Bank s Motives For Using It, Its Advantages And Risks

Banks can use it as a useful tool to make more loans and to maintain a higher capital level. However there are risks attached with this financial innovation, as securitisation played a role in the financial crisis in 2007 through sub-prime mortgages. This essay will discuss the process of securitisation, bank’s motives for using it, its advantages and the risks. There are three types of securities: Collateralised Debt Obligations (CDO), mortgage backed securities (MBS) and asset based securities (ABS).CDO are a form of security that are asset- backed, they allow banks to group cash- flow generating assets (loans, mortgages and bonds) into a SPV. Investors choose which tranches they want to buy based on their varying risk and returns. MBS†¦show more content†¦The group of assets must have ‘statistical history of losses’ so that the securities can be priced accurately and the risk characteristics can be analysed. With the asset portfolio the terms of each l oan must be fairly similar to minimise the interest rate and maturity risk, features on each loan such as the maturity will need to be assessed (Llewllyn, 1999). Securitisation as a technique of asset and liability management https://books.google.co.uk/books?id=j14ZfoAbhm8Cpg=PA7lpg=PA7dq=asset+pooling+homogeneoussource=blots=1OU58vhsHpsig=jDn16hDjQ41b_DglbHPnDDW5EDwhl=ensa=Xved=0ahUKEwjlkf-ziMHLAhXHvBQKHdK8C-EQ6AEIHzAA#v=onepageq=asset%20pooling%20homogeneousf=false Chapter 18 page 598 Securitisation began in US in 1970s; growth of securitisation picked up in 1990s and continued until 2007. Markets collapsed during 2008 and 2009, crisis displayed weakness in securitisation. Securitisation is a sophisticated process with many partakers involved, this essay will discuss each member before discussing the process. The participants of securitisation include: originator, Special purpose vehicle (SPV) or Structured investment vehicle (SIV), credit enhancer, credit rating agency, trustee, servicer, borrowers, underwriter and investors. The originator is typically a bank that securitises the assets, such as

The Twilight Saga Redefining the Vampire Essay - 837 Words

When the word â€Å"vampire† comes to mind, people think of the traditional pale-faced, malicious bloodsuckers, sporting a cape and killing people when they’re sleeping. Wrong! Nowadays, the image of a vampire is a handsome, polite, and loving person who protects humans. The new cultural phenomenon Twilight is building a new degrading image for vampires that slaps the face of all previous authors, directors, writers, etc. who contributed to giving the monster its unique image in the past. Simply searching through articles, databases, and other resources, vampires are depicted as malicious and monstrous creatures. First off, the vampire is famous for its dark and mysterious image affiliated with fear and death. In many ways, â€Å"the vampire can†¦show more content†¦Vampires unique characteristics represent the â€Å"fears of the cultures which produce them†(Stevens par.2). An example of a societal vampire could be Adolph Hitler and the Nazis during World War 2. People viewed Germany as a war machine that spread fear and sucked the life out of Europe with propaganda, concentration camps, and savage war tactics. During World War 2, Hitler had â€Å"come to embody the oblique fear of death and those who bring it, but also a variety of behaviors, conditions, and associations which are deemed outside or unacceptable to the society,†(Stevens par. 4) exactly like monstrous and horrific actions viewed normal in a vampires behavior. Metaphorically spea king, a vampires could be corporate monopolies preying on small businesses or drugs and alcohol reaping havoc on the health and well-being of others. As you can see, a metaphoric vampire carries a negative and savage image like the fictional monster. Furthermore, vampires are depicted as evil and frightening monsters because of the contributions from folklore and fiction. The new cultural phenomenon â€Å"Twilight† has given the vampire a new image. The storyline consists of a girl named Bella who moves to a new town in Washington, and eventually meets a vampire named Edward Cullen, and they fall in love. Jennifer Esposito’s article, â€Å"Vampires, Vixens, and Feminists: An analysis of Twilight† states, rather

Mixing Music and Math free essay sample

Abstract This paper is an analysis of a case study originally conducted by the Harvard Business School in August of 2005 and is based on the challenges of introducing a new technology into a market place that for decades been based on â€Å"gut feelings and intuition†. The new technology was initially designed to assist consumers in music stores find music that met a certain criteria. Later this was changed because of a sharp decline in music sales. The new revision of the technology was designed to assist music producers, record companies, and artists in the selection of music that could be successful. Faced with a very small marketing budget the challenge of the marketing team was to decide what marketing plan would give the best results. I. Background Company History The company introducing the new technology