Forward contract is an agreement between two parties under which one party agrees to buy from the other party a specified amount of an asset on a specified date at a specified price.The investor agreeing to sell the product holds as short forward contract and the buyers holds a long forward position.

A future contract is a standardized tradable contract between two parties to trade a specified asset on a specified date at a specified time.All the details are pre-determined.

There is a thin line of difference between the two,the following example will explain the difference between the two. You wanted to buy a cow for your farm. You can either buy a cow of any color and breed or u may wish to buy a cow of a particular size and breed. Futures are like buying cows of any color or breed. They are standardized. Forwards are like buying a cow of a particular breed with no standardization.

The main differences between them are;

1. Forwards are typically traded over the counter whereas futures are cleared through clearing houses.
2. Forwards are generally private agreements therefore there is high risk of default on the side of parties whereas, in futures clearing house is involved so there is a dergree of guarantee of agreement involved.
3. Forwards are settled at the end of the agreement on the specified date whereas futures are marketed on daily market basis,i.e, daily changes are settled day by day until the end of the contract.
4. Forwards are usually used by hedgers who wants to eliminate the volatility of the price and delivery agreements of the asset. On the other hand,forwards are usd bt speculators who bets on the direction in which the price of the asset will move.
5. Forwards are generally customized to consumer’s needs and involve no payments made in advance. On the other hand futures are standardized and involve payment of initial margins to avoid speculations in the contract.

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The market is full of big companies and sellers holding huge share in the market.These companies produce large quantities of goods and services with huge customer base. They have economies of scale, therefore, sell products at low prices which makes it difficult for other firms to join the market.One such market structure is oligopoly. This article focuses on the meaning, features and reasons for formation of oligopolies.

Oligopoly is a market structure in which few sellers of the commodity sell homogeneous or differentiated products.There are few sellers having significant share in the market. There is mutual inter-dependence among the sellers regarding the price and other important decisions related to the product. Because of few big sellers making huge market shares it creates a barrier for other firms to enter the market due to fear of competition. Sometimes these sellers form agreements among themselves to attain monopoly is the market.They are known as collusive oligopolies.

Oligopolies are formed in industries where huge capital is required, for eg, industries like shipping , heavy chemicals, petroleum etc.More emphasis is placed on advertisements and promotional activities because sellers sells products which are a little different from each other. The firm produces on large scale and hence achieve economies of scale which lowers the cost of production and creates a barrier for small firms to enter the market creating an oligopoly structure.Many firms forms mergers to escape the market competition thus forming an oligopoly structure.

The most famous example of this form is OPEC Cartel,i.e, Organization of Petroleum Exploring Countries.It was founded in Baghdad in September 1960 by five countries. At present there are 12 nations which are members of OPEC. The main reason for success is the inelastic demand for petroleum.Also OPEC controls a huge part of supply of oil in the world with very low cost of production as compared to others.

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According to law the company is required to publish some information about it’s working after a fixed period of time,i.e, either annually or half yearly or quarterly. But how come we get to know whether the information provided is true or not? How come we get to know whether the company is following all company laws regarding remuneration and stakeholders or not? We get to know about all these things through the reports made by different board committees comprising of independent as well as non- independent directors.According to the Company Law there are some committees that are mandatory for every company with set criteria. One such committee is the Audit Committee.This article gives all information regarding Audit Committees.

Audit Committee is the most important committee comprising of independent directors .The main function of this committee is to review the company’s financial reports and ensure that the information provided in the reports is credible.It also ensures that this financial information is made available to all the stakeholders and the disclosure is made timely. It even monitors the working of internal as well as external auditors.It even recommends external auditors to the board.It also ensures that there is legal compliance in the matters of financial statements.It identifies financial risks and takes suitable action against them.

According to the Companies Act 2014, every public company with paid up capital of INR 10 crores or more, turnover of INR 100 crores or more and aggregate claims of INR 50 crores or more, shall constitute an Audit Committee. No such criteria is given for private companies but every listed company should have an Audit Committee.This committee shall consists of minimum 3 directors with independent directors in majority. The chairperson must be an independent director.Meetings should be held at least 4 times in a year and gap between two meetings should not be more than 4 months. This committee has the power to investigate or seek information about any activity of the company.

This was all about the legal requirements as per Indian Companies Act 2014 for Audit Committees.

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Enron was one of the most powerful companies of USA. It was ranked in the US’Fortune Top 10 companies based on turnover.Enron was formed in 1985 from the merger of two American natural gas pipeline companies Houston Natural Gas and Internorth in Texas. In 2001 it employed 21000 people and was the world’s largest energy trading company. Such a large company ended it’s days as one of the largest bankruptcies in the world history which also resulted in the collapse of Anderson which was among the top 5 global accounting firms.

