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15758dda67The Royal Bank of Scotland Group operates in all the main business and financial

centres across India. We can now offer a full range of tailored advisory, financial and operational
services in both corporate and investment banking and also focus strongly on our consumer and
commercial offering in India. We take pride in our delivery culture, concentrating on excellence
in origination, execution and distribution globally.
Our Corporate and Institutional business, Global Markets, now has a strong offering in equities,
corporate finance, transaction services and mergers and acquisitions to the Indian market. Coutts
& Co and RBS Coutts International is the international private banking arm of the Royal Bank of
Scotland group, and manage assets of more than £40 billion for over 100,000 clients worldwide.
RBS International is one of the leading players in the UK offshore market, with a balance sheet
in excess of £20 billion. Our global reach will now extend to more than 50 countries, with more
than 40 million customers, confirming our position as a reliable funding partner. Our financial
strength and market power give us the tools to achieve effective results.
In 2007, RBS led the successful consortium bid for ABN AMRO, who has grown a strong
presence in India since 1921 when the first branch was opened in Kolkata. Since then the
coverage has extended to Mumbai, New Delhi, Chennai, Kolkata, Pune, Baroda, Hyderabad,
Bangalore, Surat, Noida, Gurgaon, Lucknow, Mangalore, Moradabad, Nasik, Panipat, Tirupur,
Salem, Udaipur, Kolhapur and Ahmedabad across 28 branches.

An investment bank is a financial institution that raises capital, trades in securities and manages
corporate mergers and acquisitions. Investment banks profit from companies and governments
by raising money through issuing and selling securities in capital markets (both equity, debt) and
insuring bonds (e.g. selling credit default swaps), as well as providing advice on transactions
such as mergers and acquisitions. A majority of investment banks offer strategic advisory
services for mergers, acquisitions, divestiture or other financial services for clients, such as the
trading of derivatives, fixed income, foreign exchange, commodity, and equity securities.
In terms of regulatory qualification, to perform these services in the United States, an adviser
must be a licensed broker-dealer, and is subject to Securities & Exchange Commission (SEC)
(FINRA) regulation[1]. Until 1999, the United States maintained a separation between
investment banking and commercial banks. Other industrialized countries (including G7
countries) have not maintained this separation historically. Trading securities for cash or
securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e.,
underwriting, research, etc.) was referred to as the "sell side".
Dealing with the pension funds, mutual funds, hedge funds, and the investing public who
consumed the products and services of the sell-side in order to maximize their return on
investment constitutes the "buy side". Many firms have buy and sell side components.

Main activities and units


An investment bank is split into the so-called front office, middle office, and back office. While
large full-service investment banks offer all of the lines of businesses, both sell side and buy
side, smaller sell side investment firms such as boutique investment banks and small broker-
dealers will focus on investment banking and sales/trading/research, respectively.
Investment banks offer security to both corporations issuing securities and investors buying
securities. For corporations investment bankers offer information on when and how to place their
securities in the market. The corporations do not have to spend on resources with which it is not
equipped. To the investor, the responsible investment banker offers protection against unsafe
securities. The offering of a few bad issues can cause serious loss to its reputation, and hence
loss of business. Therefore, investment bankers play a very important role in issuing new
security offerings.

[edit] Core investment banking activities


•Investment banking is the traditional aspect of the investment banks which also involves
helping customers raise funds in the capital markets and advise on mergers and
acquisitions. Investment banking may involve subscribing investors to a security
issuance, coordinating with bidders, or negotiating with a merger target. Another term for
the investment banking division is corporate finance, and its advisory group is often
termed mergers and acquisitions (M&A). The investment banking division (IBD) is
generally divided into industry coverage and product coverage groups. Industry coverage
groups focus on a specific industry such as healthcare, industrials, or technology, and
maintain relationships with corporations within the industry to bring in business for a
bank. Product coverage groups focus on financial products, such as mergers and
acquisitions, leveraged finance, equity, and high-grade debt and generally work and
collaborate with industry groups in the more intricate and specialized needs of a client.
•Sales and trading: On behalf of the bank and its clients, the primary function of a large
investment bank is buying and selling products. In market making, traders will buy and
sell financial products with the goal of making an incremental amount of money on each
trade. Sales is the term for the investment banks sales force, whose primary job is to call
on institutional and high-net-worth investors to suggest trading ideas (on caveat emptor
basis) and take orders. Sales desks then communicate their clients' orders to the
appropriate trading desks, who can price and execute trades, or structure new products
that fit a specific need. Structuring has been a relatively recent activity as derivatives
have come into play, with highly technical and numerate employees working on creating
complex structured products which typically offer much greater margins and returns than
underlying cash securities. Strategists advise external as well as internal clients on the
strategies that can be adopted in various markets. Ranging from derivatives to specific
industries, strategists place companies and industries in a quantitative framework with
full consideration of the macroeconomic scene. This strategy often affects the way the
firm will operate in the market, the direction it would like to take in terms of its
proprietary and flow positions, the suggestions salespersons give to clients, as well as the
way structurers create new products. Banks also undertake risk through proprietary
trading, done by a special set of traders who do not interface with clients and through
"principal risk", risk undertaken by a trader after he buys or sells a product to a client and
does not hedge his total exposure. Banks seek to maximize profitability for a given
amount of risk on their balance sheet. The necessity for numerical ability in sales and
trading has created jobs for physics and math Ph.D.s who act as quantitative analysts.

•Research is the division which reviews companies and writes reports about their prospects,
often with "buy" or "sell" ratings. While the research division generates no revenue, its
resources are used to assist traders in trading, the sales force in suggesting ideas to
customers, and investment bankers by covering their clients. There is a potential conflict
of interest between the investment bank and its analysis in that published analysis can
affect the profits of the bank. Therefore in recent years the relationship between
investment banking and research has become highly regulated requiring a Chinese wall
between public and private functions.
[edit] Other businesses that an investment bank may be involved in
•Global Transaction Banking is the division which provide cash management, custody
services, lending, and securities brokerage services to institutions. Prime brokerage with
hedge funds has been an especially profitable business, as well as risky, as seen in the
"run on the bank" with Bear Stearns in 2008.

•Investment management is the professional management of various securities (shares,


bonds, etc.) and other assets (e.g. real estate), to meet specified investment goals for the
benefit of the investors. Investors may be institutions (insurance companies, pension
funds, corporations etc.) or private investors (both directly via investment contracts and
more commonly via collective investment schemes eg. mutual funds). The investment
management division of an investment bank is generally divided into separate groups,
often known as Private Wealth Management and Private Client Services.
•Merchant banking is a private equity activity of investment banks.[2] Current examples
include Goldman Sachs Capital Partners and JPMorgan's One Equity Partners.
(Originally, "merchant bank" was the British English term for an investment bank.)