was Polyphonic HMI. Polyphonic was a subdivision of Grupo AIA whose core competency was the use of artificial intelligence coupled with natural sciences to provide complex business solutions for their customers. They were a small company of approximately 50 people but had a wide portfolio of business interests that included energy, finance and ebusiness. In 2002 AIA decided to venture into the world of entertainment and introduce their tools into the industry. They did this by forming a new company called Polyphonic HMI. Polyphonic’s team consisted of a relatively small number of staff members and scientists but had access to the AIA’s data and scientist staff and was given an annual operating budget of around $500,000. The product being introduced was based on the science of analyzing music by its mathematical characteristics. The new technology named Music Recommendation System and used a database compiled of millions of songs to isolate features like melody, tempo, pitch, rhythm, and cord progression. [1] Initially the company decided to target the consumer market segment in which to introduce the technology. The concept was centered on a customer going into a big box music store not knowing which music to select or what genre they may like. By entering some basic information the new technology could assist them in the selection of particular songs that met their particular set of criteria. Thus enhancing the consumer’s experience by getting them the music they wanted to hear and increasing sales for the retailers. By the time the product was ready to release there had been a sharp decline in music sales in the big box stores. (Figure 1) It was believed that this was due to several factors: first, increasing pressure from online competition and the ability to download music through the internet. Second, the belief of the consumers that online music should be free. [2] Third, was the consumers move from vinyl, cassettes and CD’s to a more portable digital format. [2] The New Product Faced with this Polyphonic and AIA revisited the design intent of the technology and created a new program called Hit Song Science (HSS). The way HSS worked was it looked at the same information as the previous version but instead of looking for music with certain criteria entered by an individual consumer it looked at the similarities of songs that had made the â€Å"Top 40† hit list and the melody characteristics of each. What the Polyphonic’s team found was that there were clusters each hit fell into and Polyphonic’s scientists felt that their system could accurately predict which songs would be hits and which ones would not, based on the analysis of HSS. After continued analysis and refinements in the program Polyphonic’s found that they could predict whether or not a song would be a hit with an 80% success rate. The calculations were made based on the weighted score found by HSS. If the songs weighted score was 7. 0 or greater there was a good probability that the song would be a hit. According to CEO Mike McCready there were still limitations to HSS [3] but if those limitations were taken into account the information provided could be useful in the selection of a hit song. At the time the Polyphonic’s was ready go to market with HSS they had invested approximately $600,000 dollars on the development of Hit Song Science and found that they were running very low on capital investments. Because of this the management team had approximately $150,000 for marketing the product. II. Analysis In this section the case study will be broken down into segments that have been perceived as important and worth a closer review. 1) The first important piece of the case study deals with Grupo AIA. Grupo AIA had established itself as having a core competency of utilizing artificial intelligence (AI) and the natural sciences to solve complex business problems. [1] AIA saw potential use for a new technology in the music industry so they formed Polyphonic HMI. When they formed Polyphonic AIA brought in staff that were familiar with the music industry and the technology the initial program was designed for would assist consumers entering a music store in the selection of music that met certain criteria leading to greater customer satisfaction and higher sales. Looking at the available information [2] Polyphonic should have seen that the market trend for sales from big box stores over previous decade had been in a sharp decline (Figure 1) and considered targeting a different market segment from the beginning. Polyphonic’s either didn’t see the trend or thought that it wouldn’t affect the release of the new technology. Because of the late discovery the product release had to be delayed, new applications for the technology searched out, and costly modifications made. By the time the new application was ready for release it had cost AIA and Polyphonic $600,000 and reduced the marketing budget to almost nothing. 2) The next part of the case study I find interesting is the amount of time dedicated to explaining all of the aspects of the record industry and the amount of money spent on producing a single song. What I didn’t see was an analysis of which level of adopter would most likely be interested in purchasing the new technology. Had they looked at this they may have seen that they may have wanted to focus the marketing campaign on the Innovators and Early Adopters and not a certain group segment such as artists or producers. 