The company’s share price was at all time high in the early 2001 because of the breakout performance of the company as stated in the books. The reality of a bit different. The debt in the balance sheet rode to $13 million by the end of 2000. In 2001 because of the fear of US recession a slide in the market caused the price of the share of fall at it’s all time low.The main reason of failure of Enron was lost confidence of investors in this company which resulted in no new borrowings from the market.The third quarter disclosed a loss of $618 million. In November 2008 the share price of Enron was only 75 cents and it was declared junk in the market.Enron simply ran out of cash due to its incompetency to raise new borrowings.Enron was delisted from the stock market in January 2002.Kenneth Lay former CEO and Jeffrey Skilling were taken on trial in 2006 for their part in the scandal.The auditors of the company were also taken for trails.

The main causes of failure of enron were many, one of them was the accounting fraud. The assets and profits were shown at an inflated rate and many debts and losses were not shown in the books.The public image of the company was also undermined because of rumors of bribery to get many important contracts.Andrew Fastow, who knew about the losses of the company , manipulated the accounts in a manner which resulted in huge profits for him and his family at the cost of the company.

This was all about one the most biggest scam in the history of USA. This scam emerged the need of corporate governance not only in America but in other countries as well.

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The Central Bank of India,i.e RBI, and the government makes two types of policies- MONETARY AND FISCAL POLICIES. Monetary policy are those policy measures which are taken to control money supply in the market to realize pre determined economic goals. Fiscal policy are those policy measures which are related to public revenue and public expenditure made by the government.

The government involves itself in an economy through fiscal policy.They make budgets of total expected revenue and expenditure of the government, which is an important tool of fiscal policy.Fiscal policies helps in accelerating the pace of economic development by making expenditure on public welfare.It even helps to control inflation and deflation in the economy.

There are Three instruments of fiscal policy. they are-
1.Public Revenue- Public revenues are the funds of the government to finance it’s expenditure.The main sources of revenue are taxes, fees, fines penalties etc. For example, the income tax paid by our parents, the chalans we pay to traffic police, the house tax, the entertainment tax on our leisure activities are all examples of public revenue.
2.Public Expenditure- It is expense that the government incurs on the maintenance of the country or for the welfare of the society.For example, expenditure on parks, water works, education and health, defense, law and order, construction work etc are all examples of public expenditure.
3.Public Debt- Debt means borrowings, therefore, public debt is made by the government when it is unable to meet it’s expenditure with current revenue.The government can borrow from the public by issuing bonds or take a loan from any international finance institute.This usually happens when public expenditure exceeds public revenue. Debt can be required to pay interest payments on previous loans or to finance new construction projects or to make public welfare schemes etc.

Fiscal policy involves using these three instruments to do the best for the public and still be in a favorable position.

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Every major company has got it’s share on the stock market.The performance of a company directly affects the market value of it’s share. According to the law it is compulsory to disclose some information of the company to the public. But there is some information which is not made public but will affect the price of the share.What if this information is available to some investors? They have an advantage over other investors which is very unjust for others.In the eyes of law it is illegal because it is against the very principles of share trading.

Insider trading refers to the use of significant information of the company,which has not been made public and likely to affect the price of shares, for making personal profits.It may include information regarding future plans,policies,strategies or any future deal or losses. An insider is the one who is connected with the company and have access to company’s information and uses this information for his personal gains. It includes all the relatives and friends of the connected person as well.For eg, the director of the company knows that his company has made a deal with a foreign company because of which the share prices of the company would rise.He tells his wife to buy these shares at current price and makes a profit because of future increase in share prices.

Insider trading is morally incorrect because it results in loss to other investors.  Every company should make strict laws against this practice and take many measures to check this issue. The company should lay down proper code of conduct and assign certain penalties against the person who violates this issue.There should be proper monitoring through cameras and phone tapping to keep a check on people having price sensitive information.

Insider trading raises many moral questions. It is obviously ethically wrong to provide advantage to certain investors to make personal gains at the cost of other investors.There are possibilities that is future Insider trading would be considered illegal in India as well.Though there are no strict laws against insiders but SEBI is trying to gain investors confidence by passing certain acts to prevent it.

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Everyone wants to invest their money where they could get guarantee of repayment of principal amount with some profits.  In today’s dynamic world where situation changes in minutes, it is difficult to find such investment scheme.We need not worry about this issue in government bonds. Government wish to raise or borrow money from the people either to fund their expenses or to control inflation in the country.

A government body may raise money on a stock exchange or by inviting invitations from the public by issuing tenders.The investor then nominate the price at which they are interested to buy the bond. An issue by tender is just like auction. For eg, the government body declares a floor price of $100 and the investors bid the price above it.The government will then determine the price and will sell this to the investor making the highest bid.

Another example to explain the concept of  bonds is, suppose an investor purchases bonds worth $1000 redeemable at 110% in six years time. The investor will receive a coupon payment of 5% p.a . In this case the investor will receive $50 at the end of each year and $1100 after six years.

In some bonds have variable redemption dates,i.e, the investor himself can choose the date of redemption of bonds within the certain time period given. Some government bodies issue bonds at a discounted rate with no coupon payment. The discount earned is the income from that bond. Such bonds are known as Zero Coupon Bonds.

Bonds issue by the government bodies are the most secure and risk free form of investment.However, with this security comes a disadvantage of low returns from the bonds.The coupons of these bonds are effected by inflation therefore, they are generally linked to price indexes to reduce the effect of inflation.

