talk of the capital flows of the developing economies it has increased from a whooping $104 billion to a huge $472 billion in 2005.The idea of enhancement through foreign capital is great as this is one way to get the enormous benefits for the developing nations like India.

Arbitrage in the Government Bond Market Case study Coursework

Essays on Arbitrage in the Government Bond Market Case study Coursework Full of 18 March Case Study: Arbitrage in the Government Bond Market Part A. Creation of Synthetic BondsThe cash flows of the callable bond which is valued at $4.2 billion in shown in Table 1 in the Appendix. The information in the table indicates that after the initial investment of $4.2 billion, interest payments of 4.125 which equates to $173.25 million is payable semi-annually. The net cash flow which is the interest over the five year period equates to a total of $1,732.5 million. The present value of these amounts is shown in the last row which indicates the present value cash flow (PVFCF). In order to capitalize on the mispricing in the bond market Ms Thompson discussed two options. One option involves creating a synthetic bond with the $4.2 million callable bond. This bond would pay the same interest as the May’00-05’callable bond. The amount of 12% May05’ bonds required to match the coupon payments of the callable bond are as follows: X Ãâ€" 12% Ãâ€" 100 = 8.25% Ãâ€" 100 X Ãâ€" 12 = 8.25 Dividing both sides by 12 yields: X = 8.25/12 Therefore, X= 0.6875 The fraction of 12% May 05’ treasury bonds required is 0.6875. Therefore, the fraction of treasury STRIP required to pay the principal amount at maturity is 0.3125 (1 – 0.6875). The ask price and bid price of the May 05’ synthetic bond is therefore calculated as follows: Ask price = 0.6875 Ãâ€" 129.901 + 0.3125 Ãâ€" 30.312 = 98.78 Bid price = 0.6875 Ãâ€" 129.7188 + 0.3125 Ãâ€" 29.91 = 98.53 The alternative option would involve the 8.875% May 00’. A similar calculation as that used in the previous option. The following calculations provides information on the fraction of 8.875% May 00’ noncallable treasury bonds and May 00’ Treasury STRIPS required to match the 8.25% May 05’ interest payments and principal payment at maturity. X Ãâ€" 8.875% Ãâ€" 100 = 8.25% Ãâ€" 100 X Ãâ€" 8.785 = 8.25 Dividing both sides by 8.875 yields: X = 8.25/8.875 Therefore, X= 0.9296 The fraction of 8.875% May 00’ treasury bonds required is 0.9296. Therefore, the fraction of treasury STRIP required to pay the principal amount at maturity is 0.0704 (1 – 0.9296). The ask price and bid price of the May 00’ synthetic bond is therefore calculated as follows: Ask price = 0.9296 Ãâ€" 104.5 + 0.0704 Ãâ€" 46.656 = 100.43 Bid price = 0.9296 Ãâ€" 104.375 + 0.0704 Ãâ€" 46.25 = 100.28 Part 2 – Case for Mispriced Callable Bonds The May ’00 – ’05 callable Treasury bond is overpriced. The information in Table 2 in the Appendix indicates this. Investors can sell the May ’00 – ’05 callable Treasury bond at the bid price of $101.125 and buy the cheaper priced synthetic bond at the bid ask price of 98.78. The profit on the transaction would be worth 2.2345 per share or $98.49 million. If the both the callable and the synthetic bond had the same price the investor should prefer to buy the synthetic bond. The reason is that when the interest rate on a callable bond falls the government is likely to call the bond since they will be able to refinance it at a lower rate of interest. The May ’05 bond should therefore be worth more because it is a noncallable Treasury bond and therefore provides the government with an option. The May ’00 synthetic bond is also worth more than the May’00 – ’05 callable bond because when the level of interest rate rise the government will not call the callable bond since it is at a lower rate. Part 3 – The Case of a Bond Trader Who Does Not Currently Own the Callable Bond Part 4 – Varying Scenarios Part 5 Fall in the Price of Callable Bond by 150bps in One Year If the price of the callable bond falls by 150 basis points below that of the synthetic bond with corresponding maturity then the (asked) yield-to-maturity of the synthetic bond which was constructed using the May ’05 non callable bond and the May ’05 STRIP would be as follows: Yield–to-Maturity (YTM) is the rate of return on the bond if it is held until it matures. It is found using the equation for value of the bond Vb, in which rd is the return. Vb = 98.78 = (8.875/2)/(1+ rd/2)1 + (8.875/2)/(1+ rd/2)2 + (8.875/2)/(1+ rd/2)3+ (8.875/2)/(1+ rd/2)4 + (8.875/2)/(1+ rd/2)5 + (8.875/2)/(1+ rd/2)6 + (8.875/2)/(1+ rd/2)7+(8.875/2)/(1+ rd/2)8 + (8.875/2)/(1+ rd/2)9 + (8.875/2)/(1+ rd/2)10 YTM = rd= 4.595% YTM (ask) synthetic May’05 is 4.595% The YTM (bid) on the synthetic May ’05 bond is Vb = 98.53 = (8.875/2)/(1+ rd/2)1 + (8.875/2)/(1+ rd/2)2 + (8.875/2)/(1+ rd/2)3+ (8.875/2)/(1+ rd/2)4 + (8.875/2)/(1+ rd/2)5 + (8.875/2)/(1+ rd/2)6 + (8.875/2)/(1+ rd/2)7+(8.875/2)/(1+ rd/2)8 + (8.875/2)/(1+ rd/2)9 + (8.875/2)/(1+ rd/2)10 YTM = rd = 4.627% If the callable bond one year from now is 150bps below that of the synthetic bond with corresponding maturity the expected asked price of the synthetic bond and the bid price of the callable bond one year from now is as follows: Asked price of synthetic bond one year from now: Vb = 98.78 = (8.875/2)/(1+ rd/2)1 + (8.875/2)/(1+ rd/2)2 YTM = rd= 5.097% Bid price of the callable bond one year from now using the bond valuation formula is: Vb = 99.61 = (8.25/2)/(1+ rd/2)1 + (8.25/2)/(1+ rd/2)2 YTM = rd= 4.338% A higher the rate means that the returns are better. Even as the price of the callable bond falls below par value the yield is less than that of the synthetic May ’05 synthetic bond because it is still overpriced. Use of $10 million Loan Assuming no securities are owned and $10 million is borrowed on the repo market to perform the transaction in order to exploit the arbitrage opportunity and assuming other securities can be posted as collateral. Since I own no securities then I would borrow some and collateralize it using the $10 million loan. I would then sell the security in a short sale. I would therefore have to pay the interest of 4.125 semi-annually until I am ready to return the bond. When that time comes I would enter the market and purchase the bond if it is not overpriced or I would enter into a similar borrowing arrangement with another bond holder. Buy-and-Hold Strategy If I use a buy-and-hold strategy for one year, my arbitrage profit would be calculated as follows: Repurchase Arrangements Description    $mn Interest Repo Market Loan 10 (527000) Borrow 8.25 May 00 - 05 10 (825000) Sell short 8.25 May 00 -05 Callable bond 10.04 828300 Net Profit/loss       (523700) Figure 1 Much of the information in Figure 1 would result in a profit if I had investments of my own. The difference between long-term borrowing and short sales indicate that borrowing bonds and selling them short has major benefits but the cost of the funds used to so may outweigh the benefits which is the case in Figure 1, the result been a loss of $523,700. Attribution Analysis Most of the profit under section (a) can be attributed to directional value trading as it is assumed that the callable bonds are overvalued when compared with the synthetic bonds. This mispricing is expected to be corrected in the future. Works cited Edleson, M.E and Tufano, P. Arbitrage in the Government Bond Market? Boston: Harvard Business School. 1995. Print. Appendix Cash Flow Table for 8.25% May 00- 05 Callable bond Date/ Period 0 1 2 3 4 5 6 7 8 9 10 Net Cash Flow Cash flow (4200) 173.25 173.25 173.25 173.25 173.25 173.25 173.25 173.25 173.25 4373.25 1732.5 PV 1 1.0413 1.0842 1.1289 1.17549 1.22398 1.2745 1.327 1.3818 1.4388 1.49813    PVFCF (4200) 166 160 153 147 142 136 131 125 120 2919 0 Table 1 Calculation Showing that Callable May 00 - 05 Bonds are Mispriced Description    Millions Price Value ($mn) Callable Bonds    42 101.125 4247.25 Synthetic Bonds:             May 05 TB    42 98.78 4148.76                Profit       2.345 98.49 Table 2

