How Systemic Risk Effects The Entire Market Finance Essay - Free Essay Example

Sample details Pages: 4 Words: 1244 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Systemic risk; commonly known as market risk or un-diversifiable risk, is risk which affects the entire market and cannot be avoided through diversification. Events such as recessions, wars, significant political events, and interest rate fluctuations (to name a few) are all believed to be sources of systemic risk. A banking panic is where large scale withdrawals from banks occur, whereby the customer believes that there is a high probability of them losing their money due to banks collapsing. Don’t waste time! Our writers will create an original "How Systemic Risk Effects The Entire Market Finance Essay" essay for you Create order As the quantity of withdrawals increase the likelihood of the banks collapsing increases. This has knock on effects, whereby liquidity is severely reduced resulting in inabilities to acquire future loans and other forms of capital from the banks. A banking panic is a systemic event because the banking system cannot honor commitments and is insolvent.[1] The National Banking Era, a period from 1863-1913 where there was no central banks in existence with very little regulation of banks, shocks to house prices were often the stem of banking panics during this era; the 2007-2010 banking panic is believed to be very similar. The current banking panic happened in the shadow banking system and not in the regulated banking system. This occurred because the falling house prices caused a shock in subprime related products offered by shadow banks. It was believed by many analysts that the huge run-up in U.S. housing prices was not at all a bubble, but rather justified by financial innovation (including to sub-prime mortgages), as well as by the steady inflow of capital from Asia and petroleum exporters.[2]. The shadow banking system was built up in conjunction with the regulated banking system, with their main aim of trying to make credit widely available and the make credit cheaper for the customer. Regulators in some way encouraged the idea of shadow banking as it allowed them to remove certain risks from the traditional banking systems by packaging these risks into loans, securitizing them and selling them on (eg. Credit, liquidity and interest risks). Little did they realise they werent getting rid of the risks; they were simply just shifting it to a different place. These loans were insured and given a AAA rating. This allowed them to borrow nearly 100% of the value of the loan/CDO tranche (a type of asset backed security) in the overnight repo market. The repo market is a trade mechanism whereby there is a simultaneous sale and repurchase of an asset with fixed interest rates and time constraints associated with it. By availing of low overnight rates on the repo market and by leveraging the asset up, they were able to make money on the margins. Problems that began to arise due to the collapsing housing bubble and with over a trillion dollars being pumped into the US subprime market alone; some people began to question the credibility of these AAA assets and whether it is big enough to undermine the entire financial system. Because no one really knew the real value of these assets, what would be deemed a fair value for them? The Asset Backed Securities index became a proxy for calculating the market price for these assets. The index is made up of 20 CDO tranches which is a traded index. The assets market price was based on the performance of the index; when the index fell, the amount you could borrow on the repo market also fell. This has led to a downward spiral in asset prices. This is a result of the number of overdue debts in the subprime market which begun to increase quite noticeably due to the bursting of the residential property bubble. Property prices began to fall dramatically nationwide, and this has put the shadow banking system in severe financial difficulty. It is also believed that credit rating organisations (CROs), the likes of Standard and Poors and Moodys, have played a big part in the causing of this current systemic crisis. Up until late 2007 investors were quite satisfied to allow CROs to calculate risk on their behalf, thinking that they were purchasing fairly priced and accurately rated assets as well as substituting for their own due diligence. With the number of downgrades and defaults of highly rated assets on the increase; the volume of risk-management mistakes was becoming quite evident. An accurate CRO rating benefits both the issuer and the investor alike. Issuers, having the responsibility of obtaining an accurate rating and the burden of paying large CRO fees, they have an incentive to play different CROs against each other and by doing so they can hold out until they find the most favourable credit rating from a well established reputable credit rating organisation. Surely one would think that this is counterincentive and would lead to inaccurate rating of assets. With so few CROs operating in the industry, major ratings organizations do not compete either in the models they use to assess credit risks or in the criteria they