Comparing Atkins and Balance Energy Bars :: Health Nutrition Diet Exercise Essays

Comparing Atkins and Balance Energy Bars   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Many are fascinated by the various diets in society; people want to lose weight by finding a reliable method that will ensure results. Two common diets include the Atkins Diet and the Zone Diet. Both of these have energy bars that contain the nutrients need to meet the diets specific requirements. In the article â€Å"Glycemic and Insulinemic responses to energy bars of differing macronutrient composition in healthy adults,† by Steven Hetzler and Veonsoo Kim, a study was conducted that compared the different energy bars. The study looked at equal proportions of these bars to see their effects on glycemic and insulinemic levels. This paper will be focusing on the differences between the Atkins and Balance Energy Bars and the effect they have on glycemic and insulin.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  The Atkins Diet contains a low amount of carbohydrates, whereas the Zone Diet has the components of a 40% carbohydrate, 30% protein, and 30% fat breakdown. The energy bars associated with these diet influences the glycemic and insulin levels in the body. By having a reduction of glycemic and insulin levels in the body affects a diet. By having low glucose levels this will ultimately lead to weight loss. This happens either through the removal of carbohydrates or by substituting low glycemic index carbohydrates for higher ones. In doing this the higher level of insulin will be reduced, for example high blood cholesterol levels will go down.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  To test the insulin and glycemic levels the energy bars contain the study had 20 healthy adult participants. They were split into groups receiving 1 of 5 test meals; 1 being low carbohydrates, 2) moderate carbohydrates, 3) high carbohydrates, 4) white bread, and 5) chicken breast. Chicken breast was the negative control since it contains no carbohydrates, whereas white bread was the positive control. Test meals 1) with the low carbohydrates, include the Atkins Energy Bar, and test meal 2) includes the Balance Energy Bar.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  In order to see the levels of the glucose and insulin after consuming the bars blood samples were taken and analyzed. In this experiment the Atkins energy bar produced the lowest glucose results.

Bank6003 Notes

BANK6003 Final Exam Notes TOPIC 4A: Credit Risk – Estimating Default Probabilities Overview * Theory of credit risk less developed than VaR based models of market risk. * Much less amenable to precise measurement than market risk – default probabilities are much more difficult to measure than dispersion of market movements. * Measurement on individual loans is important to FI for pricing and setting limits on credit risk exposure. Default Risk Models 1. Qualitative Models * Assembling relevant information from private and external sources to make a judgement on the probability of default. Borrower specific factors (idiosyncratic or specific to individual borrower) include: reputation, leverage, volatility of earnings, covenants and collateral. * Market-specific factors (systematic factors that impact all borrowers include): business cycle and interest rate levels. * FI manager weighs these factors to come to an overall credit decision. * Subjective 2. Credit Scoring Mod els * Quantitative models that use data on observed borrower characteristics to calculate a score that represents borrower’s probability of default or sort borrowers into different default risk categories.Linear Probability Models (LPMs) * Econometric model to explain repayment experience on past/old loans. * Regression model with a â€Å"dummy† dependent variable Z; Z = 1 default and Z=0 no default. * Weakness: no guarantee that the estimated default probabilities will always lie between 0 and 1 (theoretical flaw) Logit and Probit Models * Developed to overcome weakness of LPM. * Explicitly restrict the estimated range of default probabilities to lie between 0 and 1. * Logit: assumes probability of default to be logistically distributed. Probit: assumes probability of default has a cumulative normal distribution function. Linear Discriminant Analysis * Derived from statistical technique called multivariate analysis. * Divides borrowers into high or low default risk cl asses. * Altman’s LDM = most famous model developed in the late 1960s. Z < 1. 8 (critical value), there is a high chance of default. * Weaknesses * Only considers two extreme cases (default/no default). * Weights need not be stationary over time. 3. New Credit Risk Evaluation Models Newer models have been developed – use financial theory and financial market data to make inferences about default probabilities. * Most relevant for evaluating loans to larger corporate borrowers. * Area of very active continuing research by FIs. Credit Ratings * Ratings change relatively infrequently – objective of ratings stability. * Only chance when there is reason to believe that a long-term change in the company’s creditworthiness has taken place. * S&P: AAA, AA, A, BBB, BB, B and CCC * Moody’s: Aaa, Aa, A, Baa, Ba, B and Caa Bonds with ratings of BBB and above are considered to be â€Å"investment grade† Estimating Default Probabilities 1. Historical Data * Provided by rating agencies e. g. cumulative average default rates * If a company starts with a: * Good credit rating, default probabilities tend to increase with time. * Poor credit rating, default probabilities tend to decrease with time. * Default Intensity vs Unconditional Default Probability * Default intensity or hazard rate is the probability of default conditional on no earlier default. * Unconditional default probability is the probability of default as seen at time zero. Default intensities and unconditional default probabilities for a Caa rated company in the third year * Unconditional default probability = Caa defaulting during the 3rd year = 39. 709 – 30. 204 = 9. 505% * Probability that Caa will survive until the end of year 2 = 100 – 30. 204 = 69. 796%. * Probability that Caa will default in 3rd year conditional on no earlier default = 0. 09505/0. 69796 = 13. 62% Recovery Rate * Usually defined as the price of the bond 30 days after default as a perce nt of its face value. * Recovery rate % = 1 – LGD% * Ranking of bonds * Senior Secured * Senior Unsecured Senior Subordinated * Subordinated * Junior Subordinated Credit Default Swaps * Instrument that is very useful for estimating default probabilities is a CDS. * Buyer of the insurance obtains the right to sell bonds issued by the company for their face value when a credit event occurs and the seller of the insurance agrees to buy the bonds for their face value when a credit event occurs. * The total value of the bonds that can be sold is known as the CDS’ notional principal. * Total amount paid per year, as a percent of the notional principal, to buy protection is known as the CDS spread. Buyer of the instrument acquires protection from the seller against a default by a particular company or country (the reference entity) * Example: buyer pays a premium of 90bps per year for $100m of 5-year protection against company X. * Premium is known as the credit default sprea d. It is paid for the life of contract or until default. * If there is a default, the buyer has the right to sell bonds with a face value of $100m issued by company X for $100m. * Payments are usually made quarterly in arrears * In the event of default, there is a final accrual payment by the buyer * Attractions of the CDS market Allows credit risks to be traded in the same way as market risks * Can be used to transfer credit risks to a third party * Can be used to diversify credit risk Credit Indices * Developed to track credit default swap spreads. * Two important standard portfolios are: * CDX NA IG, portfolio of 125 investment grade companies in North America * iTraxx Europe, portfolio of 125 investment grade companies in Europe * Updated on March 20 and September 20 each year. * Example * 5 year CDX NA IG index is bid 165bp, offer 166bp. Quotes mean that a trader can buy CDS protection on all 125 companies in the index for 166 basis points per company. * Suppose an investor wan ts $800,000 of protection on each company. * The total cost is 0. 