Thursday, December 22, 2011

Business Quiz





Business Quiz: 

Sum does some brain storming to prepare a few mosaic Quiz Questions. Try how many you can answer (Answer them by leaving a comment and leave your email address to know the correct answers)


Quiz1: Name the airline that used a famous Belgian Statue of a urinating child in one of its advertisement and used the words “pissed off high fares?” to play a spoof on one of its competitor's high fares.

Quiz2: Which head of an airline served in full cabin crew uniform as a flight attendent on a competitor airline’s flight after losing a bet on F1?

Quiz3: Which English word meaning "the faculty of making fortunate discoveries by accident" is derived from the name of an island in the Indian Ocean? How is it derived?

Quiz4: Name any other city that you can create by shuffling the letters in TOKYO?

Quiz5: Adnan Nevic, born on Oct 12, 1999 in Sarajevo, Bosnia; what is special about this person?

Quiz6: Which famous company derive its name from the last letters of the city that inspired it. 

Quiz7: Where on the earth would you find "one hundred thousand islands"?

Quiz8: Translate “Can’t you see this” into a Hindi idiom to name the F1 driver who is also the brand ambassador for a hair care product.

Quiz9: Name the company. Its business model is offering a daily discount deal, whereby the buyers/ customers buy a product or service very cheaply if a minimum number of people sign up for the offer.

Quiz10: Which animal is reputed to have a thousand legs?

Quiz11: Which famous gun derives its name from the two cities where it was designed and manufactured? 

Quiz12: Which American Multinational recently put out an advert seeking applicants for job vacancies? They said in the advert that ‘sexual minorities’ (transgenders, gays, lesbians, bisexuals) would be given extra points in the screening process. (The advert was later withdrawn due to public uproar).

Quiz13: Which Multi-National Company is named after a type of African antelope?

Quiz14: Name the politician. He is the mayor of a city in US and we have a Television channel by his name in India.

Quiz15: Name the politician whose teenage daughter got pregnant when she was campaigning for a political post. She also said during campaigning that “Russia is just across the border of an American state”.

Quiz16: Name the famous monument in Africa that features a scantily clad man and woman, holding a child. It’s a bronze statue built with a colossal expense of USD 27 millions.

Quiz17: Analyze the featured pic to name the product launched in 1990 by a legendary auto company. The product uses a type of patented engine that produces a "potato-potato” sound.



Quiz18: During which cricket match in India the crowd gave Pakistan a standing ovation after they defeated India…in India!

Quiz19: Name the fruit/ vegetable which gains prominence in the coming week. A type of beer is also brewed from this fruit/ vegetable. (Try and explain the reason for prominence)

Quiz20: Name the concept that is used by a publishing house to determine undervalued/ overvalued exchange rates based on an informal way of measuring. The pic features a very important element of this measurement concept.



Quiz21: Name the product I am referring to - Queen Victoria received this product as a wedding gift. There are over 2000 varieties of this product one of which is Leicester. NASA exploited a myth about this product to play a spoof on April fool’s Day.

Quiz22: Combine the name of a popular Bollywood movie based on Alzheimer's disease and the actress featured in the pic to name the company I am referring to.



Quiz23: Which airline’s flight steward quit his job by opening the door of a moving aircraft and jumping out through plane’s emergency chute?

Quiz24: You 'never' actually own this product, you merely look after it for the next generation. Name the brand who claims this.

Quiz25: Name the car company, whose cars are said to have a grill which look like a Greek Temple.

Quiz26: He used the code word of India - Sri Lanka cricket matches to receive and pass secret information. Name this head of a US company who was recently sentenced to prison over charges related to financial sector.

Quiz27: What is featured in this pic?



Quiz28: What is featured in the pic and what is this particular place called?



Quiz28: The Economist and Harvard Business Review have carried out separate articles on this “Hindi” word which roughly means frugal innovation. This term is also used for a type of a vehicle in rural India. Name the word.

Quiz29: Which Governor of a state in US recently ordered all the state employees to answer their phone by a particular salutation? This was done to boost employee morale and help sell the state to outsiders. (Hint: Only a lady can think of such a thing)

Quiz30: Name the non government organization whose logo is featured in the pic. The organization was formed in 1961 in England. The present Secretary General of this organization is an Indian.



Quiz31: Name the destination featured in the pic (Hint: Its an exotic SPA destination)



Quiz32: Name the famous animated sitcom which has a character called Maggie? It also was awarded a star on the Hollywood wall of fame. It is also famous for the annoyed grunt of one of its characters, “D’oh”.

Quiz33: Name the Bollywood actress who has live in Hong Kong, China, Japan, France, Switzerland, Krakow, Berlin, Belgium, Hawaii and England before moving to Mumbai?