3) The next point I found with the case study was by the time HSS was ready for deployment Polyphonic only had a budget of $150,000 to try to reach a target market. Having a usable product Polyphonic should have looked at other possible business applications for the technology and possible continued to market the initial version. This could have given them a wider customer base and increased sales. However the problem with introducing a new technology into the market is they cannot accurately be analyzed. [4] They may not have initially known where other opportunities were available but without making the information open to the public they would never know. 4) Another important piece I found with the case study is that when it came to the marketing plan, there was very little information on which type of strategies the marketing team actually used. Although it did list several good questions it left the actual choices unanswered. Some of these questions would be what was the initial beach head for the product? Why wasn’t the whole product marketed? Were the vertical and horizontal market segments considered? The entire marketing agenda was very vague. 5) Synthesis For over a decade the music industry had been seeing a decline in record sales [2] but even with this decline in 2003 the market for music was valued at over $32 billion throughout the world. The largest of these markets was in the US with approximately 39% of the sales [1]. Figure 21st Century Music Retail Transformation and Global Music Sales Revenue [2] With declining sales and the cost of producing an album ranging from a few thousand dollars for an unknown artist to several million dollars for a well-known artist, coupled with only a 1 in 10 chance of success music producers and artist and repertoire (AR) executives had the daunting task of selecting songs that had the potential of bringing in revenue to the company. At this point the music industry had used focus groups and surveys as research methods but these could run up to $10,000 dollars per song and were not very accurate. For the most part the industry had been making critical decisions based simply on Gut feelings and intuition. [3] Polyphonic’s major decision was to choose which segment they would first introduce HSS. The choices being the producers, the AR executives, the artists, or any group that perceivable could profit from the technology the most. Prior to the release of HSS Polyphonic’s had conducted extensive research and found no comparable produces on the market. Faced with a very meager budget of $150,000 the marketing team was faced with two difficult questions. 1) What was the best target market? 2) What was a suitable marketing plan? According to one source when a company is planning the marketing strategy for a new technology there are several important questions that need to be answered: [5] 1) Who will benefit from this technology? 2) Who are the competitors and how will they respond? 3) What is the likely Demand for the product? 4) What is the risk of failure and is the company willing to take that risk? The Polyphonic marketing team did ask several of these questions. They looked at which market would be the most likely to accept the technology, which held the largest opportunity, and which could generate the highest sales. What they may not have considered the type of technology adopter they should focus on and if they should seek out that type of adopter with their marketing strategy. In the process of developing their marketing strategy for HSS Polyphonic purchased 3 registry’s that gave them the names and information on 1,600 producers, AR executives and 10,000 artists. From that list the marketing team had to decide where they needed to begin. Initially the marketing team selected several producers to ask if they were interested in free trial of HSS, which were met with some positive responses. The case study doesn’t go into how it was decided which Producers and executives were selected to receive the trial. There were some negative responses to HSS. Most of them related to the fact that music is personal, emotional and requires a connection that couldn’t be replicated by using numbers and formulas. According to Mike McCready [3] the technology was accepted by a few labels and the company eventually built up a small consulting business but nothing that was ever going to produce the financial results the company had hoped for. It was said by one author â€Å"In the race to accept new technology the music industry finishes just ahead of the Amish. â€Å" Since the initial introduction HSS has gone through many changes and is currently in revision 7. 0 and is available to the general public for use at www. mis20. com. (Figure 2) At the time of its original release the option of making HSS available on the internet was not an option but the marketing strategy is essentially the same. Make the product available and affordable to as many consumers as possible.

