Discussion #5 Example

Conversation #5 Example Conversation #5 †Essay Example Subject: Home Schooling Pros and Cons Homeschooling has the advantage of elevating home advancement because of the help that a youngster will get from all relatives. Slide ten recommends that the relatives will use the schedules, existence in the home for advancing kid improvement at home. In any case, it would be tumultuous in situations where both the guardians are working and in different situations, for example, single child rearing. This realizes a gigantic outstanding task at hand to the guardians who will be compelled to save time for self-teaching (Windley, 2006). For the kid to get quality instruction, guardians should make self-teaching a full-time responsibility to generous interest as far as exertion and time. Regarding costs, it will likewise be costly for the guardians to buy a state-of-the-art educational program other than to the expense of materials, books, and other stationery. Unschooling is another marvel that requires self-drive and a great deal of control in mak ing and clinging to a severe report plan. This way of thinking is presently picking up fame because of less weight related with the learning component where a kid will pick proper learning calendar and exercises to finish at any second. Numerous schools should begin pondering joining unschooling with their customary program to support kids investigate their abilities while simultaneously enjoy different learning works out. This arrangement wold make learning increasingly alluring as far as animating the psyche and breaking the repetitiveness of continually enjoying books as the main learning schedule. This learning mode would not be favorable for the kids who need steady inspiration to exceed expectations in their examinations just as the individuals who need consistent rivalry to exceed expectations in class work. The opportunity related with unschooling ought to be normally evaluated to determine its adequacy in the learning procedure and effect on kid advancement. ReferencesWindl ey, C. (2006). Self-teaching. New York: Atlantic Monthly Books.

The influence of technology or media Essay Example | Topics and Well Written Essays - 1000 words

The impact of innovation or media - Essay Example I have seen individuals giving a valiant effort to ensure that they have stayed one stride in front of the mechanical progressions and received them with the goal that they can be considered as socially worthy. This is the premise of my understanding the extent that innovation and its various apparatuses are worried these days. This paper investigates a portion of the comparable subjects and viewpoints related with innovation, and featured where my spaces have been reinforced throughout the years. I have seen innovation to have developed significantly in the ongoing past since it has contacted harmonies with how individuals include joined it inside their lives. I have seen innovation to have made its imprint even inside the most traditional of frameworks. It has caused me to feel quiet with how unrest has come in and permitted me to fathom the subtleties of life and science specifically. I have seen my relatives and companions adapting many new viewpoints related with innovation. I have seen them being keen on the mechanical headways and taking sharp excitement under the aegis of new devices, highlights and instruments. I opine this is a headway of sorts which has come out as a movement during circumstances such as the present. I have seen that individuals feel firmly about innovation and are commonly troubled in the event that they pass up any new mechanical advancement that goes to the fore. Thus, the young people have the most significant association with innovation since t hey are constantly related with new contraptions and apparatuses, and are keeping watch for changes, headways and updates as and when these show up. This is the motivation behind why achievement has been connected with innovation for pretty much everybody. A portion of the narratives that I can tell with respect to the use of innovation have fundamentally been restricted to my exposures. The job of innovation has additionally been obvious inside the interpersonal organizations like Facebook, Twitter, MySpace, unique

The summer before applying to graduate school COLUMBIA UNIVERSITY - SIPA Admissions Blog

The summer before applying to graduate school COLUMBIA UNIVERSITY - SIPA Admissions Blog A blog contribution by Megan Tackney, a recent SIPA graduate and former Admissions Program Assistant. (We miss you Megan!) It was just as hot and humid as it is now, maybe even worse. It was the beginning of summer in Washington D.C. and the women of Mintwood Place had decided to go to graduate school. I had lived in D.C. for almost 8 years and worked in advocacy at a women’s legal organization. My roommate was employed at one of the top political consulting firms in the country. Our third roommate, quite coincidentally also named Meaghan (different spelling), had moved out a year ago to go to SIPA, it was her dream school and it was all she talked about. We blame her for the higher education craze that took over our apartment. That summer we began to prepare for the graduate school application period. I collected packets and tracked information sessions for every school I was going to apply to, a total of 7. My roommate had a Volkswagen beetle, which for some reason always smelled like crayons, and we would squeeze ourselves in, and find these events in faraway places without transportation, like Georgetown. I asked co-workers if they knew students or alumni from possible schools and if I could talk to them. I wanted to know what jobs they held now, what the student body was like and if they were regretful of anything, and if so, what?     I tried to imagine my life in every city or in some cases, small towns, which was sometimes just as important as the school’s academic program. In addition to stalking alumni, we also had to take the GRE’s in the Fall. This meant studying and taking a test, something we hadn’t done in quite a while, but we were determined. Step 1 â€" We bought the prep. books. Step 2 â€" We made flash cards. We were going to learn 20 new words a week, which we actually did, in between some DVR sessions. Step 3 â€" We recognized our weaknesses. We tried doing the math practice problems together, but it wasn’t exactly successful. I got a tutor. The schools also demanded essays â€" lots of them. Having the self control to write that many essays is really hard. We identified nights after work where all we would do was write and give the other creative and some terrible ideas on how we could sell ourselves to the top schools in the country. That summer was intense and exciting. It was full of possibilities for the residents of our little apartment. With applications due in January the work continued into the Fall and included the new awkward task of asking for recommendations, which could be a blog post in itself. In the end it was all worth it. We got into every single school we applied to and begrudgingly left each other. That was the last step in the application process, saying goodbye to our old lives and imagining the next. As I graduated last month, this is one step I have unfortunately not yet completed.

Baseball Stars of the 1800s

Emotional Intelligence Is The Single Greatest Indicator Of...

It is important to have emotional intelligence because it is the establishment for a large group of basic aptitudes, it affects most all that you say and do every day. Emotional intelligence is the single greatest indicator of execution in the work environment and the most grounded driver of initiative and individual brilliance. Emotional intelligence requires successful correspondence between the sane and enthusiastic focuses of the mind. At the point when an individual works, his capacity to acknowledge difficulties and tackle reasonable work and ensuring that the errands is being done in a compelling and productive way is delegated execution. A man, who has terrible execution, normally originates from tiredness, the failure to†¦show more content†¦Through emotional intelligence, human resource specialists now have an imperative instrument that can help organization produce results. Emotional intelligence offers systems to deal with your support and certainty issues, improve your association s inventiveness, make joint effort from participation, upgrade information stream, drive forward your objectives, and touch off the best and most breathed life into execution from your delegates. Affiliations moreover have a commitment to their kinfolk in helping them manage their sentiments inside the working environment. The obtainment of a properly qualified aide by the relationship with whom people can speak with is an uncommonly solid way to deal with license people to discard their day and build some perspective and insightfulness on the condition. Then again, it justifies having a trusted work accomplice with whom you can discuss your disappointments. This may take care of business who makes you feel extraordinary when you are around them and will pass on your perspective to a more positive spot. This will allow people to meet up to work the next day with an unmistakable head and in a perfect world a light heart. Those with such a manner are the clear researchers and receiving

Bank6003 Notes Free Essays

BANK6003 Final Exam Notes TOPIC 4A: Credit Risk – Estimating Default Probabilities Overview * Theory of credit risk less developed than VaR based models of market risk. * Much less amenable to precise measurement than market risk – default probabilities are much more difficult to measure than dispersion of market movements. * Measurement on individual loans is important to FI for pricing and setting limits on credit risk exposure. We will write a custom essay sample on Bank6003 Notes or any similar topic only for you Order Now Default Risk Models 1. Qualitative Models * Assembling relevant information from private and external sources to make a judgement on the probability of default. Borrower specific factors (idiosyncratic or specific to individual borrower) include: reputation, leverage, volatility of earnings, covenants and collateral. * Market-specific factors (systematic factors that impact all borrowers include): business cycle and interest rate levels. * FI manager weighs these factors to come to an overall credit decision. * Subjective 2. Credit Scoring Models * Quantitative models that use data on observed borrower characteristics to calculate a score that represents borrower’s probability of default or sort borrowers into different default risk categories. Linear Probability Models (LPMs) * Econometric model to explain repayment experience on past/old loans. * Regression model with a â€Å"dummy† dependent variable Z; Z = 1 default and Z=0 no default. * Weakness: no guarantee that the estimated default probabilities will always lie between 0 and 1 (theoretical flaw) Logit and Probit Models * Developed to overcome weakness of LPM. * Explicitly restrict the estimated range of default probabilities to lie between 0 and 1. * Logit: assumes probability of default to be logistically distributed. Probit: assumes probability of default has a cumulative normal distribution function. Linear Discriminant Analysis * Derived from statistical technique called multivariate analysis. * Divides borrowers into high or low default risk classes. * Altman’s LDM = most famous model developed in the late 1960s. Z 1. 8 (critical value), there is a high chance of default. * Weaknesses * Only considers two extreme cases (default/no default). * We ights need not be stationary over time. 3. New Credit Risk Evaluation Models Newer models have been developed – use financial theory and financial market data to make inferences about default probabilities. * Most relevant for evaluating loans to larger corporate borrowers. * Area of very active continuing research by FIs. Credit Ratings * Ratings change relatively infrequently – objective of ratings stability. * Only chance when there is reason to believe that a long-term change in the company’s creditworthiness has taken place. * SP: AAA, AA, A, BBB, BB, B and CCC * Moody’s: Aaa, Aa, A, Baa, Ba, B and Caa Bonds with ratings of BBB and above are considered to be â€Å"investment grade† Estimating Default Probabilities 1. Historical Data * Provided by rating agencies e. g. cumulative average default rates * If a company starts with a: * Good credit rating, default probabilities tend to increase with time. * Poor credit rating, default probabilities tend to decrease with time. * Default Intensity vs Unconditional Default Probability * Default intensity or hazard rate is the probability of default conditional on no earlier default. * Unconditional default probability is the probability of default as seen at time zero. Default intensities and unconditional default probabilities for a Caa rated company in the third year * Unconditional default probability = Caa defaulting during the 3rd year = 39. 709 – 30. 204 = 9. 505% * Probability that Caa will survive until the end of year 2 = 100 – 30. 204 = 69. 796%. * Probability that Caa will default in 3rd year conditional on no earlier default = 0. 09505/0. 69796 = 13. 62% Recovery Rate * Usually defined as the price of the bond 30 days after default as a percent of its face value. * Recovery rate % = 1 – LGD% * Ranking of bonds * Senior Secured * Senior Unsecured Senior Subordinated * Subordinated * Junior Subordinated Credit Default Swaps * Instrument that is ver y useful for estimating default probabilities is a CDS. * Buyer of the insurance obtains the right to sell bonds issued by the company for their face value when a credit event occurs and the seller of the insurance agrees to buy the bonds for their face value when a credit event occurs. * The total value of the bonds that can be sold is known as the CDS’ notional principal. * Total amount paid per year, as a percent of the notional principal, to buy protection is known as the CDS spread. Buyer of the instrument acquires protection from the seller against a default by a particular company or country (the reference entity) * Example: buyer pays a premium of 90bps per year for $100m of 5-year protection against company X. * Premium is known as the credit default spread. It is paid for the life of contract or until default. * If there is a default, the buyer has the right to sell bonds with a face value of $100m issued by company X for $100m. * Payments are usually made quarterly in arrears * In the event of default, there is a final accrual payment by the buyer * Attractions of the CDS market Allows credit risks to be traded in the same way as market risks * Can be used to transfer credit risks to a third party * Can be used to diversify credit risk Credit Indices * Developed to track credit default swap spreads. * Two important standard portfolios are: * CDX NA IG, portfolio of 125 investment grade companies in North America * iTraxx Europe, portfolio of 125 investment grade companies in Europe * Updated on March 20 and September 20 each year. * Example * 5 year CDX NA IG index is bid 165bp, offer 166bp. Quotes mean that a trader can buy CDS protection on all 125 companies in the index for 166 basis points per company. * Suppose an investor wants $800,000 of protection on each company. * The total cost is 0. 0166 x 800,000 x 125 = $1,660,000. * When a company defaults, the investor receives the usual CDS payoff and the annual payment is reduced by 1,660,0 00/125 = $13,280. * Index is the average of the CDS spreads on the companies in the underlying portfolio. Use of Fixed Coupons * Increasingly CDS and CDS indices trade like bonds so that the periodic protection payments remain fixed. A coupon and a recovery rate is specified. * Quoted spread coupon, buyer of protection makes an initial payment. * Quoted spread coupon, seller of protection makes an initial payment. Credit Spreads * Extra rate of interest required by investors for bearing a particular credit risk. CDS Spreads and Bond Yields * CDS can be used to hedge a position in a corporate bond. * Example: investor buys a 5-year corporate bond yielding 7% per year for its face value and at the same time enters into a 5-year CDS to buy protection against the issuer of the bond defaulting. CDS spread is 2% p. . Effect of the CDS is to convert the corporate bond to a risk-free bond. If the bond issuer does not default, the investor earns 5% per year. If the bond issuer defaults, th e investor exchanges the bond for its face value and this can be invested at the risk-free rate for the remainder of the five years. The Risk-Free Rate * The risk-free rate used by bond traders when quoting credit spreads is the Treasury rate. * Traditionally used LIBOR/swap rate * Normal market conditions: risk free rate is 10bp less than the LIBOR/swap * Stressed conditions, the gap is much higher Asset Swaps Provide a direct estimate of the excess of a bond yield over the LIBOR/swap rate. * Example: asset swap spread for a particular bond is quoted as 150 basis points. 3 possible situations: 1. Bond sells for its par value of 100. Company A pays the coupon and Company B pays LIBOR plus 150bp. 2. Bond sells below par, say 95. Company A pays $5 per $100 of principal at the outset. After that, Company A pays the coupon and Company B pays LIBOR plus 150bp. 3. Bond sells above par, say 108. Company B pays $8 per $100 of principal at the outset. After that, Company A pays the coupon an d Company B pays LIBOR plus 150bp. Therefore, the present value of the asset swap spread is the present value of the cost of default. CDS-Bond Basis * CDS-Bond Basis = CDS spread minus the bond yield spread * Bond yield spread is usually calculated as the asset swap spread * Should be close to zero, but there are a number of reasons why it deviates: 1. Bond may sell for a price significantly different from par (above par = positive basis, below par = negative basis) 2. There is counterparty risk in a CDS (negative direction) 3. There is a cheapest-to-deliver bond option in a CDS (positive direction) 4. Payoff in a CDS does not include accrued interest on the bond that is delivered (negative direction) 5. Restructuring clause in a CDS contract may lead to a payoff when there is no default (positive direction) 6. LIBOR is greater than the risk-free rate assumed (positive direction) Estimating Default Probabilities from Credit Spreads * Average hazard rate between time zero and time t * s(t) = credit spread, t = maturity, R = recovery rate * s = 240bps, R = 0. 40, hazard rate = 0. 04 = 4% Real World vs Risk-Neutral Default Probabilities * Real world = backed out of historical data Risk-neutral = backed out of bond prices or credit default swap spreads * Produce very different results. Why? * Corporate bonds are relatively illiquid * Subjective default probabilities of bond traders may be much higher than the estimates from Moody’s historical data * Bonds do not default independently of each other. This leads to systematic risk that cannot be diversified away. * Bond returns are highly skewed with limited upside. The non-systematic risk is difficult to diversify away and may be priced by the market. * Use real world for calculating credit VaR and scenario analysis. Use risk-neutral for valuing for credit derivatives and PV of cost of default Option Models * Based on the idea that equity prices can provide more up-to-date information for estimating default probabilities. * Employ option pricing methods e. g. KMV. * Used by many of the largest banks to monitor credit risk. Merton’s Model * 1974 – company’s equity is an option on the assets of the company. * Equity value at time T as max(VT – D, 0) * VT is value of the firm * D is the debt repayment required * Option pricing model enables value of a firm’s equity today to be related to the value of its assets today and the volatility of its assets. Read also Recording General Fund Operating Budget and Operating Transactions Volatilities * Equation together with the option pricing relationship enables value and volatility of assets to be determined from value and volatility of equity. Example * Company equity = $3m * Volatility of equity = 80% * Risk-free rate is 5% * Debt = $10m * Time to debt maturity = 1 year * Value of assets = $12. 40m * Volatility of assets = 21. 23% * Probability of default is 12. 7% * Market value of debt = $9. 40m * PV of payment is 9. 51 * Expected loss 1. 2% * Recovery rate 91% Use of Merton’s Model to estimate real-world default probability (e. g. Moody’s KMV) * Choose time horizon Calculate cumulative obligations to time horizon (D) * Use Merton’s model to calculate a theoretical probability of default * Use historical data to develop a one-to-one mapping of theoretical probability into real-world probability of default. * Distance to default TOPIC 4B: Credit Value at Risk Background * Credit risk is the risk of loss over a certain time period that will not be exceeded with a certain confidence level. * Calculate credit risk to determine both regulatory capital and economic capital. * Time horizon for credit risk VaR is often longer than that for market risk. Market risk usually one-day time horizon and then scaled up to 10 days for the calculation of regulatory capital. * Credit risk VaR, for instruments that are not held for trading, is usually calculated with a one-year time horizon/ * Historical simulation is the main tool used to calculate market risk VaR, but a more elaborate model is usually necessary to calculate credit risk VaR. * Key aspect is credit correlation. Defaults (or downgrades or credit spread changes) for different companies do not happen independently of each other. * Credit correlation increases risks for a financial institution with a portfolio of credit exposures. Introduction * Internal economic capital allocations against credit risk are based on bank’s estimate of their portfolio’s probability density function of credit losses. * Probability of credit losses exceeding some level, say X, is equal to the shaded area under the PDF. * A risky portfolio is one whose PDF has a relatively long, fat tail i. e. where there is a significant likelihood that actual losses will be substantially larger than expected losses. * Target insolvency rate = shaded area under PDF to right of X * Allocated economic capital = X – expected credit losses Expected vs Unexpected Credit Loss Expected = amount of credit loss expected on credit portfolio over the chosen time horizon * Unexpected = amount by which actual credit losses exceed expected credit loss. Economic Capital Allocation * Economic capital = estimated capital required to support credit risk exposure. * Process is similar to VaR methods used for allocation of capital for market risk . * Probability of unexpected credit loss exhausting economic capital is less than the bank’s target insolvency rate. * Target insolvency rate usually consistent with desired credit rating. * â€Å"AA† rating implies a 0. 3% chance of default. Need enough economic capital to be 99. 97% certain that credit losses will not cause insolvency. * Based on two inputs: 1. Bank’s target insolvency rate 2. Bank’s estimated PDF for portfolio credit losses * Two banks with identical portfolios could have very different economic capital for credit risk, owing to: 1. Differences in attitudes to risk taking (reflected in target insolvency rates) 2. Differences in methods of estimating PDFs (reflected in credit risk models) Measuring Credit Losses * Credit loss = current value –future value at the end of some time horizon. Precise definition of current/future values contingent on specific credit loss paradigm. * Current generation of credit risk models employ eith er of two conceptual paradigms: 1. Default-Mode (DM) Paradigm * Most common. * Credit loss arises only if default occurs within the time horizon. * â€Å"Two-state† model – only two outcomes, default and non-default. * If borrower defaults, credit loss = bank’s credit exposure – present value of future net recoveries (cash payments less workout expenses). * Current values are known but future values are uncertain. Estimate joint probability distribution with respect to 3 types of random variables: 1. Associated credit exposure 2. Indicator denoting whether facility defaults during planning horizon 3. In the event of default, the loss given default (LGD). Unexpected losses approach: * Assumption that PDF is well-approximated by mean and standard deviation. * Set capital at some multiple of estimated standard deviation of losses. * Requires estimates of expected and unexpected credit loss from default. * Expected loss (? ) depends on 3 key components: 1. LG D = loss given default, expressed as a decimal . PD = probability of default 3. EAD = expect credit exposure at default. * Standard deviation of portfolio credit losses * i = stand-alone standard deviation of credit losses from ith facility; * i = correlation between credit losses from ith facility and those on the overall portfolio; 2. Mark-to-Market (MTM) Paradigm * Credit loss can arise in response to decline in credit risk quality. * â€Å"Multi-state† model: default is only one of several possible credit ratings a loan could ‘migrate’ to over the horizon. * Credit portfolio marked to market at the beginning and end of planning horizon. Likelihood of a customer migrating from its current risk rating to any other category within the planning horizon is typically expressed in terms of a rating transition matrix. Row = current rating Column = prob of migrating to another risk grade * Complex estimation – need to estimate credit risk migrations at end of h orizon as well as future credit spreads (risk-premium associated with end-of-period credit rating). * Two approaches: 1. Discounted contractual cash flow (DCCF) approach 2. Risk-neutral valuation (RNV) approach: an option valuation framework. In each methodology, a loan’s value is constructed as a discounted PV of its future cash flows. * Approaches differ mainly in how discount factors and yield spreads are estimated or calculated. TOPIC 5: OPERATIONAL RISK Overview * Definition: the risk of loss resulting from inadequate of failed internal processes, people and systems or from external events. * Harder to quantify and manage operational risk than credit or market risk. * FIs make a conscious decision to take a certain amount of credit and market risk but operational risk is a necessary part of doing business. Operational risk has become a more significant issue as a result of: * Increased use of highly automated technology and sophisticated systems * Growth of e-commerce * New wave of MA * Increased risk mitigation techniques that may produce other risks * Increased prevalence of outsourcing * Over 100 operational loss events exceeding USD 100m since the end of the 1980s: * Internal fraud * External fraud * Employment practices and workplace safety * Clients, products and business practices * Damage to physical assets * Business disruption and system failures Execution, delivery and process management Regulatory Capital for Operational Risk * Three methods which represent a continuum of approaches characterised by increasing sophistication and risk sensitivity: 1. Basic Indicator Approach (15% of gross income) 2. Standardised Approach (different % for each business line) 3. Advanced Measurement Approach 1. Basic Indicator Approach * KBIA=GI ? ? GI = average annual gross income (net interest income + non-interest income) ? = 15% 2. Standardised Approach Bank activities divided into 8 business lines. Capital charge for each line is calculated by multiplying its gross income by the denoted beta. Total capital charge: KTSA= (GI1-8 ? ?1-8) To qualify for use of this approach, a bank must satisfy, at a minimum: – Its board of directors and senior management, as appropriate, are actively involved in the oversight of the operational risk management framework – It has an operational risk management system that is conceptually sound and implemented with integrity. – It has sufficient resources in the use of the approach in the major business lines as well as the control and audit areas. 3. Advanced Measurement Approach (AMA) * Regulatory capital requirement is determined using the quantitative and qualitative criteria for the AMA. * Banks can only use this approach if their local regulators/supervisory authorities have provided approval. * Qualitative Standards 1. Bank must have independent operational risk management function that is responsible for the design and implementation of banks’ operational risk management framework. 2. Bank’s internal operational risk measurement system must be closely integrated into the day-to-day risk management processes of the bank. 3. There must be regular reporting of operational risk exposures and loss experience to business unit management, senior management, and to the board of directors. 4. Bank’s operational risk management system must be well documented. 5. Internal and/or external auditors must perform regular reviews of the operational risk management processes measurement systems. * Quantitative Standards 1. Banks must demonstrate that its approach captures potentially severe tail loss events. 2. Required to calculate regulatory capital requirement as the sum of expected loss (EL) and unexpected loss (UL) 3. Must be sufficiently ‘granular’ to capture the major drivers of operational risk. 4. Operational risk measurement system must include the use of internal data, relevant external data, scenario analysis and factors reflecting the business environment and internal control systems. Distributions important in estimating potential operational risk losses: 1. Loss frequency distribution * Distribution of number of losses observed during the time horizon (usually 1 year). * Loss frequency should be estimated from the banks own data as far as possible. One possibility is to assume a Poisson distribution: only need to estimate an average loss frequency. 2. Loss severity distribution * Distribution of the size of a loss given that a loss has occurred. * Based on both internal and external historical data. * Lognormal probability distribution is often used: only need to estimate mean and SD. AMA * The two distributions above are combined for each loss type and business line to dete rmine the total loss distribution. * Monte Carlo simulation can be used to combine the two distributions. Four elements specified by the Basel Committee 1. Internal Data Operational risk losses have not been recorded as well as credit risk losses * Important losses are low-frequency high-severity losses * Loss frequency should be estimated from internal data 2. External Data * Data sharing or data vendors * Data from vendors: * Based on publicly available information biased towards large losses * Only be used to estimate the relative size of the mean losses and SD of losses for different risk categories. 3. Scenario Analysis * Aim is to generate scenarios covering all low frequency high severity losses * Can be based on both internal and external experience Aggregate scenarios to generate loss distributions 4. Business Environment and Internal Control Factors * Takes account of: * Complexity of business line * Technology used * Pace of change * Level of supervision * Staff turnover rates Power Law * Prob (v x) = Kx-a * Power law holds well for the large losses experienced by banks. * When loss distributions are aggregated, the distribution with the heaviest tails tends to dominate. This means that the loss with the lowest alpha defines the extreme tails of the total loss distribution. Insurance * Important decision re operational risk is the extent to which it should be insured against. Moral Hazard * Risk that the existence of the insurance contract will cause the bank to behave differently than it otherwise would. * Example: a bank insures itself against robberies. As a result of the insurance policy, it may be tempted to be lax in its implementation of security measures – making a robbery more likely than it would otherwise have been. * Solution * Deductible – bank is responsible for bearing the first part of any loss * Coinsurance provision – insurance company pays a predetermined percentage of losses in excess of the deductible. * Policy limit – on total liability of the insurer. Adverse Selection * This is where an insurance company cannot distinguish between good and bad risks. * To overcome this, an insurance company must try to understand the controls that exist within banks and the losses that have been experienced. Sarbanes-Oxley * Sarbanes-Oxley Act passed in the US in 2002. * Requires board of directors to become much more involved with day-to-day operations. They must monitor internal controls to ensure risks are being assessed and handled well. * Gives the SEC the power to censure the board or give it additional responsibilities. A company’s auditors are not allowed to carry out any significant non-auditing services. * Audit committee of the board must be made aware of alternative accounting treatments. * CEO and CFO must return bonuses in the event that financial statements are restated. TOPIC 6: LIQUIDITY RISK Overview * Liquidity refers to the ability to make cash payments as they become due. * Solvency refers to having more assets than li abilities, so that equity value is positive. Types of Liquidity Risk * Liquidity trading risk – markets can become illiquid very quickly. Cannot unwind asset position at a fair price fire sale prices. * Liquidity funding risk – risk of being unable to service cash flow obligations. Liquidity needs are uncertain. Liquidity Trading Risk * Price received for an asset depends on: * The mid market price * How much is to be sold * How quickly it is to be sold * The economic environment Bid-Offer Spread as a Function of Quantity * Dollar bid – offer spread, p = Offer price – Bid price * There is a spread which is constant up to some quantity. After a critical level (size limit of market makers), the spread widens. Proportional bid-offer spread= Offer price-bid priceMid-market price * Cost of liquidation in normal markets i=1n12si? i * N is the number of positions, alpha is the position of the instrument, s is the proportional bid-offer spread for the instrument. * Spread widens if market is in stressed conditions. * Cost of liquidation in stressed markets i=1n12(? i+ i)? i * Mean and SD, lambda is required confidence level Liquidity Adjusted VaRLiquidity-Adjusted Stressed VaR VaR+i=1n12si? i VaR+i=1n12(? i+ i)? i Unwinding a Position Optimally (Two Options) Unwind quickly: trader will face large bid-offer spreads, but the potential loss from the mid-market price moving against the trader is small. * Unwind over several days: bid-offer spread each day will be lower, but the potential loss from the mid-market price moving against the trader is larger. Liquidity Funding Risk * Sources of liquidity * Liquid assets * Ability of liquidate trading positions (funding risk and trading risk are interr elated) * Wholesale and retail deposits * Lines of credit and the ability to borrow at short notice * Securitisation * Central bank borrowing (lender of last resort) Basel III Regulation * Liquidity Coverage Ratio: designed to make sure that the bank can survive a 30 day period of acute stress * Net Stable Funding Ratio: a longer term measure designed to ensure that stability of funding sources is consistent with the permanence of the assets that have to be funded. Liquidity Black Holes * Occurs when most market participants want to take one side of the market and liquidity dries up. Positive and Negative Feedback Trading * Exacerbates the direction of price movements * Positive feedback trader buys after a price increase and sells after a price decrease. Negative feedback trader buys after a price decrease and sells after a price increase. * Positive feedback trading can create or accentuate a black hole. Reasons for Positive Feedback Trading * Computer models incorporating stop-lo ss trading. Stop-loss trading = discarding position to prevent further losses. * Dynamic hedging a short option position. Example: if you have â€Å"sold an option† – cover yourself by going long i. e. buy underlying asset when price rises and sell when price decreases. * Creating a long option position synthetically * Margin calls The Leveraging CycleThe Deleveraging Cycle Is Liquidity Improving? * Spreads are narrowing but arguably the risks of liquidity black holes are now greater than they used to be. * We need more diversity in financial markets where different groups of investors are acting independently of each other. Principles for Sound Liquidity Risk Management and Supervision (June 2008) * GFC regulators responded by undertaking a fundamental review of existing guidance of liquidity management and issued a revised set of principles on how banks should manage liquidity. Fundamental Principle for the Management and Supervision of Liquidity Risk 1. Sound management of liquidity risk – robust risk management framework. Governance of Liquidity Risk Management 2. Clearly articulate a liquidity risk tolerance 3. Strategy, policies and practices to manage liquidity risk 4. Incorporate liquidity costs, benefits and risks for all significant business activities. Measurement and Management of Liquidity Risk 5. Framework for comprehensively projecting cash flows arising from assets, liabilities and OBS items. 6. Actively monitor and control liquidity risk exposures and funding needs within and across legal entities. 7. Establish a funding strategy that provides effective diversification. 8. Effectively manage intraday liquidity positions and risks to meet payment and settlement obligations. 9. Actively manage collateral positions. 10. Conduct stress tests on a regular basis. 11. Formal contingency funding plan (CFP) in case of emergency. 12. Maintain a cushion of unencumbered, high quality liquid assets in case of stress scenarios. Public Disclosure 13. Publicly disclose information on a regular basis The Role of Supervisors 14. Regularly perform a comprehensive assessment of a bank’s overall liquidity risk management framework. 15. Supplement point 14 by monitoring a combination of internal reports, prudential reports and market information. 16. Should intervene to require effective and timely remedial action to address liquidity deficiencies. 17. Should communicate with other regulators e. g. central banks – cooperation TOPIC 7: CORE PRINCIPLES OF EFFECTIVE BANKING SUPERVISION Overview * Most important global standard for prudential regulation and supervision. * Endorsed by vast majority of countries. * Provides benchmark against which supervisory regimes can be assessed. * 1995: Mexican and Barings Crises Lyon Summit in 1996 for G7 Leaders. 1997: Document drafted and endorsed at G7 meeting. Final version presented at annual meetings of World Bank and IMF in Hong Kong. * 1998: G-22 endorsed * 2006: Revision of the Core Principles * 2011: Basel Committee mandates a major review, issues revised consultative paper. The Core Principles (2006) * 25 minimum requirements that need to be met for an effective re gulatory system. * May need to be supplemented by other measures. * Seven major groups * Framework for supervisory authority – Principle 1 * Licensing and structure – Principles 2-5 * Prudential regulations and requirements – Principles 6-18 * Methods of ongoing banking supervision – Principles 19-21 * Accounting and disclosure – Principle 22 * Corrective and remedial powers of supervisors – Principle 23 * Consolidated and cross-border banking – Principles 24-25. * Explicitly recognise: * Effective banking supervision is essential for a strong economic environment. * Supervision seeks to ensure banks operate in a safe and sound manner and hold sufficient capital and reserves. * Strong and effective supervision is a public good and critical to financial stability. * While cost of supervision is high, the cost of poor supervision is even higher. Key objective of banking supervision: * Maintain stability and confidence in the financial system * Encourage good corporate governance and enhance market transparency Revised Core Principles (2011) * Core Principles and assessment methodology merged into a single document. * Number of core principles increased to 29. * Takes account of several key trends and developments: * Need to deal with systemically important banks * Macroprudential focus (system-wide) and systemic risk * Effective crisis management, recovery and resolution measures. Sound corporate governance * Greater public disclosure and transparency enhance market discipline. * Two broad groups: 1. Supervisory powers, responsibilities and functions. Focus on effective risk-based supervision, and the need for early intervention and timely supervisory actions. Principles 1-13. 2. Prudential regulations and requirements. Cover supervisory expectations of banks, emphasising the importance of good corporate governance and risk management, as well as compliance with supervisory standards. Supervisory powers, responsibilities and functions 1. Clear responsibilities and objectives for each authority involved. Suitable legal framework. 2. Supervisor has operational independence, transparent processes, sound governance and adequate resources, and is accountable. 3. Cooperation and collaboration with domestic authorities and foreign supervisors. 4. Permissible activities of banks is controlled. 5. Assessment of bank ownership structure and governance. 6. Power to review, reject and impose prudential conditions on any changes in ownership or controlling interests. 7. Power to approve or reject major acquisitions. 8. Forward-looking assessment of the risk profile of banks and banking groups. 9. Uses appropriate range of techniques and tools to implement supervisory approach. 10. Collects, reviews and analyses prudential reports and statistical returns. 11. Early address of unsafe and unsound practices. 12. Supervises banking group on consolidated basis (including globally) 13. Cross-border sharing of information and cooperation. Prudential regulations and requirements 14. Robust corporate governance policies and processes. 15. Banks have a comprehensive risk management process, including recovery plans. 6. Set prudent and appropriate capital adequacy requirements. 17. Banks have an adequate credit risk management process. 18. Banks have adequate policies and processes for the early identification and management of problems assets, and maintain adequate provisions and reserves. 19. Banks have adequate policies re concentration risk. 20. Banks required to enter into any transactions with related pa rties on an arm’s length basis. 21. Banks have adequate policies re country and transfer risk. 22. Banks have an adequate market risk management process. 23. Banks have adequate systems re interest rate risk in the banking book. 24. Set prudent and appropriate liquidity requirements. 25. Banks have an adequate operational risk management framework. 26. Banks have adequate internal controls to establish and maintain a properly controlled operating environment for the conduct of their business. E. g. delegating authority and responsibility, separation of the functions that involve committing the bank. 27. Banks maintain adequate and reliable records, prepare financial statements in accordance with accounting policies etc. 8. Banks regularly publish information on a consolidated and solo basis. 29. Banks have adequate policies and processes e. g. strict customer due diligence. Preconditions for Effective Banking Supervision 1. Provision of sound and sustainable macroeconomic policies. 2. A well established framework for financial stability policy formulation. 3. A well developed public infrastructure 4. A clear framework for crisis managemen t, recovery and resolution 5. An appropriate level of systemic protection (or public safety net) 6. Effective market discipline 001: IMF and World Bank Study on Countries’ Compliance with Core Principles * 32 countries are compliant with 10 or few BCPs * Only 5 countries were assessed as fully compliant with 25 or more of the BCPs. * Developing countries less compliant than advanced economies. * Advanced economies generally possess more robust internal frameworks as defined by the ‘preconditions’ 2008: IMF Study on BCP Compliance * Based on 136 compliance assessments. * Continued work needed on strengthening banking supervision in many jurisdictions, particularly in the area of risk management. More than 40% of countries did not comply with the essential criteria of principles dealing with risk management, consolidated supervision and the abuse of financial services. * More than 30% did not possess the necessary operational independence to perform effective super vision nor have adequate ability to use their formal powers to take corrective action. * On average, countries in Western Europe demonstrated a much higher degree of compliance (above 90%) with BCP than their counterparts in other regions. * Africa and Western Hemisphere weak. Generally, high-income countries reflected a higher degree of compliance. TOPIC 8: CAPITAL ADEQUACY Overview * Adequate capital better able to withstand losses, provide credit through the business cycle and help promote public confidence in banking system. Importance of Capital Adequacy * Absorb unanticipated losses and preserve confidence in the FI * Protect uninsured depositors and other stakeholders * Protect FI insurance funds and taxpayers * Protect deposit insurance owners against increases in insurance premiums * To acquire real investments in order to provide financial services e. . equity financing is very important. Capital Adequacy * Capital too low banks may be unable to absorb high level of losses . * Capital too high banks may not be able to make the most efficient use of their resources. Constraint on credit availability. Pre-1988 * Banks regulated using balance sheet measures e. g. ratio of capital to assets. * Variations between countries re definitions, required ratios and enforcement of