Quiz34: What is common in these cities - Monaco, Melbourne, Valencia and Singapore?

Quiz35: Name the auto brand which derives its name from a river in Italy. There are museums devoted to this brand in Milan and England. The Indian government acquired this company in 1950 and after hitting record production in 1985, the production of this brand was ceased in India in 1997.

Quiz36: Name the car company - The world of bullfighting is a key part of this company’s identity and it names most of its cars based on the name of bulls

Quiz37: Name the brand whose advert featured models in the nude, wearing only shoes and a python wrapped around them. Also name the models.

Quiz38: The nickname 'SoLoMo' given by a popular venture capitalist refers to which three computer technologies.

Quiz39: Which international hotel chain advertisements feature these celebrities – Lance Armstrong, Christian Louboulin and Jerry Hall (among others)? Hint: Each featured celebrity has chosen a charity to which the hotel chain has made a donation of USD 10,000.

Quiz40: Name the company whose proposed headquarters in US is a ring shaped structure dubbed as spaceship.

Quiz41: Name the brand which the following tagline: ". . . . . mixes with everything except driving".

Quiz42: Name the airline: In Mar 11, the recording of an inflight transmission of one of its pilot's unintentional conversation with his copilot was released to the press. The conversation had foul language and discussed gay, overweight and older flight attendants.

Quiz43: What am I referring to when I say QE, QM, QV ? Name the company who owns these brands. Hint: Its related to travel industry. Its also got something to do with Monarchy.

Quiz 44: Which internet domain was launched in September and the addresses went on sale?

Quiz 45: What is common between New York City, London, Milan and Paris?

Quiz46: Name the brand associated with the following product names:
Red, Black, Green, Gold, Blue, XR21 and King George V

Quiz47: Name the brand associated with "eternity ring", "trilogy" ring and the "right hand ring".

Quiz48: Which airline would you be flying if you fly by "Queen's Own Aviation Company".

Quiz49: Name the airline in which cabin crew used to sing in-flight safety instructions (or sometimes interpret the instructions artistically). The featured picture depicts a Television Show that promoted the airline with a specialized concept. The airline ceases to exist now.

Quiz50: Name the country which is also referred to as the ‘eighth continent’ because of its rich biodiversity; 80-90% of the plants and animal species found in this country are found no where else in the world.

Quiz51: Name this fortnight long fair in which more than 7 million liters of beer is consumed. This is the largest people’s fair in the world.

Quiz52: Name the Company that played an April fool spoof on its subscribers wherein if anyone clicked on the company website’s main page, the whole page turned upside down. The company claimed this was a new layout.

Quiz53: Name the airline whose advertisement is featured in the pic. The advertisement appeared in the March 19th, 1979 issue of major dailies in the west. Yes, the shadow is in pretty much in the same place as where the planes hit on September 11th, 2001. (I’ve cropped the pic to remove the name of the airline)


Quiz54: Name the airline. Every plane in this airline’s fleet is named with a destination containing some part of the airline’s name. The airline is also known for it’s “letter ads” i.e. the ads starting with Dear….and ending with Sincerely…

Quiz55: Relate the featured image to name the NGO which is one of the older human rights associations. It has a separate prison committee to provide assistance to its members who have been imprisoned, tortured, threatened, attacked, made to disappear, and killed for the peaceful practice of their profession.

Quiz56: Name the person. He became leader of a country in 1975. His policies and torture/ force resulted in the deaths of approximately 21 percent of the country’s population (approx 2.5 million people died under his leadership). Gas chambers were one of the ways used by him to execute people.






Tuesday, December 13, 2011

Why is depreciating Rupee a cause of concern?





The next two years of policy action (or rather inaction) will decide the fate of India’s growth story. It will decide whether India will emulate Greece or Chinese economy in the next decade or so.  Everyone expected India to be rather isolated from the sovereign debt crisis and rather be the growth engine for global economy along with China. But it is turning out to be the other way around. Depreciation of rupee relative to dollar is making news and is hurting when it hurts the most.

Rupee Depreciation

Rupee is currently trading at its cheapest level (in nominal terms) relative to the dollar. It is currently the worst performing Asian currency and its fall has been fairly steep. The depreciation makes Rupee cheaper to buy for the foreigners and it makes the foreign exchange expensive to buy for Indians. This makes Indian exports cheaper and imports expensive. If we compare the valuation of rupee relative to dollar in terms of purchasing power parity (by accounting for inflation); the rupee is overvalued even at these levels.

Why a depreciating Rupee is a cause of concern?

