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Friday, June 6, 2014
Opportunity cost
Opportunity cost
Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen). It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. The opportunity cost is also the cost of the forgone products after making a choice. Opportunity cost is a key concept in economics, and has been described as expressing "the basic relationship between scarcity and choice". The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. Thus, opportunity costs are not restricted to monetary or financial costs: the real cost of output forgone, lost time, pleasure or any other benefit that provides utility should also be considered opportunity costs.
Opportunity costs in consumption
Opportunity cost is assessed in not only monetary or material terms, but also in terms of anything which is of value. For example, a person who desires to watch each of two television programs being broadcast simultaneously, and does not have the means to make a recording of one, can watch only one of the desired programs. Therefore, the opportunity cost of watching Dallas could be not enjoying the other program (such as Dynasty). If an individual records one program while watching the other, the opportunity cost will be the time that the individual spends watching one program versus the other. In a restaurant situation, the opportunity cost of eating steak could be trying the salmon. The opportunity cost of ordering both meals could be twofold: the extra $20 to buy the second meal, and his reputation with his peers, as he may be thought of as greedy or extravagant for ordering two meals. A family might decide to use a short period of vacation time to visit Disneyland rather than doing household improvements. The opportunity cost of having happier children could therefore be a remodelled bathroom.
In environmental protection, opportunity cost is also applicable. This has been demonstrated in the legislation that required the carcinogenic aromatics (mainly reformate) to be largely eliminated from gasoline. Unfortunately, this required refineries to install equipment at a cost of hundreds of millions of dollars – and pass the cost to the consumer. The absolute number of cancer cases attributed to exposure to gasoline, however, is low, estimated a few cases per year in the U.S. Thus, the decision to require fewer aromatics has been criticized on the grounds of opportunity cost: the hundreds of millions of dollars spent on process redesign could have been spent on other, more fruitful ways of reducing deaths caused by cancer or automobiles. These actions (or strictly, the best one of them) are the opportunity cost of reduction of aromatics in gasoline
The Opportunity Cost of consuming good y, relative to good x (y:x), can be calculated by the price of good y, relative to good x (Py/Px). For example, a movie (good x) costs $10 (Px) and bowling (good y) costs $20 (Py), the opportunity cost of going bowling is 2 movies (Py/Px = 20/10). That is the $20 spent on bowling could have been used to see two movies priced at $10. Conversely the opportunity cost of going to watch a movie is 0.5 (10/20) games of bowling. Units should be specified in the opportunity cost, for example if forgoing 3 party invitations to go out on a date you would not say "I passed on 3 for this date", your date would need to know the units of the good forgone for the statement to make sense.
Opportunity costs in production
Opportunity costs may be assessed in the decision-making process of production. If the workers on a farm can produce either one million pounds of wheat or two million pounds of barley, then the opportunity cost of producing one pound of wheat is the two pounds of barley forgone (assuming the production possibilities frontier is linear). Firms would make rational decisions by weighing the sacrifices involved.
Explicit costs
Explicit costs are opportunity costs that involve direct monetary payment by producers. The opportunity cost of the factors of production not already owned by a producer is the price that the producer has to pay for them. For instance, a firm spends $100 on electrical power consumed; their opportunity cost is $100. The firm has sacrificed $100, which could have been spent on other factors of production.
Implicit costs
Implicit costs are the opportunity costs that in factors of production that a producer already owns. They are equivalent to what the factors could earn for the firm in alternative uses, either operated within the firm or rent out to other firms. For example, a firm pays $300 a month all year for rent on a warehouse that only holds product for six months each year. The firm could rent the warehouse out for the unused six months, at any price (assuming a year-long lease requirement), and that would be the cost that could be spent on other factors of production.
Non-monetary opportunity costs
Opportunity costs are not always monetary units or being able to produce one good over another. The opportunity cost can also be unknown, or spawn a series of infinite sub opportunity costs. For instance, an individual could choose not to ask a girl out on a date, in an attempt to make her more interested by playing hard to get, but the opportunity cost could be that they get completely ignored, which could lead to other opportunity costs.
