The extent of gender fatigue transpiring within the workplace, and the Dissertation

The extent of gender fatigue transpiring within the workplace, and the ways it can be overcome - Dissertation Example The only viable explanation for the disparaging gender treatments is gender fatigue. It is concluded that both victims and managers need to ignore gender fatigue and deal with incidents of gender inequality responsibly to void the dangers of gender equality losing ground. Table of Contents Abstract 2 Introduction 4 Research Questions 5 Statement of the Problem 5 Significance of the Study 6 Aims and Objectives of the Study 7 Research Methodology 8 A Review of Literature 8 Gender Inequality in the Work Place 8 Why Gender Inequality Exists in Some Organizations 10 Gender Fatigue as the Driving Force Behind Gender Inequality in the Workplace 12 Results and Analysis 15 Conclusion 18 Bibliography 20 Introduction Gender fatigue is a phrase used to describe stagnation and complacent attitudes toward reforms and calls for gender equality (Dehhehy, 2012). Initial evidence of gender fatigue was present during the 1980s when feminists were portrayed in public discourse as cartoon characters and as bitter women devoid of humour who projected a belief that all men were â€Å"pigs† and all â€Å"women are saints’ and that â€Å"women who stay at home are wasting their lives† (Sadker & Zittleman, 2009, p. 52). Kelan (2009) gives expression to gender fatigue in the workplace describing it as a situation in which organizations are self-described as â€Å"gender neutral†, yet there is evidence of gender discrimination and the prevailing attitude is one in which there is a general feeling that gender discrimination is thing of the past and â€Å"can happen,† but it is up to women to find solutions (p. 197). Kelan (2008) also argues that members of an organization will often describe their respective organizations as â€Å"gender neutral† although it is obvious to all that there is gender discrimination (p. 1). Workers will acknowledge that gender discrimination occurs in the workplace but will brush it off as unimportant to the work that they do. According to Kelan (2008), this is evidence that these workers are â€Å"experiencing gender fatigue† and that they are â€Å"weary of thinking about gender inequality† (p. 1). Kelan (2010) points out that the practice of doing gender at work takes dual approaches in which gender equality is established and juxtaposed against a situation in which gender differences are once again pronounced. For example, a task is usually performed in which gender equality is highlighted and this will be followed by the allocation of â€Å"remedial work, through which gender hierarch is re-established† (Kelan, 2010, p. 176). This research study investigates the problems created by gender fatigue in the work place. In particular, this research study is concerned with the prevailing attitude in organizations that take the position that they are gender neutral, yet gender inequality remains a part of the organizational culture. In these circumstances, described as gender f atigue, this research paper seeks to identify how the problems associated with achieving gender equality as a result of gender fatigue within organizations can be overcome. Research Questions In order to investigate the problem of gender fatigue in organizations and how gender fatigue can be overcome to

Marketing planning for iPhone 4s Case Study Example | Topics and Well Written Essays - 500 words

Marketing planning for iPhone 4s - Case Study Example Basically, the market for iPhone 4s is the busy people and the gadget geeks. No particular age limit is specified for as long as one has knowledge in using smartphones. The lowering of the price set for iPhone 4s means that Apple is targeting the mass market. Since the product is priced lower than the usual, money spent to purchase it will be worth it and with its advanced features, the mass market will be drawn to the product thus leading to a sudden purchasing decision. The fast-paced lifestyle in most nations has driven Apple to create smartphones with its multiple usage that enable people to do multi-tasking using a single technological gadget such as the iPhone 4s. In the application of ethnographic research, the "human behavior is being studied in its natural context" (Lamb, Hair, and McDaniel 276) and is being held as an object of observation for consumer behavior. In reference to this form of research, Apple has made sure that the additions it has made to iPhone 4s are suited to what is needed by people based on their human behavior. Certain economic factors also affect the positioning of the product in the market. Price was set lower than before in order to reach more potential buyers, especially the mass market. It has a dual core A5 chip that makes this new iPhone version power efficient and convenient for everyday use (Apple, Inc.). Extensive research is needed to execute the plans for the promotion and launching of the product. In that case, ethnographic research can be useful since it does not only require a simple observation of individual behavior, but it also takes into account learning from the individuals behavior ("Ethnographic Research"). In the past months, there was a relative decline on sales of Apple smartphones. Because of this circumstance, the company has decided to keep prices in line with the competitors following a status quo pricing strategy. At the moment, the iPhone 4s is considered the most talked

Optimism and Health Benefits Essay Example for Free

Optimism and Health Benefits Essay â€Å"Even the darkest night will end and the sun will rise.† This quote from Victor Hugo is a perfect example of optimism. When someone is optimistic, they have a disposition or tendency to look on the more favorable side of events or conditions and to expect the most favorable outcome. Optimism is simply a mental game. The brain can interpret situations or events as being optimized; meaning that some factors may not be fully comprehendible, yet having confidence that the present moment is in an optimist state. This understanding, although criticized by counter views such as pessimism, realism, and idealism, leads to a state of mind that believes everything is as it should be. With optimism, someone contains hopefulness and confidence about the future or the successful outcome of something. Not only does optimism give someone confidence, it also provides many health benefits and a sense of purpose in life. â€Å"Is your glass half empty, or half full?† This saying is a common idiom that illustrates optimism versus pessimism; an optimist is said to see the glass half full, and a pessimist sees the glass as half empty. Winston Churchill provides another unique understanding of this idea: â€Å"The optimist sees opportunity in every danger; the pessimist sees danger in every opportunity,† The defining characteristic of pessimists is that they tend to believe bad events will last a long time, will undermine everything they do, and are their own fault. The optimists, who are confronted with the same problems of the world, think about misfortune in the opposite way. They tend to believe defeat is just a temporary setback. Provoked by a bad situation, they perceive is as a challenge to try harder. If the thoughts that run through one’s head are mostly negative, their outlook on life is more likely to be pessimistic. There is nothing better in life than having a peace of mind that no matter what the troubles are that life may bring, everything will be okay and that life has so much to offer. Unfortunately this peace of mind does not happen over-night, it takes years of trials and experience s to be able to see the bright side of any given situation. People are not automatically born with optimism; they have to experience negative circumstances in order to find the strength to be optimistic in general. Without hardships, optimism would not grow. Optimism often starts with self-talk. These endless streams of unspoken thoughts can either be positive, or negative. Optimism does not mean that one keeps their head in the sand and ignore life’s less unpleasant situations, it just means that the approach to the unpleasantness is in a more positive and productive way. With this approach to any given situation, stress can be reduced. Often time’s people upset themselves over something minute, causing a lack of