0166 x 800,000 x 125 = $1,660,000. * When a company defaults, the investor receives the usual CDS payoff and the annual payment is reduced by 1,660,000/125 = $13,280. * Index is the average of the CDS spreads on the companies in the underlying portfolio. Use of Fixed Coupons * Increasingly CDS and CDS indices trade like bonds so that the periodic protection payments remain fixed. A coupon and a recovery rate is specified. * Quoted spread > coupon, buyer of protection makes an initial payment. * Quoted spread < coupon, seller of protection makes an initial payment. Credit Spreads * Extra rate of interest required by investors for bearing a particular credit risk. CDS Spreads and Bond Yields * CDS can be used to hedge a position in a corporate bond. * Example: investor buys a 5-year corporate bond yielding 7% per year for its face value and at the same time enters into a 5-year CDS to buy protection against the issuer o f the bond defaulting. CDS spread is 2% p. . Effect of the CDS is to convert the corporate bond to a risk-free bond. If the bond issuer does not default, the investor earns 5% per year. If the bond issuer defaults, the investor exchanges the bond for its face value and this can be invested at the risk-free rate for the remainder of the five years. The Risk-Free Rate * The risk-free rate used by bond traders when quoting credit spreads is the Treasury rate. * Traditionally used LIBOR/swap rate * Normal market conditions: risk free rate is 10bp less than the LIBOR/swap * Stressed conditions, the gap is much higher Asset Swaps Provide a direct estimate of the excess of a bond yield over the LIBOR/swap rate. * Example: asset swap spread for a particular bond is quoted as 150 basis points. 3 possible situations: 1. Bond sells for its par value of 100. Company A pays the coupon and Company B pays LIBOR plus 150bp. 2. Bond sells below par, say 95. Company A pays $5 per $100 of principal at the outset. After that, Company A pays the coupon and Company B pays LIBOR plus 150bp. 3. Bond sells above par, say 108. Company B pays $8 per $100 of principal at the outset. After that, Company A pays the coupon and Company B pays LIBOR plus 150bp. Therefore, the present value of the asset swap spread is the present value of the cost of default. CDS-Bond Basis * CDS-Bond Basis = CDS spread minus the bond yield spread * Bond yield spread is usually calculated as the asset swap spread * Should be close to zero, but there are a number of reasons why it deviates: 1. Bond may sell for a price significantly different from par (above par = positive basis, below par = negative basis) 2. There is counterparty risk in a CDS (negative direction) 3. There is a cheapest-to-deliver bond option in a CDS (positive direction) 4.Payoff in a CDS does not include accrued interest on the bond that is delivered (negative direction) 5. Restructuring clause in a CDS contract may lead to a payoff when th ere is no default (positive direction) 6. LIBOR is greater than the risk-free rate assumed (positive direction) Estimating Default Probabilities from Credit Spreads * Average hazard rate between time zero and time t * s(t) = credit spread, t = maturity, R = recovery rate * s = 240bps, R = 0. 40, hazard rate = 0. 04 = 4% Real World vs Risk-Neutral Default Probabilities * Real world = backed out of historical data Risk-neutral = backed out of bond prices or credit default swap spreads * Produce very different results. Why? * Corporate bonds are relatively illiquid * Subjective default probabilities of bond traders may be much higher than the estimates from Moody’s historical data * Bonds do not default independently of each other. This leads to systematic risk that cannot be diversified away. * Bond returns are highly skewed with limited upside. The non-systematic risk is difficult to diversify away and may be priced by the market. * Use real world for calculating credit VaR an d scenario analysis. Use risk-neutral for valuing for credit derivatives and PV of cost of default Option Models * Based on the idea that equity prices can provide more up-to-date information for estimating default probabilities. * Employ option pricing methods e. g. KMV. * Used by many of the largest banks to monitor credit risk. Merton’s Model * 1974 – company’s equity is an option on the assets of the company. * Equity value at time T as max(VT – D, 0) * VT is value of the firm * D is the debt repayment required * Option pricing model enables value of a firm’s equity today to be related to the value of its assets today and the volatility of its assets. Read also Recording General Fund Operating Budget and Operating TransactionsVolatilities * Equation together with the option pricing relationship enables value and volatility of assets to be determined from value and volatility of equity. Example * Company equity = $3m * Volatility of equity = 80% * Risk-free rate is 5% * Debt = $10m * Time to debt maturity = 1 year * Value of assets = $12. 40m * Volatility of assets = 21. 23% * Probability of default is 12. 7% * Market value of debt = $9. 40m * PV of payment is 9. 51 * Expected loss 1. 2% * Recovery rate 91% Use of Merton’s Model to estimate real-world default probability (e. g. Moody’s KMV) * Choose time horizon Calculate cumulative obligations to time horizon (D) * Use Merton’s model to calculate a theoretical probability of default * Use historical data to develop a one-to-one mapping of theoretical probability into real-world probability of default. * Distance to default TOPIC 4B: Credit Value at Risk Backgr ound * Credit risk is the risk of loss over a certain time period that will not be exceeded with a certain confidence level. * Calculate credit risk to determine both regulatory capital and economic capital. * Time horizon for credit risk VaR is often longer than that for market risk. Market risk usually one-day time horizon and then scaled up to 10 days for the calculation of regulatory capital. * Credit risk VaR, for instruments that are not held for trading, is usually calculated with a one-year time horizon/ * Historical simulation is the main tool used to calculate market risk VaR, but a more elaborate model is usually necessary to calculate credit risk VaR. * Key aspect is credit correlation. Defaults (or downgrades or credit spread changes) for different companies do not happen independently of each other. * Credit correlation increases risks for a financial institution with a portfolio of credit exposures.Introduction * Internal economic capital allocations against credit ri sk are based on bank’s estimate of their portfolio’s probability density function of credit losses. * Probability of credit losses exceeding some level, say X, is equal to the shaded area under the PDF. * A risky portfolio is one whose PDF has a relatively long, fat tail i. e. where there is a significant likelihood that actual losses will be substantially larger than expected losses. * Target insolvency rate = shaded area under PDF to right of X * Allocated economic capital = X – expected credit losses Expected vs Unexpected Credit Loss Expected = amount of credit loss expected on credit portfolio over the chosen time horizon * Unexpected = amount by which actual credit losses exceed expected credit loss. Economic Capital Allocation * Economic capital = estimated capital required to support credit risk exposure. * Process is similar to VaR methods used for allocation of capital for market risk. * Probability of unexpected credit loss exhausting economic capital is less than the bank’s target insolvency rate. * Target insolvency rate usually consistent with desired credit rating. * â€Å"AA† rating implies a 0. 