Let us learn about the fixed interest rate and floating interest rate before understanding the differences between them.Fixed interest rateIn fixed interest rate the lending rate is fixed. In fixed interest rate loan tenure and months installment are known before. Switching of fixed rates to floating rate (a few years) ... Read More

Both terms recession and slowdown affects the economy negatively. Cause, manner and degree in which they affect the economy differ.RecessionIt is the term used in general economic activity. In macroeconomics, recession is recognized when there is negative GDP growth rate after two consecutive quarters. Recession is the part of the ... Read More

In option trading there are different terms involved and different complexities are involved in choosing the best fit or strategy. Each term has its own advantages and limitations.Some of the aspects to look at are the current market position, investor risk appetite, investor trading experience, profit potential, trade breakeven point, ... Read More

In trading investors can take long positions and short positions, they can buy an asset or sell an asset. Long and short positions are further complicated into call and put. An investor can take any of the above positions, meaning they may enter in long put, long call, short put ... Read More

Future contract is the contract that allows the buyer/seller to buy/sell a particular commodity at a strike price at a future date. Stock futures enable investors to buy a certain quantity of stocks at strike price on a future date. Stock futures contracts were introduced in 2000 which were index ... Read More

Hedged items are identified and designated at inception of hedge. Recognized asset or liability, unrecognized firm commitment, forecasted transaction (highly probable), exposures (aggregated), net investment (foreign operations) etc., are some of the hedged items (provided they are reliably measurable).Exposure (aggregated) − Combination of derivative and exposure.Risk components − Financial and ... Read More

Changes in fair value or cash flows of designated financial instruments should offset the change in fair value/cash flow of designated hedged items. That instrument is called a hedging instrument.ExampleMost oil companies need to hedge their exposure to energy prices which are volatile in nature. Choosing a suitable hedging instrument ... Read More

In hedge accounting, items being hedged are to be identified and designated at inception of hedge.Some of the examples of hedge items are assets, liability, forecasted transaction (highly probable), net investment (foreign operation), firm commitment or group of above items.Hedged items essentially expose the entity to risk that changes fair ... Read More

Generally hedging instruments are financial instruments used by investors to offset potential changes in fair value of their hedged items.For example, if a company is selling and buying their products in international markets they are subject to foreign exchange risk, as the exchange rate (foreign currency to domestic currency) always ... Read More

IFRS 9 and IAS 39 are two important accounting standards which tell how to account for financial instruments. IFRS is the recent standard which was released on 24/07/2014.DifferencesThe major differences between the International Accounting Standards 39 (IAS 39) and International Financial Reporting Standards 9 (IFRS 9) are as follows−IAS 39IFRS ... Read More