Behavioral Finance Essay Example | Topics and Well Written Essays - 2000 words

Behavioral Finance - Essay Example Evaluate the comments made by this particular director. Make sure your responses are well organized and documented, using references/examples from any of the assigned readings on the topic for this class. Be well organized in your writing. The extract herein depicts a conversation. The conversation seems to be anchored around organizational management. A keen look at the extract avails the exact relationship between the communicator and the context. Here, the communicator seems to be a successful management guru who gets to be interviewed by a journalist. The first statement justifies the success that the communicator has had in management. In the sentence, the communicator is quoted as saying how he has never been in need to work for any organization at the corporate level. At this point, the reader is made to understand that the speaker has been working at the corporate level of organizations courtesy of the success he/she has enjoyed. Further, the speaker seems to have vast knowledge on the different aspects of management. This experience might have been the platform through which he/she has won attraction from many organizations. The basic aspect of the organization that the speaker seems to have met success is mo tivation of employees. In more than one occasion in the extract, the speaker is seen as mentioning the word â€Å"compensation.† The repetition at one point may mean emphasis; basically showing which aspect of the organization is more important to the speaker. The repetition may also stand to mean the point of interest. The speaker sounds to be very interested on the wellbeing of the employees, not only when such employees are with the organization, but even after such employees leave the organization. Apparently, the many times the speaker has been forced to boards of directors, he/she has always noticed that managerial production is very much anchored on how best organizations

Hedging risk exposure and arbitrage Term Paper Example | Topics and Well Written Essays - 1500 words

Hedging risk exposure and arbitrage - Term Paper Example Some of the methods include hedging or diversification of risks (Madura, 2014). The investors should choose the best option cautiously not only to eliminate the risk but also to maximize revenue. This document evaluates put option as a hedging strategy in a simulation scenario. Hedging is concurrent acquisition and sale of two equivalent securities having different maturity period with the expectation of gaining from the consequent movements the price of those securities (Bouzoubaa & Osseiran, 2010, p. 78). The investors hold stocks with the expectation that at one point they will be able to sell the stock at a higher price to cover the transaction cost and other cost of holding the stock such as inflation cost (Bingham & Kiesel, 2004). The stocks are sold at a premium, but the sales may have to be delayed. The unit value of stock after price appreciation is equivalent to the marginal cost of holding that security. Anticipation of price increase in the stock value will result to an increase in the current price of the stock (Madura, 2014, p. 342). By hedging the stock investors commit to taking a minimum value of the stock and avoid making loss in case, the value of the underlying security goes below the future value of the contract. However, the hedger risk losing profit in case the value of the stocks exceeds the future contract value. It is imperative to note that the individual’s decision to hedge security does not affect the market condition because the investor transfers the risk to a willing speculator who buys a security. Also, when an investor purchases a security with anticipation that their prices will raise in the future that result in the transfer of risk from the seller to the buyer of the stocks (Madura, 2014, p. 242). However, investors accept risk premium in order to hedge their securities. The implication of risk premium is the fact that the investor has to sell