3% chance of default. Need enough economic capital to be 99. 97% certain that credit losses will not cause insolvency. * Based on two inputs: 1. Bank’s target insolvency rate 2. Bank’s estimated PDF for portfolio credit losses * Two banks with identical portfolios could have very different economic capital for credit risk, owing to: 1. Differences in attitudes to risk taking (reflected in target insolvency rates) 2. Differences in methods of estimating PDFs (reflected in credit risk models) Measuring Credit Losses * Credit loss = current value –future value at the end of some time horizon. Precise definition of current/future values contingent on specific credit loss paradigm. * Current generation of credit risk models employ either of two conceptual paradigms: 1. Default-Mode (DM) Paradigm * Most common. * Credit loss arises only if default occurs within the time horizon. * â€Å"Two-state† model – only two outcomes, default and non-default. * If borrower defaults, credit loss = bank’s credit exposure – present value of future net recoveries (cash payments less workout expenses). * Current values are known but future values are uncertain. Estimate joint probability distribution with respect to 3 types of random variables: 1. Associated credit exposure 2. Indicator denoting whether facility defaults during planning horizon 3. In the event of default, the loss given default (LGD). Unexpected losses approach: * Assumption that PDF is well-approximated by mean and standard deviation. * Set capital at some multiple of estimated standard deviation of losses. * Requires estimates of expected and unexpected credit loss from default. * Expected loss (? ) depends on 3 key components: 1. LGD = loss given default, expressed as a decimal . PD = probability of default 3. EAD = expect credit exposure at default. * Standard deviation of portfolio credit losses * i = stand-alone standard deviation of credit losses from ith facility; * i = correlation between credit losses from ith facility and those on the overall portfolio; 2. Mark-to-Market (MTM) Paradigm * Credit loss can arise in response to decline in credit risk quality. * â€Å"Multi-state† model: default is only one of several possible credit ratings a loan could ‘migrate’ to over the horizon. * Credit portfolio marked to market at the beginning and end of planning horizon. Likelihood of a customer migrating from its current risk rating to any other category within the planning horizon is typically expressed in terms of a rating transition matrix. Row = current rating Column = prob of migrating to another risk grade * Complex estimation – need to estimate credit risk migrations at end of horizon as well as future credit spreads (risk-premium associated with end-of-period credit rating). * Two approaches: 1. Discounted contractual cash flow (DCCF) approach 2. Risk-neutral valuation (RNV) approach: an option valuation framework. In each methodology, a loan’s value is constructed as a discounted PV of its future cash flows. * Approaches differ mainly in how discount factors and yield spreads are estimated or calculated. TOPIC 5: OPERATIONAL RISK Overview * Definition: the risk of loss resulting from inadequate of failed internal processes, people and systems or from external events. * Harder to quantify and manage operational risk than credit or market risk. * FIs make a conscious decision to take a certain amount of credit and market risk but operational risk is a necessary part of doing business. Operational risk has become a more significant issue as a result of: * Increased use of highly automated technology and sophisticated systems * Growth of e-commerce * New wave of M&A * Increased risk mitigation techniques that may produ ce other risks * Increased prevalence of outsourcing * Over 100 operational loss events exceeding USD 100m since the end of the 1980s: * Internal fraud * External fraud * Employment practices and workplace safety * Clients, products and business practices * Damage to physical assets * Business disruption and system failures Execution, delivery and process management Regulatory Capital for Operational Risk * Three methods which represent a continuum of approaches characterised by increasing sophistication and risk sensitivity: 1. Basic Indicator Approach (15% of gross income) 2. Standardised Approach (different % for each business line) 3. Advanced Measurement Approach 1. Basic Indicator Approach * KBIA=GI ? ? GI = average annual gross income (net interest income + non-interest income) ? = 15% 2. Standardised Approach Bank activities divided into 8 business lines.Capital charge for each line is calculated by multiplying its gross income by the denoted beta. Total capital charge: KTSA = (GI1-8 ? ?1-8) To qualify for use of this approach, a bank must satisfy, at a minimum: – Its board of directors and senior management, as appropriate, are actively involved in the oversight of the operational risk management framework – It has an operational risk management system that is conceptually sound and implemented with integrity. – It has sufficient resources in the use of the approach in the major business lines as well as the control and audit areas. 3.Advanced Measurement Approach (AMA) * Regulatory capital requirement is determined using the quantitative and qualitative criteria for the AMA. * Banks can only use this approach if their local regulators/supervisory authorities have provided approval. * Qualitative Standards 1. Bank must have independent operational risk management function that is responsible for the design and implementation of banks’ operational risk management framework. 2. Bank’s internal operational risk measureme nt system must be closely integrated into the day-to-day risk management processes of the bank. 3.There must be regular reporting of operational risk exposures and loss experience to business unit management, senior management, and to the board of directors. 4. Bank’s operational risk management system must be well documented. 5. Internal and/or external auditors must perform regular reviews of the operational risk management processes & measurement systems. * Quantitative Standards 1. Banks must demonstrate that its approach captures potentially severe tail loss events. 2. Required to calculate regulatory capital requirement as the sum of expected loss (EL) and unexpected loss (UL) 3.Must be sufficiently ‘granular’ to capture the major drivers of operational risk. 4. Operational risk measurement system must include the use of internal data, relevant external data, scenario analysis and factors reflecting the business environment and internal control systems. Dis tributions important in estimating potential operational risk losses: 1. Loss frequency distribution * Distribution of number of losses observed during the time horizon (usually 1 year). * Loss frequency should be estimated from the banks own data as far as possible. One possibility is to assume a Poisson distribution: only need to estimate an average loss frequency. 2. Loss severity distribution * Distribution of the size of a loss given that a loss has occurred. * Based on both internal and external historical data. * Lognormal probability distribution is often used: only need to estimate mean and SD. AMA * The two distributions above are combined for each loss type and business line to determine the total loss distribution. * Monte Carlo simulation can be used to combine the two distributions. Four elements specified by the Basel Committee 1. Internal Data Operational risk losses have not been recorded as well as credit risk losses * Important losses are low-frequency high-severi ty losses * Loss frequency should be estimated from internal data 2. External Data * Data sharing or data vendors * Data from vendors: * Based on publicly available information biased towards large losses * Only be used to estimate the relative size of the mean losses and SD of losses for different risk categories. 