•Commercial banking see article commercial bank. Examples being Goldman Sachs and
Morgan Stanley growing into the commercial banking businesses even before the
financial crises of 2008.
[edit] Middle office
•Risk management involves analyzing the market and credit risk that traders are taking onto
the balance sheet in conducting their daily trades, and setting limits on the amount of
capital that they are able to trade in order to prevent 'bad' trades having a detrimental
effect to a desk overall. Another key Middle Office role is to ensure that the above
mentioned economic risks are captured accurately (as per agreement of commercial terms
with the counterparty), correctly (as per standardized booking models in the most
appropriate systems) and on time (typically within 30 minutes of trade execution). In
recent years the risk of errors has become known as "operational risk" and the assurance
Middle Offices provide now includes measures to address this risk. When this assurance
is not in place, market and credit risk analysis can be unreliable and open to deliberate
manipulation.
•Corporate treasury is responsible for an investment bank's funding, capital structure
management, and liquidity risk monitoring.
•Financial control tracks and analyzes the capital flows of the firm, the Finance division is
the principal adviser to senior management on essential areas such as controlling the
firm's global risk exposure and the profitability and structure of the firm's various
businesses. In the United States and United Kingdom, a Financial Controller is a senior
position, often reporting to the Chief Financial Officer.

•Corporate strategy, along with risk, treasury, and controllers, often falls under the finance
division as well.
•Compliance areas are responsible for an investment bank's daily operations' compliance
with government regulations and internal regulations. Often also considered a back-office
division.
[edit] Back office

•Operations involves data-checking trades that have been conducted, ensuring that they are
not erroneous, and transacting the required transfers. While some believe that operations
provides the greatest job security and the bleakest career prospects of any division within
an investment bank[3], many banks have outsourced operations. It is, however, a critical
part of the bank. Due to increased competition in finance related careers, college degrees
are now mandatory at most Tier 1 investment banks.[citation needed] A finance degree
has proved significant in understanding the depth of the deals and transactions that occur
across all the divisions of the bank.
•Technology refers to the information technology department. Every major investment bank
has considerable amounts of in-house software, created by the technology team, who are
also responsible for technical support. Technology has changed considerably in the last
few years as more sales and trading desks are using electronic trading. Some trades are
initiated by complex algorithms for hedging purposes.

[edit] Chinese wall


An investment bank can also be split into private and public functions with a Chinese wall which
separates the two to prevent information from crossing. The private areas of the bank deal with
private insider information that may not be publicly disclosed, while the public areas such as
stock analysis deal with public information.

[edit] Size of industry


Global investment banking revenue increased for the fifth year running in 2007, to $84.3 billion.
[4] This was up 22% on the previous year and more than double the level in 2003. Despite a
record year for fee income, many investment banks have experienced large losses related to their
exposure to U.S. sub-prime securities investments.
The United States was the primary source of investment banking income in 2007, with 53% of
the total, a proportion which has fallen somewhat during the past decade. Europe (with Middle
East and Africa) generated 32% of the total, slightly up on its 30% share a decade ago.[citation
needed]Asian countries generated the remaining 15%. Over the past decade, fee income from the
US increased by 80%.[citation needed] This compares with a 217% increase in Europe and
250% increase in Asia during this period.[citation needed] The industry is heavily concentrated
in a small number of major financial centres, including New York City, London and Tokyo.
Investment banking is one of the most global industries and is hence continuously challenged to
respond to new developments and innovation in the global financial markets. Throughout the
history of investment banking, it is only known that many have theorized that all investment
banking products and services would be commoditized. New products with higher margins are
constantly invented and manufactured by bankers in hopes of winning over clients and
developing trading know-how in new markets. However, since these can usually not be patented
or copyrighted, they are very often copied quickly by competing banks, pushing down trading
margins.
For example, trading bonds and equities for customers is now a commodity business[citation
needed], but structuring and trading derivatives retains higher margins in good times - and the
risk of large losses in difficult market conditions, such as the credit crunch that began in 2007.
Each over-the-counter contract has to be uniquely structured and could involve complex pay-off
and risk profiles. Listed option contracts are traded through major exchanges, such as the CBOE,
and are almost as commoditized as general equity securities.
In addition, while many products have been commoditized, an increasing amount of profit within
investment banks has come from proprietary trading, where size creates a positive network
benefit (since the more trades an investment bank does, the more it knows about the market flow,
allowing it to theoretically make better trades and pass on better guidance to clients).
The fastest growing segment of the investment banking industry are private investments into
public companies (PIPEs, otherwise known as Regulation D or Regulation S). Such transactions
are privately negotiated between companies and accredited investors. These PIPE transactions
are non-rule 144A transactions. Large bulge bracket brokerage firms and smaller boutique firms
compete in this sector. Special purpose acquisition companies (SPACs) or blank check
corporations have been created from this industry.[citation needed]

[edit] Vertical integration


In the U.S., the Glass-Steagall Act, initially created in the wake of the Stock Market Crash of
1929, prohibited banks from both accepting deposits and underwriting securities which led to
segregation of investment banks from commercial banks. Glass-Steagall was effectively repealed
for many large financial institutions by the Gramm-Leach-Bliley Act in 1999.
Another development in recent years has been the vertical integration of debt securitization.
[citation needed] Previously, investment banks had assisted lenders in raising more lending
funds and having the ability to offer longer term fixed interest rates by converting the lenders'
outstanding loans into bonds. For example, a mortgage lender would make a house loan, and
then use the investment bank to sell bonds to fund the debt, the money from the sale of the bonds
can be used to make new loans, while the lender accepts loan payments and passes the payments
on to the bondholders. This process is called securitization. However, lenders have begun to
securitize loans themselves, especially in the areas of mortgage loans. Because of this, and
because of the fear that this will continue, many investment banks have focused on becoming
lenders themselves,[5] making loans with the goal of securitizing them. In fact, in the areas of
commercial mortgages, many investment banks lend at loss leader interest rates[citation needed]
in order to make money securitizing the loans, causing them to be a very popular financing
option for commercial property investors and developers.[citation needed] Securitized house
loans may have exacerbated the subprime mortgage crisis beginning in 2007, by making risky
loans less apparent to investors.

