Hedging with Prepaid Variable Forward Contract

Prepaid variable forward contract is an agreement made with the brokerage firm by an executive of the firm to lock in the profut and defer the taxes on the capital gain. Predetermined number of shares is given to the brokerage firm, with the official transferring on some future date. In return the executive recieves usually 75%to 90% of the current value of the stock.

The original owner receives a high percentage of the value of the shares at the time of transfer and receives a portion of the gains at the official transferring. If there was a loss during this time period, the brokerage absorbs it. The investor can then use the cash advance to diversify his or her overall investment portfolio.

Options - In nutshell

Option contracts are the trade right and obligation for buyer and seller respectively on underlying asset at a pre determined price on or before the time specified in the option contract. Having said that, the buyer of the option contract acquires the right to to buy/sell the asset and the seller of the option contract is under the obligation to honour the trade if option is exercised by the owner of the option.

Underlying asset can be stocks, indices, commodity future, currency or interest rates.

Option premium is the consideration paid upfront by the option holder (buyer of the option) to the option writer (seller of the option).

Analyst Role - Branching it out....

Analyst in finance can play multiple roles depending on the industry one is in and company ne is associated with. Lets have a close look at what a financial analyst can be involved in.

Equity Research Analyst - Aka sell-side/buy-side researchers are involvled in searching and aggregating data and building different financial models to being the clients 'thought partner' in writing in-depth reports and generating ideas for other analysts sometime working at back office. Sell-side analyst work with client focusing on specific sectors or companies of the economy. They prepare ready-to-publish reports by implementing their strategy research capabilities such as building and maintaining highly analytical databases, building and maintaining financial models, preparing earnings review or preview notes, initiating coverage and generating thematic research ideas. Similarly researchers working with buy-side clients offer comprehensive range of service, from front- and middle-office work like portfolio optimization, research and analysis, etc. to back-office support like portfolio accounting and data maintenance.

Financial Analyst - Wanna b 1? Lets understand it...

Job of a financial analyst in investment domain is basically to researches on macro and micro economic conditions along with the industry and company fundamentals to make business and industry recommendations.

Evaluation of company stocks (equity), providing customers with buy or sell recommendations, preparing financial models for recommendations and other economic conditions can also be a part of job.

Analyst can work in for either equities or fixed income securities like bonds.

Specifically, investment banking analyst deals with the study on the feaibility studies of different sources of raising funds, market competitions. At an IB, analyst is also involved in underwritting of securities, merger and acquisitions, modeling and forecasting like jobs.

So most of the time it goes like performaing analysis of the world and then country economic conditions. Then drill down to particular sector in the industry and then to the company research in the same order.

Investment Banking in simple words

Its neither Investment not Banking.

But what resides at the core the job of investment bankers is to help corporate or organization, raising funds and involving underwriting. They are equally responsible for diligence and valuation during merger and acquisitions.

The underwriting by which money is raised can be equity i.e. stocks or bonds. What they get is a percentage of the capital raised as their fees for the service.