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Understanding ETFs Uses, Returns and Comparison with Mutual Funds and Stocks

 Exchange-Traded Funds (ETFs) have gained popularity among investors for their unique features and benefits. In this blog, we'll explore the uses of ETFs, their potential returns, how they differ from mutual funds and stock investments, and their safety profile. What is an ETF? An ETF is a type of investment fund that trades on stock exchanges, much like individual stocks. It holds a collection of assets, such as stocks, bonds, or commodities, and aims to track the performance of a specific index, sector, or asset class. Uses of ETFs Diversification : ETFs allow investors to gain exposure to a wide range of assets without having to purchase each individually. For instance, an ETF tracking the S&P 500 gives you exposure to 500 different stocks, reducing the risk associated with individual stock investments. Cost Efficiency : ETFs often have lower expense ratios compared to mutual funds. They typically pass on lower management costs to investors since they are often passively man
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RISK IN BANKING - PART 1

Risk in Banking - Part 2

 Banking Book - Deposits and Landing and Some Investment required for Statuary Requirement
Banking Book exposed to
1) Liquidity Risk
2) Defaulter Credit Risk
3) Interest Rate Risk
4) Operational Risk

Off Balance Sheet Exposure-
- Contingent in nature
- Not involve immediate funding but become fund based obligations.Subject to certain contingencies.
Example- Guarantee, Derivatives like swaps, Futures, Forward contract, Options.

 Off Balance Sheet Exposed to
1) Liquidity Risk
2) Interest Rate Risk
3) Market Risk
4) Credit Risk
5) Operational Risk

 Sources of Risks in Banks-
1) Corporate Finance
2) Trading and Sales
3) Retail Banking
4) Private Banking
5) Commercial Banking
6) Payment and Settlement
7) Agency  Services
8) Asset Management
9) Retail Brokerage

 Banking book exposed to-

 Liquidity Risk, Defaulter Credit Risk, Interest Rate Risk, Operational Risk

 Trading Book Exposed to-

 Market Risk, Liquidation Risk, Market Liquidity Risk, Default or Credit Risk, Operation Risk

 Credit or Default Risk- 

 Credit Risk - Potential of a borrower or counter party failing to meet obligation.

 Counter Party Risk - Is a credit risk generally associated with a trading transaction.
Country or Sovereign Risk - In case of cross country.

 Market Risk - Also known as price risk, adverse mark to market risk and arises due to movement in prices of interest rate instrument, equity, commodity and currency.
Forex Risk or Exchange Risk - market liquidity risk.

 Operational Risk - Risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
  • Fraud Risk (internal or external)
  • Model Risk
  • Compliance Risk
  • Regulatory Risk
  • Technology/System Risk
  • Legal risk
Other Risks - 
  • Strategic Risk
  • Reputation Risk
  • Political Risk
  • Environment Risk
  • Natural Calamities Risk etc.
Interest Rate Risk - Risk to interest income due to adverse interest rate movement.



Interest Rate Movement Impact-
  • Earning of bank     
  • Economic value of equity
  • Off balance sheet exposures like derivatives.


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