[edit] Possible conflicts of interest


Potential conflicts of interest may arise between different parts of a bank, creating the potential
for financial movements that could be market manipulation. Authorities that regulate investment
banking (the FSA in the United Kingdom and the SEC in the United States) require that banks
impose a Chinese wall which prohibits communication between investment banking on one side
and equity research and trading on the other.
Some of the conflicts of interest that can be found in investment banking are listed here:

•Historically, equity research firms were founded and owned by investment banks. One
common practice is for equity analysts to initiate coverage on a company in order to
develop relationships that lead to highly profitable investment banking business. In the
1990s, many equity researchers allegedly traded positive stock ratings directly for
investment banking business. On the flip side of the coin: companies would threaten to
divert investment banking business to competitors unless their stock was rated favorably.
Politicians acted to pass laws to criminalize such acts. Increased pressure from regulators
and a series of lawsuits, settlements, and prosecutions curbed this business to a large
extent following the 2001 stock market tumble.[citation needed]

•Many investment banks also own retail brokerages. Also during the 1990s, some retail
brokerages sold consumers securities which did not meet their stated risk profile. This
behavior may have led to investment banking business or even sales of surplus shares
during a public offering to keep public perception of the stock favorable.

•Since investment banks engage heavily in trading for their own account, there is always the
temptation or possibility that they might engage in some form of front running. Front
running is the illegal practice of a stock broker executing orders on a security for their
own account before filling orders previously submitted by their customers, thereby
benefiting from any changes in prices induced by those orders.

Investment banking:
is a particular form of banking which finances capital requirements of an enterprises. Investment
banking assists as it performs IPOs, private placement and bond offerings, acts as broker and
carries through mergers and acquisitions.
Functions of Investment Banking:

Investment banks have multilateral functions to perform. Some of the most important functions
of investment banking can be jot down as follows: Investment banking help public and private
corporations in issuing securities in the primary market, guarantee by standby underwriting or
best efforts selling and foreign exchange management . Other services include acting as
intermediaries in trading for clients. Investment banking provides financial advice to investors
and serves them by assisting in purchasing securities, managing financial assets and trading
securities. Investment banking differ from commercial banking in the sense that they don't accept
deposits and grant retail loans. However the dividing line between the two fraternal twins have
become flimsy with loans and securities becoming almost substitutable ways of raising funds.
Small firms providing services of investment banking are called boutiques. These mainly
specialize in bond trading, advising for mergers and acquisitions, providing technical analysis or
program trading.

Investment banking is a field of banking that aids companies in acquiring funds. In addition to
the acquisition of new funds, investment banking also offers advice for a wide range of
transactions a company might engage in.

Traditionally, banks either engaged in commercial banking or investment banking. In


commercial banking, the institution collects deposits from clients and gives direct loans to
businesses and individuals. In the United States, it was illegal for a bank to have both
commercial and investment banking until 1999, when the Gramm-Leach-Bliley Act legalized it.
Through investment banking, an institution generates funds in two different ways. They may
draw on public funds through the capital market by selling stock in their company, and they may
also seek out venture capital or private equity in exchange for a stake in their company.
An investment banking firm also does a large amount of consulting. Investment bankers give
companies advice on mergers and acquisitions, for example. They also track the market in order
to give advice on when to make public offerings and how best to manage the business' public
assets. Some of the consultative activities investment banking firms engage in overlap with those
of a private brokerage, as they will often give buy-and-sell advice to the companies they
represent.
The line between investment banking and other forms of banking has blurred in recent years, as
deregulation allows banking institutions to take on more and more sectors. With the advent of
mega-banks which operate at a number of levels, many of the services often associated with
investment banking are being made available to clients who would otherwise be too small to
make their business profitable.
capital market:
When referring to a capital market, it is important to note that the term can refer to a rather broad
range of products and services that are associated with finances and investments. To that end, a
capital market will include such components as the stock market, commodities exchanges, the
bond market, and just about any physical or virtual facility or medium where debt and equity
securities can be bought or sold.
As a market for securities with a very broad reach, the capital market is an ideal environment for
the creation of strategies that can result in raising long-term funds for bond issues or even
mortgages. At the same time, the capital market provides the medium for short-term fund
strategies as well. Essentially, any type of financial transaction that is meant to result in the
buying and selling of securities and commodities for profit can rightly be considered part of the
capital market.
Institutions are also part of the framework of the capital market. Stock exchanges are one of the
more visible examples of established operations that give form and function to the capital
market. Along with the stock exchanges, support organizations such as brokerage firms also
form part of the capital market. Over the counter markets are also included in the working
definition for a capital market. By providing the mechanisms that make trading possible, these
outward expressions of the capital market make it possible to keep the process ethical and more
easily governed according to local laws and customs.
venture capital:

Venture capital is the term used when investors buy part of a company. A venture capitalist
places money in a company that is high risk and has a high growth. The investment is usually for
a period of five to seven years. The investor will expect a return on his money either by the sale
of the company or by offering to sell shares in the company to the public.
When investing venture capital, the investor may want receive a percentage of the company’s
equity, and may also wish to have a position on the director’s board. Always remember that an
investor who agrees to place venture capital in a company is looking to make a healthy return.
She can demand repayment by the sale of the company, asking for her funds back or
renegotiating the original deal.
There are three different types of venture capital investment. Early stage financing includes seed
financing, start-up financing and first stage financing. Seed financing refers to a small amount of
venture capital given to an entrepreneur or inventor who wishes to start a business. It may be
used to build a management team, for market research or to develop a business plan.
Start up financing refers to venture capital that is given when a business has been operating for
less than a year. Their product will not have been sold commercially yet, and they will just be
ready to start doing so. First stage financing is used when companies wish to expand their capital
and to proceed full scale and enter the public business arena.
Another type of venture capital investment is expansion financing. This covers second and third
stage financing and bridge financing. Second stage financing is an investment used to expand a
company that is already on its feet. The company is trading and has growing accounts and
inventories, although it may not yet be showing a profit.
Third stage financing is an investment to companies that are breaking even or becoming
profitable. The venture capital is used to expand the business. It may be used in the acquisition of
real estate or for further in-depth product development.
Bridge financing covers a variety of different meanings. It is a short term, interest only
investment. It is used when company restructuring is taking place. The money can also be used if
an initial investor wants to liquidate his position and sell his stock.
mergers:

A merger occurs when two companies combine to form a single company. A merger is very
similar to an acquisition or takeover, except that in the case of a merger existing stockholders of
both companies involved retain a shared interest in the new corporation. By contrast, in an
acquisition one company purchases a bulk of a second company's stock, creating an uneven
balance of ownership in the new combined company
The entire merger process is usually kept secret from the general public, and often from the
majority of the employees at the involved companies. Since the majority of merger attempts do
not succeed, and most are kept secret, it is difficult to estimate how many potential mergers
occur in a given year. It is likely that the number is very high, however, given the amount of
successful mergers and the desirability of mergers for many companies.
A merger may be sought for a number of reasons, some of which are beneficial to the
shareholders, some of which are not. One use of the merger, for example, is to combine a very
profitable company with a losing company in order to use the losses as a tax write-off to offset
the profits, while expanding the corporation as a whole.
Increasing one's market share is another major use of the merger, particularly amongst large
corporations. By merging with major competitors, a company can come to dominate the market
they compete in, giving them a freer hand with regard to pricing and buyer incentives. This form
of merger may cause problems when two dominating companies merge, as it may trigger
litigation regarding monopoly laws.
Another type of popular merger brings together two companies that make different, but
complementary, products. This may also involve purchasing a company which controls an asset
your company utilizes somewhere in its supply chain. Major manufacturers buying out a
warehousing chain in order to save on warehousing costs, as well as making a profit directly
from the purchased business, is a good example of this. PayPal's merger with eBay is another
good example, as it allowed eBay to avoid fees they had been paying, while tying two
complementary products together.
A merger is usually handled by an investment banker, who aids in transferring ownership of the
company through the strategic issuance and sale of stock. Some have alleged that this
relationship causes some problems, as it provides an incentive for investment banks to push
existing clients towards a merger even in cases where it may not be beneficial for the
stockholders.

brokerage:
A brokerage is a firm that acts as an intermediary between a purchaser and a seller. More
commonly, a brokerage is referred to as a brokerage firm. To broker a deal is to communicate
with both the buyer and seller as to acceptable price on anything sold or purchased.
A broker, a single person, or the brokerage firm completes any necessary legal paperwork,
obtains the appropriate signatures, and collects money from the purchaser to give to the seller.
Since the buyer and seller are employing the brokerage to complete the deal, the brokerage may
collect a portion of the money obtained. In some cases, a brokerage receives money from both
parties. In others, the brokerage receives a commission only from the seller.
Brokerage firms are most commonly thought of in relationship to the sale and purchase of stock
shares. Fees are variable, depending on the degree to which the brokerage is involved in
decisions about purchase. Some stockowners give their brokers power of attorney to make
decisions about when to buy or sell stock and depend upon their brokers for researching new
stock for purchase. This type of brokerage firm usually assesses a fairly large fee, and regardless
of whether the owner loses or earns money, the firm is paid.
Other brokerage firms are employed by people who like to do their own research and make all
their own decisions about what and when to buy and sell. These firms have a tendency to charge
per transaction and can be quite reasonable to employ. In the past few years, several brokerage
firms have begun stock trading on the Internet, allowing their clients access to information that
will help them carefully research their decisions. These companies are not a sound economical
choice for clients who do not do adequate research or cannot consistently read up on their stocks.
Extensive involvement by the stockowner is necessary to hopefully make the best deals.
In other areas of business, brokerage firms may be employed to acquire and sell real estate.
Brokerages exist to acquire art or antiquities. Also, restaurants and other service companies may
use brokerage firms to obtain meat and produce, restaurant supplies, or furniture. Sometimes,
employing a broker in this last sense is not initially expensive to the purchaser, because the
broker receives a fee from the companies used by their clients. However, the price of
merchandise obtained through a broker generally has a mark-up that makes up for this lack of
commission.
Brokerage firms can be helpful because they save their clients, whether buying or selling, time.
Not everyone has time to look at 40 real estate properties before purchasing. Not every restaurant
manager wants to interview a slew of potential food supply companies before selecting one.

mutual fund:

A mutual fund is a professionally managed type of collective investment scheme that pools
money from many investors and invests it in stocks, bonds, short-term money market
instruments, and/or other securities.[1] The mutual fund will have a fund manager that trades the
pooled money on a regular basis. The net proceeds or losses are then typically distributed to the
investors annually.
Since 1940, there have been three basic types of investment companies in the United States:
open-end funds, also known in the U.S. as mutual funds; unit investment trusts (UITs); and
closed-end funds. Similar funds also operate in Canada. However, in the rest of the world,
mutual fund is used as a generic term for various types of collective investment vehicles, such as
unit trusts, open-ended investment companies (OEICs), unitized insurance funds, and
undertakings for collective investments in transferable securities (UCITS).
NAV:

The net asset value, or NAV, is the current market value of a fund's holdings, less the fund's
liabilities, usually expressed as a per-share amount. For most funds, the NAV is determined
daily, after the close of trading on some specified financial exchange, but some funds update
their NAV multiple times during the trading day. The public offering price, or POP, is the NAV
plus a sales charge. Open-end funds sell shares at the POP and redeem shares at the NAV, and so
process orders only after the NAV is determined. Closed-end funds (the shares of which are
traded by investors) may trade at a higher or lower price than their NAV; this is known as a
premium or discount, respectively. If a fund is divided into multiple classes of shares, each class
will typically have its own NAV, reflecting differences in fees and expenses paid by the different
classes.
Some mutual funds own securities which are not regularly traded on any formal exchange. These
may be shares in very small or bankrupt companies; they may be derivatives; or they may be
private investments in unregistered financial instruments (such as stock in a non-public
company). In the absence of a public market for these securities, it is the responsibility of the
fund manager to form an estimate of their value when computing the NAV. How much of a
fund's assets may be invested in such securities is stated in the fund's prospectus.

Average annual return


US mutual funds use SEC form N-1A to report the average annual compounded rates of return
for 1-year, 5-year and 10-year periods as the "average annual total return" for each fund. The
following formula is used:[6]
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the
1-, 5-, or 10-year periods at the end of the 1-, 5-, or 10-year periods (or fractional portion).

[edit] Turnover
Turnover is a measure of the fund's securities transactions, usually calculated over a year's time,
and usually expressed as a percentage of net asset value.
This value is usually calculated as the value of all transactions (buying, selling) divided by 2
divided by the fund's total holdings; i.e., the fund counts one security sold and another one
bought as one "turnover". Thus turnover measures the replacement of holdings.
In Canada, under NI 81-106 (required disclosure for investment funds) turnover ratio is
calculated based on the lesser of purchases or sales divided by the average size of the portfolio
(including cash).

