Terms Beginning With 'w'


Sometimes referred to as the grantor, a writer is the seller of an option. He opens a position to accumulate a premium payment from the buyer, which gives the buyer the right to buy or sell the underlying within an agreed period of time at an agreed price. The main goal for option writers is to produce income through the collection of premiums when contracts are sold to open a position. Ideally, a writer incurs losses if, the options written are uncovered in nature.

Have you ever thought about becoming financially independent or creating a decent wealth or maybe making your life worry-free from a financial standpoint? If the answer to any of these is Yes, then you probably need to focus on this vast subject of personal finance. So, what exactly is personal finance and how it may help you to achieve your financial goals? Personal finance is a very vast yet quite simple subject which covers everything that affects the financial health of an individual. It guides an individual on how to save money, the importance of an emergency fund, how and where to invest, how to achieve your retirement corpus etc. Below we will be touching upon a few of the essential aspects of personal finance that are a no-brainer to increasing your financial stability. Is savings the foundation of your financial stability? Savings to your financial goals is what food is to your body. Without the habit of savings, it isn't easy to achieve financial goals. Without the fundamental habit of saving, any level of income would be spent recklessly, and initial corpus to grow would get hammered constantly. One thumb rule of savings is “Pay yourself first” which has been described in Robert Kiyosaki’s book ‘Rich Dad Poor Dad’. This rule states whatever you are earning be it $1 or $1 million, always save a specific amount first and then look for spending the remaining income, instead of doing the opposite. In other words, spend what’s left after saving instead of saving what’s left after spending. Are multiple sources of income really helpful? Most people are having a single source of income, i.e. their salary to rely upon. But what if you could have two or more sources of income? Wouldn’t you be able to save at a higher rate or maybe achieve your goals well before projected time? This is the purpose of different sources of income, and in today’s world of internet, it’s not that difficult to create another source. Like if you are a good writer, you can write and self-publish your e-book or even start a blog. Love travelling? Start a vlogging channel on YouTube. Have any specialized skill? You can leverage it to others on freelancing sites. Perhaps, you can invest in equity, bonds, currency, commodity, derivatives or other different forms of assets. Judicious portfolio investment calls for sound qualitative and quantitative analysis. Emergency fund – Your umbrella on a rainy day? Life is uncertain and is full of both good times and bad times, but it is often the bad times for which we need to be prepared. Same goes for the financial stability of any individual which can take a hit at any point of time. To safeguard yourself for any uncertainty in the future, the creation of an emergency fund is mandatory. An emergency fund is also your savings which is kept isolated from the day-to-day reach so that by any means it cannot be dipped into for your normal expenditure. The sole purpose of this form of savings is to get a backup in the time of absolute need which is unforeseen like hospital bill for an accident or to keep you afloat for a few months in case the only source of income goes for a toss. Ideally, a person should have around 3 to 6 months’ worth of living expenses in his/her emergency fund. Does a budget provide enough worth as compared to the effort to create one? Most people are not into budgeting mainly because of the amount of efforts to constantly track the expenses, need for making a plan to tackle those and updating it with respect to changes in either income or expenses. Is it worth it after all of these constant efforts? To answer it in one line “What cannot be measured, cannot be improved”. If you are unaware of where your money is going, how much could be saved, what is the essential spending, then it is really difficult to optimize your expenses. Is Compounding the real gamechanger? Compounding, in its basic essence, is getting a return on an asset and reinvesting that return with the initial investment to generate an additional return. This way, the returns gradually becomes exponentially higher than any linear method. For example, If you invest $100 for a 10% compounded return, in the first year your return would be $10, but in the second year with the same 10% return, you would be getting $11 as your initial capital has also increased. But the real benefit of compounding is seen after a few years. To continue with the example above, look at the table below to get the real essence of compounding. As can be seen from the above table, after 10 years, the initial capital has grown more than 2.5 times with just 10% return per annum. This exponential growth is projected graphically on the chart below. Now comes the most asked question on how and where to invest? Is investing for a decent compounded return within the competence of an average individual having no expertise in this domain? First of all, investment is not rocket science; anyone with the basic understanding of the business and finance can invest on his own with proper due diligence. Mix of quantitative and qualitative analysis in the attractive assets, keeping in mind risk appetite and return expectations seem to be the key to successful investing. Apart from that, nowadays, a lot of financial/investment advisors are available who are better equipped with the knowledge and experience to do the job for you. A mutual fund is another example of outsourcing your investment-related work to a fund manager. Mutual funds are a pool of investment coming from retail investors which is invested in different assets. All the decision making is done by a dedicated fund manager on where to invest, how much to keep in cash etc. To sum it all up, always make sure that your income is always greater than your expenses and whatever means help you to achieve this basic principle, comes under the domain of personal finance.