sleep, unhealthy eating habits, hostile mood, etc. What they do not know is that with a simple thought of, â€Å"I can do this,† or â€Å"It will be okay,† their whole stream of thoughts eventually start following that positive pattern, changing their whole mood, reducing stress, and increasing their chances of overcoming obstacles. Not only does an optimistic view reduce stress, it also decreases the risks of cardiovascular disease, hypertension, and infections. Optimism itself, not just its association with happiness, lowers anxiety, thus causing less hostility, and has the potential to lower the risk of a stroke. U.S. researchers followed more than 97,000 women for about eight years. Measures of optimism and cynical hostility were strongly associated with these outcomes: Optimists had a lower incidence of heart disease and total mortality. Conversely, cynical hostility, which is a lack of confidence and increased bitterness, was associated with both higher overall mortality and cancer-related effects. Along with positive health benefits, optimism also gives someone a sense of purpose. American psychologist, Salvatore Maddi, co-author of Resilience at Work: How to Succeed No Matter What Life Throws at You, extensively studied what makes executives tough in the face of work-related stress. He found that the healthiest of executives shared three characteristics: a feeling of commitment, a sense of control in their lives, and an acceptance of life’s stressful moments as challenges rather than threats. This research confirms that having a sense of commitment to a purpose does not merely give someone meaning; it makes them more resistant to the impact of stressful living. This view on optimism can increase one’s chances of succeeding their goals or dreams, and not allowing negative situations to hinder their attitude. With hopefulness that their goals will be achieved, their motivation is amplified as well. Optimism is a way of life that is not learned automatically, it takes time and effort to completely change one’s mindset. This mindset has many positive effects. A firm confidence in one’s self develops, and they have self-assurance that no matter what life throws at them, it is completely possible to overcome those obstacles. Optimists tend to believe that defeat is not their fault; circumstances, bad luck, or other people bring it about. Such people are unfazed by defeat. Optimism not only gives one confidence, but also provides a countless number of health benefits. With an optimistic attitude, depression can be reversed. Although it takes time to get out of a slump, just the start of positive self-talk can remove one out of despair. Positive self-talk also reduces stress and the chance of cardiovascular disease, hypertension, and strokes. A sense of purpose also develops with someone who acquires an optimistic mentality. A sense of purpose does not only give someone meaning, it helps them to overcome the stresses that life brings. Optimism merely starts with a simple â€Å"I will be okay.† It takes small steps, but it is completely possible for one to change their outlook on life and not let circumstances defeat one’s life.

Historical Cost Accounting: Criticisms and Alternatives

Historical Cost Accounting: Criticisms and Alternatives Introduction Accounting is a measurement and communication of financial information about economic activities to interested persons.  [1]  The primary role of accounting is to provide an effective measurement and reporting system which is also accounting information system for decision making. The corporate form of a large business has created separation of business ownership and control. Outsiders of an organization, usually, dont possess first-hand knowledge of the day-to-day running and condition of the business, which makes them dependant, to some extent, on accounting reports for information. Management is considered to be a company insider, who has access to the important information about a company that can affect its stock prices or might influence investors decisions. This creates conflict of interest as company insiders are in a position to exploit a professional or official capacity in some way for their personal or corporate benefit. International Accounting Standards Committee (IASC) view that investors need information on risk and return; employees are interested in their stability and profitability; lenders are concerned with loans and interest to be paid when due; suppliers and other traders want to know whether owed amount will be paid or not; and customers are interested in continuance of the enterprise.  [2]  Information is needed by various users to be able to decide when to buy, hold or sell equity of investment; or to access the stewardship or accountability of management. Creditors and suppliers use information to assess security for the amount lent to the enterprise. However, not all users of information have interest or confidence in the information provided by the management. Due to separation of ownership and control; and managements ability of exploiting outsiders for their own benefits, many investors have no interest or confidence in analyzing a companys financial statements. Instead, they rely on market analysis by other specialists about the psychology of the market and its effect on share prices. This report is focused on the historical cost accounting adopted by most of the countries and why, even though has many problems associated with it, have governments accepted this system even with availability of alternative accounting systems. This report details the benefits and criticism of historical cost accounting along with alternatives to historical cost accounting and their criticisms. 2. Historical Cost Accounting The historical cost accounting values an asset for balance sheet purposes at the price paid for the asset at the time of its acquisition.  The historical cost accounting is the situation in which accountants record revenue, expenditure and asset acquisition and disposal at historical cost: that is, the actual amounts of money, or moneys worth, received or paid to complete the transaction.   Historical cost is based on actual transaction rather than forecasts. There are supporting records for all the figures provided in the financial statements. It is also relevant in making economic decisions, as past data transactions are needed for making future decisions. Another defense of historical cost is that historical cost has been used throughout history as financial statements which use historical cost are found to be useful. Profit is the excess of selling price over historical cost. Profit is a very well accepted concept of measure of performance. It is the difference between revenue and cost that determines on decision to continue a product line or division. Historical Cost Accounting is very much based on this concept of profit and loss. Others, in defense of Historical Cost Accounting argue that historical cost is less subject to manipulation of data than other forms of accounting such as Current Cost. The use of current cost or exit price opens the door to manipulation of these numbers. In other words, how are current costs to be determined and how can accountants determine which value is true and fair? More importantly accountants must guard the integrity of their data against internal modification. Criticisms of Historical Cost Accounting Overtime, criticisms of historical cost accounting have been raised by number of notable scholars, particularly in relation to its inability to provide useful information in times of rising prices.  [3]  Historical Cost Accounting record all assets at an original cost and continue to use these historic figures throughout the assets life, while time-value of money is completely ignored. Across time these criticisms appear to have been accepted to a certain degree by accounting regulators. In recent years various accounting standards have been released that require the application of fair values when measuring assets. For example AASB 116 gives financial statement preparers a choice between the cost model and the fair value model in measurement of property, plant, and equipment. Financial Instruments (AASB 139), investment properties (AASB 114), and biological assets (AASB141) are required to be valued at fair value as opposed to historical cost. Chambers in 1966 argued that the historical cost accounting information suffers from problems of irrelevance in times of rising prices. It is also questioned whether it is useful to be informed about something that cost a particular amount many years ago whereas its current value might be considerably different. It has been argued that there is a real problem of additivity.  [4]  The matter at issue is whether it is logical to added together assets acquired at different periods when those assets were acquired with amounts of different purchasing power. Alternatives to Historical Cost Accounting Current Cost Accounting Current Cost Accounting (CCA) attempts to provide more realistic book values by valuing assets at current market buying prices. It takes into account time-value of money and inflation. It is more complex than the traditional accounting, and it has created controversy about what adjustments are appropriate. Unlike Historical Cost Accounting, there is no need for inventory cost flow assumptions such as last-in-first-out and weighted average. The business profit in CCA shows how the entity has gained in financial terms the increase in cost of its resources, which is ignored by historical cost accounting. Differentiating operating profit from holding gains and losses has claimed to enhance the usefulness of information being provided by CCA. Holding gains are different from trading income as they are due to market-wide movements which are beyond the control of the management.  [5]  Therefore, CCA doesnt rewards managers for profits from holding gains and losses which isnt an actual profit and also gives useful information to investors. Supporters of CCA are convinced that it provides more useful information than conventional accounting but still they do not agree on all issues. There is one group who believe in the financial capital concept in which the holding gains is included in the profit and the other group is those who believe in the physical capital concept. Under physical capital concept, holding gains and losses are not included in the profit and are supported by the theory of optimal resource usage that uses current costs as a measure of input opportunity cost. Criticisms of Current Cost Accounting Measurement errors may have reduced the usefulness of current-cost and replacement-cost data. Replacement-cost valuations of plant and equipment often include the cost of technological advances and often these advances would reduce operating costs below the level reported by historical cost. As a result, when replacement-cost depreciation is substituted for historical-cost depreciation, the cost of doing business includes the high capital cost of the advanced technology as well as the high operating costs of the older technology in use, which creates measurement errors.  [6]   The supporters of Historical Cost Accounting criticize CCA because it violates the traditional revenue recognition principle by recognizing increases in the value of the assets, both current and non-current, before they are sold. This is irrelevant as changes in market price dont mean anything until the assets are sold. A non-current asset isnt more valuable to a business just because its current cost has increased. Another problem is the subjectivity of determining the amount of the increase in cost. There are some non-current assets that dont have a second-hand market because it was specifically built or made for that business only. So the basis of determining the current cost must be the new asset expected to replace the old one. CCA also involves a mathematical problem of additivity. This is because the figures generated from CCA arent of the same nature because it involves a variety of measurement models. Exit Price Accounting Exit Price Accounting (EPA) also known as Continuously Contemporary Accounting (CoCoA) has been proposed by researchers such as McNeal, Sterling, and especially Raymond Chambers. Its an accounting theory that prescribes that assets should be valued at exit prices and that financial statements should function to inform about an organizations capacity to adapt.  [7]  Chambers described the entitys capacity to adapt as the cash that could be obtained if the entity sold its assets. Chambers believed that economic survival of the entity depends on the amount of cash it can command and the balance sheet is crucial to these decisions. Chambers used the term current cash equivalents to refer to the amount that was expected to be generated through the orderly sale of assets. He believe that the information about current cash equivalent were fundamental to effective decision making. Chambers stated that the accounting rules used were so different in effect that comparison between companies was often quite misleading.  [8]  One of the main arguments for EPA is that it provides useful information to the users. They believe that EPA reports all profits and losses and values as determined in competitive markets and provides a true and fair financial statement that serves the purpose of the shareholders. Other arguments that support EPA is the additivity function. EPA values all elements in the balance sheet and income statement at their exit prices, which, therefore, provides one consistent rule that could be applied by all or any company. It involves references to real-world examples because untestable assertions arent made such as depreciation. Criticism of Exit Price Accounting According to Chambers model of CoCoA, if assets cant be sold separately, they are deemed to have absolutely no value for the purpose of determining organizations financial position. This is considered to be too extreme by many accounting practitioners and researchers. Assets such as goodwill and work-in-progress have no selling value therefore will be have no value at all in the financial statements. Other criticisms of CoCoA are that it doesnt consider the value in use. An asset that is held rather than sold out must be worth more to its owner than its exit price, otherwise, it would be sold. In case of specialized resources such as a blast furnace has positive value in use, but cannot be sold separately, for the purpose of CoCoA has no value.  [9]  Even though proponents of EPA argue for the additivity of exit prices, the concept of current cash equivalent doesnt recognize the possibility of selling assets as one package. Some assets sold as a package are worth more than when sold individually in the market. This concept has been ignored in the exit price accounting. CoCoA has also been criticized on the basis that exit prices are determined by the price that could be achieved in an orderly sale.  [10]  The sales might be at different times and wont necessarily reflect values at balance date. Therefore, the financial statements based on these values might not be useful for monitoring the companys management. Positive Accounting Theory and Efficient Markets Hypothesis Milton Friedman was the one who strongly supported and backed the positive theories in economics. He stated that the ultimate goal of a positive science is the development of a theory or hypothesis that yields valid and meaningful predictions about phenomena not yet observed. Watts and Zimmerman also stated that the objective of positive accounting theory is to explain and predict accounting practice which was consistent with the views of Friedman. The beginning of positive accounting theory is the Efficient Markets Hypothesis (EMH). The EMH is based on the assumption that capital markets react in an efficient and unbiased manner to publicly available information. The main strengths of Positive Accounting Theories over Normative Accounting Theories are the facts that hypothesis are framed in such a way that they are capable of falsification by empirical research. Also, these theories aim to provide an understanding of how the world works rather than stating how the world should work. Moreover, PAT tries to understand the relationship and connection between various accounting information, managers, firms, and markets; and also analyze these relationships within an economic framework. There are several assumptions made in development of positive accounting theory. The first is that the firm is a nexus of contracts. In relation to PAT, because there is a need to be efficient, the firm will want to minimize costs associated with contracts. Contract costs involve accounting variables as contracts can be stipulated in terms of accounting information such as net income, and financial ratios.  [11]  The firm will choose the accounting policies that best acknowledge the need for minimization of contract costs. PAT recognizes that changing circumstances require managers to have flexibility in choosing accounting policies which brings forward the problem of opportunistic behavior. This occurs when the actions of management are to better their own personal interests. The other assumption is that the managers are rational economic decision makers and will act to maximize their own profit and not the profit of the company. Under PAT, firms want to maximize their prospects for survival, so they organize themselves efficiently. Criticisms of Positive Accounting Theories One of the main criticisms of PAT is that it doesnt provide prescription for accounting and therefore doesnt provide any means of improving accounting practice.  [12]  This, therefore results in alienation of practicing accountants. It is argued that simply explain and predicting accounting practice is not enough. There is no guidance on what people should do, as there is a general absence of prescription. The other criticisms of PAT relate to the fundamental that all action is driven by a desire to maximize wealth. Many researchers find this statement very negative in nature. They believe that PAT promotes a morally bankrupt view of the world. The concept of positive theory is drawn from an obsolete philosophy of science and is in any case a misnomer, because the theories of empirical science make no positive statement of what is.  [13]  And also of course, Watts and Zimmerman do say, We do not contend that all issues are settled, but rather encourage others to pursue, correct, and extend our analysis. Conclusion Quite clearly the several limitations and flaws of the traditional historical costs method have been highlighted and picked upon from time to time. Still historical costs are the standard form of accounting due to its unique features and conventions that make it better than most available alternatives. Historical cost accounting has and is still been widely recognized and accepted by corporations across the world. There hasnt been any development of better alternatives to Historical Cost Accounting. The alternative accounting such as current cost accounting and exit price accounting carry more problems in them than historical cost accounting. For examples countries like Unites States and United Kingdom have tried to adopt current cost accounting system but later withdrew as there were many complexities in using current cost accounting. Even if accounting bodies simply pick an existing method to form the standard of accounting, it will definitely not be better than historical cost accounting. However, in my opinion, the current use of historical cost accounting by many firms have been a contributing factor in masking the true and fair value of their assets. As investors are the primary users of financial statements, priority must be given to the needs and wants of the shareholders. Empirical evidences show that investors want both measurements i.e. historical cost and current cost accounting.  [14]  I believe a process should be created where historical cost and current cost operate side-by-side, which will enhance relevance, reliability, and comparability. Rather than debating between different approaches, focus should be given to implement an accounting system which reports all assets and liabilities at their true value without eliminating the benefits of historical cost accounting.

Telemachus in The Odyssey Essay -- Papers Odyssey Essays Papers

Telemachus in The Odyssey The first four books of the Odyssey are sometimes known as 'Telemachy'. It is a self-contained section that could in fact be easily removed, allowing the story to begin with Odysseus without damaging the plot. They deal with Telemachus' struggle and coming of age through his travels and quest. Telemachus is sent on his travels because although he has grown to adulthood, when Athene first visits him in book one, he is somewhat pathetic, lonely and very much a young boy and is not strong enough to remove the suitors from his father's palace: "Sitting disconsolate among the Suitors, imagining how his noble father might come back out of the blue, drive the Suitors headlong from the house, and so regain his royal honours, and reign over his own once more" Telemachus had no one strong to support him and there were 108 suitors for his mother. Telemachus at this point would not impress the great Odysseus (his father). As Telemachus was only an infant when his father left for Troy, he was desperate for some news about him. Telemachus says that he knows that he is Odysseus' son only by what he has been told and he is also very negative about ever finding his father, and his conviction that he is dead is obvious: "My father's unhappy end" Also, his grandfather Laertes was not at the palace and so he has no male role model to lead him on the right path to becoming a man. His travels also give Telemachus a chance to develop his own identity and Kleos and become a man. He develops somewhat in books one to four. Kleos in Homeric context meant what people said of you and defined how you'd be r... ...s, which tie him to his childlike life with his overly emotional mother. He needs to learn about being a hero and polite etiquette in the company of gods or heroic men. He must prepare himself for the imminent arrival of his father, which is delayed by Homer whilst Telemachus becomes a son resembling his father in ways other than physically. He gains a role model in characters such as Menelaus and a positive attitude that comes from reassuring words from him and confidence from Athene. Telemachus discovers the last known whereabouts of his father, is given hope that he could still be alive and learns that his father was indeed a hero with many important friends. We feel sorry for Telemachus' difficult childhood, and yet think that he needs to become a stronger, more confident character, that his father can be proud of.

Exploring Cultural Diversity in Mirror for Man :: Mirror for Man Essays

Exploring Cultural Diversity in Mirror for Man Why do men do the things they do? Professor Kluckhohn attempts to explore, define and explain the answer to this complex question in one brief passage. He reasons that we are all given the same basic biological "tools" at birth, so it should follow then, that we should all behave in similar ways. But, because of "culture", defined as "the total life way of a people", we do not react to similar situations in exactly the same way. Culture is the main reason we can not explain other people's actions "in terms of biological properties." Professor Kluckhohn proceeds to explain cultural differences and similarities through some experiences of his own. First he parallels an American woman's view of polygamy to a Koryak woman's. Then he shares an anecdote of an American man who was raised as a Chinese. Lastly, he tells a tale of a woman serving rattlesnake sandwiches to her guests. After each example he points out that it is a persons upbringing and way of life that dictates how he or she will act in or react to a given situation. I am in total agreement with Professor Kluckhohn's views. I found his passage to be very interesting reading because it put into words views and ideas I had formulated through dealing with people of other nationalities. It also pointed out that a body doesn't make a man, a mind does. How the mind is trained and nurtured will decide what the man is and how he thinks. I am what some would call a "people-person." I love being with new people and learning about what makes them "tick." I have been lucky enought to travel through Europe and the Orient so I have seen first hand whether East does meet West or not. But the place where I learned the most about people and the way they live would have to be right here at home - Southern California. Living here in an area with a rich ethinic mixture has opened my eyes to things like: the Filipino tendency to eat with a spoon and fork while Americans tend to use mainly the fork, the Oriental's tight family ties and the growing rate of American divorces, etc. The mixture of traditional Filipino parents and growing up in California has given me a chance to glimpse how some cultures go hand in hand while others clash violently.