Derivative (finance)
A derivative is a financial instrument that is derived from some other asset, index, event, value
or condition (known as the underlying asset). Rather than trade or exchange the underlying asset
itself, derivative traders enter into an agreement to exchange cash or assets over time based on
the underlying asset. A simple example is a futures contract: an agreement to exchange the
underlying asset at a future date.
Derivatives are often leveraged, such that a small movement in the underlying value can cause a
large difference in the value of the derivative.
Derivatives can be used by investors to speculate and to make a profit if the value of the
underlying moves the way they expect (e.g. moves in a given direction, stays in or out of a
specified range, reaches a certain level). Alternatively, traders can use derivatives to hedge or
mitigate risk in the underlying, by entering into a derivative contract whose value moves in the
opposite direction to their underlying position and cancels part or all of it out.
Derivatives are usually broadly categorised by:

•The relationship between the underlying and the derivative (e.g. forward, option, swap)

•The type of underlying (e.g. Freight derivatives based on Baltic Exchange shipping indices),
equity derivatives, foreign exchange derivatives and credit derivatives)

•The market in which they trade (e.g., exchange traded or over-the-counter)

Uses
[edit] Hedging
A technique designed to eliminate or reduce risk.
Derivatives allow risk about the price of the underlying asset to be transferred from one party to
another. For example, a wheat farmer and a miller could sign a futures contract to exchange a
specified amount of cash for a specified amount of wheat in the future. Both parties have reduced
a future risk: for the wheat farmer, the uncertainty of the price, and for the miller, the availability
of wheat. However, there is still the risk that no wheat will be available because of events
unspecified by the contract, like the weather, or that one party will renege on the contract.
Although a third party, called a clearing house, insures a futures contract, not all derivatives are
insured against counterparty risk.
From another perspective, the farmer and the miller both reduce a risk and acquire a risk when
they sign the futures contract: The farmer reduces the risk that the price of wheat will fall below
the price specified in the contract and acquires the risk that the price of wheat will rise above the
price specified in the contract (thereby losing additional income that he could have earned). The
miller, on the other hand, acquires the risk that the price of wheat will fall below the price
specified in the contract (thereby paying more in the future than he otherwise would) and reduces
the risk that the price of wheat will rise above the price specified in the contract. In this sense,
one party is the insurer (risk taker) for one type of risk, and the counterparty is the insurer (risk
taker) for another type of risk.
Hedging also occurs when an individual or institution buys an asset (like a commodity, a bond
that has coupon payments, a stock that pays dividends, and so on) and sells it using a futures
contract. The individual or institution has access to the asset for a specified amount of time, and
then can sell it in the future at a specified price according to the futures contract. Of course, this
allows the individual or institution the benefit of holding the asset while reducing the risk that the
future selling price will deviate unexpectedly from the market's current assessment of the future
value of the asset.

Derivatives serve a legitimate business purpose. For example a corporation borrows a large sum
of money at a specific interest rate.[1] The rate of interest on the loan resets every six months.
the corporation is concerned that the rate of interest may be much higher in six months. The
corporation could buy a forward rate agreement. A forward rate agreement is a contract to pay a
fixed rate of interest six months after purchases on a notional sum of money.[2] If the interest
rate after six months is above the contract rate the seller pays the difference to the FRA buyer,
the corporation. If the rate is lower the corporation would pay the difference to the seller. The
purchase of the FRA would serve to reduce the uncertainty concerning the rate increase and
stabilize earnings.

Speculation and arbitrage


Derivatives can be used to acquire risk, rather than to insure or hedge against risk. Thus, some
individuals and institutions will enter into a derivative contract to speculate on the value of the
underlying asset, betting that the party seeking insurance will be wrong about the future value of
the underlying asset. Speculators will want to be able to buy an asset in the future at a low price
according to a derivative contract when the future market price is high, or to sell an asset in the
future at a high price according to a derivative contract when the future market price is low.
Individuals and institutions may also look for arbitrage opportunities, as when the current buying
price of an asset falls below the price specified in a futures contract to sell the asset.
Speculative trading in derivatives gained a great deal of notoriety in 1995 when Nick Leeson, a
trader at Barings Bank, made poor and unauthorized investments in futures contracts. Through a
combination of poor judgment, lack of oversight by the bank's management and by regulators,
and unfortunate events like the Kobe earthquake, Leeson incurred a $1.3 billion loss that
bankrupted the centuries-old institution.

Types of derivatives
OTC and exchange-traded
Broadly speaking there are two distinct groups of derivative contracts, which are distinguished
by the way they are traded in the market:

•Over-the-counter (OTC) derivatives are contracts that are traded (and privately
negotiated) directly between two parties, without going through an exchange or other
intermediary. Products such as swaps, forward rate agreements, and exotic options are
almost always traded in this way. The OTC derivative market is the largest market for
derivatives, and is largely unregulated with respect to disclosure of information between
the parties, since the OTC market is made up of banks and other highly sophisticated
parties, such as hedge funds. Reporting of OTC amounts are difficult because trades can
occur in private, without activity being visible on any exchange. According to the Bank
for International Settlements, the total outstanding notional amount is $684 trillion (as of
June 2008)[4]. Of this total notional amount, 67% are interest rate contracts, 8% are
credit default swaps (CDS), 9% are foreign exchange contracts, 2% are commodity
contracts, 1% are equity contracts, and 12% are other. Because OTC derivatives are not
traded on an exchange, there is no central counterparty. Therefore, they are subject to
counterparty risk, like an ordinary contract, since each counterparty relies on the other to
perform.
•Exchange-traded derivatives (ETD) are those derivatives products that are traded via
specialized derivatives exchanges or other exchanges. A derivatives exchange acts as an
intermediary to all related transactions, and takes Initial margin from both sides of the
trade to act as a guarantee. The world's largest[5] derivatives exchanges (by number of
transactions) are the Korea Exchange (which lists KOSPI Index Futures & Options),
Eurex (which lists a wide range of European products such as interest rate & index
products), and CME Group (made up of the 2007 merger of the Chicago Mercantile
Exchange and the Chicago Board of Trade and the 2008 acquisition of the New York
Mercantile Exchange). According to BIS, the combined turnover in the world's
derivatives exchanges totaled USD 344 trillion during Q4 2005. Some types of derivative
instruments also may trade on traditional exchanges. For instance, hybrid instruments
such as convertible bonds and/or convertible preferred may be listed on stock or bond
exchanges. Also, warrants (or "rights") may be listed on equity exchanges. Performance
Rights, Cash xPRTs and various other instruments that essentially consist of a complex
set of options bundled into a simple package are routinely listed on equity exchanges.
Like other derivatives, these publicly traded derivatives provide investors access to
risk/reward and volatility characteristics that, while related to an underlying commodity,
nonetheless are distinctive.

