Essay on We Must Strive to Protect Privacy in Technology

We Must Strive to Protect Privacy in Technology Technology is getting more and more complex as the years come and go. The availability of personal information is easier to access and the risk of it being tampered with is also high. As the years pass, the threat of privacy invasion gets greater and greater and easier to happen. There are several ways that privacy is able to be invaded and there will only be more to come. Americans have had their personal information given away without even knowing it. From dozens of public and private sources that have created consumer profiles, â€Å"the average American is profiled in up to 150 commercial databases† (Hinds 7). People are trying to â€Å"prohibit collection of personal information on the†¦show more content†¦Ã¢â‚¬Å"In countless offices, employers can monitor telephone calls, peruse email messages, and even retrieve supposedly ‘deleted’ files without an employee’s knowledge† (Brin 56). There is nothing the employees can do about this if they never know it is even happening. New technology has been invading organizations as well. The workers of the organizations are also at a high risk. â€Å"Technology enhances the ability of organizations to monitor individuals† and what they do on the job (Regan 2). If they do something on the computer or phone, the possibility of someone else knowing is always there. With this problem growing, it makes workers feel uncomfortable and unsafe with every move they make. In order to feel safer about using a computer, there are some precautions that may be taken to prevent any potential hacking or privacy invasion. Firewalls may be set up to â€Å"prevent any unauthorized access to or from a network.† For a wireless network, Wired Equivalent Privacy (WEP) would be used to avoid hackers. An implement that hackers use to infiltrate a network is called SATAN. It is a â€Å"Security Administrator Tool for Analyzing Networks.† It was initially created to allow administrators to find any vulnerability in a system. Hackers have used this to look at important files and documents that are confidential (webopedia). As time goes on, so will the movement toward protecting privacy from technology. There will always be hackers that findShow MoreRelatedMobile Phones And The Advancements Of Modern Day1333 Words   |  6 PagesThe expanding use of cellular phones and the advancements of modern-day technology are leading the way for a broadening perspective and interpretation of our Fourth Amendment right. Modern technology, such as cellular phones, challenge the standards of an individual s right to privacy as set forth in our Bill of Rights, Amendment No. 4. 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It is safe to say the loss of privacy can be self-imposed for societies need to collaborate and socialized

The Enigma Of Capital And The Crisis Of Capitalism

A Critical Review of David Harvey’s The Enigma of Capital and the Crisis of Capitalism Sudheer Vemuru Economics 490 10 November, 2014 In writing this paper, I have abided by the Honor Code at UNC-Chapel Hill. Signature:____________________ ______________________ ï ¿ ¼ The Enigma of Capital and the Crisis of Capitalism is a forum for author David Harvey to voice his concerns on the contemporary global capitalist model. As a Marxist geographer and anthropologist, Harvey analyzes modern capitalism through a lens of skepticism that results in a scathing renunciation of the capitalist goals of perpetual accumulation and creative destruction. Harvey argues that in a world constrained by scarce resources and burgeoning social barriers, the capitalist process produces a strange dynamic that oscillates between periods of crisis and boom (40). In the end the capitalist may be able to hedge against her losses, but the vast majority of the population will wallow in the doldrums, enslaved by the power of capital and unable to pull themselves up by their bootstraps. Such is the extent of the problem we face in the wake of the Great Recession. The economy continues to grow modestly, while median household income shrinks (Noss 2). The capitalists are reloading on ce again at the expense of Main Street. As Harvey points out, there is a great need to reevaluate of our views of modern capitalism. The Enigma of Capital is just a starting point. Harvey begins his analysis of capitalism with aShow MoreRelatedThe Enigma Of Capital And The Crisis Of Capitalism By David Harvey779 Words   |  4 Pages210-350 Enigma Capital INTRODUCTION The book that I chose to do my book review on was The Enigma of Capital and The Crisis of Capitalism by David Harvey. (Oxford University Press, 2011). 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Consumer Behaviour in Australia