3. Scenario Analysis * Aim is to generate scenarios covering all low frequency high severity losses * Can be based on both internal and external experience Aggregate scenarios to generate loss distributions 4. Business Environment and Internal Control Factors * Takes account of: * Complexity of business line * Technology used * Pace of change * Level of supervision * Staff turnover rates Power Law * Prob (v > x) = Kx-a * Power law holds well for the large losses experienced by banks. * When loss distributions are aggregated, the distribution with the heaviest tails tends to dominate. This means that the loss with the lowest alpha defines the extreme tails of the total los s distribution. Insurance * Important decision re operational risk is the extent to which it should be insured against.Moral Hazard * Risk that the existence of the insurance contract will cause the bank to behave differently than it otherwise would. * Example: a bank insures itself against robberies. As a result of the insurance policy, it may be tempted to be lax in its implementation of security measures – making a robbery more likely than it would otherwise have been. * Solution * Deductible – bank is responsible for bearing the first part of any loss * Coinsurance provision – insurance company pays a predetermined percentage of losses in excess of the deductible. * Policy limit – on total liability of the insurer.Adverse Selection * This is where an insurance company cannot distinguish between good and bad risks. * To overcome this, an insurance company must try to understand the controls that exist within banks and the losses that have been experien ced. Sarbanes-Oxley * Sarbanes-Oxley Act passed in the US in 2002. * Requires board of directors to become much more involved with day-to-day operations. They must monitor internal controls to ensure risks are being assessed and handled well. * Gives the SEC the power to censure the board or give it additional responsibilities. A company’s auditors are not allowed to carry out any significant non-auditing services. * Audit committee of the board must be made aware of alternative accounting treatments. * CEO and CFO must return bonuses in the event that financial statements are restated. TOPIC 6: LIQUIDITY RISK Overview * Liquidity refers to the ability to make cash payments as they become due. * Solvency refers to having more assets than liabilities, so that equity value is positive. Types of Liquidity Risk * Liquidity trading risk – markets can become illiquid very quickly.Cannot unwind asset position at a fair price fire sale prices. * Liquidity funding risk – risk of being unable to service cash flow obligations. Liquidity needs are uncertain. Liquidity Trading Risk * Price received for an asset depends on: * The mid market price * How much is to be sold * How quickly it is to be sold * The economic environment Bid-Offer Spread as a Function of Quantity * Dollar bid – offer spread, p = Offer price – Bid price * There is a spread which is constant up to some quantity. After a critical level (size limit of market makers), the spread widens.Proportional bid-offer spread= Offer price-bid priceMid-market price * Cost of liquidation in normal markets i=1n12si? i * N is the number of positions, alpha is the position of the instrument, s is the proportional bid-offer spread for the instrument. * Spread widens if market is in stressed conditions. * Cost of liquidation in stressed markets i=1n12(? i+ i)? i * Mean and SD, lambda is required confidence level Liquidity Adjusted VaRLiquidity-Adjusted Stressed VaR VaR+i=1n12si? i VaR+i= 1n12(? i+ i)? i Unwinding a Position Optimally (Two Options) Unwind quickly: trader will face large bid-offer spreads, but the potential loss from the mid-market price moving against the trader is small. * Unwind over several days: bid-offer spread each day will be lower, but the potential loss from the mid-market price moving against the trader is larger. Liquidity Funding Risk * Sources of liquidity * Liquid assets * Ability of liquidate trading positions (funding risk and trading risk are interrelated) * Wholesale and retail deposits * Lines of credit and the ability to borrow at short notice * Securitisation * Central bank borrowing (lender of last resort) Basel III Regulation * Liquidity Coverage Ratio: designed to make sure that the bank can survive a 30 day period of acute stress * Net Stable Funding Ratio: a longer term measure designed to ensure that stability of funding sources is consistent with the permanence of the assets that have to be funded. Liquidity Black Holes * Occurs when most market participants want to take one side of the market and liquidity dries up. Positive and Negative Feedback Trading * Exacerbates the direction of price movements * Positive feedback trader buys after a price increase and sells after a price decrease. Negative feedback trader buys after a price decrease and sells after a price increase. * Positive feedback trading can create or accentuate a black hole. Reasons for Positive Feedback Trading * Computer models incorporating stop-loss trading. Stop-loss trading = discarding position to prevent further losses. * Dynamic hedging a short option position. Example: if you have â€Å"sold an option† – cover yourself by going long i. e. buy underlying asset when price rises and sell when price decreases. * Creating a long option position synthetically * Margin calls The Leveraging CycleThe Deleveraging CycleIs Liquidity Improving? * Spreads are narrowing but arguably the risks of liquidity black holes are now greater than they used to be. * We need more diversity in financial markets where different groups of investors are acting independently of each other. Principles for Sound Liquidity Risk Management and Supervision (June 2008) * GFC regulators responded by undertaking a fundamental review of existing guidance of liquidity management and issued a revised set of principles on how banks should manage liquidity. Fundamental Principle for the Management and Supervision of Liquidity Risk 1.Sound management of liquidity risk – robust risk management framework. Governance of Liquidity Risk Management 2. Clearly articulate a liquidity risk tolerance 3. Strategy, policies and practices to manage liquidity risk 4. Incorporate liquidity costs, benefits and risks for all significant business activities. Measurement and Management of Liquidity Risk 5. Framework for comprehensively projecting cash flows arising from assets, liabilities and OBS items. 6. Actively monitor and control liquidi ty risk exposures and funding needs within and across legal entities. 7.Establish a funding strategy that provides effective diversification. 8. Effectively manage intraday liquidity positions and risks to meet payment and settlement obligations. 9. Actively manage collateral positions. 10. Conduct stress tests on a regular basis. 11. Formal contingency funding plan (CFP) in case of emergency. 12. Maintain a cushion of unencumbered, high quality liquid assets in case of stress scenarios. Public Disclosure 13. Publicly disclose information on a regular basis The Role of Supervisors 14. Regularly perform a comprehensive assessment of a bank’s overall liquidity risk management framework. 15.Supplement point 14 by monitoring a combination of internal reports, prudential reports and market information. 16. Should intervene to require effective and timely remedial action to address liquidity deficiencies. 