[edit] Common derivative contract types


There are three major classes of derivatives:
Futures/Forwards are contracts to buy or sell an asset on or before a future date at a price
specified today. A futures contract differs from a forward contract in that the futures
contract is a standardized contract written by a clearing house that operates an exchange
where the contract can be bought and sold, while a forward contract is a non-standardized
contract written by the parties themselves.
Options are contracts that give the owner the right, but not the obligation, to buy (in the case
of a call option) or sell (in the case of a put option) an asset. The price at which the sale
takes place is known as the strike price, and is specified at the time the parties enter into
the option. The option contract also specifies a maturity date. In the case of a European
option, the owner has the right to require the sale to take place on (but not before) the
maturity date; in the case of an American option, the owner can require the sale to take
place at any time up to the maturity date. If the owner of the contract exercises this right,
the counterparty has the obligation to carry out the transaction.
Swaps are contracts to exchange cash (flows) on or before a specified future date based on
the underlying value of currencies/exchange rates, bonds/interest rates, commodities,
stocks or other assets.
More complex derivatives can be created by combining the elements of these basic types. For
example, the holder of a swaption has the right, but not the obligation, to enter into a swap on or
before a specified future date

Leverage (finance)

In finance, leverage or leveraging refers to the use of debt to supplement investment.[1]


Companies usually leverage to increase returns to stock, as this practice can maximize gains (and
losses). The easy but high-risk increases in stock prices due to leveraging at US banks has been
blamed for the unusually high rate of pay for top executives during the recent banking crisis,
since gains in stock are often rewarded regardless of method.[2] Delevering is the action of
reducing borrowings.[1] In macroeconomics, a key measure of leverage is the debt to GDP ratio.
Types of leverage

Financial leverage
Financial leverage (FL) takes the form of a loan or other borrowings (debt), the proceeds of
which are (re)invested with the intent to earn a greater rate of return than the cost of interest. If
the firm's rate of return on assets (ROA) is higher than the rate of interest on the loan, then its
return on equity (ROE) will be higher than if it did not borrow because assets = equity + debt
(see accounting equation). On the other hand, if the firm's ROA is lower than the interest rate,
then its ROE will be lower than if it did not borrow. Leverage allows greater potential returns to
the investor that otherwise would have been unavailable but the potential for loss is also greater
because if the investment becomes worthless, the loan principal and all accrued interest on the
loan still need to be repaid.
Margin buying is a common way of utilizing the concept of leverage in investing. An unlevered
firm can be seen as an all-equity firm, whereas a levered firm is made up of ownership equity
and debt. A firm's debt to equity ratio is therefore an indication of its leverage. This debt to
equity ratio's influence on the value of a firm is described in the Modigliani-Miller theorem. As
is true of operating leverage, the degree of financial leverage measures the effect of a change in
one variable on another variable. Degree of financial leverage (DFL) may be defined as the
percentage change in earnings (earnings per share) that occurs as a result of a percentage change
in earnings before interest and taxes.

Operating leverage
Operating leverage reflects the extent to which fixed assets and associated fixed costs are utilized
in the business. Degree of operating leverage (DOL) may be defined as the percentage of
leveraging.

Hedge (finance)
In finance, a hedge is a position established in one market in an attempt to offset exposure to
price fluctuations in some opposite position in another market with the goal of minimizing one's
exposure to unwanted risk. There are many specific financial vehicles to accomplish this,
including insurance policies, forward contracts, swaps, options, many types of over-the-counter
and derivative products, and perhaps most popularly, futures contracts. Public futures markets
were established in the 1800s to allow transparent, standardized, and efficient hedging of
agricultural commodity prices; they have since expanded to include futures contracts for hedging
the values of energy, precious metals, foreign currency, and interest rate fluctuations.
Investment management
:Investment management is the professional management of various securities (shares, bonds
etc.) and assets (e.g., real estate), to meet specified investment goals for the benefit of the
investors. Investors may be institutions (insurance companies, pension funds, corporations etc.)
or private investors (both directly via investment contracts and more commonly via collective
investment schemes e.g. mutual funds or Exchange Traded Funds) .
The term asset management is often used to refer to the investment management of collective
investments, (not necessarily) whilst the more generic fund management may refer to all forms
of institutional investment as well as investment management for private investors. Investment
managers who specialize in advisory or discretionary management on behalf of (normally
wealthy) private investors may often refer to their services as wealth management or portfolio
management often within the context of so-called "private banking".
The provision of 'investment management services' includes elements of financial analysis, asset
selection, stock selection, plan implementation and ongoing monitoring of investments.
Investment management is a large and important global industry in its own right responsible for
caretaking of trillions of dollars, euro, pounds and yen. Coming under the remit of financial
services many of the world's largest companies are at least in part investment managers and
employ millions of staff and create billions in revenue.
Fund manager (or investment adviser in the U.S.) refers to both a firm that provides investment
management services and an individual who directs fund management decisions.
Portfolio manager:
A portfolio manager is a person who makes investment decisions using money other people
have placed under his or her control. In other words, it is a financial career involved in
investment management. They work with a team of analysts and researchers, and are ultimately
responsible for establishing an investment strategy, selecting appropriate investments and
allocating each investment properly for a fund- or asset-management vehicle.
Portfolio managers are presented with investment ideas from internal buy-side analysts and sell-
side analysts from investment banks. It is their job to sift through the relevant information and
use their judgment to buy and sell securities. Throughout each day, they read reports, talk to
company managers and monitor industry and economic trends looking for the right company and
time to invest the portfolio's capital.
Portfolio managers make decisions about investment mix and policy, matching investments to
objectives, asset allocation for individuals and institutions, and balancing risk against.
performance.
Portfolio management is about strengths, weaknesses, opportunities and threats in the choice of
debt vs. equity, domestic vs. international, growth vs. safety, and other tradeoffs encountered in
the attempt to maximize return at a given appetite for risk.
In the case of mutual and exchange-traded funds (ETFs), there are two forms of portfolio
management: passive and active. Passive management simply tracks a market index, commonly
referred to as indexing or index investing. Active management involves a single manager, co-
managers, or a team of managers who attempt to beat the market return by actively managing a
fund's portfolio through investment decisions based on research and decisions on individual
holdings. Closed-end funds are generally actively managed.
Retrieved from "http://en.wikipedia.org/wiki/Portfolio_manager"
Portfolio Management is used to select a portfolio of new product development projects to
achieve th following goals:

•Maximize the profitability or value of the portfolio

•Provide balance

•Support the strategy of the enterprise


Portfolio Management is the responsibility of the senior management team of an organization or
business unit. This team, which might be called the Product Committee, meets regularly to
manage the product pipeline and make decisions about the product portfolio. Often, this is the
same group that conducts the stage-gate reviews in the organization.
A logical starting point is to create a product strategy - markets, customers, products, strategy
approach, competitive emphasis, etc. The second step is to understand the budget or resources
available to balance the portfolio against. Third, each project must be assessed for profitability
(rewards), investment requirements (resources), risks, and other appropriate factors.
The weighting of the goals in making decisions about products varies from company. But
organizations must balance these goals: risk vs. profitability, new products vs. improvements,
strategy fit vs. reward, market vs. product line, long-term vs. short-term. Several types of
techniques have been used to support the portfolio management process:

•Heuristic models

•Scoring techniques

•Visual or mapping techniques


The earliest Portfolio Management techniques optimized projects' profitability or financial
returns using heuristic or mathematical models. However, this approach paid little attention to
balance or aligning the portfolio to the organization's strategy. Scoring techniques weight and
score criteria to take into account investment requirements, profitability, risk and strategic
alignment. The shortcoming with this approach can be an over emphasis on financial measures
and an inability to optimize the mix of projects. Mapping techniques use graphical presentation
to visualize a portfolio's balance. These are typically presented in the form of a two-dimensional
graph that shows the trade-off's or balance between two factors such as risks vs. profitability,
marketplace fit vs. product line coverage, financial return vs. probability of success, etc.
Portfolio beta
Used in the context of general equities. The beta of a portfolio is the weighted sum of the
individual asset betas, According to the proportions of the investments in the portfolio. E.g., if
50% of the money is in stock A with a beta of 2.00, and 50% of the money is in stock B with a
beta of 1.00,the portfolio beta is 1.50. Portfolio beta describes relative volatilityof an individual
securities portfolio, taken as a whole, as measured by the individual stock betas of the securities
making it up. A beta of 1.05 relative to the S&P 500 implies that if the S&P's excess return
increases by 10% the portfolio is expected to increase by 10.5%.
Copyright © 2004, Campbell R. Harvey. All Rights Reserved.
portfolio beta
The relative volatility of returns earned from holding a specific portfolio of securities. A high
portfolio beta indicates securities that tend to be more volatile in their price movements than the
market taken as a whole. Portfolio beta is calculated by summing the products of each security's
beta times the proportional weight of the security in the portfolio. For example, if a portfolio
consists of two securities, one valued at $15,000 and having a beta of 0.9 and the other valued at
$10,000 and having a beta of 1.5, the portfolio beta is (0.9)( $15,000/$25,000 ) + (1.5)( $10,000/$25,000 ), or
1.14.
What Does Zero-Beta Portfolio Mean?
A portfolio constructed to have zero systematic risk or, in other words, a beta of zero.
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Investopedia explains Zero-Beta Portfolio
Such a portfolio would have the same expected return as the risk-free rate.

What is Beta?

Beta is an indicator that measures how closely related the movement of a stock is to a broad
index of stocks, like the S&P 500. Every stock has a beta value. The following will help you
interpret what those beta values indicate:

Beta = 1

Indicates that the stock moves in tandem with the S&P 500. If the S&P 500 goes up, the stock
will usually go up. If the S&P 500 goes down, the stock will usually go down.

Beta > 1

Indicates that the stock moves in the same direction as the S&P 500, only faster. If the S&P 500
goes up, the stock will usually go up faster. If the S&P 500 goes down, the stock will usually go
down faster.

0 < Beta < 1

Indicates that the stock moves in the same direction as the S&P 500, only slower. If the S&P 500
goes up, the stock will usually go up slower. If the S&P 500 goes down, the stock will usually go
down slower.

Beta < 0

Indicates that the stock moves in the opposite direction as the S&P 500. If the S&P 500 goes up,
the stock will usually go down. If the S&P 500 goes down, the stock will usually go up.

By maintaining a portfolio of stocks that have different betas, you protect yourself from having
all of your stocks drop in value at the same time.

equities
Definition
An instrument that signifies an ownership position, or equity, in a corporation, and represents a
claim on its proportionate share in the corporation's assets and profits. A person holding such an
ownership in the company does not enjoy the highest claim on the company's earnings. Instead,
an equity holder's claim is subordinated to creditor's claims, and the equity holder will only enjoy
distributions from earnings after these higher priority claims are satisfied. also called equities or
equity securities or corporate stock.
Equity
Ownership interest in a firm. Also, the residual dollar value of a futures trading account,
assuming its liquidation is at the going trade price. In real estate, dollar difference between what
a property could be sold for and debts claimed against it. In a brokerage account, equity equals
the value of the account's securities minus any debit balance in a margin account. Equity is also
shorthand for stock market investments.
What Does Equity Market Mean?
The market in which shares are issued and traded, either through exchanges or over-the-counter
markets. Also known as the stock market, it is one of the most vital areas of a market economy
because it gives companies access to capital and investors a slice of ownership in a company
with the potential to realize gains based on its future performance.
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Investopedia explains Equity Market
This market can be split into two main sectors: the primary and secondary market. The primary
market is where new issues are first offered. Any subsequent trading takes place in the secondary
market.
stock market:

A stock market is a public market for the trading of company stock and derivatives at an agreed
price; these are securities listed on a stock exchange as well as those only traded privately.
What Does Stock Market Mean?
The term for the overall market in which shares are issued and traded on exchanges or in over-
the-counter markets. Also known as the equity market, it is one of the most vital areas of a
market economy because it provides companies with access to capital and allows investors to
own companies and participate in economic growth.
Investopedia explains Stock Market
The stock market is made up of the primary and secondary markets. The primary market is
where new issues (IPOs) first are offered, with any subsequent trading going on in the secondary
market.
Indian Equity Market

The Indian Equity Market is also the other name for Indian share market or Indian stock market.
The forces of the market depend on monsoons, global fundings flowing into equities in the
market and the performance of various companies. The Indian market of equities is transacted on
the basis of two major stock indices, National Stock Exchange of India Ltd. (NSE) and The
Bombay Stock Exchange (BSE), the trading being carried on in a dematerialized form. The
physical stocks are in liquid form and cannot be sold by the investors in any market. Two types
of funds are there in the Indian Equity Market, Venture Capital Funds and Private Equity Funds.

