Maitya

  1. Hi Maitya, I think what you mean to ask here is in comparison with standard interest rate of 5%. Although its very important to understand that which interest rate would be higher and that would obviously the AER one. Also higher the interest rate, better the profit on your investment. So let's sayRead more

    Hi Maitya, I think what you mean to ask here is in comparison with standard interest rate of 5%. Although its very important to understand that which interest rate would be higher and that would obviously the AER one. Also higher the interest rate, better the profit on your investment. So let’s say your standard interest rate is 5%, which is divided as 2.5% for 2 parts of six months, then by the end of the year your AER would be 5.06%, which would be greater than the one which you accrue at the end of the year alltogether.

    See less
    • 0
rayon

  1. According to a definition on Wikipedia, "The effective interest rate, effective annual interest rate, annual equivalent rate or simply effective rate is the interest rate on a loan or financial product restated from the nominal interest rate and expressed as the equivalent interest rate if compoundRead more

    According to a definition on Wikipedia, “The effective interest rate, effective annual interest rate, annual equivalent rate or simply effective rate is the interest rate on a loan or financial product restated from the nominal interest rate and expressed as the equivalent interest rate if compound interest was payable annually in arrears.”
    Simply speaking we can say that, Annual Equivalent Rate or AER is the real or actual interest rate that an investor would manifest at the end of the year for his shares and bonds or loans. It could also be noted that the AER will be higher than the stated interest rate.

    See less
    • 0
rayon

  1. Yes Rayon, swaps are indeed OTC(over-the-counter). They are customized contracts traded in the over-the-counter market privately, versus options and futures traded on a public exchange. Basically, firms and financial institutions dominate the swaps market, with few individuals that rarely participatRead more

    Yes Rayon, swaps are indeed OTC(over-the-counter). They are customized contracts traded in the over-the-counter market privately, versus options and futures traded on a public exchange. Basically, firms and financial institutions dominate the swaps market, with few individuals that rarely participating. Since, swaps occur on the OTC market, there is always the risk of a counter party defaulting on the swap.

    See less
    • 0
Janny

  1. There are many benefits of swapping, firstly talking about their cost, swap is generally cheaper. There is no upfront premium and it reduces transactions costs. They can be used to hedge risk, and long time period hedge is possible and it provides flexibility and maintains informational advantages.Read more

    There are many benefits of swapping, firstly talking about their cost, swap is generally cheaper. There is no upfront premium and it reduces transactions costs. They can be used to hedge risk, and long time period hedge is possible and it provides flexibility and maintains informational advantages. A snap has longer term than futures or options, they will run for years, whereas forwards and futures are for the relatively short term. Lastly, using swaps can give companies a better match between their liabilities and revenues.

    See less
    • 0
Manushree Mishra

  1. There are many types of swaps, although in order of their quantitative importance, they are: interest rate swaps, basis swaps, currency swaps, inflation swaps, credit default swaps, commodity swaps and equity swaps. Generally, the most common kind of swap is an interest rate swap. Swaps do not tradeRead more

    There are many types of swaps, although in order of their quantitative importance, they are: interest rate swaps, basis swaps, currency swaps, inflation swaps, credit default swaps, commodity swaps and equity swaps. Generally, the most common kind of swap is an interest rate swap. Swaps do not trade on exchanges, and retail investors do not generally engage in swaps. Rather, swaps are over-the-counter contracts primarily between businesses or financial institutions that are customized to the needs of both parties.

    See less
    • 0
rayon

  1. Swapping is the process of creating a contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Generally swapping involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything.Read more

    Swapping is the process of creating a contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Generally swapping involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything. Although, the principal does not change hands. Each cash flow comprises one leg of the swap. One cash flow is generally fixed, while the other is variable and based on a benchmark interest rate, floating currency exchange rate or index price.

    See less
    • 0
Manushree Mishra

  1. If insider trading is done under set guidelines then its not illegal and obviously not tracked by any jurisdiction. So, here we are talking about illegal insider trading. In order to track illegal insider trading, SEC has some regulations, which says it is illegal when, "buying or selling a securityRead more

    If insider trading is done under set guidelines then its not illegal and obviously not tracked by any jurisdiction. So, here we are talking about illegal insider trading. In order to track illegal insider trading, SEC has some regulations, which says it is illegal when, “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.” In order to track it, market surveillance activities take place in which SEC uses sophisticated tools to detect illegal insider trading, especially around the time of important events such as earnings reports and key corporate developments.
    Adding to that, insider trading is also revealed through tips and complaints from sources such as unhappy investors or traders on the wrong side of a trade. Also, the tendency to leverage up the inside information as much as possible is another vulnerability that makes it easier to detect insider trading.

    See less
    • 0
Manushree Mishra

  1. Insider trading is illegal use of information of a company for one's personal profit. This term is commonly used to refer to buying or selling of stocks on the basis of information that is not available to the public. Let's consider an example of a manager who has exact information about the stocksRead more

    Insider trading is illegal use of information of a company for one’s personal profit. This term is commonly used to refer to buying or selling of stocks on the basis of information that is not available to the public. Let’s consider an example of a manager who has exact information about the stocks which is not disclosed and he uses that information to buy stocks of his own company knowing the profit he will manifest out of this action, then it is called insider trading.
    Other example of it could be an employee trading the information about his company’s future planning regarding a product with some other competitor company in the market.

    See less
    • 0
Aakash

  1. Insider trading is guilty of crime, especially if the information traded is sensitive and extremely private. It is illegal in almost all the countries and special rules and regulations are passed by various companies so as to set that what according to them will be qualified as insider trading. AlthRead more

    Insider trading is guilty of crime, especially if the information traded is sensitive and extremely private. It is illegal in almost all the countries and special rules and regulations are passed by various companies so as to set that what according to them will be qualified as insider trading. Although trading by specific insiders, such as employees, is generally permitted as long as it does not rely on material information which is not in the public domain. Also many jurisdictions require that such trading be reported so that the transactions can be monitored. In the United States and several other jurisdictions, trading conducted by corporate officers, key employees, directors, or significant shareholders must be reported to the regulator or publicly disclosed, usually within a few business days of the trade.

    See less
    • 0
Maitya

  1. According to the definition on Wikipedia, "Insider trading is the trading of a public company's stock or other securities based on material, nonpublic information about the company. In various countries, some kinds of trading based on insider information is illegal." Broadly speaking, every companyRead more

    According to the definition on Wikipedia, “Insider trading is the trading of a public company’s stock or other securities based on material, nonpublic information about the company. In various countries, some kinds of trading based on insider information is illegal.” Broadly speaking, every company has its own private information on its working, planning, financing, marketing etc. This information is although not as private and safe as it might seem. Since employees who work in that organization has most of this information as they are trusted with it. When employees secretively leak this information, or we can say when an insider trade this information for his or her own profit then it is known as insider trading.

    See less
    • 0