17. Should communicate with other regulators e. g. central banks – coo peration TOPIC 7: CORE PRINCIPLES OF EFFECTIVE BANKING SUPERVISION Overview * Most important global standard for prudential regulation and supervision. * Endorsed by vast majority of countries. * Provides benchmark against which supervisory regimes can be assessed. * 1995: Mexican and Barings Crises Lyon Summit in 1996 for G7 Leaders. 1997: Document drafted and endorsed at G7 meeting. Final version presented at annual meetings of World Bank and IMF in Hong Kong. * 1998: G-22 endorsed * 2006: Revision of the Core Principles * 2011: Basel Committee mandates a major review, issues revised consultative paper. The Core Principles (2006) * 25 minimum requirements that need to be met for an effective regulatory system. * May need to be supplemented by other measures. * Seven major groups * Framework for supervisory authority – Principle 1 * Licensing and structure – Principles 2-5 * Prudential regulations and requirements – Principles 6-18 *Methods of ongoing banking s upervision – Principles 19-21 * Accounting and disclosure – Principle 22 * Corrective and remedial powers of supervisors – Principle 23 * Consolidated and cross-border banking – Principles 24-25. * Explicitly recognise: * Effective banking supervision is essential for a strong economic environment. * Supervision seeks to ensure banks operate in a safe and sound manner and hold sufficient capital and reserves. * Strong and effective supervision is a public good and critical to financial stability. * While cost of supervision is high, the cost of poor supervision is even higher. Key objective of banking supervision: * Maintain stability and confidence in the financial system * Encourage good corporate governance and enhance market transparency Revised Core Principles (2011) * Core Principles and assessment methodology merged into a single document. * Number of core principles increased to 29. * Takes account of several key trends and developments: * Need to deal with systemically important banks * Macroprudential focus (system-wide) and systemic risk * Effective crisis management, recovery and resolution measures. Sound corporate governance * Greater public disclosure and transparency enhance market discipline. * Two broad groups: 1. Supervisory powers, responsibilities and functions. Focus on effective risk-based supervision, and the need for early intervention and timely supervisory actions. Principles 1-13. 2. Prudential regulations and requirements. Cover supervisory expectations of banks, emphasising the importance of good corporate governance and risk management, as well as compliance with supervisory standards. Supervisory powers, responsibilities and functions 1.Clear responsibilities and objectives for each authority involved. Suitable legal framework. 2. Supervisor has operational independence, transparent processes, sound governance and adequate resources, and is accountable. 3. Cooperation and collaboration with domestic a uthorities and foreign supervisors. 4. Permissible activities of banks is controlled. 5. Assessment of bank ownership structure and governance. 6. Power to review, reject and impose prudential conditions on any changes in ownership or controlling interests. 7. Power to approve or reject major acquisitions. 8.Forward-looking assessment of the risk profile of banks and banking groups. 9. Uses appropriate range of techniques and tools to implement supervisory approach. 10. Collects, reviews and analyses prudential reports and statistical returns. 11. Early address of unsafe and unsound practices. 12. Supervises banking group on consolidated basis (including globally) 13. Cross-border sharing of information and cooperation. Prudential regulations and requirements 14. Robust corporate governance policies and processes. 15. Banks have a comprehensive risk management process, including recovery plans. 6. Set prudent and appropriate capital adequacy requirements. 17. Banks have an adequate credit risk management process. 18. Banks have adequate policies and processes for the early identification and management of problems assets, and maintain adequate provisions and reserves. 19. Banks have adequate policies re concentration risk. 20. Banks required to enter into any transactions with related parties on an arm’s length basis. 21. Banks have adequate policies re country and transfer risk. 22. Banks have an adequate market risk management process. 23.Banks have adequate systems re interest rate risk in the banking book. 24. Set prudent and appropriate liquidity requirements. 25. Banks have an adequate operational risk management framework. 26. Banks have adequate internal controls to establish and maintain a properly controlled operating environment for the conduct of their business. E. g. delegating authority and responsibility, separation of the functions that involve committing the bank. 27. Banks maintain adequate and reliable records, prepare financial state ments in accordance with accounting policies etc. 8. Banks regularly publish information on a consolidated and solo basis. 29. Banks have adequate policies and processes e. g. strict customer due diligence. Preconditions for Effective Banking Supervision 1. Provision of sound and sustainable macroeconomic policies. 2. A well established framework for financial stability policy formulation. 3. A well developed public infrastructure 4. A clear framework for crisis management, recovery and resolution 5. An appropriate level of systemic protection (or public safety net) 6. Effective market discipline 001: IMF and World Bank Study on Countries’ Compliance with Core Principles * 32 countries are compliant with 10 or few BCPs * Only 5 countries were assessed as fully compliant with 25 or more of the BCPs. * Developing countries less compliant than advanced economies. * Advanced economies generally possess more robust internal frameworks as defined by the ‘preconditions’ 2008: IMF Study on BCP Compliance * Based on 136 compliance assessments. * Continued work needed on strengthening banking supervision in many jurisdictions, particularly in the area of risk management. More than 40% of countries did not comply with the essential criteria of principles dealing with risk management, consolidated supervision and the abuse of financial services. * More than 30% did not possess the necessary operational independence to perform effective supervision nor have adequate ability to use their formal powers to take corrective action. * On average, countries in Western Europe demonstrated a much higher degree of compliance (above 90%) with BCP than their counterparts in other regions. * Africa and Western Hemisphere weak. Generally, high-income countries reflected a higher degree of compliance. TOPIC 8: CAPITAL ADEQUACY Overview * Adequate capital better able to withstand losses, provide credit through the business cycle and help promote public confidence in ba nking system. Importance of Capital Adequacy * Absorb unanticipated losses and preserve confidence in the FI * Protect uninsured depositors and other stakeholders * Protect FI insurance funds and taxpayers * Protect deposit insurance owners against increases in insurance premiums * To acquire real investments in order to provide financial services e. . equity financing is very important. Capital Adequacy * Capital too low banks may be unable to absorb high level of losses. * Capital too high banks may not be able to make the most efficient use of their resources. Constraint on credit availability. Pre-1988 * Banks regulated using balance sheet measures e. g. ratio of capital to assets. * Variations between countries re definitions, required ratios and enforcement of regulations. * 1980s: bank leverage increased, OBS derivatives trading increased. * LDC debt = major problem 1988 Basel Capital Accord (Basel I) * G10 agreed to Basel I Only covered credit risk * Capital / risk-adjusted assets > 8% * Tier 1 capital = shareholders equity and retained earnings * Tier 2 capital = additional internal and external resources e. g. loan loss reserves * Tier 1 capital / risk-adjusted assets > 4% * On-balance-sheet assets assigned to one of four categories * 0% – cash and government bonds * 20% – claims on OECD banks * 50% – residential mortgages * 100% – corporate loans, corporate bonds * Off-balance-sheet assets divided into contingent or guarantee contracts and FX/IR forward, futures, option and swap contracts. Two step process (i) derive credit equivalent amounts as product of FV and conversion factor then (ii) multiply amount by risk weight. * OBS market contracts or derivative instruments = potential exposure + current exposure. * Potential exposure: credit risk if counterparty defaults in the future. * Current exposure: cost of replacing a derivative securities contract at today’s prices. 