Source: https://docs.google.com/document/d/1B1QJzI2i_eSEE4IGgGgfjtDTJqAEKzwdS7CpUfAoldE/edit#heading=h.3dy6vkm
Factors that Shift the Supply Curve
Factors that Shift the Supply Curve
We list and explain three factors that shift a supply curve:
Change in input costs: An increase in input costs shifts the supply curve to the left. A supplier combines raw materials, capital, and labor to produce the output. If a furniture maker has to pay more for lumber, then her profits decline, all else equal. The less attractive profit opportunities force the producer to cut output. Alternatively, car manufacturer may have to pay higher labor costs. The higher labor input costs reduces profits, all else equal. For a given price of a car, the manufacturer may trim output, shifting the supply curve to the left. Conversely, if input costs decline, firms respond by increasing output. The furniture manufacturer may increase production if lumber costs fall. Additionally, chicken farmers may boost chicken output if feed costs decline. The reduction in feed costs shifts the supply curve for chicken to the right.
Increase in technology: An increase in technology shifts the supply curve to the right. A narrow definition of technology is a cost-reducing innovation. Technological progress allows firms to produce a given item at a lower cost. Computer prices, for example, have declined radically as technology has improved, lowering their cost of production. Advances in communications technology have lowered the telecommunications costs over time. With the advancement of technology, the supply curve for goods and services shifts to the right.
Change in size of the industry: If the size of an industry grows, the supply curve shifts to the right. In short, as more firms enter a given industry, output increases even as the price remains steady. The fast-food industry, for example, exploded in the latter half of the twentieth century as more and more fast food chains entered the market. Additionally, on-line stock trading has increased as more firms have begun delivering that service. Conversely, the supply curve shifts to the left as the size of an industry shrinks. For example, the supply of manual typewriters declined dramatically in the 1990s as the number of producers dwindled.
Factors that Shift the Demand Curve
Factors that Shift the Demand Curve
We list and explain four factors that can shift a demand curve:- Change in consumer incomes: As the previous video rental example demonstrated, an increase in income shifts the demand curve to the right. Because a consumer's demand for goods and services is constrained by income, higher income levels relax somewhat that constraint, allowing the consumer to purchase more products. Correspondingly, a decrease in income shifts the demand curve to the left. When the economy enters a recession and more people become unemployed, the demand for many goods and services shifts to the left.
- Population change: An increase in population shifts the demand curve to the right. Imagine a college town bookstore in which most students return home for the summer. Demand for books shifts to the left while the students are away. When they return, however, demand for books increases even if the prices are unchanged. As another example, many communities are experiencing "urban sprawl" where the metropolitan boundaries are pushed ever wider by new housing developments. Demand for gasoline in these new communities increases with population. Alternatively, demand for gasoline falls in areas with declining populations.
- Consumer preferences: If the preference for a particular good increases, the demand curve for that good shifts to the right. Fads provide excellent examples of changing consumer preferences. Each Christmas season some new toy catches the fancy of kids, and parents scramble to purchase the product before it is sold out. A few years ago, "Tickle Me Elmo" dolls were the rage. In the year 2000 the toy of choice was a scooter. For a given price of a scooter, the demand curve shifts to the right as more consumers decide that they wish to purchase that product for their children. Of course, demand curves can shift leftward just as quickly. When fads end suppliers often find themselves with a glut of merchandise that they discount heavily to sell.
- Prices of related goods: If prices of related goods change, the demand curve for the original good can change as well. Related goods can either be substitutes or complements.
- Substitutes are goods that can be consumed in place of one another. If the price of a substitute increases, the demand curve for the original good shifts to the right. For example, if the price of Pepsi rises, the demand curve for Coke shifts to the right. Conversely, if the price of a substitute decreases, the demand curve for the original good shifts to the left. Given that chicken and fish are substitutes, if the price of fish falls, the demand curve for chicken shifts to the left.
- Complements are goods that are normally consumed together. Hamburgers and french fries are complements. If the price of a complement increases, the demand curve for the original good shifts to the left. For example, if McDonalds raises the price of its Big Mac, the demand for french fries shifts to the left because fewer people walk in the door to buy the Big Mac. In contrast, If the price of a complement decreases, the demand curve for the original good shifts to the right. If, for example, the price of computers falls, then the demand curve for computer software shifts to the right.