The Times of the New Year Free Essays

My best friend was a drug addict and i had to help her into rehab. She did not want to go to rehab so we told her we were taking her to disneyland. She was so excited that she drove right home and packed her bags. We will write a custom essay sample on The Times of the New Year or any similar topic only for you Order Now Every country has their own holiday system. Different countries have different holidays. There are also some common holidays that people celebrate around the world, such as Christmas and New Year. Different countries have their own definition of the New Year. was said that long long time ago, there lived a horrible beast named† Nian† In the mountain. Every year, on the first day of the year, which Is the first new moon of the year, the beast would awaken and descend upon the village. The Vietnamese lunar New Year festival, Tet Nguyen Dan, Is the most significant holiday taking place within the first three days of the New Year. The nearer New Year comes the more excited and enthusiastic people are. In general, preparation for Tet starts one week before New Year’s Day. The New Year’s cake New Year’s cake Is a pastry made of the flour of glutinous rice nd used primarily in the lunar New Year period. 1 . Introduction (300 words) The New Year cake Is a special Year goods In Spring Festival. Those Rice cake were made by glutinous rice. A Turbulent Year for Israel 1996 has been a very turbulent year for Israel. This Iles In the assassination of Yitzhak Rabin on November 4, 1995. How to cite The Times of the New Year, Essays