use to map the forecasts their models produce into different rating classes. This similarity in methods means that errors are likely to be similar[3]The CROs had very little incentive to update their poorly tested models over the years. This also begs to question whether CRO employees have been entirely truthful when rating assets or have th ey been tempted to chase down big issuers in order to obtain large bonuses putting the CRO reputation at stake? Without accurately rated and priced assets, surely we have been staring a systemic crisis right in the face. Some would suggest that regulators should be made accountable for providing a stable economy in an effort to steer away from systemic crises. Increased competition amongst banks in different regulatory systems was brought about by system deregulation and increased asset securitization resulting in decreased supervision in the banking sector. To counteract this lack of supervision, the Basel committee had been formed to try and eliminate inequalities amongst competitors and to improve stability in the financial sector. With Basel 1 being implemented in 1988, initial steps proved to be successful with the generation of loan supplies but it wasnt soon after that cracks began to emerge in the system. With shortcomings in the formulation of the risk-weighted assets formula, arbitrage opportunities began to surface. Basel 2 was then created in 2004 to try and improve on the proponents of Basel 1 and to prevent such arbitrage opportunities which inevitably have led us into this current economic crisis. With Basel 2 still in the initial stages of implementation, is it a case of too little too late? With improvements in minimum capital requirements and supervisory reviews; will it be enough to steer away from further systemic crises having overlooked on how to improve on the capital measurement and ratio weaknesses set out in Basel 1. Basel 2 still remains to be viewed as a major step forward for banks. While risk-management mistakes, low interest rates and some kind of asset-price bubbles are features of most crises, this crisis may be remembered as one in which long successful systems for using debt ratings to control institutional risk-taking failed massively.[4]Going forward increased supervision and accountability in the banking system needs to be put in place as well as being enforced. Expectations of government bail outs also needing dissipation. With ongoing deregulation of the banking system authorities need to update their methods of monitoring liquidity issues within banks and generate newly devised resolutions to suit.

A Chronicle Of A Death Foretold - 1253 Words

The most important aspect of the Latin American culture has everything to do with honor. Women have the biggest responsibility when it comes to honor. Losing your honor might undoubtedly portray as the worst deed in this culture. In a Chronicle of a Death Foretold the author Gabriel Marquez demonstrates the horrifying actions taken when losing one’s honor. The purpose of this paper is to analyze the events that occurred in the novel and compare them to the same the culture and also the outcomes of going against your religion in different cultures. Latin American culture is usually stereotyped as Hispanic culture simply because of the Spanish association with each other. One major concept that dignifies this culture is honor. The concept of honor is very important in Latin America. Any decision and behavior of each individual becomes based largely on the pleasing of the family. The women become pressured with containing their honor. The women also get pressured into purity; mainly because it shows they have respect for themselves and their family. Expectation involving women revolve around retaining their virginity and purity longer than a male. Theoretically, women have their ‘own’ honor; but in reality their honor depicts on the whole family. Which explains the reasoning behind why losing the honor shames everyone. The biggest action that could take away a woman’s honor would be premarital sex. Containing your virginity until marriage shall bring virtuous honor to one’sShow MoreRelatedChronicle of a Death Foretold600 Words   |  3 PagesIn the novel, Chronicle of a Death Foretold, two of the main characters are Santiago Nasar and Bayardo San Roman. Santiago Nasar is introduced to the reader in chapter 1 of the novel and Bayardo San Roman is introduced to the reader in chapter 2. Santiago Nasar is described as being handsome and rich, and also displays a love of firearms and falconry. 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How the soliloquies reveal the character of Hamlet Essay Example For Students

