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Derivative Markets: Structure and Risks
By: Scott P. Mason, Kuljot Singh
Gives a conceptual understanding of derivative products, their applications, and valuation. After a brief treatment of exchange-traded derivatives, explores over-the-counter (OTC) derivatives,…
- Length: 17 page(s)
- Publication Date: Aug 26, 1994
- Discipline: Finance
- Product #: 295009-PDF-ENG
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Gives a conceptual understanding of derivative products, their applications, and valuation. After a brief treatment of exchange-traded derivatives, explores over-the-counter (OTC) derivatives, emphasizing the market, credit, legal, operational, and other risks associated with these instruments.
Aug 26, 1994
Discipline:
Industries:
Banking and investment industry, Securities and investment banking
Harvard Business School
295009-PDF-ENG
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Hot Oceans Worsened Dubai’s Dramatic Flooding, Scientists Say
An international team of researchers found that heavy rains had intensified in the region, though they couldn’t say for sure how much climate change was responsible.
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By Raymond Zhong
Scenes of flood-ravaged neighborhoods in one of the planet’s driest regions stunned the world this month. Heavy rains in the United Arab Emirates and Oman submerged cars, clogged highways and killed at least 21 people. Flights out of Dubai’s airport, a major global hub, were severely disrupted.
The downpours weren’t a total surprise — forecasters had anticipated the storms several days earlier and issued warnings. But they were certainly unusual.
Here’s what to know.
Heavy rain there is rare, but not unheard-of.
On average, the Arabian Peninsula receives a scant few inches of rain a year, although scientists have found that a sizable chunk of that precipitation falls in infrequent but severe bursts, not as periodic showers. These rains often come during El Niño conditions like the ones the world is experiencing now.
U.A.E. officials said the 24-hour rain total on April 16 was the country’s largest since records there began in 1949 . And parts of the nation had already experienced an earlier round of thunderstorms in March.
Oman, with its coastline on the Arabian Sea, is also vulnerable to tropical cyclones. Past storms there have brought torrential rain, powerful winds and mudslides, causing extensive damage.
Global warming is projected to intensify downpours.
Stronger storms are a key consequence of human-caused global warming. As the atmosphere gets hotter, it can hold more moisture, which can eventually make its way down to the earth as rain or snow.
But that doesn’t mean rainfall patterns are changing in precisely the same way across every part of the globe.
In their latest assessment of climate research , scientists convened by the United Nations found there wasn’t enough data to have firm conclusions about rainfall trends in the Arabian Peninsula and how climate change was affecting them. The researchers said, however, that if global warming were to be allowed to continue worsening in the coming decades, extreme downpours in the region would quite likely become more intense and more frequent.
Hot oceans are a big factor.
An international team of scientists has made a first attempt at estimating the extent to which climate change may have contributed to April’s storms. The researchers didn’t manage to pin down the connection precisely, though in their analysis, they did highlight one known driver of heavy rain in the region: above-normal ocean temperatures.
Large parts of the Indian, Pacific and Atlantic Oceans have been hotter than usual recently, in part because of El Niño and other natural weather cycles, and in part because of human-induced warming .
When looking only at El Niño years, the scientists estimated that storm events as infrequent as this month’s delivered 10 percent to 40 percent more rain to the region than they would in a world that hadn’t been warmed by human activities. They cautioned, however, that these estimates were highly uncertain.
“Rainfall, in general, is getting more extreme,” said Mansour Almazroui, a climate scientist at King Abdulaziz University in Jeddah, Saudi Arabia, and one of the researchers who contributed to the analysis.
The analysis was conducted by scientists affiliated with World Weather Attribution, a research collaboration that studies extreme weather events shortly after they occur. Their findings about this month’s rains haven’t yet been peer reviewed, but are based on standardized methods .
The role of cloud seeding isn’t clear.
The U.A.E. has for decades worked to increase rainfall and boost water supplies by seeding clouds. Essentially, this involves shooting particles into clouds to encourage the moisture to gather into larger, heavier droplets, ones that are more likely to fall as rain or snow.