  • India is heavily dependent on oil imports. A weak currency makes these imports expensive. Worst part is that these expensive imports are heavily subsidized in India
  • High interest rates in India caused a lot of domestic companies to borrow abroad in the form of external commercial borrowings. The depreciation is hurting these companies hard as the interest and repayment of principal in foreign exchange is expensive. Indian banking system is cramped up because of excessive borrowing program of the government to plug its burgeoning fiscal deficit. This limits their lending limits to the private sector and demand for capital by the government is crowding out the private sector. Thus private sector sought permissions to borrow abroad which is hurting them in the light of a steep depreciation of rupee
  • Though India’s external debt is not at very high levels, still currently the external debt of USD 313 billion is almost equal to the reserves of USD 330 billion. This limits the active participation of RBI in the money market to stem the steep fall of rupee and keep it near its desired levels. The reserves are not large enough to afford a money market intervention.
  • Due to a current account deficit position (imports more than exports) the economy is dependent on inflows from abroad. The dependence on foreign inflows is keeping the economy on tenterhooks as any further depreciation will make it difficult for the RBI to accommodate outflow of foreign exchange by the investors in case of a global event. RBI may have to put controls in that case which might result in a full blow exodus of capital from India; the worst case scenario; but highly likely possible.
  • India is running a very high fiscal deficit; close to double digits if we take the deficit of states into account. The deficit is being financed by foreign investment. The dependence on foreign investment to bridge the fiscal hole which is on account of unproductive subsidies and concessions and not on account of productive capital investment risks a catastrophic fall in the currency in case of a global event.
  • Every major economy from US to Japan and from China to Korea is trying hard to keep its currency cheap relative to other currencies to give its exporters an advantage over other countries. Cheaper currencies make exports cheaper and thus the advantage. In fact China has accumulated hoards of American Dollars only because it aimed to keep its Yuan undervalued relative to the Dollar. It thus continued to buy Dollar is the money market to keep Yuan relatively undervalued. A depreciating rupee is good news for Indian exporters and it makes Indian exports cheaper. But there is little to rejoice as India currently is a net importer. Policy inaction and lopsided decision making is ensuring no major impetus to Indian exports. 


Wednesday, December 7, 2011

How credit risk can be hedged / transferred?



A tutorial on how credit risk can be hedged / transferred using the credit risk instruments. 

(Key inputs from CFA Institute Readings)

An investor faces three types of credit risk. The risk of default, credit downgrade of the debtor and widening of credit spreads on the debtor’s debt. The credit risk that the investor faces can be sold off to another party, basically like any other insurance contract. The party who assumes the credit risk (or who buys the credit risk) is called the credit protection seller. He may be willing to take this risk for several reasons. He may buy because he believes that the credit quality of the debt will improve. He may see value addition in some major corporate events like mergers or refinancing of debt at lower rates. All these would be positive credit events for the credit protection seller.

There are basically three products that transfer credit risk – Credit Derivatives.
    1. Credit Options
                                                               i.      Credit options written on an underlying asset
                                                             ii.      Credit spread options
    1. Credit forwards
    2. Credit swaps
Credit options

  1. The triggering events of credit options can be based on either
    1. The value decline of the underlying asset
    2. The spread change over a risk free rate
  2. Credit options written on an underlying asset
    1. Binary credit options provide payoffs contingent on the occurrence of a specified negative credit event
    2. There are only two options
                                                               i.      Default
                                                             ii.      No default
    1. If the credit has not defaulted by the maturity if the option the buyer receives nothing
    2. The option buyer pays a premium to the option seller for the protection afforded by the option
    3. Pay off can also be based on the credit rating of the underlying asset
    4. A credit put pays for the difference between the strike price and market price when a specified credit event occurs and pays nothing if the event does not occur
  1. Credit Spread Options
    1. Payoff is based on the spread over a benchmark rate
    2. Pay off formula

Credit Forwards
  1. Their payoffs are based on the bond values or credit spreads
  2. If a credit forward contract is symmetric the buyer of a credit forward contract benefits from a widening credit spread and the seller benefits from a narrowing credit spread
  3. The maximum the buyer can lose is limited to the pay off amount in the event that the credit spread becomes zero
 Credit Swaps
  1. It is a contract that shifts credit exposure of an asset issued by a specified reference entity from one investor to another investor
  2. The protection buyer usually makes regular payments to the protection seller
  3. In case of a credit event the protection seller compensated the buyer from the loss on the investment and the settlement by the protection buyer can take the form of either physical delivery or negotiated cash payment equivalent to the market value of the defaulted companies
  4. CDS can be used a hedging instrument
  5. Banks can use the CDS to reduce credit risk concentration
  6. Instead of selling loans, banks can transfer credit risk by means of CDS