Wednesday, June 4, 2014
PAPER 6(f): TREASURY MANAGEMENT (Optional Subject)
PAPER 6(f): TREASURY MANAGEMENT (Optional Subject)
Full Marks: 100
Chapter 1 Introduction to Treasury
Function of Treasury
The Market
Key Variables in Treasury Management
What is Liquidity
The Role of Central Bank
Treasury as a profit center of the bank
Chapter 2 Reserves
Operational Reserve
Statutory Reserve Requirement
Government Securities
Chapter 3 Asset Liability Management
Liquidity Management
Tools of Liquidity Management
Balance Sheet & Capital Planning
Transfer Pricing of Assets & Liability
ALCO
Chapter 4 Foreign Exchange Management
Fx Markets
FX Quote Conventions
Net Open Position
Assessing Exposure to Risk
Forward & FX Swap Pricing
Foreign Exchange Trading
Chapter 5 Money Market
Money Market Instruments
Participants of Money Market
Treasury Bill Market of Bangladesh
Repo & Reverse Repo
Swap
Chapter 6 Fixed Income
Fixed Income Market
Fixed Income Instruments
Bond Pricing & Yield to Maturity
Duration & Convexity
Primary & Secondary Market
Chapter 7 Basic Derivatives
FX Derivatives
Interest Rate Derivatives
Commodity Derivatives
Credit Derivatives
Chapter 8 Market Risk Management
Risk Factors in a Bank
FX Risk Management
Interest Rate Risk Management
Risk Management Limits & Reporting
Implication of Basel II
Chapter 1 Introduction to Treasury
Function of Treasury
The Market
Key Variables in Treasury Management
What is Liquidity
The Role of Central Bank
Treasury as a profit center of the bank
Chapter 2 Reserves
Operational Reserve
Statutory Reserve Requirement
Government Securities
Chapter 3 Asset Liability Management
Liquidity Management
Tools of Liquidity Management
Balance Sheet & Capital Planning
Transfer Pricing of Assets & Liability
ALCO
Chapter 4 Foreign Exchange Management
Fx Markets
FX Quote Conventions
Net Open Position
Assessing Exposure to Risk
Forward & FX Swap Pricing
Foreign Exchange Trading
Chapter 5 Money Market
Money Market Instruments
Participants of Money Market
Treasury Bill Market of Bangladesh
Repo & Reverse Repo
Swap
Chapter 6 Fixed Income
Fixed Income Market
Fixed Income Instruments
Bond Pricing & Yield to Maturity
Duration & Convexity
Primary & Secondary Market
Chapter 7 Basic Derivatives
FX Derivatives
Interest Rate Derivatives
Commodity Derivatives
Credit Derivatives
Chapter 8 Market Risk Management
Risk Factors in a Bank
FX Risk Management
Interest Rate Risk Management
Risk Management Limits & Reporting
Implication of Basel II
PAPER 6(e) : INVESTMENT BANKING AND LEASE FINANCING
PAPER 6(e) : INVESTMENT BANKING AND LEASE FINANCING
Full Marks : 100
Module A : Investment Banking
Investment Banking Functions and Score Investment Setting Investment Return and Risk, Asset Allocation, Security Market Instruments.
Module B : Primary Security Markets
Management of Capital Issues, Undertaking, Issue of Prospectus, Private Placement, Mutual Fund (open ended and closed ended)
Module C : Secondary Market
Dealing vs Brokering- Dealer Activity-Managing Dealer Risk-Financing Dealer Inventory- Brokerage Activity, Possible Abuses by Brokers, Security-Market Indicators. Central Deposit, Stop Exchange.
Module D : Portfolio Management
Introduction to Portfolio Management, Some Background Assumptions, Asset Pricing Models, Efficient Capital Markets.
Module E : Portfolio Analysis
Financial Statement Analysis- Major Financial Statement, Analysis of Financial Ratios, Economic Analysis, Relating Economic Analysis to Efficient Market, Forecasting Tools, The Nature of Effective Economic Forecast, Industry Analysis, Company Analysis.