Cloud seeding and other rain-enhancement methods have been tried around the world, including in Australia, China, India, Israel, South Africa and the United States. Studies have found that these operations can, at best, affect precipitation modestly — enough to turn a downpour into a bigger downpour, but probably not a drizzle into a deluge.
Still, experts said pinning down how much seeding might have contributed to this month’s storms would require detailed study.
“In general, it is quite a challenge to assess the impact of seeding,” said Luca Delle Monache, a climate scientist at the Scripps Institution of Oceanography in La Jolla, Calif. Dr. Delle Monache has been leading efforts to use artificial intelligence to improve the U.A.E.’s rain-enhancement program.
An official with the U.A.E.’s National Center of Meteorology, Omar Al Yazeedi, told news outlets that the agency didn’t conduct any seeding during the latest storms. His statements didn’t make clear, however, whether that was also true in the hours or days before.
Mr. Al Yazeedi didn’t respond to emailed questions from The New York Times, and Adel Kamal, a spokesman for the center, didn’t have further comment.
Cities in dry places just aren’t designed for floods.
Wherever it happens, flooding isn’t just a matter of how much rain comes down. It’s also about what happens to all that water once it’s on the ground — most critically, in the places people live.
Cities in arid regions often aren’t designed to drain very effectively. In these areas, paved surfaces block rain from seeping into the earth below, forcing it into drainage systems that can easily become overwhelmed.
One recent study of Sharjah , the capital of the third-largest emirate in the U.A.E., found that the city’s rapid growth over the past half-century had made it vulnerable to flooding at far lower levels of rain than before.
Omnia Al Desoukie contributed reporting.
Raymond Zhong reports on climate and environmental issues for The Times. More about Raymond Zhong
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policy development. Section III discusses status of global derivatives market vis-a-vis Indian derivatives market. The last section specifies summary and concluding remarks. Section I 1. Concept of Derivatives The term 'derivatives, refers to a broad class of financial instruments which mainly include options and futures. These instruments ...
derivatives market is headed, Greenwich Associates conducted a study in partnership with FIA, an association that represents banks, brokers, exchanges, and other firms in the global derivatives markets. The study gathered insights from nearly 200 derivatives market participants—traders, brokers, investors, clearing firms, exchanges,
Schoinas (2021) used time series techniques to study the global derivatives market, concluding that disruptive futures tended to be more sustainable, ... Innovation by an exchange: A case study of the development of the plywood futures contract. The Journal of Law and Economics, 16 (1) (1973), pp. 119-136.
the over-the-counter (OTC) derivatives market worldwide exceeds $640 trillion, with a collective gross market value of over $27 trillion. ... potentially lethal leverage-volatility combination that accompanies derivatives. Several important case studies are presented that highlight these risks. Section 5 discusses derivatives markets in the ...
A CASE STUDY DETAILING MARKET EVOLUTION, CURRENT MARKET DYNAMICS AND PRICING ISSUES VIA THE BINOMIAL TREE MODEL Joshua Schiffrin1 Duke University Durham, NC April, 2001 ... Financial derivatives currently are widely used by corporations, money managers and hedge funds. Investment banks make markets in a wide array of derivatives and can price and
The study is conducted to establish the framework for comparing the relation in performance of the derivatives of BSE and NSE in India and to analyse the relationship of derivatives with the cash ...
Brought to you by: Industry and Background Note. Derivative Markets: Structure and Risks. By: Scott P. Mason, Kuljot Singh. Gives a conceptual understanding of derivative products, their applications, and valuation. After a brief treatment of exchange-traded derivatives, explores over-the-counter (OTC) derivatives,…. Length: 17 page (s)
This study investigates the determinants for the use of derivatives by firms in the Indian market. Using a sample of 433 firms listed in the National Stock Exchange (NSE) in India for the period 2013-2018, we find that firm size, debt to equity, turnover, price-earnings ratio and the magnitude of international transactions are significant influential drivers responsible for pushing the ...