1996 Amendment * Implemented in 1998 * Requi res banks to measure and hold capital for market risk. * k is a multiplicative factor chosen by regulators (at least 3) VaR is the 99% 10-day value at risk SRC is the specific risk charge Total Capital = 0. 08 x [Credit risk RWA + Market risk RWA] where market risk RWA = 12. 5 x [k x VaR + SRC] Basel II (2004) * Implemented in 2007 * Three pillars 1. New minimum capital requirements for credit and operational risk 2. Supervisory review: more thorough and uniform 3. Market discipline: more disclosure * Only applied to large international banks in US * Implemented by securities companies as well as banks in EU Pillar 1: Minimum Capital Requirements * Credit risk measurement: * Standardised approach (external credit rating based risk weights) * Internal rating based (IRB) Market risk = unchanged * Operational risk: * Basic indicator: 15% of gross income * Standardised: multiplicative factor for income arising from each business line. * Advanced measurement approaches: assess 99. 9% wor st case loss over one year. * Total capital = 0. 08 x [Credit risk RWA + market risk RWA + Operational risk RWA] Pillar 2: Supervisory Review * Importance of effective supervisory review of banks’ internal assessments of their overall risks. Pillar 3: Market discipline * Increasing transparency – public disclosure Basel 2. 5 (Implemented 2011) * Stressed VaR for market risk * Incremental risk charge Ensures products such as bonds and derivatives in the trading book have the same capital requirement that they would if they were in the banking book. * Comprehensive risk measure (re credit default correlations) Basel III (2010) * Considerably increase quality and quantity of banks capital * Macroprudential overlay – systemic risk * Allows time for smooth transition to new regime * Core capital only retained earnings and common shares * Reserves increased from 2% to 4. 5% * Capital conservation buffer – 2. 5% of RWA * Countercyclical capital buffer * Tracing/ monitoring of liquidity funding Introduction of a maximum leverage ratio Capital Definitions and Requirements * Common equity > 4. 5% of RWA * Tier 1 > 6% of RWA * Phased implementation of capital levels stretching to Jan 1, 2015 * Phased implementation of capital definition stretching to Jan 1, 2018 Microprudential Features * Greater focus on common equity * Loss-absorbing during stress/crisis period capital conservation buffer * Promoting integrated management of market and counterparty credit risk. * Liquidity standard introduced introduced Jan 1, 2015 Introduced Jan 1, 2018 Available Stable Funding FactorsRequired Stable Funding Factors Macroprudential Factors * Countercyclical buffer * Acts as a brake in good times of high credit growth and a decompressor to restrict credit during downturns. * Within a range of 0-2. 5% * Left to the discretion of national regulators * Dividends restricted when capital is below required level * Phased in between Jan 1, 2016 – Jan 1, 2019 * Leverage Ratio * Target 3% * Ratio of Tier 1 capital to total exposure > 3% * Introduced on Jan 1, 2018 after a transition period * SIFIs * Required to hold additional loss absorbency capital, ranging from 1-2. 5% in common equity

Mcdonalds Company Profile And Industry - 784 Words

McDonalds Expands to Vietnam Hieu Le Columbia Southern University 3 Contents McDonalds Expands to Vietnam 3 Introduction 3 Company Profile and Industry 3 Country Description 4 Conclusion 5 McDonalds Expands to Vietnam Introduction McDonalds is one of the largest fast-food restaurants in the world, which serves burgers, soft drinks, and other type of foods and drinks as well. McDonalds was founded in 1940 by Maurice and Richard McDonald (McDonalds, 2016). The firm?s headquarters locates in Oak Brook, Illinois. McDonalds is currently serving over 100 countries globally, and it expands gradually in recent years. The firm?s business model focuses intensively on the franchising restaurants. Thus, the majority of the organization?s revenue depends heavily on its franchise divisions, which operate by its franchisees. Company Profile and Industry In March 1st, 2015, the company had hired the new CEO, Steve Easterbrook to revive its revenue, which has been declined in recent years. The firm?s major rivals include Burger king, Chick Fil A, Hardy, and Taco Bell. However, in the last decade, the fast-food industry has been noticed of business stagnation due to consumers change their eating habits to heathier foods. As the end of 2015, the total revenue of the firm is $66.3 billion, and its total asset is $38 billion (McDonalds, 2016). According to August, Mayer Bixby (2013), joint venture is the most practical business strategy that businesses utilize inShow MoreRelatedMcdonald Business Environment906 Words   |  4 PagesIntroduction McDonald Corporation is the world’s largest chain of hamburger fast food restaurant. There are over 30,000 McDonald’s restaurants in more than 100 countries and served an average of 50 million customer daily. A McDonald restaurant is operated by either a franchisee or by the corporation itself. The very first McDonald was open in Singapore in 1979 and today there are over 120 McDonald restaurants across the island which served 1.2 million customers weekly. McDonald employs around 9Read MoreGeneral Information / History : Starbucks1062 Words   |  5 Pagesfounders sold the company to the present CEO Howard Schultz for $7 million (â€Å"Starbucks Corporation†). Currently having 22,519 retail stores worldwide, Starbucks has developed into the largest coffeehouse company globally (â€Å"Starbucks Company Profile†). They sell a variety of products, such as handcrafted beverages, packaged coffee, bottled drinks, tea, single-serve products, merchandise and snac k, at licensed stores and grocery markets (â€Å"Starbucks Corporation Public Company Profile†). Business CategoryRead MoreMarketing Analysis : U.s. Capita Coffee Essay782 Words   |  4 PagesUniversity Industry Analysis. Study shows that U.S. per capita coffee consumption has not really varied in over 15 years. 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The firm was forced to vertically integrate through the local food industry on a heroic scale,importing tomatoe seeds and bull semen and indirectly managing dairy farms,cattle ranches and vegetableRead MoreProfile the Market1023 Words   |  5 PagesExecutive Summary For the purpose of this essay, I have taken into consider two organizations from the fast food industry. I chose McDonald s as it is primary operator in this market and holds the highest market share. I chose Hungry Jack s as the product they offer is similar to McDonald s and I thought it would be interesting to compare marketing strategies of two organisations which offer a fairly similar product. Table Of Contents Market Position 3 Target Markets Read MoreMcdonald s Successful Fast Food Chain911 Words   |  4 PagesMcDonald’s was founded in 1948 after Dick and Mac McDonald shut down the Bar-B-Que restaurant. Three months after shutting it down in December it reopens as a self-service drive in restaurant known as McDonald’s. In 1961 Ray Kroc purchases the interests of the McDonald brothers along with the rights to the McDonald’s name for $2.7 million. McDonald’s had continued to grow from a small restaurant in California into the world’s most recognized fast food chain. McDonald’s operates in over 119 countries