How the soliloquies reveal the character of Hamlet Essay William Shakespeare is one of the greatest dramatist who wrote plays that offer timeless lessons and reflections on human nature. Hamlet is one of his most complex tragedies. Shakespeare was well known for his tragedies, and romantic comedies, some of which are still remembered till date. Hamlet reveals Shakespeares gift for dramatic depiction and brilliant poetic imagery. The play is related to the Elizabethan concept of the divine right of kings. The idea that the King is a gods directly appointed; killing a King is a crime against social order. Shakespeare contrasts the external conflict with internal trouble. Hamlet is a play with moral corruption Since the Elizabethan era considered revenge to be manly and a prince had to be loyal to his duties, Hamlet was forced into a very critical situation, and his inner thoughts have been effectively portrayed through Shakespeares dramatic techniques. One of the dramatic techniques that Shakespeare uses is cross-reference, I will speak daggers to her, a similar image is created in the readers mind in Macbeth. Shakespeare makes a powerful use of language to convey the conflict in the mind of a man torn between love and hatred, loyalty and disillusionment. Hamlet, has been one of Shakespeares finest creations, and well known heroes. The use of supernatural elements makes the play more interesting, and the readers interest is automatically intensified. Hamlet is disturbed at his mothers hasty decision of marrying his devious uncle, Claudius. We see Hamlets sensitivity, through out the play, especially when he is in contact with other characters in the play. Hamlet is a philosophers price and a very sensible and remarkable human, but his vacillation leads to his tragedy. He is of a meditative, reflective and philosophical bent. He is so philosophical in his nature that all his decisions are subject to scrutiny. He is the scholars prince but everyone calls him to be the man of action. Thats the heart of his tragedy; being one person he cannot slip into different roles. He cannot be a man of action because hes too deeply philosophical. The epithet, doubtless intended to differentiate him from the late King Hamlet, is the 1st indication of his youthfulness, emphasized in the early part of the play. Hamlet represents a 21st century person with the same social background. Hamlets character in the play is of diverse emotions and attitudes towards other characters. He deals with all the relationships that make a human complete. We see this as and when he comes face to face with his mother, Gertrude. Gertrudes character is so negative and insignificant that she arouses in hamlet the feeling, which she is incapable of representing. Hamlet is possessive of his mother and cannot stand the thought of her sharing a relationship with his uncle. Hamlets fine nature is shown to us, even as a disturbed lover. We see that Hamlet is surrounded by treachery and deception, and in spite of this he manages to be a loyal friend. As a lover, his varied actions and sentiments tell us a lot about his character. His disturbed state of mind is usually shown to us when Ophelia and Hamlet are alone on stage. Even though Hamlet tries to be indifferent to his lover we still see that he finds solace in his love. We see that hamlet is a Human of great substance and is a true man of the Elizabethan era. As a son he keeps to his word and obeys his late father. His deep respect and sadness is hyped through this particular action. Hamlets feelings as a nephew towards his uncle Claudius tell us that he respects relationships. Different means of procrastinating are only an excuse to prolong the life of his uncle. It is because of these two main characters that Hamlet ends up in a bewildered state of mind. Friendship is a theme that reveals a new side of Hamlet to the audience. His dedications and trust in Horatio reveals his innermost thoughts. Shakespeare shows us that Hamlet is dual faced. He could be a true friend, but if deceived he could be an enemy. His admiration for Horatio and cold attitude towards Rosencrantz and Guildenstern tells us that he is a philosophical prince, and he is sociable and that he respects people who do not reach the levels of his own social status. He confides in Horatio throughout the play. His laid back attitude, and unrevealed fear in avenging his fathers revenge is shown to us as when he procrastinates. Shakespeare uses Soliloquies a dramatic device to bring out the characters innermost secrets. When a character speaks with other characters he is unable to convey the conflict in his mind. Hamlets soliloquies tell the audience that he is disillusioned with the world. Sullied flesh would melt, and Self Slaughter, the words show the confusion in his mind. His bewilderment is glorified in the repetition of the word, Oh God, God. Hamlet uses nature imagery to emphasize his internal views of life tis an unweeded garden that grows to seed. The world is compared to a garden. The weeds dont contribute to the beauty of the world and the meaning of life. It refers to Denmark as an unweeded garden bearing no fruit. His soliloquy is weighed down with vulgarity. Shakespeare has included mythological characters to compare the King to Claudius. Hyperion to a Satyr. Claudius is compared to a Satyr to show how inferior he is to his brother. This is an accepted notion in Shakespeares time because a usurper is on the throne. Another comparison is shown to us My fathers brother, but no more like my father than I to Hercules. Hamlet compares himself to Hercules and Claudius to the Dead King. Hamlet compares himself to Hercules because the comparison between him and Claudius is ridiculous. Rhoda"s