Module F : Technical Analysis
Concepts of Technical Analysis, Challenges to Technical Analysis, Advantages, of Technical Analysis, Technical Trading Rules and Indicators.
Module G : Security Valuation
Security Valuation Overview of the Valuation Process. Theory of Valuation, Bond Fundamentals and Valuation of Bonds-Computing Bond Yields. Valuation of Equities.
Module H : Lease Financing
Concept of Lease Different Forms of Lease Financing vs. Operating Leaser Financing Evaluating Lease Financing in Relation to Debt Financing : Lessees Perspective-Financing Evaluation : Lessees Perspective Advantages of Lease Financing. Practices of Lease Financing in Bangladesh.
Module I : Investment Banking Structure in Bangladesh
Structure, Legal Framework, Performance, Role of SEC (Prevention of Insider Lending and Investor Protection), ICB (Institutional Investor), DSE and CEC Corporate Merger, Restructuring, Acquisition, Corporate Advisory
References:
Module A : Investment Banking
Investment Banking Functions and Score Investment Setting Investment Return and Risk, Asset Allocation, Security Market Instruments.
Module B : Primary Security Markets
Management of Capital Issues, Undertaking, Issue of Prospectus, Private Placement, Mutual Fund (open ended and closed ended)
Module C : Secondary Market
Dealing vs Brokering- Dealer Activity-Managing Dealer Risk-Financing Dealer Inventory- Brokerage Activity, Possible Abuses by Brokers, Security-Market Indicators. Central Deposit, Stop Exchange.
Module D : Portfolio Management
Introduction to Portfolio Management, Some Background Assumptions, Asset Pricing Models, Efficient Capital Markets.
Module E : Portfolio Analysis
Financial Statement Analysis- Major Financial Statement, Analysis of Financial Ratios, Economic Analysis, Relating Economic Analysis to Efficient Market, Forecasting Tools, The Nature of Effective Economic Forecast, Industry Analysis, Company Analysis.
Module F : Technical Analysis
Concepts of Technical Analysis, Challenges to Technical Analysis, Advantages, of Technical Analysis, Technical Trading Rules and Indicators.
Module G : Security Valuation
Security Valuation Overview of the Valuation Process. Theory of Valuation, Bond Fundamentals and Valuation of Bonds-Computing Bond Yields. Valuation of Equities.
Module H : Lease Financing
Concept of Lease Different Forms of Lease Financing vs. Operating Leaser Financing Evaluating Lease Financing in Relation to Debt Financing : Lessees Perspective-Financing Evaluation : Lessees Perspective Advantages of Lease Financing. Practices of Lease Financing in Bangladesh.
Module I : Investment Banking Structure in Bangladesh
Structure, Legal Framework, Performance, Role of SEC (Prevention of Insider Lending and Investor Protection), ICB (Institutional Investor), DSE and CEC Corporate Merger, Restructuring, Acquisition, Corporate Advisory
References:
1 Different Publications of SEC, DSE and CSE.
2 Francis, J.C.-Investment (McGraw Hill, Singapore).
3 Hirt, G. A. ad Stanley B. Block-Fundamentals of Investment Management (IRWIN, U.S.A.)
4 Public Issue Rules, 1998.
5 Reily, Frank, K. and Edger A. Norton-Investments (The Dryden Press, U.S.A.)
6 Securities & Exchange Ordinance, 1969.
7 Sharpe, W.F.-Investments (Prentice-Hall Inc., U.S.A.)
8 Avw_K cwZ b AvBb, 1993
9 wmwKDwiwUR I GP Kwgkb (wgDPzqvj dv) (1993 mvbi 15 bs AvBb)
10 wmwKDwiwUR I GP Kwgkb AvBb, 1993 (1993 mbi 15 bs AvBb)
PAPER 6(d) : ISLAMIC BANKING
PAPER 6(d) : ISLAMIC BANKING
Full Marks : 100
Module A: Islamic Economics
Islamic Economics- Meaning and Scope, Nature of Economic Laws, Islam and Other Economic Systems, Consumption and Production in Islam, Distribution of Wealth in Islam, Trade and Commerce in Islam, Islamic Approach to Money, Banking and Monetary Policy.
Module B: Interest in Islam
Interest in Islam, Meaning of Riba, Conceptual Issues Related to Riba, Comparative Difference Between Interest and Profit, Classical and Keynesian Views on Interest.
Module C: Islamic Banking
Objectives and Functions, Global Experiences, Operational Mechanism of Islamic Banking System of Guarantee, Non-Banking Services of Islamic Banks, Islamic Bank and Central Bank, Conventional vis--vis Islamic Banking.
Module D: Deposit Mobilization Process
Wadia and Mudraba Accounts their Characteristics and Mode of Operations.
Module E: Investment and Operation of Islamic Banks
Musharaka, Mudaraba, Murabaha, Bai-E-Muazzal, Bai-E-Salam, Hire Purchases, Quarz E Hasana, Lease Finance, Auction Investment, Syndicated Investment, Term Investment.
Module F: Fund Management in Islamic Banking
Asset Liability Management (ALM), Liquidity Management, Liquidity Versus Profitability, Liquidity Theories and Islamic Banking Risk Management in Islamic Bank.
Module G: Foreign Exchange Operation of Islamic Bank
Import and Export Financing, Methods of Trade Payments Exchange Rates Applicable Rates for FEX Operations.
Module H: Central Banking in Islamic Framework
Central Banking in Islamic Framework Monetary Policy in Islam Banking Supervision.
Module I: Rural Finance, Welfare and Ancillary Services of Islamic Banking
Module J: Role of Shariah Council
Need for Shariah Board Relationship with Board of Directors and Central Bank, Power and Function of Shariah Councils.
Module K: Experience of Islamic Banks at National and International Level
References:
Module A: Islamic Economics
Islamic Economics- Meaning and Scope, Nature of Economic Laws, Islam and Other Economic Systems, Consumption and Production in Islam, Distribution of Wealth in Islam, Trade and Commerce in Islam, Islamic Approach to Money, Banking and Monetary Policy.
Module B: Interest in Islam
Interest in Islam, Meaning of Riba, Conceptual Issues Related to Riba, Comparative Difference Between Interest and Profit, Classical and Keynesian Views on Interest.
Module C: Islamic Banking
Objectives and Functions, Global Experiences, Operational Mechanism of Islamic Banking System of Guarantee, Non-Banking Services of Islamic Banks, Islamic Bank and Central Bank, Conventional vis--vis Islamic Banking.
Module D: Deposit Mobilization Process
Wadia and Mudraba Accounts their Characteristics and Mode of Operations.
Module E: Investment and Operation of Islamic Banks
Musharaka, Mudaraba, Murabaha, Bai-E-Muazzal, Bai-E-Salam, Hire Purchases, Quarz E Hasana, Lease Finance, Auction Investment, Syndicated Investment, Term Investment.
Module F: Fund Management in Islamic Banking
Asset Liability Management (ALM), Liquidity Management, Liquidity Versus Profitability, Liquidity Theories and Islamic Banking Risk Management in Islamic Bank.
Module G: Foreign Exchange Operation of Islamic Bank
Import and Export Financing, Methods of Trade Payments Exchange Rates Applicable Rates for FEX Operations.
Module H: Central Banking in Islamic Framework
Central Banking in Islamic Framework Monetary Policy in Islam Banking Supervision.
Module I: Rural Finance, Welfare and Ancillary Services of Islamic Banking
Module J: Role of Shariah Council
Need for Shariah Board Relationship with Board of Directors and Central Bank, Power and Function of Shariah Councils.
Module K: Experience of Islamic Banks at National and International Level
References:
1 Ahmed, Shaikh Mahmud. Towards Interest Free Banking. International Islamic Publisher, Delhi
2 Choudhury, Masudul Alam. Money in Islam, Routledge, London
3 Hasan, Kabir M. A Text Book on Islamic Banking
4 Hoque, Ataul, Readings in Islamic Banking Islamic Foundation Bangladesh
5 Mannan, M A, Islamic Economics- Theory and Practice, New Delhi, India
6 Rahman, M.M and Rahman, B.M.H. Islamic Finance System
7 Shaghil, M, Islamic Economics New Delhi, India