Derivatives have been associated with a number of high-profile corporate events that roiled the global financial markets over the past two decades. To some critics, derivatives have played an important role in the near collapses or bankruptcies of Barings Bank in 1995, Long-term Capital Management in 1998, Enron in 2001, Lehman Brothers in and American International Group (AIG) in 2008. Warren ...
increased international financial fragility to the global economy. Together with transactions. that were once heralded as hallmarks of market ef ficiency (Kojima, 1995), such as. conglomerate ...
Used properly, derivatives can help organizations reduce financial risk. Although incidents involving large losses receive the most public attention, such incidents are the exception rather than the rule in derivatives markets. Most public policy concerns center around the speculative use of deriva-tives.
The current scenario in Indian derivatives trading is at par with international markets where options are preferred to futures contracts. Higher outlay, lower liquidity and greater risk in single stock futures could be the reasons behind this shift. This study analyses the market dynamics for trading Nifty Index futures and options contracts.
Abstract. Derivatives market a significant role to play in a country's economic development. The study's objective is to investigate the effect on the underlying market volatility of financial derivatives (futures and options). Currently, financial derivatives have become increasingly popular and utmost frequently used in the world of finance.
Ashutosh Vashishtha and Satish Kumar (2010) conducted a case study on Development of Financial Derivatives Market in India. In this study they focused conceptual framework of derivatives. This study helps to know the Derivatives Products Traded in Derivatives Segment of BSE and NSE and its turnover,
structure and vital participants engaged with the market. Then, it looks at how the derivatives market in India has grown and grown in size, including the kinds of instruments traded, the amount of trading, and the market share of different players. The study also talks about the problems that the Indian derivatives market has to deal
Product details. Derivative Markets: Structure and Risks. Note. -. Reference no. 9-295-009. Subject category: Finance, Accounting and Control. Authors: Scott P Mason (Harvard Business School); Kuljot Singh (Harvard Business School) Published by: Harvard Business Publishing. Originally published in: 1994.
Risk Management: A Case Study on Derivative The case study is based on the derivative debacle. The companies which initially gained some benefit on account of derivative deals, ... buy USD 0.625 mio from market @44.10 i.e. by paying INR 2,75,62,500/- Scenario 3: If on maturity the USDINR rate is less than 44.10, say it is at 42.10 than M/s ...
The present study attempts to discuss the genesis of derivatives trading by tracing its historical. development, types of traded derivatives produc ts, regulation and policy developments, trend ...
Derivatives Trading in India - Bombay Stock Exchange, The case discusses the introduction and growth of the derivatives market in India. It describes in detail the reasons that led to the introduction of derivatives trading in India and why it faced opposition by a section of industry analysts and media. The case then describes the issues that still remain to be addressed by the regulatory ...
the over-the-counter (OTC) derivatives market worldwide exceeds $640 trillion,withacollective gross market value of over $27 trillion. ... potentially lethal leverage-volatility combination that accompanies derivatives. Several important case studies are presented that highlight these risks. Section 5 discusses derivatives markets in the Indian ...
A Study of Derivatives Market in India and its Current Position in Global Financial Derivatives www.iosrjournals.org 27 | Page 1. Management of risk: One of the most important services provided by the derivatives is to control, avoid, shift and manage efficiently different types of risk through various strategies like hedging, arbitraging ...
Email: [email protected]. Abstract: Derivatives market a significant role to play in a country's economic development.The study's o. bjective is to investigate the effect on the underlying ...
Options Case Study Transactions. On purchase of the call option, the manufacturer (the option holder) pays a premium to the option writer. The premiums are dictated by the options market, and are affected by the strike price and volume on the option contract. If the market never exceeds $30 per barrel, the option expires out of the money.
Boeing has a storied history that reaches back well over a century. Its current problems raise the question of how we got here — and magnify worries about American manufacturing at large. Jerry ...
One recent study of Sharjah, the capital of the third-largest emirate in the U.A.E., found that the city's rapid growth over the past half-century had made it vulnerable to flooding at far lower ...