Slowdown in U.S housing market

Slowdown in U.S housing market During the period between 1998 and 2008, the prices of housing in the United States rose dramatically. In some part of the country, the prices increased by more than fifty percent (Roberts 25). This process can be explained by different factors such as deregulation, tax policies, low interest rates, and the firm conviction of many people that real estate will never depreciate (Roberts 25).Advertising We will write a custom essay sample on Slowdown in U.S housing market specifically for you for only $16.05 $11/page Learn More Nevertheless, in 2006 U.S. housing market began to slow down. The prices on housing declined in different regions of the United States. Despite the efforts of the government, the situation has not changed much, and the real estate market of the country remains stagnant even at the beginning of 2013. This problem will be discussed can be attributed the fact that modern economy has become extremely interc onnected, and the failure of one sector can adversely influence other areas of economy. It is particularly important to speak about the context of this issue because in this way one can better understand its impacts. First of all, before 2006 the value of housing was important for the purchasing power of many people in the country. Furthermore, the sustainability of many banks depended on the price of housing since these institutions used real estate as a form of mortgage or collateral (Roberts 12). Additionally, the financial performance of stock could be affected by the housing market. Thus, one can argue that different elements of the economy were extremely interdependent. This is the reason why the collapse and subsequent stagnation of the housing market produced far-reaching consequences. There are several implications of this crisis. In particular, one can speak about the diminishing availability of credit for the population since many banks expect to receive some collateral f rom the borrowers. The problem is that real estate has long been the most conventional form of collateral, and currently it has become less valuable. Furthermore, in the U.S housing market, the supply significantly exceeds the demand for real estate. Moreover, a great number of financial institutions and governmental agencies face a significant challenge. In particular, they should avoid numerous foreclosures since this trend increases the supply of the housing. These are the main challenges that should be overcome.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More One can identify several consequences that are very important. For instance, the revenues of many real estate companies dropped dramatically. These organizations have to lay off many of their workers. At this point, the sustainability of these firms is under threat. Furthermore, one should remember about the difficulties faced by h omeowners. At this point, these people do not know whether their real estate can retain its value in the future. This issue is very urgent when the rate of foreclosures increases. Furthermore, one should remember that many communities have been affected by this slowdown. Many of them have become almost abandoned because of many people had to leave their houses. This is another issue that should not be overlooked. These examples suggest that the recession of the U.S housing market has affected various stakeholders such as homeowners, financial organizations, real estate companies and sometimes even entire communities. The most important challenge is the lack of stimulus that can revitalize this industry. This is the main problem that policy-makers and business leaders should address in order to boost the development of the American economy. The government’s rent control and rental regulations Another issue that should be discussed is the rent control that is aimed at making ho using more affordable (Rowley and Schneider 188). In many cases, governmental regulations are supposed to act as price ceilings that prevent the price of rent from increasing. Furthermore, they are designed to protect the rights of clients who often fall victims of information asymmetry (Rowley and Schneider 188). Apart from that, these laws are designed to benefit many families since it may be difficult for them to find a new apartment. This is the main rationale for adopting this strategy. It is important to determine the implications of this policy, especially its impact on the market. One can say that this intrusion into the market can create difficulties for tenants and renters. However, these regulations are vital for people with low levels of income. First, it should be noted that these regulations have become extremely important at the time, when the price on housing was gradually rising. Some people could not afford to purchase a real estate, and rent was probably the only option available to them. This situation was very widespread among low-income people who could not receive a mortgage from a bank.Advertising We will write a custom essay sample on Slowdown in U.S housing market specifically for you for only $16.05 $11/page Learn More Nevertheless, one should also remember about people who choose to rent their houses. These individuals and organizations can be affected by inflation, while price-ceilings do not always reflect the changes in the inflation rate. Moreover, it should be kept in mind that these stakeholders can invest capital in the redevelopment of the housing that they possess (Euchner and McGovern 168). Nevertheless, they may be unable to recover these costs by increasing rent prices. These are some of some of the main circumstances that should be considered. These factors can