The equity indexes are correlated beyond the boundaries of different countries with their
exposure to common calamities like monsoon which would affect both India and Bangladesh or
trade integration policies and close connection with the foreign investors. From 1995 onwards,
both in terms of trade integration and FIIs India has made an advance. All these have established
a close relationship between the stock market indexes of India stock market and those of other
countries. The Stock derivatives adds up all futures and options on all individual stocks. This
stock index derivatives was found to have gone up from 12 % of NSE derivatives turnover in
2002 to 35 % in 2004. the Indian Equity Market also comprise of the Debt Market, dominated by
primary dealers, banks and wholesale investors.

Indian Equity Market at present is a lucrative field for the investors and investing in Indian
stocks are profitable for not only the long and medium-term investors, but also the position
traders, short-term swing traders and also very short term intra-day traders. In terms of market
capitalization, there are over 2500 companies in the BSE chart list with the Reliance Industries
Limited at the top. The SENSEX today has rose from 1000 levels to 8000 levels providing a
profitable business to all those who had been investing in the Indian Equity Market. There are
about 22 stock exchanges in India which regulates the market trends of different stocks.
Generally the bigger companies are listed with the NSE and the BSE, but there is the OTCEI or
the Over the Counter Exchange of India, which lists the medium and small sized companies.
There is the SEBI or the Securities and Exchange Board of India which supervises the
functioning of the stock markets in India.

In the Indian market scenario, the large FMCG companies reached the top line with a double-
digit growth, with their shares being attractive for investing in the Indian stock market. Such
companies like the Tata Tea, Britannia, to name a few, has been providing a bustling business for
the Indian share market. Other leading houses offering equally beneficial stocks for investing in
Indian Equity Market, of the SENSEX chart are the two-wheeler and three-wheeler maker Bajaj
Auto and second largest software exporter Infosys Technologies.

Other than some restricted industries, foreign investment in general enjoys a majority share in
the Indian Equity Market. Foreign Institutional Investors (FII) need to register themselves with
the SEBI and the RBI for operating in Indian stock exchanges. In fact from the Indian stock
market analysis it is known that in some specific industries foreigners can have even 100%
shares. In the last few years with the facility of the Online Stock Market Trading in India, it has
been very convenient for the FIIs to trade in the Indian stock market. From an analysis on the
Indian Equity Market it can be said that the increase in the foreign investments over the years no
doubt have accentuated the dynamism of the Indian market of equities. Foreign investors are
allowed to buy Indian equity for the purpose of converting the equity into ADR or GDR.

Thus, the growing financial capital markets of India being encouraged by domestic and foreign
investments is becoming a profitable business more with each day. If all the economic
parameters are unchanged Indian Equity Market will be conducive for the growth of private
equities and this will lead to an overall improvement in the Indian economy.

equities market
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Definition
Securities market in which common stock (ordinary shares) is traded. The US equities market,
for example, comprises of American Stock Exchange (AMEX), NASDAQ National Market, and
New York Stock Exchange (NYSE).
NASDAQ:

The full form of NASDAQ is National Association of Securities Dealers Automated Quotation
System, it is an American stock exchange. It is the largest electronic screen-based equity
securities trading market in the United States. With approximately 3,200 companies, it lists more
companies and has more trading volume per day than any other stock exchange in the world.
It was founded in 1971 by the National Association of Securities Dealers (NASD),
DOW JONES:

The Dow Jones Industrial Average also referred to as the Industrial Average, the Dow Jones,
the Dow 30, or simply as the Dow; is one of several stock market indices, created by Wall Street
Journal editor and Dow Jones & Company co-founder Charles Dow. The average is named after
Dow and one of his business associates, a statistician, Edward Jones. It is an index that shows
how certain large, publicly-owned companies have traded during a standard trading session in
the stock market.[1] Dow compiled the index to gauge the performance of the industrial sector
within the American economy. However, the performance of the Dow continues to be influenced
by not only corporate and economic reports, but also by domestic and foreign political events
such as war and terrorism, as well as by natural disasters that could potentially lead to economic
harm. It is the second oldest U.S. market index after the Dow Jones Transportation Average,
which Dow also created. The average is computed from the Dow Jones Indexes by the stock
prices of 30 of the largest and most widely held public companies in the United States. The
Industrial portion of the name is largely historical, as many of the modern 30 components have
little or nothing to do with traditional heavy industry. The average is price-weighted, and to
compensate for the effects of stock splits and other adjustments, it is currently a scaled average.
The value of the Dow is not the actual average of the prices of its component stocks, but rather
the sum of the component prices divided by a divisor, which changes whenever one of the
component stocks has a stock split or stock dividend, so as to generate a consistent value for the
index.
Along with the NASDAQ Composite, the S&P 500 Index, and the Russell 2000 Index, the Dow
is among the most closely-watched benchmark indices tracking targeted stock market activity.
Components of the Dow trade on both the NASDAQ OMX and the NYSE Euronext, two of the
largest stock market companies. Derivatives of the Dow trade on the Chicago Board Options
Exchange and through the CME Group, the world's largest futures exchange company.

BANK OF AMERICA
Profile of Bank Of America

Bank of America is one of the oldest American Banks. The Indian arm of the Bank Of America
has been operating since the 1960s. In 1999 the Bank of America had four branches in India. The
bank plans to increase its product range and client base for its Indian arm. Bank of America
Securities India Pvt Ltd, is a subsidiary of the Bank of America, India.

Financial performance of the Bank of America in India

The Indian arm of Bank of America registered 80 % growth in its net profit to Rs 144 crores in
the fiscal year 2005 - 2006. Further, the net revenue earnings of the Indian arm of the bank rose
by 60% to Rs 398.9 crores during the same period. The Asset base of Bank of America, in India,
rose by 9% to Rs 6992.7 crores and return on assets grew by 2.4% during 2005-06.

The bank had zero non-performing assets (NPA) during the aforesaid period, as stated by Mr.
Vishwavir Ahuja, Managing Director and Country Executive Officer, India chapter. The bank
also maintained its rich history of quality service and offered highest interest. During the same
period it infused capital worth US $ 175 million in to India.

What Does Derivative Mean?


A security whose price is dependent upon or derived from one or more underlying assets. The derivative
itself is merely a contract between two or more parties. Its value is determined by fluctuations in the
underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies,
interest rates and market indexes. Most derivatives are characterized by high leverage.
Investopedia explains Derivative
Futures contracts, forward contracts, options and swaps are the most common types of derivatives.
Derivatives are contracts and can be used as an underlying asset. There are even derivatives based on
weather data, such as the amount of rain or the number of sunny days in a particular region.

Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative
purposes. For example, a European investor purchasing shares of an American company off of an
American exchange (using U.S. dollars to do so) would be exposed to exchange-rate risk while holding
that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified
exchange rate for the future stock sale and currency conversion back into Euros.

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