What is a Market Risk? Market risk reflects the potential of reduction in the investment value due to the interplay of varying market forces in the direction that can lead to losses for the business/ investors.  Significantly, the returns on the investment are often exposed to a range of market forces over which the business/investors do not possess any control. For instance, the financial crisis following the outbreak of coronavirus can be called systematic risk, affecting the overall market. Similarly, a change in the economic policy that can typically impact certain types of companies can also be an illustration of market risk as it can hurt the profitability and share price of such companies.  What do we understand by Market Risk in Stock Markets? Political upheaval, natural disasters, war, pandemic, and fluctuations in macroeconomic indicators such as inflation, interest rate, fiscal deficit, recession, etc. can also overall impact the market and are thus considered as market risk. Market risk can be the measure of the volatility of the overall stock markets across different asset types, industries, and sectors.   Such risks are typically associated with the impact of macroeconomic indicators, global factors and geo-political concerns on the financial market rather than being linked up to a company or an industry. Thus, they have the potential to affect a range of investment across different companies and sectors. The market risk is also called a Systematic risk, which can only be minimised but not eliminated through diversification.  How does Systematic Risk Differs from Unsystematic Risk? The total risk faced by the business can be categorised into Systematic Risk and Unsystematic Risk.  While Systematic Risk is the risk resulting from various external market variables that are uncontrollable and affect the entire market or segment, the Unsystematic Risk is mainly company or industry-specific and emerge from factors, which can be controlled by the necessary actions of the management.  Let us have a look at the key difference between Systematic and Unsystematic Risks. Causes of Risk- Systematic risk is caused by the widely impacting market variables or macroeconomicvariables such as market crashes, currency risks, economic downturns, terrorist attacks, etc. Whereas, Unsystematic risk is directly attributed to a company or industry. They are caused by microeconomic or internal factors, with the familiar risk sources involving business insolvency, labour strikes, disruption in operations, etc.  Possibility to Avoid- Systematic risks cannot be avoided entirely by the management as it arises due to circumstances over which management does not have any control. The administration can avoid unsystematic risk if they take necessary actions in the right direction.  Types-Systematic risks experienced by the investment typically include interest rate risk, inflation risk, regulatory risk, currency risk. The types of unsystematic risk include business risk, financial risk, operational risk, and insolvency risk.   The magnitude of Impact-The extent of the impact of Systematic Risk can be felt across a broad range of organisations and sectors, which eventually impacts the value of the securities present in the market. Unsystematic risk only affects a specific section of the market or a particular company or industry. Management-Although systematic risk cannot be eliminated, one can mitigate it by utilising techniques such as hedging and asset allocation. The investors via diversification can dodge off the unsystematic risk. How to Measure Market Risks? Market Risk is generally measured using two methods which include Beta Value for the portfolio and value-at-risk (VaR) method.  Beta Measures Market Risks can be evaluated using Beta, which indicates the volatility of a particular asset/stock/portfolio viz-a-viz the overall market volatility. Beta, also referred to as financial elasticity, is used as a measure of systematic risk of an asset considering the market as a whole. Significantly, the beta value of the market is considered to be 1.  Beta only considers the systematic risk, thereby providing a clearer picture of the market risks attached to the investment portfolio. It is also used in the Capital Asset Pricing Model (CAPM) for measuring the expected return of a stock, considering the risk-free rate plus a premium on the systematic risk attached to the security.   Beta Value Analysis If β < 1 => The systematic risk associated with the stock is less than that of the overall market. Thus, if the market index falls by 10%, the share price of the security is likely to drop by less than 10%.  If β= 1 => The market risk attached to security is the same as that experienced by the market and the security share price will potentially mirror the market movement.  If β > 1 => The systematic risk of the stock is higher compared to the overall market. Thus, a fall in the market index by 10% would lead to a plunge in the stock price by more than 10%.  If β < 0 => The negative beta value indicates that the security moves in the opposite direction to the overall market. For example, the price of the gold stocks generally increases with the decrease in the overall stock market returns.  Investors calculate the Beta for the portfolio to gauge the systematic risk of the portfolio in comparison to the overall market risk.  Value-at-Risk Measure Value at Risk (VaR) is often used as a simplified technique of calculating the market risk. The measure encapsulates the entire market risk faced by a company. VaR is a statistical method, which answers three significant questions surrounding an investment decision, which are: What is the maximum potential loss that the investment can suffer? What is the likelihood of the loss to occur? What would be the time horizon for the loss? VaR measures the degree of risk as well as occurrence probability attached to the security over a specific time period. For example, VaR of 2% at the one-month time frame, with 95% confidence level indicates that there is only 5% chance that the value of the security will fall more than 2% in the one month.  Market risk using VaR is calculated through the following methods:  Historical Method- Using the historical data to calculate VaR. Variance-Covariance Method- Creating a normal distribution curve by combining data on average returns and standard deviation.  Monte Carlo Simulation- Simulations are created for calculating VaR, and then different variables are input each time when running simulation. The graph generated based on the change in the input values provides a measure of market risk.  What are the ways to Hedge Market Risks? Hedging is a risk management strategy generally undertaken for reducing portfolio exposure to the downside market risks. Hedging technique utilising financial derivatives involves holding offsetting position (long position vs short position) with the purpose to counterbalance losses from one position with profits from the another.   Following strategies can be undertaken to hedge against the market risks, depending on return expectation, financial situation and risk profile: Futures Contract- It is a legal obligation on the two transacting parties to buy or sell assets and securities at a specific time in the future at a price earlier agreed upon by the parties. It prevents both the sides against the market risk resulting from the unfavourable price movement of the underlying security. Options- The Options contract provide the buyer of the options an opportunity to buy or sell a security at a specified time at the predetermined and agreed upon price. While the buyer of the option has an alternative whether to execute the transaction or not, the writer (seller) of the option is obligated to sell or buy if the other party chooses to. Significantly, the buyer, therefore, pays an option premium for option rights granted. 

What is Journalism? Journalism is a profession in which one gathers, accesses, and presents news and trending updates and opinion. It is called the fourth pillar of democracy; the first three are Legislative, Executive and Judiciary. Journalism is an umbrella term for the act of producing and disseminating news reports. It is a dynamic field. In other words, it is not only of various types but also encompasses several media forms and is forever changing. There is a famous saying by Walter Lippmann, American writer, reporter and political commentator, which highlights an important aspect of journalism: ‘There can be no higher law in journalism than to tell the truth and to shame the devil.’ What are the Different Mediums of Journalism? In older times, the act of writing and presenting news was limited to print and non-print mediums. Print mediums included magazines, newspapers and non-print included television and radio. With ever-evolving technology and advent of internet, journalism has not been limited to print, radio and television, but it has also shifted to digital mediums. Notably the journalism process is complicated as it starts with gathering the information, assembling it, editing and making it presentable and ultimately presenting it to the viewers or readers in a fastest possible way. Its all about covering and presenting what’s trending, what’s interesting to the readers, and tapping the right medium depending on target audience and journalism expectation. ALSO READ: Global Digital Titans and Fall-out with Australian Media Companies Why Has Online Journalism Taken a Front Foot? The traditional press always gave importance to citizen journalism. Which is nothing but inspiring the masses to participate in the news or information telling process. With the rise of the internet, online journalism has paved its path to be the most crucial medium of the press. As masses have easy access to digital platforms, they can independently voice out opinions or publish information, without the help of any publication. Online Journalism consist of similar sections like print or non-print media. Apart from that, online journalism also has new age mediums such as:  Blogs: These are articles in the form of online diaries kept by individuals or companies. These include the views and opinions of the writers. Podcast: These include audio programs which contain information and have views and opinions of the podcast host and attendee. Discussion boards: These are online platforms which offer a group of people an opportunity to discuss and exchange views, opinions and information Videos sharing: This platform is turning out to be essential, and it is said that the future of the press is video. Videos are created and shared on various platforms which contain views, opinions, graphics and information and much more.  ALSO READ: PointsBet Enters into Exclusive Media Partnership with US Media Giant NBCUniversal, Share Price Skyrockets 56.4%     What are the Various Forms of Journalism?  NEWS: This journalism segment includes gathering and presenting the information and facts as it is. The journalist is responsible for presenting news in a meaningful and honest way. When delivering a report, a journalist has to offer it the way it is, without giving his/her opinions or involving personal feelings. The hard news consists of news related to politics and public affairs, whereas soft news represents human interest stories and celebrity stories. Apart from these essential sections, there are other genres such as business, sports, medicine, weather, science, education and much more. The entire news report revolves around the 5 W's and the H.  Who - who is involved, benefited, affected, harmed? What - what is the topic, what does it involve, what is it similar/ different from, what might be affected/ changed by the topic? When - when does/did/will/should this take place? Where - where does/did/will/should this take place? Does it matter where it takes place? Is it affected by location? Why – why is this topic important, why does it matter, do certain things happen (What are some causes and effects within the subject)? How - How does this topic work, function, how does it do what it does, how did it come to be, how are those involved affected? OPINION: This category involves a different style and purpose of presenting information.  Editorials: These include articles that express publication’s opinion through its senior editorial staff or the publisher. These articles are often unsigned and appear in the opinion section of the print media.   Op-Ed: These represent short form of opposite editorial and are commonly called guest columns. These articles are submitted to the publications and are often written by members of the community, not publication’s employees.  Columns: These articles can be a part of Op-Ed, which are signed articles written by independent writers and mainly consist of their own opinions or stories. Publications do not represent these opinions as to their own; they are solely of writers.  Reviews: This section provides reviews of movies, restaurants, musical concerts, drama etc. and are often written by publication employees or a special guest.  How Can We Trace the History and Evolution of Journalism? A reference to the process of gathering, organising, and distribution of information to the masses go back to Rome circa 59 B.C. A circular called Acta Diurna was daily published and hung strategically for the masses to read data. Another reference came from Asia where Tang dynasty in China around 618 A.D. to 907 A.D. period issued a court report named Bao. The purpose of this circular was to keep the government officials informed on the relevant events.  However, the first regular news publication has its roots in Germany as the newspaper published in the English language in 1609.  It should come as no surprise that during earlier days, the role of journalism was only on reporting government affairs but slowly it started to change and the role reversed as it became a powerful platform to present the truth and question authorities in power. Slowly, the freedom of the press became essential in order to publicize the news and information honestly. The first journalist foundation came into existence in 1883 in England. The American Newspaper Guild was created in 1933 as a trade union for the people working in the news industry. Print, radio and television were the trusted medium of information for the masses throughout the world. Though many authoritative regimes still do not have freedom of the press in their countries. Now in the modern world with a rise of electronic and digital mediums, the print media has taken a hit in readership. However, even as the world is ever-changing, the need for the free and honest press is always there, be it in the form of print or non-print mediums.  ALSO READ: Australian News Media to Negotiate with Google And Facebook Post Adoption of Draft Mandatory Code

What is an IPO? Initial Public Offering (IPO) is a process to raise money through a stake sale by existing shareholders by listing a company on a new stock exchange. It’s named IPO as it’s the first time a company is raising money through public forum though a particular stock exchange. The company, when private, usually depends on private funding from investors such as founders, friends, family, angel investors, and venture capitalists. Although private markets provide growth funding to budding companies, the ultimate exit of private investors is public markets. IPO is one of the funding sources of equity for a business. An Enterprise’s decision to go public is partly driven by the need for funding, and to attain a potential premium value to its assets, business model and future growth. Markets refer to this potential premium or discount as multiples because share prices of companies often trade in multiples of their underlying assets or profits. But many companies also trade below the perceived value of their assets and profit. A listing provides private investors with an exit route mostly at a premium, while founders also get paid if they sell a part of their stake. IPO funding is primarily used by the company to fund growth, repay debt, capital investment etc. IPO is a stock market launch of a company wherein shares are sold to retail investors as well as institutional investors. The process gives an opportunity to investors to assess and maybe take exposure in the potential growth of a business. Returns and risks come hand in hand, and it becomes imperative for investors to carefully evaluate the opportunity compared to the offering price of the securities. Not all IPOs end-up becoming a large-cap company, therefore it is essential to assess the associated risks. Please note: a company which is offering its shares to be public is not obliged to repay the capital invested by the public investors. What is the process of an IPO? Not every company is fortunate enough to sail through an IPO process. Going Public is a big step for a private company, which means that the company can now have access to a lot of money, giving it a better opportunity to grow and expand. Further, meeting disclosure criteria and share listing credibility can be used to negotiate for better terms in case of borrowed funds. And even after making into stock exchange bourse, there is no guarantee that the company will have a share price growth over the future. IPO process is complex and requires time, money, and substantial consulting. While investment bankers are inclined to take most of the companies’ public, it solely depends on the perception of public markets of the upcoming listing. Selecting an Investment bank: As step one, a company which wants its transformation to a public goes to investment bankers, for advice on the transaction and to provide underwriting services. Investment banks evaluate the prospects of a business and its past performance. They also look carefully at the business model, industry, and products of the company. An IPO prospectus includes a lot of information about the business that is mostly sufficient to evaluate an investment opportunity. Companies often select banks that have been engaged with the business in the past because these banks know in and out of the company. Other factors that impact the selection of a bank include the reputation of the bank, the ability to deliver quality research, and underwriting capability. Regulatory filings: Markets regulators regulate public markets across most of the jurisdictions. Since public markets come in the ambit of market regulators, IPOs are also monitored and evaluated by the regulators. This process also includes completing the underwriting agreement with the investment bank. Underwriter effectively acts as a broker between public market investors and the company. The investment bank or group of investment banks decide their underwriting capacity. In this stage, the company also provides necessary information and disclosure to the stock exchange and market regulator. It also registers the prospectus prepared by an investment bank. An IPO prospectus is an extensive document about the company’s business model, business fundamentals, management background, as well as legal information related to the IPO. Once the prospectus is registered, it is accessed by investors who are willing to invest in the upcoming IPO. Therefore, the prospectus of the company provides a base for investment decision-making of investors. Pricing of the IPO: After the necessary fillings and approvals, the investment banks that are handling the transaction undertake pricing of the company. The offer price of an IPO is based on valuation, market factors, and business performance. IPOs are priced in two ways. In a fixed price offer, the offer price of the shares is fixed by the investment bank based on the valuation; this process is usually applied when a small company is going public. In the book-building process, the investors submit their bids to the investment banks promoting the IPO transaction. This process is used for a large enterprise to obtain a maximum issue price for the stock based on the investors’ expectations. Once investment bankers receive bids, they evaluate the bids provided by investors and arrive at an issue price for the company’s share. Offer period: After the pricing of the IPO is completed, the offer period commences, which is given in the prospectus. During the offer period, the public market investors subscribe to the IPO of the company. This period usually decides whether the IPO is ready to hit the market or not. A company should achieve a minimum subscription to make debut in the markets. And the underwriting facility provided by investment banks seeks to ensure that minimum subscription is met. Allotment of shares: Once the offer period is closed, it is revealed whether the IPOs was oversubscribed or undersubscribed. If the issue is undersubscribed, the investors will receive the same number of shares subscribed by them. When shares are oversubscribed, the underwriters have the option to raise the price, offer additional securities or consider both. Advantages of IPO Primary objective is to raise money for a business. Whereas other benefits include: Facilitates completing acquisition deals, by helping in determining acquisition pricing and paying by issuing shares. Necessary transparency measures help in favourable terms of borrowing. Further funds can be raised through public, by going in for secondary offerings. Expands the company reach for money, its prestige, and improves its public image.   Disadvantages IPO is a very expensive process and requires a lot of work. It not only needs expert services of investment bankers to be listed, but the cost of maintaining a public company is ongoing. The focus of the company management may change; a lot of effort goes under disclosing information. Original shareholders lose control of the company due to new shareholders obtaining voting rights. Sometimes practices inflating the share price of the company are used, which increases the risk and instability of the company.

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