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• Wednesday, 22 May 2013

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• Saving is Priority One, But Investing is Everything Thereafter - 5 January 2011

The past two years have been some of the severest on record when it comes to measuring how tough economic times can affect a family’s financial well being, much less the nation as a whole. Budgeting and priority setting become tougher elements of a prudent financial plan, but short-term thriftiness can bode well for long-term financial security, as long as you stick to your plan.

• Moral Hazard – Part 2 - 30 December 2010

While there are many reasons behind the current economic crisis, the term 'moral hazard' has been applied to risky decision making actions by lenders which led to the chaos in large financial institutions, referred to as the US subprime mortgage crisis, or the 2007-2010 financial crisis. It appears that the whole too-big-to-fail mindset may have resulted in extreme leniency when assessing the ability of borrowers to repay their loans – to the detriment of both lenders and borrowers. A number of financial giants took a tumble, with some being bailed out with government/taxpayers money and others being taken over by previous competitors, shifting at least part of the burden of bad decision making elsewhere.

• Moral Hazard – Part 1 - 27 December 2010

Renowned in financial circles for his work on incentives relating to asymmetric information, Professor of Economics at the Massachusetts Institute of Technology (MIT) Bengt Robert Holmström defines the term 'moral hazard' in the 1979 Bell Journal of Economics as follows: "It has long been recognized that a problem of moral hazard may arise when individuals engage in risk sharing under conditions such that their privately taken actions affect the probability distribution of the outcome." Economist Professor Paul Krugman put it in a nutshell by describing moral hazard as being "any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly."

• Information Asymmetry - 16 September 2010

Information asymmetry – where one party has superior information, putting the other party at a disadvantage - is often seen as the underlying cause of business transactions failing to meet expectations. Quoted examples of information asymmetry include "moral hazard" and "adverse selection", with the former being the change in behavior of one of the parties in relation to the level of risk, and the latter referring to a situation where a bad choice is made because of a lack of information available to the person making the choice.

• Basel III Aims For 2013 Implementation - 13 September 2010

Consisting of representatives from twenty-seven countries, the Basel Committee on Banking Supervision (BCBS) provides a forum for discussion and cooperation with regard to standardizing banking regulations of member countries. The BCBS was initially created by the central bank governors of the Group of Ten (G-10) nations – which consists of eleven member nations, being United States, United Kingdom, Sweden, the Netherlands, Japan, Italy, Germany, France, Canada and Belgium, with Switzerland joining later. Other member nations participating in the BCBS are Australia, Argentina, Brazil, China, Hong Kong SAR, Indonesia, India, Korea, Mexico, Luxembourg, Russia, Singapore, Audi Arabia, South Africa and Turkey.

• Stock Market Simulators - 6 September 2010

Few would disagree that being a stock market player must be one of the most stressful, but also the most exciting, career paths to follow – especially in light of the global financial turmoil over the past two years or so. Have you ever wondered what it must feel like to win, or lose, a fortune as a result of a single decision? Or if slow and steady is your way, how would you best go about building up a comfy nest-egg by investing in the stock market? Before you leap into the world of high finance, you can test your aptitude for stock market trading, without any of the financial risk, by means of a stock market simulator.

• Market Makers - 26 August 2010

With stock exchange transactions taking place in the blink of an eye, market makers play a vital role in trading by being ready at any given moment of a trading day to buy or sell at publicly quoted prices, thereby linking sellers and buyers. These broker-dealer firms accept the risk of holding a predetermined number of shares in a chosen security, thereby facilitating instant trades in that security. Market makers trade in an environment of vigorous competition for customer order flow. As the term suggests, market makers create a market by displaying buy and sell quotations for a guaranteed number of shares. As a buy order enters the system, the market maker will sell from its own inventory, or in the event of not having inventory, will seek a corresponding sell order or inventory from other market makers. With modern technology at the forefront of stock market trading, these complex transactions take place in a matter of seconds.