In most of the developing nations bonds form the largest, most important and liquid form investment.If we have proper knowledge about them, an investors can earn huge profits from them.This was all from my side about the government bonds. I hope this article helps you to gain some knowledge about them.

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What comes in your mind first when i say the word DERIVATIVES.? If i would have been a layman i would have thought it to be the one we studied in maths,i.e, rate of change under the topic differentiation. But it has got an entirely different meaning in finance A derivative is a financial instrument whose value is dependent upon the value of some other underlying asset.

The distinguishing feature of derivative contracts is that they are legal agreements between two parties to trade an asset at a future date. For eg, A and B made a contract in which A agreed to sell its property to B for $10 million after 6 months regardless of the market value of the property on that future date. They are in contrast to the investments in the sense that they are not issued to raise money from the investor. They are mainly issued to control future risks. They can reduce risk through a process called hedging and can even increase risk through speculation. For eg, an investor may agree to buy a share for $100 in future, so he may invest this $100 somewhere else for the time being at a risk free rate and increase it’s value but at the end of the contract he will pay only $100 for the share and will have an extra income earned on investing that $100.

There are many types of derivatives but the main ones used are-

1. FUTURES -It is a contract between two parties to trade a standardized exchangeable asset on a set date in future at a predetermined price.
2. OPTIONS -An option is a contract in which an investor has a right (option) to sell or buy a specified asset on the future date.
3. SWAPS -It is a contract in which both the parties agree to exchange a series of payment according to the set formula.

This was all about derivatives. I tried to use as many examples as i could to explain this topic. I hope my motive have been achieved and i was successful is making you guys understand about this subject.

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In a layman language market is a place where exchange of goods and services takes place. But nowadays market is not only limited to geographical areas, there is a whole new world of virtual market using the internet.There are many types of markets like monopoly,monopolistic, oligopoly etc. Through this article i would like to increase knowledge about the perfect competitive market.

Perfect competition is a market structure characterized by complete absence of rivalry,i.e, there are large number of sellers selling homogeneous products at same price.

CONDITIONS OF PERFECT COMPETITION

1. LARGE NUMBER OF BUYERS AND SELLERS- There are large number of sellers and buyers in the market.No individual buyers or seller can influence the market conditions. The seller sells the product at a predetermined price and buyer buys a product at predetermined price.In short buyer and sellers are price takers.They have no bargaining powers.
2. HOMOGENEOUS PRODUCT- The sellers sell same products.No discrimination is made on the basis of brand packaging or labeling. Products are perfect substitutes of each other.
3. FREE ENTRY AND EXIT OF FIRMS- There are no restrictions on the entry or exit of firms. The firm can enter or exit the market at there own wish without any legal formalities.This is the reason why firms earn normal profits in the long run.If a firm is earning extra profits then more firms will join in the markets due to which firms will start earning normal profits again due to increase in supply of the product.
4. NO INTERVENTION BY THE GOVERNMENT-As i earlier told you there is no role played by the law in perfect competition market therefore government doesn’t intervene in its working.There are no licencing or allocation of resources by the government for them.
5. PERFECT KNOWLEDGE-All buyers and sellers have perfect knowledge of the market structure and the prevailing price in the market.

This kind of market doesn’t exist in the real because it is impossible to have complete knowledge about the market.Secondly it is not possible to sell homogeneous products at same price,for eg, we have two types of bread in the market Britannia and harvest different in terms of brand name, secondly each company charges different price at different locations like higher price is charged in hilly areas.  Therefore this model exists only in the books of economics.

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Statistics is an important part of our life. No research work can take place without the use of statistics.One of the most important part of statistics is it’s distributions. They are known as statistical and probability distributions, for eg  binomial, negative binomial, geometric etc. We all have heard about binomial distribution and have even learnt it at school level. But the two main distributions which are used in everyday life the most are Poisson distribution and normal distribution. The main purpose behind this article is to create awareness about these two because there is no research work without the knowledge of these two.

POISSON DISTRIBUTION

This distribution models the number of events that occur in a specified interval of time, when the events occur one after another in time in a well defined manner.For eg- events like modelling the number of goals scored in a match and its probability, modelling no. of accidents in a city, modelling no. of telephone calls in an hour in a call center etc.

There is an assumption that events occur at a constant rate and number of events that occur in separate time intervals are independent of each other.The Poisson distribution gives a good approximation to the binomial distribution.When number of events are very large ,i.e, n is very large in binomial then Poisson gives a good approximation to the answers.

NORMAL DISTRIBUTION

This distribution, with it’s symmetrical bell shape , is the most important distribution in both statistical and practice theory.It’s features include the following-

• it is bell shaped and symmetrical
• it is a ‘building block’ for many other distributions
• it is a good model for the distribution of measurement that occurs in practice in a wide variety of different situations. For eg, height of students.
• it provides good approximation to other distributions as well.
• much of large sample statistical inference is based on it, and some models require an assumption that the data belongs to normal distribution.

That was a brief introduction about these two distributions.The knowledge of these two is necessary to survive in the analytical and research sector today. I hope i was able to fulfill my objective for providing information about these two.

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