Question: Describe about the consumer behaviour. Answer: The market trend of Australia can be determined by the demographic characteristics which help to analyze the need of the varied customers in the country. The demographic characteristics help the industry to evaluate the need of the present trend of the market and also help in market segmentation of the industry as well. The demographic trend also helps in the effective planning of the business and also helps in evaluating the marketing mix and potentiality of the customers towards organizational products as well (Solomon et al. 2012). Thus, the consumer behavior helps industries to analyze their products and also help them to increase the profitability rate through present market demand as well. Thus, the consumer behavior in various ways influences the industries of Australia and also helps in determining the sustainability of the industry. A) Vacation in Australia and New Zealand gets affected by the long life span of the senior citizen. The traveling and transport become difficult for the Australian families and thus the face service constraints regarding improvement and development in the market (Moutinho 2012). The Australian vacation industry thus faces constant challenge regarding long life span of the senior citizen as they find difficult at times in traveling which affects the industry as a whole. The social disadvantage also affects the cost of the industry and thus proves to be difficult for the industry to attract more people towards the industry. The industry also faces constraint regarding accessing private transport due to financial stress, or cost of petrol which also affect the vacation industry in Australia and New Zealand. The cosmetic industry is widely affected by the senior citizen in Australia and New Zealand. Most women are interested in the cosmetic surgery which helps the industry to expand its business and helps in the growth of the industry as well. 48% of women are interested towards the industry and demands for the liposuction (Akehurst et al. 2012). This helps the company in increasing the profit sales of the country and helps in expansion as well. 23% of men are interested towards the industry as well. Remaining 23% of women and 17% of men are also possible interested towards the industry as a whole. Thus, the consumer behavior helps in the growth rate of the industry in the market. The pre-cooked food industry also gets highly affected by the consumer behavior of the senior citizen. The senior citizen needs to maintain the health to stay well and live long. Thus, the pre-coked foods are not well accepted by the people belonging to the senior citizen in the country (Paul and Rana 2012). Australia and New Zealand thus suffer a setback regarding pre-cooked industry as both the countries comprises mostly with aging people. B) The baby boomers are more prone towards the vacation industry in Australia and New Zealand, which helps the industry to increase their growth level more rapidly in the countries as well. The baby boomers after leaving their workplace to find out a reason for relaxation and thus traveling opt to be the best option for the baby boomers to relax (Losasso et al. 2012). The vacation industry in Australia and New Zealand thus gets affected by the baby boomers as they want to travel with the free mind and helps in gaining competitive advantage. The baby boomers with Australia and New Zealand affect the cosmetic industry to a large extent. The boomers between the ages of 40 50 comprise as ideal cosmetic candidates within Australia and New Zealand. The consumer through entering at the age of 50 still feels to be at the 30s and thus become conscious more towards the cosmetic industry (Solomon et al. 2012). This helps the industry to gain competitive advantage and also helps to gain more loyal customers towards the industry. The baby boomers become very conscious regarding the health of the consumer and also help in improving the industrial growth as well. The baby boomers after the retirement tend more towards healthy and nutritious diet which lowers the consumption of pre-cooked industry in the country (Hansen et al. 2012). Thus, the industry gets negative affect from the baby boomers towards the expansion of the market. C) The Generation Y with growing household and also burden with high mortgage tends towards lowering travel interest in the country. The generation Y though gets interested towards tourism, but the burden of mortgage also affect the industry which lowers the profit rate of the industry (Batt and Liu 2012). The net sales of the industry get affected, and thus, the debts hold back Generation Y towards the improvement and development of the industry in the market. The Generation Y tends towards the cosmetic industry to a broad expect. Mostly women tend towards the cosmetic industry rather than men in the society. Though the cosmetic industry