Pnl Explain

P&L Explain – Bonds and Swaps Tony Morris antony. [email  protected] com MICS – DKS Manila Contents 1. Bond Pricing – basic concepts 2. P&L sensitivities of a bond i. PV01 ii. CS01 iii. Theta iv. Carry 3. Extension to interest rate swaps 1. Bond Pricing – basic concepts Let’s say you have a 4 year 10% annual coupon bond, with a yield (‘yield to maturity’ or ‘yield to redemption’) of 12%. From this information, the price can be calculated as 93. 93%. The price is calculated by pricing each of the bond’s cash flows using the yield to maturity (YTM) as a discount rate.Why? Because the YTM is defined as the rate which, if used to discount the bond’s cash flows, gives its price. We could picture it like this: Bond Cash Flows on a Time Scale Each fixed coupon of 10% is discounted back to today by the yield to maturity of 12%: 93. 93% = 10 + 10 + 10 + 110 (1. 12)1 (1. 12)2 (1. 12)3 (1. 12)4 All we are doing is obse rving the yield in the market and solving for the price. Alternatively, we could work out the yield if we have the price from the market.Bond price calculators work by iteratively solving for the yield to maturity. For a bond trading at par, the yield to maturity and coupon will be the same, e. g. a four year bond with a fixed coupon of 10% and a yield of 10% would be trading at 100%. Note that bond prices go down as yields go up and bond prices go up as yields go down. This inverse relationship between bond prices and yields is fairly intuitive. For our par bond above, if four year market yields fall to 9% investors will be willing to pay more than par to buy the above market coupons of 10%. This will force its price up until it, too, yields 9%.If yields rise to, say, 11% investors will only be willing to pay less than par for the bond because its coupon is below the market. For a detailed example of the bond pricing process, see Appendix 3. For now, note that the dirty price of a bond is the sum of the present values of the cash flows in the bond. The price quoted in the market, the so-called â€Å"clean† price or market price, is in fact not the present value of anything. It is only an accountants’ convention. The market price, or clean price, is the present value less accrued interest according to the market convention. . P&L sensitivities of a bond As we saw above, the price of a bond can be determined if we know its cash flows and the discount rate (i. e. YTM) at which to present value them. The yield curve from which are derived the discount factors for a bond can itself be considered as the sum of two curves: 1. the â€Å"underlying† yield curve (normally Libor), and 2. the â€Å"credit† curve i. e. the spread over the underlying curve The sensitivity of the bond price to a change in these two curves is called: i. PV01, and ii. CS01 respectively. Related essay: â€Å"Support Positive Risk Taking For Individuals†In terms of the example above, the discount rate of 12% might be broken down into, say, a Libor rate of 7% together with a credit spread of 5%. (Note, in the following, it is important not to confuse the discount rate, which is an annualised yield, and the discount factor, which is the result of compounding the discount rate over the maturity in question. ) In addition to the sensitivities described above, we can also consider the impact on the price of the bond of a one day reduction in maturity. Such a reduction affects the price for two reasons: ) assuming the yield curve isn’t flat, the discount rates will alter because, in general, the discount rate for time â€Å"t† is not the same as that for time â€Å"t-1† b) since one day has elapsed, whatever the discount rate, we will compound it based on a time interval that is shorter by one day The names given to these two sensitivities are, r espectively: iii. Theta, and iv. Carry Note that, of these four sensitivities, only the first two, i. e. PV01 and CS01, are â€Å"market sensitivities† in the sense that they correspond to sensitivities to changes in market parameters.Theta and Carry are independent of any change in the market and reflect different aspects of the sensitivity to the passage of time. i)PV01 Definition The PV01 of a bond is defined as the present value impact of a 1 basis point (0. 01%) increase (or â€Å"bump†) in the yield curve. In the derivation below, we will refer to a generic â€Å"discount curve†. As noted earlier, this discount curve, from which are derived the discount factors for the bond pricing calculation, can itself be considered as the sum of two curves: the â€Å"underlying† yield curve (normally Libor), and a credit curve (reflecting the risk over and above the interbank risk ncorporated in the Libor curve). The PV01 calculates the impact on the price of bu mping the underlying yield curve. Calculation For simplicity, consider the case of a zero coupon bond i. e. where there is only one cash flow, equal to the face value, and occurring at maturity in n years. Note, though, that the principles of the following analysis will equally apply to a coupon paying bond. We start by defining: P = price or present value today R(t) = discount rate, today, for maturity t FV = face value of the bond Then, from the above, we know:P = FV/(1+r(t))^n Now consider the impact a 1bp bump to this curve. The discount rate becomes: R(t) = R(t) + 0. 0001 The new price of the bond, Pb(t), will be: Pb = FV/(1+[r(t)+. 0001])^n Therefore, the sensitivity of this bond to a 1bp increase to the discount curve will be: Pb – P = FV/(1+[r(t)+. 0001])^n – FV/(1+r(t))^n Eqn. 1 The first term is always smaller than the second term, therefore: * if we hold the bond (long posn), the PV01 is negative * if we have short sold the bond (short posn), the PV01 is pos itive We can also see that: the higher the yield (discount rate), the smaller the PV01. This is because a move in the discount rate from, for example, 8. 00% to 8. 01% represents a smaller relative change than from 3. 00% to 3. 