DETERMINATION OF RIGHT PRICE( think about business involved in it)

This is a major responsibility of the purchasing group.many factors influences what is a "right price" and, again comprehensible discussion is hardly possible.In a broad sense ,a right price is one that is "right" for all concerened- the purchaser,vendor,buyer's customer,public.

In the past the way to avoid the price increases that Forrester and Gartner are initiating on a regular basis would be to use the usual purchasing best practices. These include waiting until the last minute before the end of the quarter or better yet end of the fiscal year to finalize a contract, playing one firm off another, signing up for a multi-year contract, and consolidating purchases to obtain a larger discount.

Alas, these techniques are not as effective now with Forrester and Gartner as they were in the past.

While there are hundreds of analyst firms, with some large ones like AMR Research and IDC, the unfortunate reality is that when it comes to the market for end-user advisory analysts, Forrester and Gartner have achieved a de facto duopoly. Because the market for their services is so underpenetrated, neither firm has to compete on price to grow revenues, clients, and market share.   Therefore they can concentrate on improving margins while growing revenues by expanding their sales forces. It is a very cozy duopoly. To date there have been no serious contenders to the Big 2 as replacements for the acquired Giga and META. As long as firm executives continue to impose pricing and discounting discipline on their sales forces the opportunity to negotiate a better price with the Big 2 is limited. Gartner has been especially disciplined, using a “Bloomberg model” of a price for the first seat, a slight discount for the second seat and no incremental increase in discounts after the second seat regardless of volume. So while it is still possible to negotiate on price, the opportunity is not as great as in the past.

The best way to get the right price for the analysts services you require is not to put all your effort into trying to whittle down Gartner’s or Forrester’s price. Rather, the approach for getting the right price is to get the right service from the right firm as laid out in parts 3 and 4 of this series (see below for links). By not falling into the trap of buying the most expensive services from Forrester or Gartner, you can still get the right price.

RISK MANAGEMENT MODEL BY LI COUPLA AND WHAT TO DO FURTHER?

 First i would like to do briefing about LI’s coupla model (risk management model) and why it failed?

In laymen language, it deals with how much risk is involved while giving any loans or a package of mortgages (started by investment bankers).

This formula is mostly used by all major giant banks and investment companies of world.  Actually what happened is like this when bankers started buying mortgage bonds or so called package of mortgages (mortgage pools) from external companies. They used coupla’s formula which is generally for risk mapping involves in any particular loan but they used for group of loans (here the problem rose).

 Mortgage pools are not as simple as most bonds. There's no guaranteed interest rate, since the amount of money homeowners collectively pay back every month is a function of how many have refinanced and how many have defaulted. There's certainly no fixed maturity date: Money shows up in irregular chunks as people pay down their mortgages at unpredictable times—for instance, when they decide to sell their house. And most problematic, there's no easy way to assign a single probability to the chance of default. All of this makes it much more difficult to calculate risk on mortgage pools and CDOs than on conventional bonds or old-fashioned home loans.

Wall Street "solved" many of these problems through a process called tranching, which divides a pool and allows for the creation of safe bonds with a risk-free triple-A credit rating. Investors in the first tranche, or slice, are first in line to be paid off. Those next in line might get only a double-A credit rating on their tranche of bonds but will be able to charge a higher interest rate for bearing the slightly higher chance of default. And so on.

They took some assumptions-

First was that one loan is not related to others. If one party does not repay the loan then it does not mean that others will also not pay (even in same category).

Second - risk probabilities are may be different for different kind of lenders but we can calculate an average for all (biggest flaw).

Initially this formula was working well because external factors like growth rate n employment which are basically sources of revenues of lenders were doing well. But at last when eventually these externalities stopped helping out, so consequentially realty or flaw of this formula came out.

The CDOs, based on Li's Copula function and created and traded on Wall street, now account for most of the toxic assets that have turned shares of major banks like Citicorp into penny stocks.

 

So what is the solution?

Do we have to go back to conventional banking only?

Do we have any another way rather than stop giving loans to sub-prime lenders?

Now i would like to divide this discussion into two parts-

Small lenders and mid class lenders-

By former i mean lenders which generally lend very small amount of loans and may or may not able to payback.

So the solution to insure that they will repay back is grammen banking model (which i have recently studied) or micro finance companies based on trust and lender’s responsibility. They are having unbelievable repayment rate (95-99%). They have to repay their loan from basic salary only which is not basically hiked up due to undue growth in any sector.

So it makes easier for them to repay loan even in financial crisis. On the another way around crisis would not affect much their income.

Other factor- their total loan amount is not that much big that it would lead to liquidity crisis.

Now come to second part mid class lenders-

In this case expectations are high. They are able to take bigger amount of loans than small lenders because of undue advantage of recently hiked in salaries. But what will happen when these sources will not help them out to repay---- REPOSSESSIONS--- FINANCIAL CRISIS----ETC...

How to save or how to manage?

Open for discussion....

Pass your comment it will make your mind work..

Say anything which comes to your mind kya pta that would be a best solution...

 

 

punchlines

AIRLINE                 PUNCHLINE

Austrian Airlines            The most friendly airlines

Cathay Pacific                The heart of Asia

Indian Airlines                Your home in the sky

Singapore Airlines          A great way to fly

Lufthansa                         There is no better way to fly

Jet Airways                      The joy of flying

Air Sahara                        Emotionally yours

Thai Airways                   Smooth as silk

Sri Lankan Airlines         You are our world

British Airlines               It‘s time to change the way you look at things

why crisis comes in to existence??

first problem- mathematical error

because we generally assume that 9.9999 = 10 or as we know that mathematical its possible to prove in this way..

x= 9.9999

10 x=99.9999

9x= 90

x=10

mathematical flaw...

so this small flaw can be a reason of crisis because when we neglect this flaw and think that there is no need to consider .ooooooooooooo1(aprrox.)(again its a flaw). but when dealing becomes hefty then this small approximations does matter. let's say we are dealing in 100 trillions of rupees. if we don't consider this then u can loss some millions.....

so it does matter..

look at this one..( from economics point of view what i have  researched till now)

Example

The market rate of return on the 4.25% govt. bond maturing on 7 March 2036 is currently 3.81% per annum. Let's assume that this can be broken down into a real rate of exactly 2% and an inflation premium of 1.775% (no premium for risk, as government bond is considered to be "risk-free"):

1.02 x 1.01775 = 1.0381

you can ignore the third term (0.02 x 0.01775 = 0.00035 or 0.035%) and just call the nominal rate of return 3.775%, on the grounds that that is almost the same as 3.81%.

nominal rate= real rate + inflation

3.775= 2+1.775

At a nominal rate of return of 3.81% pa, the value of the bond is rs.107.84 per 100 nominal. At a rate of return of 3.775% pa, the value is rs.108.50 per 100 nominal, or 66p more.

The average size of actual transactions in this bond in the market in the final quarter of 2007 was rs. 400 million. So a difference in price of 66p per 100 translates into a difference of 26,40,000 per deal.

on more problem is we have taken lots of assumption n approximations..

so second problem is which variables we have to take as decison variables.( others will be left as constant).

if we take CAPM model, look it carefully which says that-

cost of capital = rf + b(km - rf) ( sorry if there is any problem in formaulla, does not matter)

 linear equation based risk engeering model..

which means if marketing returns increase i.e. km then cost of capital also increase which means expectation also increase. so it means continous growth.. if we consider stock market then it will move like 10 k to 12 k in one month then 12k - 14 k and so on... but is it really possible... think logically

so can we make a prefect model on nonlinear basis??

 no we can never make a prefect model but we can make a good model which better directs banks , investment companies even to governments... 

first we have to indentify all the factors which are important..

that's what we discussed in class...

but think one step ahead..

while creating models, did economists, reseach engineers nvr thought abt imp. variables...

yes they did...( they are not as fool as we are thinking)

but wot's the problem??

"dynamic environment" 

acc. to change in environment we have to make changes in models, again is it possible ansd up to wot extent..( kehna assan hota hai yarr) but if u have a passion then u can do it..

make a model for SEBI which will make sensex, nifty less riskier then foriegn markets... is it possible???

dn't have enough time to write more in bad english...

 so think yourself

(play with psychology)

let me think...

How to decide curiculum for b-school in this dynamic world???

One of the questions that we face now in

business education is, to what extent should we

encourage researchers and students to work with

practice—corporate involvement and case

studies?

I have a simple picture of university education. I

think what you do is get the brightest, smartest,

most discipline-trained people you can get and

you tell them to teach what they think is important

and interesting. And the curriculum consists of the

collection that turns out as a result of that. My

sense is that different good teachers use different

methods. Some of them use cases, some of them

use models, some use field work, some use equations.

And the good ones are scattered all over that

map. And any time you try to make a principle of

doing one or the other, you are almost certainly

wrong. In my “dream business school” there would

be a collection of good scholars, and they would be

the teachers, and what they taught would be the

curriculum. Whatever that would be. If they are

really teachers, they would want to teach what

they genuinely thought these students should

have.

DIANETICS......must learn

this is imaging guyz....
for those who never fully recovered from serious loss in life.....
in day to day life every experience, touch, emotion, feeling, smell,sound,pain, taste etc effects our behaviour..
our past experiences are effecting our present and both past and present gonna effect future..
so what should we do???
to remove or soothing the negative effect on rational decision...

dianetics is a solution...
wot actually dianetics is?
whatever i felt or experienced, dianetics is something which changes your negative experiences to positive by artificial intelligence or simply remove that experience from your mind (unconscious mind, which effects most of the rational decisions)...
dianetics also take a help of hypnotism and spirituality...


i experienced it but i m not able to pen down..
how actually to use dianetics...
so its your work guyz n galz to give me some favour n pls comment on it....

try to think , think , think to try , try......
you will definitely be benefited by this..

Ask questions your self.....

Why an apple falls on the ground ? This very question made Newton a great Scientist. Otherwise there would be no Newton. The existence of science and philosophy is the outcome of questions. Buddha left home to get the answer of the questions: How to get freedom from suffering? This Question forces you to search for a reply.

It is not the events that shape our lives, that determine how we feel and act, but rather it is the way we interpret and evaluate our life experience. Interpretation and evaluation are based upon questions what we put to our selves. The meaning we attach to an event will determine our attitude.

I began to realize that thinking itself is nothing but the process of asking and answering questions that matter.

Questions represent your mind, your thought process and your level of thinking. Questions come from your situational reactions. Questions are basic. They indicate your thinking. They reflect your mental make up, your programming and your perceptions.

Relationship Between
Questions and Your Success

Know your problem and ask the right question. You will have your own solutions. Sometime, the solution lies in the problem itself. It is not far from the question. It is in the hearts of problems. Questions are the compass, they guide your directions. They give you the purpose of living. They create interest in your lives.

Sometime “Why” of some questions are dis empowering. The answers of these questions depress you and discourage you. Your mind being enormously powerful can find many reasons for your failure or problems. Most of these reasons will continue and justify future failures. In this way vicious circles of failure continue. When you ask why I am unlucky, why God is against me, why the whole world is against me . Then your whole feelings and behaviour will be against success. So you must not ask such negative questions. Questions should not be connected with the past. They should be connected with good actions to do now or in future.