Diary The Withered Arm by Thomas Hardy EssayRepetition of the word Sleep tells us of how Hamlet procrastinates, and is reluctant to kill his uncle. He is trying to escape from the problems and promises that await him. Hamlet compares life to a calamity That makes calamity of so long life. His words are punctuated with sorrow, mortal coil. Hamlet is comparing his duties to times brutality whips and scorns of time. Hamlet summarizes his problems once again in this soliloquy, refreshing the audience memory. Over here we see his perspective of life. He uses alliteration in the phrase bare bodkin. He talks about life after death and he renames heaven or hell to be a country from where no traveler returns. He accuses his conscience for stopping him from fulfilling the ghosts dream. Sicklied oer with the pale cast of thought, this shows he is of a reflective nature. This shows that too much thought has drained him off the energy to act. Shakespeare has captured Hamlets feelings and indirectly states that he cannot take revenge. The tone is of helplessness and confusion. In other soliloquies we see that Hamlets speeches are a combination of anger, and agitation. We realize Hamlets perplexity and how disheartened he is through his soliloques. He uses sarcasm accompanied by a cynical tone, A villain kills my father, and for that I, his sole son, do this same villain send to heaven, this is the next conflict in his mind. He doesnt want his fathers murderer to go to heaven. This would be salary to Claudius and not revenge, as it would be like a payment for a service instead of punishment for a crime committed by Claudius. The question resounds in his mind should he kill Claudius when he stands a fair chance to go to heaven. If Hamlet had acted then, many tragedies would have been averted. Hamlet scrutinizes all possible ways of killing Claudius drunk asleep. He talks about the preparations of the next world. He also uses sexual connotations when describing Claudius actions incestuous pleasure of his bed. When there is no chance of salvation he should be murdered, this shows Hamlets conflicting nature. He uses imagery and comparisons his heels may kick at heaven. And now Ill dot, this shows the variance in his mind. Hamlets speech shows the turmoil in his mind. He supposes that Claudius is in a state of repentance, and so his death at this moment will, quite literally, enable him to go to heaven. Would be scanned this tells us that he needs to be subjected to scrutiny. Blown, as flush as May in full bloom, Hamlet is recalling that the ghost said he was Cut off even in the blossoms of my sin. He reasons that killing Claudius while he is praying will earn him divine mercy and send his soul straight to heaven. Hamlet, therefore, decides to kill Claudius at a time when he is either drinking or sleeping with his wife. Hamlets choice not to kill Claudius at this stage represents the most significant moment of the tragedy. Paradoxically, the play, however, would have lost its high sense of tragedy, and Hamlet would have been less a tragic hero by attacking Claudius from behind as he knelt in prayer. At this point many critics feel that Hamlet is merely putting off revenge. Hamlet expresses his feelings of death thought the quote Exposing what is mortal and unsure to all that fortune, death, and danger dare, even for an eggshell. He believes himself to be a careless son as he has a father killed and a mother stained. Hamlets soliloquy reveals his bewilderment with his duties at this point of time in the play. He fails to understand the true identity of a man. A rhetorical question has been used and it sets the reader thinking, Be but to sleep and feed. He compares man to a beast. Sure, he that made us with such large discourse, Looking before and after, gave us not That capability and godlike reason To fust in us unused, Here Hamlet is saying that every man has reason, and that reason should be put to good use. He contradicts himself in the dialogue Examples gross as earth exhort me. As a prince, he fears making any decisions that involves the Kingdom. He accuses himself for the death of twenty thousand men. Hamlet is a play, which sustains the readers interest. It deals with not only different family relationships, but also with other formal relationships. It is very easy for the audience to relate to Hamlets feelings for such emotions have been carried down till today. Shakespeare dramatizes on central issues, and beautifully deals with a lovers feelings, a sons feelings, and an heirs feelings. In other common characters we see other simple bonds that tie any family such as a father and a daughter, and brother and a sister and so on. Hamlet is a play that knocks at the audiences hearts and brings out a new sense of emotions, leaving them spellbound. Reading this play has not only been a memorable experience, but a moralistic one as well. Time waits for no man, and you never know when its heading towards you. In the end Hamlet leaves us with the message that life is indeed worth living even though you come across many hassles and obligations in life. One of the messages that Shakespeare tries to convey through his books is that good is wasted but evil never triumphs.