01%. In other words, the higher the yield, the less sensitive is the bond price to an absolute change in the yield * the longer the maturity, the bigger the PV01. This is more obvious – the longer the maturity, the bigger the compounding factor that is applied to the changed discount rate, therefore the bigger the impact it will have.To extend this method to a coupon paying bond, we simply note that any bond can be considered as a series of individual cash flows. The PV01 of each cash flow is calculated as above, by bumping the underlying yield curve at the corresponding maturity. In practice, where a portfolio contains many bonds, it would not be practical, nor provide useful information, to have a PV01 for every single cash flow. Therefore the cash f lows across all the positions are bucketed into different maturities. The PV01 is calculated on a bucketed basis i. e. by calculating the impact of a 1bp bump to the yield curve on each bucket individually.This is an approximation but enables the trader to manage his risk position by having a feel for his overall exposure at each of a series of maturities. Typical bucketing might be: o/n, 1wk, 1m, 2m, 3m, 6m, 9m, 1y, 2y, 3y, 5y, 10y, 15y, 20y, 30y. Worked example: Assume we hold $10m notional of a zero-coupon bond maturing in 7 years and the yield to maturity is 8%. Note that, for a zero coupon bond, the YTM is, by definition, the same as the discount rate to be applied to the (bullet) payment at maturity. We have: Price, P = $10m / (1. 08)^7 = $5. 834mBumping the curve by 1bp, the â€Å"bumped price† becomes: Pb = $10m / (1. 0801)^7 = $5. 831m Therefore, the PV01 is: Pb – P = $5. 831m – $5. 835m = -$0. 004m (or -$4k) Meaning In the example above, we have calcul ated the PV01 of the bond to be -$4k. This means that, if the underlying yield curve were to increase from its current level of 8% to 8. 01%, the position would reduce in value by $4k. If we assume the rate of change in value of the bond with respect to the yield is constant, then we can calculate the impact of, for example, a 5bp bump to the yield curve to be 5 x -$4k = -$20k.Note, this is only an approximation; if we were to graph the bond price against its yield, we wouldn’t see a straight line but a curve. This non-linear effect is called convexity. In practice, while for small changes in the yield the approximation is valid, for bigger changes, convexity cannot be ignored. For example, if the yield were to increase to 9%, the impact on the price would be -$365k, not -(8%-9%)x$4k = -$400k. Use The concept of PV01 is of vital day to day importance to the trader. In practice, he manages his trading portfolio by monitoring the bucketed yield curve exposure as expressed by PV 01.Where he feels the PV01 is too large, he will perform a transaction designed to either flatten or reduce the risk. Similarly, when he has a view as to future yield curve movements, he will position his PV01 exposure to take advantage of them. In this case, he is taking a trading position. ii)CS01 The basis of the CS01 calculation is identical to that of the PV01, only this time we bump the credit spread rather than the underlying yield curve. The above example was based on a generic discount rate. In practice, for any bond other than a risk free one, this rate will be combination of the yield curve together with the credit curve.At first glance therefore, we would expect that, whether we bump the yield curve or the credit spread by 1bp, the impact on the price should be similar, and described by Eqn. 1 above. What we can also say is that, bumping the yield curve, the overall discount rate will increase and therefore, as for PV01: * if we hold the bond (long posn), the CS01 is neg ative * if we have short sold the bond (short posn), the CS01 is positive From the same considerations as for PV01, we can see that: * the higher the credit spread, the smaller the CS01 * the longer the maturity, the bigger the CS01In practice, when we look at multiple cash flows, the impact of a 1bp bump in the yield curve is not identical to a 1bp bump in the credit spread. This is because, inter alia: * the curves are not the same shape and therefore interpolations will differ * bumping the credit spread affects default probability assumptions that will, in turn, impact the bond price In general though, PV01 and CS01 for a fixed coupon bond will be similar. The exception is where the bond pays a floating rate coupon. In this case, the sensitivity to yield curve changes is close to zero so, although the PV01 will be very small, the CS01 will be â€Å"normal†.Worked example: A worked example would follow the same steps as for PV01 above, only this time we would bump the cred it spread by 1bp rather than the underlying yield curve. Theta and Carry We now look at the two sensitivities arising from the passage of time (â€Å"1 day decay†, to use option pricing terminology). First, let’s calculate what the total impact on the value of a position would be if the only change were that one day had passed. In particular, we assume that the yield and credit curves are unchanged. Again, for simplicity, consider the case of a zero coupon bond i. . where there is only one cash flow, equal to the face value, and occurring at maturity in n years. Again, we note that the principles of the following analysis will equally apply to a coupon paying bond. Following the previous notation, the value (or price) today will be: P(today) = FV/(1+r(t))^n The value tomorrow will be: P(tomorrow) = FV/(1+r(t-1))^(n-1/365)Eqn. 2 There are two differences between the formula for the value today and that for tomorrow. Firstly, the discount rate has moved from r(t) to r(t- 1). Here, r(t-1) is the discount rate for maturity (t-1) today.We have assumed that the discount curve does not move day on day, therefore the rate at which the cash flow will be discounted tomorrow is the rate corresponding to a one day shorter maturity, today. Secondly, the period over which we discount the cash flows has reduced by one day, from n to n-1/365 (we divide by 365 because n is specified in years). Theta and Carry capture these two factors. P(tomorrow) – P(today) gives the full impact on the price due to the passing of one day. This impact can be approximated by breaking down the above formula into its two component parts i. e. he change in discount rate and the change in maturity, as explained below. iii)Theta As before, we define: P = price or present value today r(t) = discount rate, today, for maturity t FV = face value of the bond In addition, we define: r(t-1) = discount rate, today, for maturity t-1 (e. g. for a bond with 240 days to maturity, if the 240 day discount rate today is 8. 00% and the 239 day discount rate today is 7. 96% then: r(t) = 8. 00% and r(t-1) = 7. 