explain some effects of governmental intervention in the housing market. There are several consequences and implications of this is sue. First of all, researchers believe that this policy decreases the mobility of people. In other words, they are willing to stay in those cities, where they can find more affordable housing. This means that they can be deprived of many economic opportunities, for instance, when they have to find a new job (Rittenberg 100). Additionally, economists warn policy-makers about the existence of the so-called shadow market that are hardly regulated by the government (Euchner and McGovern 168). The problem is that in state-controlled markets the demand for housing will eventually exceed supply. The property owners, who have to work in such an environment, can rely on the backdoor payments while dealing with customers (Rittenberg 100). For example, one can mention the use of large security deposits (Rittenberg 100). This is the main danger that legislator should be aware of while designing their policies. Yet, one should remember about another effect of price controls. They create more sec urity for many occupants are dependent on the availability housing and the stability of prices. These people cannot be easily evicted from houses. As it has been noted before, for many families it is extremely challenging to find a new accommodation. The rent control is supposed to uphold the rights of these people. Thus, one should not forget about the possible benefit of this strategy. Economists believe that government can give some tax relief to the property owners who have to operate in state-controlled market (Rittenberg 100). In this way, they can reconcile the interests of different stakeholders.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Therefore, one can argue that the governmental regulations can create many difficulties for people who need to rent an apartment or a house. In particular, this strategy can eventually decrease the supply of accommodation. Nevertheless, it can increase the security of many tenants. Thus, it has both advantages and disadvantages that should be taken into account by policy-makers in the United States. The minimum wage laws The economic development of a country is also influenced by the existence of the minimum wage laws. According to these regulations, private companies and governmental organizations are obliged to pay a certain minimum amount of money for their hourly work (Mathis 371). Overall, it is possible to argue that these laws are important for protecting the rights of employees in the workplace. Moreover, they are important for increasing the purchasing power of the population. This is why they can be regarded as a positive force. This is the main argument that should be exa mined in more detail. It should be noted that minimum wage law has a long history in the United States. For example, they can be traced to 1933. In turn, the most recent piece of legislation is Fair Minimum Wage Act of 2007 (Mathis 372). Overall, these protective measures are particularly important for young and often unskilled people who often lack experience and expertise. These workers are most likely to become the victims of unscrupulous employers. This danger is the most important rationale for enacting minimum wage laws in the United States. Nevertheless, one should not forget about the interests of companies that are now driven by the need to reduce their operational costs and labor expenses. This conflict of interest is one of the reasons why these regulations are so often debated. The task of policy makers is to find some form of compromise. It is vital to look at the possible consequences of this strategy and its long-term implications. Overall, one can say that nowadays t he existence of minimum wage laws influences various kinds of businesses. These organizations can be engaged in different economic activities such as construction, hospitality, fishing, retailing, and so forth. The workers, who benefit from the legislation, often lack professional education, and their labor is not very expensive (Mathis 373). The most important benefit of this policy is that the purchasing power of low-wage employees remains relatively stable. Some critics of this policy believe that minimum wage laws can decrease the demand for the labor of young workers. However, this hypothesis has been fully confirmed (Mathis 373). Therefore, there are no adverse consequences of this regulation; at they have not demonstrated in an empirical way. This is one of the main points that can be made. Thus, it is possible to argue that minimum wage laws have already become an inseparable part of the modern economic life. These regulations are important for a great number of workers in t he United States. Although some companies can be reluctant to accept these laws, they remain vital for ensuring the compensation of workers and the purchasing power of American people. This is the main reason why this initiative can be supported by the government. Works Cited Euchner, Charles and S. McGovern. Urban Policy Reconsidered: Dialogues on the  Problems and Prospects of American Cities. Philadelphia: Routledge, 2003. Print. Mathis, Robert. Human Resource Management, New York: Cengage Learning, 2010. Print. Rittenberg, Libbie. Principles of Microeconomics, Boston: Flat World Knowledge, 2008. Print. Roberts, Lawrence. The Great Housing Bubble, New York: Monterey Cypress LLC, 2008. Print. Rowley, Charles, and F. Schneider. The Encyclopedia of Public Choice, New York: Springer, 2004. Print. This essay on Slowdown in U.S housing market was written and submitted by user Zackery Acosta to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.