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Archive for the ‘credit’ Category

Reinforce your knowledge about payday loan

28 Jun

By using this practical cognitive technique, human beings have learned about life and survived on their own even in new and unfamiliar situations. A primitive example of this knowledge transference is the lesson most of us learned at a very young age about fire. We were told not to touch it because it was hot. Fire hurts! Most of us heeded that advice. Furthermore, if we happened to get burned inadvertently, the accident did something very important for us. It reinforced our knowledge that fire is hot and it will burn and hurt if we touch it. Since we don’t enjoy pain, we created a mental map about fire and avoided touching it. Now, as adults, we make decisions about fire based on our past orientation.

The “Mental Map Matrix,” illustrates how we use mental maps. While the human decision-making process includes an incalculable number of variables, this simple model shows how we continue to create new mental maps and reinforce old ones. It starts when something happens to us or we experience a new event (box 1). The first thing we do is instantaneously scan our memory for any similar experiences (box 2). Generally at a subconscious level, we ask, “Have I had an experience like this?” (box 3). In most cases, especially as we get older and have more life experiences behind us, we’ll identify some experience that resembles the current situation. If we do, we then try to remember the outcome: “Was it successful for me?” (box 4). This is an internal value judgment. We make this judgment based on our psychology and personality at that moment in our life. Most likely we judge “success” by whether the outcome got us what we needed. If we judge the previous outcome to have been successful, we’ll duplicate the behavior (box 5) to match our mental map and will expect a similar outcome. The aftermath of the experience reinforces our mental map (box 6) as the “right” reaction to that experience.

 

Take advantage of credit self-managing

23 Mar

78Let me illustrate the power of a closed paradigm. I once worked with the director of a regional telephone company to help establish a self-managed group of technicians responsible for telephone service repair in a western state. The managers who reported to the director were initially reluctant to try a self-managed group because they thought their employees were lazy and would take advantage of a selfmanaging environment. But a nine-month trial demonstrated that the self-managed team was more productive and did higher quality work than the traditional work team with a supervisor. In fact, the self-managed team completed a greater number of repair calls and had a lower rate of repeat visits. With these impressive results, I expected the organization to embrace the new method and expand its use.

I was wrong. Despite documented evidence of the self-managed team’s success, the managers clung to their old perception.Moreover, their stubbornness proved to be a powerful influence on the director, who dismantled the self-managed team. The data regarding the team’s performance were kept from the rest of the organization simply because the managers refused to update their beliefs or disturb the status quo. They still believed the employees needed supervision or they would not work. When reality contradicted their beliefs, they preferred to suppress the data rather than change their mental maps.

 
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Posted in credit, credit cards, credit score, economy, finances

 

The credit and economic risks

19 Dec

A synthetic CDO is an investment in which the underlying collateral is a portfolio of CDS. The issuer does not own the underlying assets but retains the credit and economic risks. The recent CDOs make use of “unfunded” senior tranches. The super senior investor will enter into a CDS with the SPV. The super senior is typically unfunded, matching the unfunded nature of CDS. The super senior tranche provides second-loss credit protection. As in cash CDOs, the rated note and equity pieces are generally funded. Synthetic deals can have a final maturity of 5–7 years.

Example: Collateral pool No of reference entities: 100 Notional amount of CDS: Euro 5 million Total size: Euro 500 million The example details a possible tranching of a 500 million portfolio into four tranches. Losses in the portfolio up to 5 percent (Euro 25 million of losses in total) would result in a complete write-down of the equity tranche. Further losses in the portfolio in excess of 5 percent and up to 9.5 percent (losses of Euro 47.5 million in total) would then result in a write-down of principal in the mezzanine tranche. If each credit had a 50 percent recovery rate, each default in the underlying portfolio would result in a loss of Euro 2.5 million. Therefore, it would take 10 defaults to write-down the equity tranche.

 

The leveraged loan spreads

05 Dec

The following types of CDOs are rather common:

  • Investment grade CDOs (synthetic)
  • Collateralized loan obligations/Synthetic balance sheet CLOs
  • High-yield CBOs/Emerging market CBOs

A typical feature of collateralized loan obligations (CLOs) is that all loan collateral is typically in a senior and secured position in the borrower’s capital structure. Various covenants also serve to enhance the secured nature of loans. Loans are typically issued as floating rate instruments and have shorter average lives than high-yield CBOs. The single most important differentiating factor between loans and high-yield bonds is the senior secured nature of the loans (much higher recoveries and actually lower default probability). It shows the leveraged loan spreads.

Adjusting CDS spreads and loans in the investment grade universe for risk (default and recovery rate) and reward (loan pricing) shows that the CDS loan basis should be rather positive.

 
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Posted in credit, finances, income, making money

 

The basic credit strucure

21 Nov

The idea in a CDO transaction is to securitize debt collateral to make it more attractive to different classes of investors. In the earlier days, CDOs purchased high yield/emerging market debt through a special purpose vehicle (SPV) and raised funds by issuing securities ranging from AAA to BB/B. The overall risk of the portfolio of various collateral is tranched from relatively safe to speculative to satisfy different degrees of risk appetite.

Beginning with the most senior class, the cash flows from the collateral are used to service the outstanding notes sequentially. Losses are allocated on the basis of reverse seniority. This basic structure is also known as a cash flow CDO because the collateral cash flows are used to sevice the outstanding securities. Every CDO has an asset side, generating its revenue, and a liability side, whose obligations need to be satisfied. The difference between them is termed the funding gap.

 
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Posted in business tips, cash reserves, credit, credit cards

 

Have confidence to develop a credit

25 Oct

If these new products do not exist, you can have the confidence to develop them.

Another way in which customer loyalty drives profitability is through the ability to increase prices to loyal customers, because, of all the possible purchasers, they are the ones best placed to understand the value of your products. Loyal customers do not typically require discounts or product add-ons to stay with you. If they are happy with the product or service they are buying and if it is competitive, they will not normally be tempted away. Clearly, this depends on variables such as the nature of the market, but there is an element of inertia in most markets.

Loyal customers can also be used to help with market testing of new products. This not only saves money in testing through other means, but it is also often much more effective.

 
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