96%) We now define Theta as: FV/(1+r(t-1))^n – FV/(1+r(t))^n We can see that, compared to the formula for the full price impact above (Eqn. ), this sensitivity reflects the change in the discount rate but ignores the reduction by 1 day of the maturity. In other words, Theta represents the price impact due purely to the change in discount rate resulting from a 1 day shorter maturity but ignores the impact on the compounding factor of the discount rate resulting from the shorter maturity. Note that the sign of Theta, in contrast to PV01 and CS01, can be both positive and negative. This is because r(t-1) can be higher or lower than r(t), depending on the shape of the yield curve.That said, in practice, given that yield curves are normally upward sloping, we would expect r(t) to be higher than r(t-1). Therefore Theta will normally be positive. In the same way, if th e yield curve is flat, then Theta will be zero. iv)Carry Using the standard notation, we define Carry as: FV/(1+r(t))^(n-1) – FV/(1+r(t))^n Comparing to the formula for the full price impact above (Eqn. 2), we see that this sensitivity reflects the change in maturity on the compounding factor to be applied to the discount rate but ignores the impact on the discount rate itself of moving one day down the curve.In other words, Carry represents the price impact due purely to the change in discount factor resulting from a 1 day shorter compounding period but ignores the impact on the discount rate resulting from the shorter maturity. Where discount rates are positive (r(t) > 0), Carry will always be positive since the first term will be larger than the second. Using the Taylor expansion, we can obtain a simplified approximate value for Carry. Remembering that: 1/(1+x)^n = 1 – n. x + (1/2). n. (n-1). x^2 – †¦ we have: Carry = FV. 1-(n-1/365). r(t)) – FV. (1-n. r(t)) = FV. r(t). 1/365 Note that r(t). 1/365 would represent one day’s â€Å"interest† calculated on an accruals basis since, in the case, the yield equals the coupon rate. (Note, where a position is accounted for on an accruals basis, and therefore valued at par, the yield will always equal the coupon. ) In other words, this definition ties in to the intuitive idea of carry that we have from, say, a deposit where the carry would be equal to one day’s interest, based on its coupon.We can also see that Carry is directly proportional to the yield. We have now seen that, between them, Theta and Carry attempt to capture the two components affecting the price move arising from the passing of 1 day, all other factors being kept constant. There will be certain â€Å"cross† effects of the two that will not be captured when performing this decomposition. In other words, Theta + Carry will not exactly equal the full impact (as per Eqn. 2). The difference, ho wever, will not normally be material.In general, for a long bond position, both Theta and Carry will be positive as, with the passing of one day, not only will the annualised discount rate be less (reflecting the lower yield normally required for shorter dated instruments) but the compounding factor will be smaller (reflecting the shorter maturity). Worked example: Assume we hold $10m notional of a zero-coupon bond maturing in 240 days and the yield to maturity today is 8%. Also, the yield today for the 239 day maturity is 7. 96%. Theta = $10m/(1. 0796)^(240/365) – $10m/(1. 08)^(240/365) = $23,159 Carry = $10m/(1. 8)^(239/365) – $10m/(1. 08)^(240/365) $20,047 Theta + Carry = $43,205 To compare, the full price impact of a 1 day â€Å"decay† is: $10m/(1. 076)^(239/365) – $10m/(1. 08)^(240/365) = $43,113 Summary We have now analysed the key sensitivities that explain the 1 day move in a bond’s mark to market value. To summarise some of the main featur es; for a long bond position: PV01 / CS01: * negative * for a fixed coupon or zero coupon bond, PV01 and CS01 will be similar * the higher the yield/credit spread, the smaller the PV01/CS01 * the longer the maturity, the bigger the PV01/CS01 for a floating rate coupon (with a Libor benchmark), PV01 will be very small but the CS01 will be â€Å"normal† Theta * positive * the flatter the curve, the smaller the Theta Carry * positive * proportional to the yield 3. Extension to interest rate swaps In essence, all the above applies equally to interest rate swaps (IRSs) when calculating/explaining daily P&L. We start by noting that an IRS is simply the exchange of two cash flows, one fixed and one floating. Extending the analysis we made for bonds, we can say: a) The PV01 of the floating rate leg will be close to zero. This is as noted for a floating rate bond.In both cases, as the yield curve changes so do the expected future cash flows but, at the same time, so will the discount rates at which they are PV’d. The two effects will broadly cancel out. (The PV01 will not be exactly zero because, once the Libor fixing occurs, the next cash flow becomes fixed and therefore effectively becomes a zero coupon bond, on which there will be PV01. ) b) The fixed leg is similar to the fixed coupon stream on a bond and can be considered as a series of zero coupon bonds. Therefore the exact same analysis as applied to bonds above will apply to the fixed leg. An IRS that ays floating and receives fixed will have a PV01 sensitivity similar to that of a long bond position. c) IRSs are normally interbank trades where it is assumed that there is no credit risk over and above Libor. Therefore, the CS01 will be zero. d) Theta and Carry may be either positive or negative. Appendix 1 : Date Conventions There are several methods for computing the interest payable in a period and the accrued interest for a period. A particular method applied to a transaction can affect the yie ld of that transaction and also the payment for a transaction. Counting the Number of DaysThe conventions used to determine the interest payments depend on two factors: 1) The number of days in a period and 2) The number of days in a year. The conventions are: 0 Actual/360 1 Actual/365 : sometimes referred as Actual/365F (seldom used now) 2 Actual/Actual 3 30/360 European: sometimes referred to as ISMA method (30E/360) 4 30/360 US (30U/360) The first three methods (Actual/360, Actual/365 and Actual/Actual) calculate the number of days in a period by counting the actual number of days. For each method the number of days in a year is different. Actual/365 and Actual/Actual are similar except: 1.Periods which include February 29th (leap year) count the number of days in a year as 365 under Act/365 and 366 under Act/Act; 2. Semi-annual periods are assumed to have 182. 