The Diversity Of The Natural Ecosystem - 1014 Words

1.0 INTRODUCTION Nigeria is placed between latitudes 4 0 16IN and 130 52IN and between Longitudes 20 49IE and 14037IE. The land covers a add soil area of 923, 768 km2 with a population of 140,431,790 in 2006 (NPC, 2009). Due to its gigantic geographical extent, the country covers diverse climatic and ecological zones. The diversity of the natural ecosystem ranges from semi-arid port in the northern, to rain forest and vast freshwater swamp forest with another different coastal vegetation in the southwesterly. The land s heavy capableness of biodiversity let around 20,000 species of insects, near 1000 species of birds, 247 species of mammals, 123 species of reptiles and most 1000 species of fish. The land is also fortunate with near 7,895 species of plants (Federal Government of Nigeria, 2001). Nigeria s economy is characterized by vast rural-based conventional sector with almost 70% of the assemblage lives on agriculture guiding to legal felling, infringements by farmers and cattle herders, firewood collectors and illicit procurement of shielded wildlife. Fast growth and high measure of poorness (Omonoma, 2009), has led to burden on water, land and other natural resources. while many of the local communities live on the wild species biodiversity (Northerner Governing of Nigeria). 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Racial Profiling And The Right For Police Officers

We all come from a particular ethnic background. It is what makes us unique; it helps identify ourselves amongst the billions of people in the world. However, does the previous history of your race or ethnicity grant the right for police officers to profile you? That question is countlessly being debated amongst American citizens and even top government officials. Racial profiling is a subject that has stirred up so much controversy in the past that it still hasn t been fully resolved to this day. To put into historical context, periods of American history as the Jim Crow era, segregated colored people by regarding them as second-class citizens and restricted them from access to specific public facilities. The justification of racial†¦show more content†¦He says, Numerous studies, data collection, and individual anecdotes confirm that law enforcement agents continue to rely on race, color or national or ethnic origin as a basis for subjecting people to criminal investigation s,(Parker). He argues that correlating suspicious criminal activity mainly off an ethnicity is retroactive in a proactive society. What Parker means is that as a country, we should be trying to move forward, yet we are still stuck debating on a concept that should be fairly straightforward morally. On the other hand, Heather Mac Donald, an esteemed American political commentator from the Manhattan Institute argues that the ground of racial profiling is proactive policing. Mac Donald believes that there is no credible evidence that profiling is a disastrous problem within the police department. She backs up her claim by emphasizing that most complaints of racial profiling come from the ethnicities where crime is the most abundant. Given the racial disparities in crime commission, the police cannot provide protection to neighborhoods that most need it without generating racially disproportionate enforcement, (Mac Donald), says Mac Donald. Parker and Mac Donald take a very different approach to racial profiling, but their major concerns may be closer than it initially appears. They can find common ground in their quest to see crime rates and citizen discomfort decrease. Both sides can find a middle

Funny Ads Free Essays

â€Å"Humour certainly succeeds in getting people’s attention and is the most effective advertising strategy of our time. † Advertisement is one of the important things for a company’s marketing. It can say that in today’s modern life advertisement plays a key role in order for any company or product to succeed the advertisement must deliver a powerful message which attracts the consumer’s attention (Creativenerds 2010). We will write a custom essay sample on Funny Ads or any similar topic only for you Order Now That is because â€Å"advertising can achieve communications object such as informing people about brands, it can create awareness and it can move people closer to choosing one brand rather than another. (Blithe 2009) Humour has become a mainstay of advertising campaigns and has proven to be one of the most effective methods ever devised for selling products and creating a positive brand image (Clayton n. d. ). That is because Funny advertisements are a way to make sure they provide something different to the eyes of customers to stand out in the crowd of products of services (SloDive n. d. ). Advertising is defined as a paid insertion of a message in a medium, and it is probably the most prominent of all marketing activities. Non-marketers often think that advertising is all that marketers do, which is of course not case the definition specifically excludes anything that is not paid for, or anything that does not pass through a medium, or anything that does not convey a message (Blithe 2009). However, it is true that using humour in advertisement can get people’s attention but it is not the most effective advertising strategy of our time. This essay will firstly show the disadvantages of using humour in advertising with some examples, and secondly, it also mentions some benefits of funny advertisement together with an example. The last thing is the recommendation about an advertising strategy. It is clear that the most obvious advantage of funny advertisement is that it does get more attention from consumers and is better like. That is because humour is not only one of the best ways to captivate your audience’s attention but it also makes a product or service easier to recall or remember. People will probably love to  remember things  that make them smile or laugh and making people recognize a product is the most important thing for company’s marketing. The quote from presidiacreative is the good example. Humor is the best medicine, and this holds true in advertising as well, humor is one of the best ways to captivate your audience’s attention. Whether the humor is blatantly obvious, or a subtle joke, funny advertisements are always appreciated by the public, which is why so much effort goes into Superbowl ads. † (presidiacreative 2011) Furthermore, funny advertisement can ge t more attention because most people like funny things and it put them in a good mood. People love to be entertained that is why laughter has an enormous power when it comes to  advertisements. If asking some people about any advertisement that they seem to remember up to this day, more than 80 percents of them will think about  advertisements  that made them smile or laugh. They will relax and pay more attention when they know that advertisement has a sense of humor. Also, it create a more comfortable atmosphere and positive image for the company as Mr. Daboll, CEO of Ace Metrix, said â€Å"If you’re equal on relevance and information, almost always funny will win over unfunny ads because it drives the other scores like likability and attention. (Neff 2012) Another advantage of using humour in advertising is that it can persuade people to buy products. Many people decide to buy the product because they like the advertisement. That is why the advertisement has a lot influence on circulation. According to Bhatti’s survey (2012), more than 50% of the current Vodafone customer is the result of effective funny advertisement created. Moreover, for advertisemen t, creativity is most important, and funniness is an extra added bonus for success. The Huggies advertisement is the very good example. It was successful funny advertisement because it conveys the message that a kid with a serious bladder problem can be contained. † (Hollis 2011). From two reason mentioned above it can understand that the advantages of using humour in advertisement are that people tend to enjoy it more, remember it, talk about it and then ultimately purchase a product. If a brand manager or a marketer always remembers that as long as people smile, they will surely buy. On the other hand, trying to use some serious approach in advertisement can make people find it boring and they will skip your advertisement (Sterling 2012). Although funny advertising has some advantages, it also has a lot disadvantages. The first one is that it can make consumers laugh but do not make them buy and the worst thing that could happen, and does happen, is for people to notice the advertisement and remember the joke, but not the business (Theselfemployed n. d. ). It is true that funny advertisements are useful for entertaining viewers, but are not the most effective way for advertisers to convince those viewers to buy the product. There was a report about this point from Ace Metrix. It presented that â€Å"Funniness had little correlation with effectiveness in a scoring system that incorporates watchability, likability and persuasion among other factors. In fact, funny ads were slightly less likely to increase desire or purchase intent than unfunny ones. † (Neff 2012) These means that perfect ad is one that is appealing and memorable and effective all in the same breath (Pride et al. 2007). As Mr. Peter Daboll, CEO of Ace Metrix, said â€Å"Just being funny doesn’t make an ad better, but being funny, relevant and informative are the things that really make an ad work† (Neff 2012). Secondly, some viewers cannot understand what those ads want to advertise. That is because there are a lot of jokes, slangs and spoken language in funny ads, so some people can understand but some people cannot. Nigel Hollis (2011), chief global analyst at Millward Brown, a global market research company, said that â€Å"Humor is culturally specific. Subtle references and puns tend to travel badly. † This is the example of one of the viewers’ opinion on the incomprehensible funny advertisement. I’m confused by the latest TV commercial for Adidas running shoes. The one that has the guy running through the city, and everything gets disrupted when he runs by it. Waterbeds explode, tractor trailer tires blow out, balloon floats deflate, a kid gets knocked off a pogo stick. At first I thought it was because the guy’s feet smelled so bad he was causing all of this to happen, but the commercial is for a running shoe, so they wouldn’t do that. † (Sass one 2005) This will make the company lose the group of people who cannot understand he advertisement. A lot of people simply do not have a sense of humours, so if they think that the advertisement is not fun or they do not understand it, the company will lose these people immediately, and the potential size of the market will shrinks (Professional Advertising n. d. ). Thirdly, not all ads can be funny. It is believed that advertisement is a representative of company so if companies use funny things in ads that should not be funny, it will provide bad effect to companies’ images. In addition, advertising humor can backfire. If companies make a joke at the expense of any one group, they will surely alienate them. For example, many years ago, in Thailand, there was disrespectful act toward Buddha in one restaurant’s poster to make people fun. As a result, a lot of Thai people blamed on that restaurant and were banned it. This is because Buddhists who see a Buddha image placed in an improper place will feel very unhappy and may become subject to conflict arising from such situations. (Knowingbuddha n. d. ). Finally, some people cannot get any information from funny advertisement while some get bored with the same jokes. As the Professional Advertising said â€Å"The first time we see it we may laugh out loud. But after a while, although we still may smile at the joke, it’s not so funny anymore. Funny ads need to be replaced periodically. † (Professional Advertising n. d. ) Generally, when someone got the jokes, those jokes are not funny anymore. In the same ways as a funny advertisement, the first time people see the advertisement they will feel fun and interested, but they will find it not funny anymore when they see it again and again. Additionally, some advertisements have a lot of funny things but less information. In fact, giving information about a product is the most important of advertising and using humor is a supplement. Although funny advertisements drive the great advertising attributes such as attention and likeability, low information and relevance on many funny ads results in creating lower desire for the advertised products than non-funny advertisements (Tuttle 2012). This is the same concept as Michael Curran, Resource Manager at Capgemini, that â€Å"If an ad is merely funny and does nothing to bolster the featured product’s attributes, however, it’s probably a failure, no matter how funny the ad is. † (Tuttle 2012) In conclusion, Funny advertisement can get attention from viewers but it not always makes them buy a product. Besides, some people cannot understand what the ad wants to advertise and they sometimes cannot get anything about the product but fun. Also, not all ads can be funny. As a result, using humour in advertisement is one advertising strategy but it cannot be used with all advertisements and it is not the best way. It is recommended that companies should take care in considering what’s best for their brand. Don’t just jump on the funny band wagon because everyone is doing it. Every product must have its own proper way to advertise, so if a company can find that proper way, it will succeed in advertising. Some products are suited for funny advertisement but some are not, so companies should think carefully before advertising their product. Word count: 1670 How to cite Funny Ads, Essay examples

alturism Essay Example For Students

alturism Essay Altruism is used in discussions of ethics as an alternative to ethical egoism: the belief that people ought to be selfish. Altruism leads us to find a middle ground between being purely self interested and devoting our entire lives to the group. We learn that its not preferable to be too self interested, but can be harmful to devote all your energy to other people. A little too much self interest can be as harmful as too much virtuousness towards others. As an ethical egotist, what you might learn from altruism is; there are certain situations where it could pay not to be self interested. A good example would be several people stuck on a deserted island. If everyone left destined for their separate survival, surly only a few would live very long. If the people banded together, shared the work and supplies, surely most or all would survive longer.This shows that there are situations you can handle better when you chose to be in a group, then on your own. In conclusion I think any person should carefully consider before deciding to act in their own interest or act for a group that they are part in. People should try and think of what might be more beneficial for them in the long term as well as immediately. If the worst is true; and humans are purely selfish beings, what people should do is substitute a little altruistic philosophy in their thinking. This would help incorporate every self interested person into a group that functions better than any people could individually. It would probably help expand the available choices for people who feel they cannot make a decision. I think it can also lead the world in a more tolerant direction.