does not gain much advantage from this section of the society still, the industry retains its position in the market with minimum net sales profit. Generation Y also tends more towards the pre-cooked industry as the consumer mostly spend time in chasing their career and thus affects the food habit. The pre-cooked industry also attracts more customers through well packaging and gains more loyal customers towards the organizational products and helps in gaining competitive advantage in the market (Dibb and Simkin 2012). The consumer behavior also helps the industry to gain sustainability and thus increase the growth rate of the industry as well. D) Vacation industry in Australia and New Zealand gets affected largely by the "Single Adult" households. The single adults love to travel and are known as audacious explorers. They are believed to treat their life with adventures, and thus, the risk cannot stop them from exploring (Eze et al. 2012). This helps the industry to add value towards the organization and also helps in the expansion of the market as a whole. However, the risk and threat factor influence some from exploring but major population of this section helps in the growth of the industry. The consumer behaviour of the Single Adult group comprises largely towards the expansion of the cosmetic industry in New Zealand and Australia. Women mostly tend towards the cosmetic industry but with the present marketing trend, the consumer behaviour of men also tends towards the industry (Eze et al. 212). This helps the industry towards the development and expansion of the market in the international scenario. The cosmetic industry thus gets highly profitable with the increased consumer behavior and helps in improving the sales rate of the industry. The pre-cooked industry also helps to expand the market through the positive response of consumer behaviour towards the industry. Single Adults tends more towards the pre-cooked industry as they find themselves with less space for themselves and thus the industry gets more loyal customers towards the industry (St Wang 2013). The increased consumer behavior towards the products helps in the expansion of the market and thus helps in improving the quality of the products as well. Single Adults in New Zealand and Australia thus gets more prone towards the pre-cooked industry which further helps the generation to save time and gets high quality of food as well. This helps in the expansion of the industry as well. The demographic characteristics of a varied consumer within Australia and New Zealand help to determine the profitability of the industry. The cosmetic, vacation and pre-cooked industry thus gets affected by the consumer behaviour which affects the profit rate of the industry as a whole. The positive and negative behavior also helps the industry in an evaluation of the need for the industrial products and thus helps in analyzing the expansion of the market as well. The consumer behavior helps the industry to gain competitive advantage and helps in sustainability as well in the market. Reference List: Akehurst, G., Afonso, C. and Martins Gonalves, H., 2012. Re-examining green purchase behaviour and the green consumer profile: new evidences.Management Decision,50(5), pp.972-988. Batt, P.J. and Liu, A., 2012. Consumer behaviour towards food products in Western Australia.British Food Journal,114(2), pp.285-297. Dibb, S. and Simkin, L., 2012. Targeting, segments and positioning.International Journal of Retail Distribution Management,19(3), pp.29-34. Eze, U.C. and Lee, C.H., 2012. Consumers' attitude towards advertising.International journal of business and management,7(13), p.94. Eze, U.C., Tan, C.B. and Yeo, A.L.Y., 2012. Purchasing cosmetic products: a preliminary perspective of Gen-Y.Contemporary Management Research,8(1), p.51. Hansen, T., Risborg, M.S. and Steen, C.D., 2012. Understanding consumer purchase of free of cosmetics: A value driven TRA approach.Journal of Consumer Behaviour,11(6), pp.477-486. Losasso, C., Cibin, V., Cappa, V., Roccato, A., Vanzo, A., Andrighetto, I. and Ricci, A., 2012. Food safety and nutrition: Improving consumer behaviour.Food Control,26(2), pp.252-258. Moutinho, L., 2012. Consumer behaviour in tourism.European journal of marketing,21(10), pp.5-44. Paul, J. and Rana, J., 2012. Consumer behavior and purchase intention for organic food.Journal of consumer Marketing,29(6), pp.412-422. Solomon, M., Russell-Bennett, R. and Previte, J., 2012.Consumer behaviour. Pearson Higher Education AU, 22(1), pp.34-54. Solomon, M.R., Russell-Bennett, R. and Previte, J., 2013.Consumer behaviour: Buying, having, being. Pearson Australia. ST Wang, E., 2013. The influence of visual packaging design on perceived food product quality, value, and brand preference.International Journal of Retail Distribution Management,41(10), pp.805-816.

International Financial Management Essay Example

International Financial Management Essay INTERNATIONAL FINANCIAL MANAGEMENT Undertaken at â€Å"TECNIA INSTITUTE OF ADVANCED STUDIES† Submitted in the partial fulfillment for the award of the degree of MASTER OF BUSINESS ADMINISTRATION Under the Supervision  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Submitted by and Guidance ofRAMAN KUMAR Ms. Sakshi Goel 05117003910 (Lecturer IFM)MBA- 3rd Sem SESSION: 2010 2012 TECNIA INSTITUTE OF ADVANCED STUDIES (Approved by AICTE, Ministry of HRD, Govt. of India) Affiliated To Guru Gobind Singh Indraprastha University, Delhi INSTITUTIONAL AREA, MADHUBAN CHOWK, ROHINI, DELHI- 110085 E-Mail:[emailprotected] rg, Website: www. tecniaindia. org Fax No: 27555120, Tel: 27555121-24 Ques 1) Bring out the similarities and dissimilarities in the financing facilities at IMF and World Bank. Discuss how the two institutions help in the development of developing countries? World Bank and IMF * The World Bank and the IMF are twin pillars supporting the worlds economic and financial structure. The World Bank is an investment bank owned by its member nations. The IMF functions more like a credit union whose members can draw from a common pool of funds to assist in emergencies. As of Aug. 1, 2010, its biggest borrowers were Romania, Ukraine and Hungary. 19441969 * From July 1 to 22, 1944, the IMF and World Bank Articles of Agreement were formulated at the International Monetary and Financial Conference in Bretton Woods, New Hampshire. On May 8, 1947, France became the first nation to borrow from the IMF. On Sept. 29, 1967, the IMF board approved a plan to establish special drawing rights (SDRs), which are international reserve assets used by member countries to supplement their foreign exchange reserves. 19701985 * On Aug. 15, 1971, the U. S. topped using the gold standard to settle international transactions. In 1974, the IMF adopted a new method of SDR valuation based on a basket of 16 currencies. This basket was simplified on Sept. 17, 1980, to hold five currencies, and today it holds fou r: the U. S. dollar, euro, Japanese yen and pound sterling. On Dec. 2, 1985, the two agencies expressed support for a U. S. initiative for comprehensive adjustment measures by debtors, increased and more effective structural lending by multilateral development banks, and expanded lending by commercial banks. 1986-Onward * On Dec. 9, 1987, the IMF established the Enhanced Structural Adjustment Facility (ESAF) to provide resources to developing nations undergoing fundamental debt restructuring and economic reform. Countries of the former Soviet Union joined the two agencies in 1992. The IMF, in conjunction with the G7, helped stabilize the 1995 Mexican peso crisis and the 1997 Asian currency crisis. On Jan. 8, 2001, the IMF and the Bank announced debt relief for 22 countries, 18 of them in Africa. On Apr. 13, 2003, a joint IMF-World Bank project was launched to monitor the policies and actions needed to achieve the United Nations Millennium Development Goals by 2015. On Sept. 25, 2005, agreement was reached on a G7/G8 proposal to provide 100 percent debt relief to the worlds heavily indebted poor countries (HIPCs). During their April 2006 meetings, the IMF and the Bank focused on ways to finance clean energy in developing countries, and the role of governance in meeting worldwide social, health and economic goals. Similarities Differences The overall structure of the  United Nations System  and  World Bank Group  has been described in previous posts. Both of those groups have expanded exponentially since their creation. Given that both the UN and World Bank were born from the same parents almost simultaneously, the extent of differences among organizations both within and between those two broad institutional systems is surprising: 1. Although membership in all entities within the UN System and World Bank Group is limited to sovereign- states, all members of the United Nations  General Assembly  are not necessarily members of  IBRD  (or other  World Bank  subsidiary bodies or specific UN  specialized agencies); 2. We will write a custom essay sample on International Financial Management specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on International Financial Management specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on International Financial Management specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Although sovereign-state members are represented by their respective governments within  UN  System  and  World Bank Group  entities, different agencies within those governments represent them in those different international bodies (for example, [i] ministries of  foreign affairs  generally represent their governments  in the  General Assembly  and  Security Council, [II] bi-lateral development agencies, ministries of external affairs, or sector-specific  line ministries  normally represent them inspecialized agencies, and [iii] ministries of  finance  or  central banksnormally represent them in the  World Bank  and  International Monetary Fund  [IMF]); 3. Although informal agreements existed that the  Administrator  of the  United Nations Development Programme  (UNDP) and thePresident  of the  World Bank  should both be Americans,6  a wide range of other nationalities have always served in the highest leadership position of other UN specialized agencies; 4. Although senior leaders within both systems stressed the importance of â€Å"country-knowledge† among staff, the UN system began posting  Resident Representatives  to client countries very early-on while the World Bank continues to rely primarily on staff and consultants dispatched from its Washington headquarters; and 5. Although the UN system fairly rapidly expanded its interests in international development assistance and capacity to provide it, the attention of its overall leadership and Secretariat staff remains focused on, in the words of Craig Murphy, â€Å"matters of international high politics. † IMF and World Bank help in the development of developing countries The IMF and World Bank collaborate regularly and at many levels to assist member countries and work together on several initiatives. In 1989, the terms for their cooperation were set out in a  concordat  to ensure effective collaboration in areas of shared responsibility. High-level coordination: During the  Annual Meetings  of the  Boards of Governors of the IMF  and the World Bank, Governors consult and present their countries’ views on current issues in international economics and finance. The Boards of Governors decide how to address international economic and financial issues and set priorities for the organizations. A group of IMF and World Bank Governors also meet as part of the  Development Committee, whose meetings coincide with the Spring and Annual Meetings of the IMF and the World Bank. This committee was established in 1974 to advise the two institutions on critical development issues and on the financial resources required to promote economic development in low-income countries. Management consultation. The Managing Director of the IMF and the President of the World Bank meet regularly to consult on major issues. They also issue joint statements and occasionally write joint articles, and have visited several regions and countries together. Staff collaboration. The staffs of the IMF and the Bank collaborate closely on country assistance and policy issues that are relevant for both institutions. The two institutions also often conduct country missions in parallel and staff participate in each other’s missions. IMF assessments of a country’s general economic situation and policies provide input to the Bank’s assessments of potential development projects or reforms. Similarly, Bank advice on structural and sectoral reforms is taken into account by the IMF in its policy advice. The staffs of the two institutions also cooperate on the  conditionality  involved in their respective lending programs. The 2007 external review of Bank-Fund collaboration led to a  Joint Management Action Plan  on World Bank-IMF Collaboration (JMAP) to further enhance the way the two institutions work together. Under the plan, Fund and Bank country teams discuss their country-level work programs, which identify macro-critical sectoral issues, the division of labor, and the work needed from each institution in the coming year. A recent  review of JMAP implementation  underscored the importance of these   joint country team consultations in enhancing collaboration. Reducing debt burdens. The IMF and World Bank also work together to reduce the external debt burdens of the most heavily indebted poor countries under theHeavily Indebted Poor Countries (HIPC) Initiative  and the  Multilateral Debt Relief Initiative (MDRI). The objective is to help low-income countries achieve their development goals without creating future debt problems. IMF and Bank staff jointly prepare country debt sustainability analyses under the  Debt Sustainability Framework (DSF)  developed by the two institutions. Reducing poverty. In 1999, the IMF and the World Bank initiated the  Poverty Reduction Strategy Paper (PRSP)  approach—a country-led plan for linking national policies, donor support, and the development outcomes needed to reduce poverty in low-income countries. PRSPs underpin the HIPC Initiative and most  concessional lending by the IMF  (in particular, the  Extended Credit Facility (ECF)) and World Bank. Monitoring progress on the MDGs. Since 2004, the Fund and Bank have worked together on the  Global Monitoring Report  (GMR), which assesses progress needed to achieve the UN  Millennium Development Goals (MDGs). The report also considers how well developing countries, developed countries, and the international financial institutions are contributing to the development partnership and strategy to meet the MDGs. Assessing financial stability. The IMF and World Bank are also working together to make financial sectors in member countries resilient and well regulated. The  Financial Sector Assessment Program (FSAP)  was introduced in 1999 to identify the strengths and vulnerabilities of a countrys financial system and recommend appropriate policy responses. Ques 2) What to do understand by swap? What are the various types of swaps? An Introduction To Swaps Derivatives  contracts can be divided into two general families: 1. Contingent claims, i. e. , options 2. Forward claims, which include exchange-traded futures,  forward contracts  and  swaps   3. A swap is an agreement between two parties to exchange sequences of cash flows for a set period of time. Usually, at the time the contract is initiated, at least one of these series of cash flows is determined by a random or uncertain variable, such as an interest rate, foreign exchange rate, equity price or commodity price. Conceptually, one may view a swap as either a portfolio of forward contracts, or as a long position in one bond coupled with a short position in another bond. This article will discuss the two most common and most basic types of swaps: the  plain vanilla  interest rate and  currency swaps. The Swaps Market Unlike most standardized  options  and  futures  contracts, swaps are not exchange-traded instruments. Instead, swaps are customized contracts that are traded in the  over-the-counter  (OTC) market between private parties. Firms and financial institutions dominate the swaps market, with few (if any) individuals ever participating. Because swaps occur on the OTC market, there is always the risk of a counterparty defaulting on the swap. (For background reading, see  Futures Fundamentals  and  Options Basics. ) The first  interest rate swap  occurred between IBM and the World Bank in 1981. However, despite their relative youth, swaps have exploded in popularity. In 1987, the  International Swaps and Derivatives Association  reported that the swaps market had a total notional value of $865. 6 billion. By mid-2006, this figure exceeded $250  trillion, according to the Bank for International Settlements. Thats more than 15  times  the size of the  U. S. public equities market. Plain Vanilla Interest Rate Swap The most common and simplest swap is a plain vanilla interest rate swap. In this swap, Party A agrees to pay Party B a predetermined,  fixed rate of interest  on a  notional principal  on specific dates for a specified period of time. Concurrently, Party B agrees to make payments based on a  floating interest rate  to Party A on that same notional principal on the same specified dates for the same specified time period. In a plain vanilla swap, the two cash flows are paid in the same currency. The specified payment dates are called  settlement dates, and the time between are called settlement periods. Because swaps are customized contracts, interest payments may be made annually, quarterly, monthly, or at any other interval determined by the parties. (For related reading, see  How do companies benefit from interest rate and currency swaps? ) For example, on December 31, 2006, Company A and Company B enter into a five-year swap with the following terms: * Company A pays Company B an amount equal to 6% per annum on a notional principal of $20 million. Company B pays Company A an amount equal to one-year LIBOR + 1% per annum on a notional principal of $20 million. LIBOR, or  London Interbank Offer Rate, is the interest rate offered by  London  banks on deposits made by other banks in the  eurodollar  markets. The market for interest rate swaps frequently (but not always) uses LIBOR as the base for the floating rate. For simplicity, lets assume the two parties ex change payments annually on December 31, beginning in 2007 and concluding in 2011. At the end of 2007, Company A will pay Company B $20,000,000 * 6% = $1,200,000. On December 31, 2006, one-year LIBOR was 5. 33%; therefore, Company B will pay Company A $20,000,000 * (5. 33% + 1%) = $1,266,000. In a plain vanilla interest rate swap, the floating rate is usually determined at the beginning of the settlement period. Normally, swap contracts allow for payments to be netted against each other to avoid unnecessary payments. Here, Company B pays $66,000, and Company A pays nothing. At no point does the principal change hands, which is why it is referred to as a notional amount. Figure 1 shows the cash flows between the parties, which occur annually (in this example). (To learn more, read  Corporate Use Of Derivatives For Hedging. ) | Figure 1: Cash flows for a plain vanilla interest rate swap| Plain Vanilla Foreign Currency Swap The plain vanilla currency swap involves exchanging principal and fixed interest payments on a loan in one currency for principal and fixed interest payments on a similar loan in another currency. Unlike an interest rate swap, the parties to a currency swap will exchange principal amounts at the beginning and end of the swap. The two specified principal amounts are set so as to be approximately equal to one another, given the exchange rate at the time the swap is initiated. For example, Company C, a  U. S. firm, and Company D, a European firm, enter into a five-year currency swap for $50 million. Lets assume the exchange rate at the time is $1. 25 per euro (i. e. , the dollar is worth $0. 80 euro). First, the firms will exchange principals. So, Company C pays $50 million, and Company D pays  ¬40 million. This satisfies each companys need for funds denominated in another currency (which is the reason for the swap). | Figure 2: Cash flows for a plain vanilla currency swap, Step 1. | Then, at intervals specified in the swap agreement, the parties will exchange interest payments on their respective principal amounts. To keep things simple, lets say they make these payments annually, beginning one year from the exchange of principal. Because Company C has borrowed euros, it must pay interest in euros based on a euro interest rate. Likewise, Company D, which borrowed dollars, will pay interest in dollars, based on a dollar interest rate. For this example, lets say the agreed-upon dollar-denominated interest rate is 8. 5%, and the euro-denominated interest rate is 3. 5%. Thus, each year, Company C pays  ¬40,000,000 * 3. 50% =  ¬1,400,000 to Company D. Company D will pay Company C $50,000,000 * 8. 25% = $4,125,000. As with interest rate swaps, the parties will actually net the payments against each other at the then-prevailing exchange rate. If, at the one-year mark, the exchange rate is $1. 40 per euro, then Company Cs payment equals $1,960,000, and Company Ds  payment would be $4,125,000. In practice, Company  D would pay the net difference of $2,165,000 ($4,125,000 $1,960,000)  to Company C. | Figure 3: Cash flows for a plain vanilla currency swap, Step 2| Finally, at the end of the swap (usually also the date of the final interest payment), the parties re-exchange the original principal amounts. These principal payments are unaffected by exchange rates at the time. | Figure 4: Cash flows for a plain vanilla currency swap, Step 3| Who would use a swap? The motivations for using swap contracts fall into two basic categories: commercial needs and  comparative advantage. The normal business operations of some firms lead to certain types of interest rate or currency exposures that swaps can alleviate. For example, consider a bank, which pays a floating rate of interest on deposits (i. e. , liabilities) and earns a fixed rate of interest on loans (i. e. , assets). This mismatch between assets and liabilities can cause tremendous difficulties. The bank could use a fixed-pay swap (pay a fixed rate and receive a floating rate) to convert its fixed-rate assets into floating-rate assets, which would match up well with its floating-rate liabilities. Some companies have a comparative advantage in acquiring certain types of financing. However, this comparative advantage may not be for the type of financing desired. In this case, the company may acquire the financing for which it has a comparative advantage, then use a swap to convert it to the desired type of financing. For example, consider a well-known  U. S. firm that wants to expand its operations into  Europe, where it is less well known. It will likely receive more favorable financing terms in the  US. By then using a currency swap, the firm ends with the euros it needs to fund its expansion. Exiting a Swap Agreement Sometimes one of the swap parties needs to exit the swap prior to the agreed-upon termination date. This is similar to an investor selling an exchange-traded futures or option contract before expiration. There are four basic ways to do this. 1. Buy Out the Counterparty Just like an option or futures contract, a swap has a calculable market value, so one party may terminate the contract by paying the other this market value. However, this is not an automatic feature, so either it must be specified in the swaps contract in advance, or the party who wants out must secure the counterpartys consent. . Enter an Offsetting Swap For example, Company A from the interest rate swap example above could enter into a second swap, this time receiving a fixed rate and paying a floating rate. 3. Sell the Swap to Someone Else Because swaps have calculable value, one party may sell the contract to a third party. As with Strategy 1, this requires the permission of the counterparty. 4. Use a Swaption A  swaption  is an option on a swap. Purchasing a swaption would allow a party to set up, but not enter into, a potentially offsetting swap at the time they execute the original swap. This would reduce some of the market risks associated with Strategy 2.. Conclusion Swaps can be a very confusing topic at first, but this financial tool, if used properly, can provide many firms with a method of receiving a type of financing that would otherwise be unavailable. This introduction to the concept of plain vanilla swaps and currency swaps should be regarded as the groundwork needed for further study. You now know the basics of this growing area and how swaps are one available avenue that can give many firms the comparative advantage they are looking for.