5 days under Act/365 and however many actual days under Act/Act. Eurobond markets use the 30E/360 basis. This calculatio n assumes every month has 30 days. This means that the 31st of a month is always counted as if it were the 30th of the month. For 30E/360 basis, February is also assumed to have 30 days. If the beginning or end of a period falls on a weekend the coupon is not adjusted to a good business day.This means that there are always exactly 360 days in a year for all coupons. For example a coupon from 08-November-1997 to 08-November-1998 of 5% is a coupon of 5%, even though 08-November-1998 is a Sunday. There is no adjustment to the actual coupon payment. The various European government bond markets are described below: Country| Accrual| Coupon Frequency| Austria| Act/Act| Annual| Belgium| Act/Act| Annual| Denmark| Act/Act| Annual| Finland| Act/Act| Annual| France| Act/Act| Annual| Germany| Act/Act| Annual| Ireland| Act/ActAct/Act (Earlier Issues)| AnnualSemi-Annual| Italy| Act/Act| Semi-Annual| Luxembourg| Act/Act| Annual|Netherlands| Act/Act| Annual| Norway| Act/Act| Annual or Semi-Annual| Portugal| Act/Act| Annual| Spain| Act/Act| Annual| Sweden| Act/Act| Annual| Switzerland| Act/Act| Annual| United Kingdom| Act/Act | Semi-Annual| Appendix 2 : Calculating Accrued Interest Even though Eurobond coupons are not adjusted for weekends and holidays, the accrual of a coupon for any part of the year has to use the correct number of days. The difference between European and US 30/360 method is how the end of the month is treated. For US basis the 31st of a month is treated as the 1st of the next month, unless the period is from 30th or 31st of the previous month.In this case the period is counted as number of months: | 30/360 European| 30/360 US| Beginning DateEnding Date| M1/D1/ Y1M2/D2/Y 2| M1/D1/Y1M2/D2/Y 2| If D1 = 31| D1 = 30| D1 = 30| If D2 = 31| D2 = 30| If D1 = 31 or 30Then: D2 = 30Else: D2 = 31| The difference occurs when the accrual period starts and ends at the end or beginning of a calendar month: European and US 30/360 Examples Start| End| European| US| Actual| 3 1-Jul-01| 31-Oct-01| 90| 90| 92| 30-Jul-01| 30-Oct-01| 90| 90| 92| 30-Jul-01| 01-Nov-01| 91| 91| 94| 29-Jul-01| 31-Oct-01| 91| 92| 94| 01-Aug-01| 31-Oct-01| 89| 90| 91|Euro money markets: 0 Day count basis: actual/360 1 Settlement basis: spot (two day) standard 2 Fixing period for derivatives contracts: two day rate fixing convention Euro FX markets 3 Settlement timing: spot convention, with interest accrual beginning on the second day after the deal has been struck 4 Quotation: ‘Certain for uncertain’ (ie 1 Euro = x foreign currency units) U. S. Conventions Product| Day Count Convention| USD LIBOR| Act/360| USD Swap Fixed Rate in U. S. | Act/Act s. a. | USD Swap Fixed Rate in London| Act/360 p. a. | T-Bills| Act/360 discount rate| Government Bonds| Act/Act s. a. |Agency and Corporate Bonds| 30/360 s. a. | Appendix 3 : Detailed worked example of bond price calculation We can check the pricing of bonds in a more complicated example by using the following German governmen t bond (or Bund) : German Government Bund (in Euros) Coupon:| 5. 00%| Maturity:| 04-Feb-06| Price (Clean):| 102. 2651%| Yield:| 4. 43%| We are pricing this bond on 27/July 2001. It matures on 4 Feb 2006 and has a coupon of 5%. The table below shows that the bond price (the ‘dirty price’ or invoice price) is simply the sum of the present value of all of the coupons discounted at the yield to maturity.Pricing the German Euro Denominated Bund Dates| AA Days| Periods| Cash Flow| Cashflow PV| 04-Feb-01| | | | | 27-Jul-01| | | | 104. 6350%| 04-Feb-02| 192| 0. 5260| 5. 00%| 4. 8873%| 04-Feb-03| 557| 1. 5260| 5. 00%| 4. 6800%| 04-Feb-04| 922| 2. 5260| 5. 00%| 4. 4814%| 04-Feb-05| 1288| 3. 5260| 5. 00%| 4. 2913%| 04-Feb-06| 1653| 4. 5260| 105. 00%| 86. 2950%| The market convention uses the yield to maturity as the discount rate, and discounts each cash flow back over the number of periods as calculated using the accrued interest day-count convention.In the case of Bunds, the day -count convention is the Act/Act convention. Appendix 1 contains more details of date conventions – it is recommended that you read this at the end of the module. The part of a year between the settlement date (27 July 2001) and the next coupon (4 February 2002) is: Day Count 192/365 (ie Actual days/Actual days) = 0. 5260 The price of the first coupon can therefore be calculated in the following way: PV of First Coupon = 4. 8873% All of the other cash flow present values are calculated in the same manner. Adding them up gives us the price of the bond.Accrued interest is calculated from 04 February 2001 to 27 July 2001 (173 days) : Accrued Interest Accrued = 5% x 0. 47397 = 2. 3699% There is more detail on Accrued interest in Appendix 2. It is recommended that you read it at the end of this module. Notice that the quoted price of the bond (the ‘clean price’) is 102. 2651% not 104. 6350% (which is the ‘dirty price’ or invoice price – ie the pric e actually paid for the bond). The dirty price is the sum of the present values of the cash flows in the bond. The price quoted in the market, the so-called â€Å"clean† price or market price, is in fact not the present value of anything.It is only an accountants’ convention. The market price, or clean price, is the present value less accrued interest according to the market convention. Practitioners find it easier to quote the clean price because it abstracts from the changing daily accrued interest (i. e. it avoids a â€Å"saw-toothed† price profile). This publication is for internal use only by Deutsche Bank Global Markets employees. The material (including formulae and spreadsheets) is provided for education purposes only and should under no circumstances be used for client pricing.Examples, case studies, exercises and solutions may use simplifying assumptions that do not apply in practice, and may differ from Deutsche Bank proprietary models actually used. The publication is provided to you solely for information purposes and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or product. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed.