Derivatives and financial crisis Assignment Example | Topics and Well Written Essays - 2000 words

Derivatives and financial crisis - Assignment Example Such types of derivatives are used based on the type of risk exposure i.e. liquidity, financial, exchange rate risks, etc (Chisholm, 2011). Derivatives were used primarily to hedge risk, but over time people used it to make gains out of the price movements of the underlying assets. The purpose of using derivatives is incumbent on the investment objective. The price volatility of the underlying influenced various investor community to use derivative as a lucrative investment option. Earlier the use of derivatives was not popular, owing to its complexities it was not considered to be a feasible investment option. Over time, it was adopted by various investors to insure the various risks facing them. With various risk outcomes, the fluctuations in the price of the underlying assets made it volatile. Such price volatility attracted speculators, who engaged in the use of derivatives to earn profits. Speculations are done on both the up trends and down trends of the asset price movements. The impact of speculations is felt across the investor community i.e. the hedgers. Speculators gamble on the direction of the asset price m ovement. When a speculator feels that the price of the underlying asset will fall, he will short sell the stock or buy an option. When the price of the asset falls, he exercises the option or buys the underlying asset to make profit. Speculators leverage the vulnerability of the price movements of the asset to make gains. Though all types of derivatives cannot be used to speculate, but futures, options and swaps are lucrative avenues for speculators (Poitras, 2002). From the inception, starting in 1970’s and continuing through the ‘80’s and ‘90’s, the financial market evolved and made it a riskier place for trading. The interest rate changes, bonds and stock markets witnessed phases of increased volatility. Owing to such evolution of risk, investors and managers of financial institutions became wary and resorted to

Management in the News paper Research Example | Topics and Well Written Essays - 1250 words

Management in the News - Research Paper Example However, from the period of 2007 Grady Memorial Hospital the charitable and training institution in Atlanta started suffering from a huge financial crisis. The huge financial crisis amounting to millions of dollars affected the operations of the hospital. However, the local and the national government have not taken any significant steps to help the hospital revive from the crisis. (Dewan & Sack, 2008) The Grady Memorial Hospital based in Atlanta share a nostalgic relationship with many Americans who have risen to higher positions in the country. In fact, the Grady Memorial Hospital had been the first home in the world to many people living in the region of Atlanta. The hospital observed to be a charitable organization caring for a host of immigrants, prisoners and low income groups is suffering from a financial crisis from the 2007 period. Management operations in the hospital are being carried on through a system of small financial packages obtained from various sources. The case of Grady earns similarity to other health organizations based in different areas of the United States like Memphis, Chicago and Miami. However, the magnitude of financial crisis has led Grady to surpass the distressful situation of around 1,300 hospitals operating in United States. The financial crisis loomed over Grady for the hospital operated on a traditional approach which failed to generate suffici ent funds to help the organization carry out its operations in an extensive manner. Grady Memorial Hospital renders maximum focus in the treatment of the patients belonging to the uninsured and immigrant groups. Moreover, the amounts received from the end of the insured patients also fail to suffice in meeting the operational costs. Further, the Grady Memorial Hospital faces huge competition from other private players operating in the health care arena of the country. The private hospitals and other non-profit health organizations earned high popularity in successfully rendering