regulations. * 1980s: bank leverage increased, OBS derivatives trading increased. * LDC debt = major problem 1988 Basel Capital Accord (Basel I) * G10 agreed to Basel I Only covered credit risk * Capital / risk-adjusted assets 8% * Tier 1 capital = shareholders equity and retained earnings * Tier 2 capital = additional internal and external resources e. g. loan loss reserves * Tier 1 capital / risk-adjusted assets 4% * On-balance-sheet assets assigned to one of four categories * 0% – cash and government bonds * 20% – claims on OECD banks * 50% – residential mortgages * 100% – corporate loans, corporate bonds * Off-balance-sheet assets divided into contingent or guarantee contracts and FX/IR forward, futures, option and swap contracts. Two step process (i) derive credit equivalent amounts as product of FV and conversion factor then (ii) multiply amount by risk weight. * OBS market contracts or derivative instruments = potential exposure + current exposure. * Potential exposure: credit risk if counterparty defaults in the future. * Current exposure: cost of replacing a derivative securities contract at today’s prices. 1996 Amendment * Implemented in 1998 * Requires banks to measure and hold capital for market risk. * k is a multiplicative factor chosen by regulators (at least 3) VaR is the 99% 10-day value at risk SRC is the specific risk charge Total Capital = 0. 08 x [Credit risk RWA + Market risk RWA] where market risk RWA = 12. 5 x [k x VaR + SRC] Basel II (2004) * Implemented in 2007 * Three pillars 1. New minimum capital requirements for credit and operational risk 2. Supervisory review: more thorough and uniform 3. Market d iscipline: more disclosure * Only applied to large international banks in US * Implemented by securities companies as well as banks in EU Pillar 1: Minimum Capital Requirements * Credit risk measurement: * Standardised approach (external credit rating based risk weights) * Internal rating based (IRB) Market risk = unchanged * Operational risk: * Basic indicator: 15% of gross income * Standardised: multiplicative factor for income arising from each business line. * Advanced measurement approaches: assess 99. 9% worst case loss over one year. * Total capital = 0. 08 x [Credit risk RWA + market risk RWA + Operational risk RWA] Pillar 2: Supervisory Review * Importance of effective supervisory review of banks’ internal assessments of their overall risks. Pillar 3: Market discipline * Increasing transparency – public disclosure Basel 2. 5 (Implemented 2011) * Stressed VaR for market risk * Incremental risk charge Ensures products such as bonds and derivatives in the trading book have the same capital requirement that they would if they were in the banking book. * Comprehensive risk measure (re credit default correlations) Basel III (2010) * Considerably increase quality and quantity of banks capital * Macroprudential overlay – systemic risk * Allows time for smooth transition to new regime * Core capital only retained earnings and common shares * Reserves increased from 2% to 4. 5% * Capital conservation buffer – 2. 5% of RWA * Countercyclical capital buffer * Tracing/monitoring of liquidity funding Introduction of a maximum leverage ratio Capital Definitions and Requirements * Common equity 4. 5% of RWA * Tier 1 6% of RWA * Phased implementation of capital levels stretching to Jan 1, 2015 * Phased implementation of capital definition stretching to Jan 1, 2018 Microprudential Features * Greater focus on common equity * Loss-absorbing during stress/crisis period capital conservation buffer * Promoting integrated management of market and counterparty credit risk. * Liquidity standard introduced introduced Jan 1, 2015 Introduced Jan 1, 2018 Available Stable Funding Factors Required Stable Funding Factors Macroprudential Factors * Countercyclical buffer * Acts as a brake in good times of high credit growth and a decompressor to restrict credit during downturns. * Within a range of 0-2. 5% * Left to the discretion of national regulators * Dividends restricted when capital is below required level * Phased in between Jan 1, 2016 – Jan 1, 2019 * Leverage Ratio * Target 3% * Ratio of Tier 1 capital to total exposure 3% * Introduced on Jan 1, 2018 after a transition period * SIFIs * Required to hold additional loss absorbency capital, ranging from 1-2. 5% in common equity How to cite Bank6003 Notes, Papers

Winning Attitude Essay Example For Students

Winning Attitude Essay A winning attitude is being a good sport. People who always brag about winning dont have a winning attitude. Not all people have a winning attitude. Although a lot do. When you play a game and a person always says that they are going to win, then they dont have a winning attitude. When you are playing a game with somebody and both of you play fair then you both have winning attitudes. A winning attitude helps alot in games. Some people only care about winning. Thats not a winning attitude. When you play a game and the other person loses, if they are all upset and angry, they should not play because they dont have a winning attitude. Sometimes people like to cheat just to win a game. When half of the time the person who cheated ends up losing. Then they look bad because they lost even though they cheated. So, dont cheat, cheaters never win. Always play fair. When you play a game dont be rude to the other player(s). And dont be rude to your own teammates. If you play a game like basketball, dont be a ballhog and not pass the ball to anyone else. Share the ball and let the team win the game, dont win the game for the team. Just one person cant win the whole game by themself. It takes a whole team to win. Teamwork is what makes the team, and what gives you, and the rest of the team a winning attitude. All of these factors are important to have a winning attitude. Even when you lose a game you still need a winning attitude. After the game go shake hands with the other team. Say good game or good job. If you or somebody you know gets all mad or upset if they lose a game tell them that they dont have a winning attitude. Even if you have a winning attitude encourage others to have one too. The more winning attitudes, the more winners, or example; After a baseball game you dont see the baseball players yelling or screaming at eachother. They ALL walk out on the field and shake hands a nd say good game. So remember, even if you win or lose, you should always have a winning attitude.

Women in Hollywood

How a Tree Grows - A Brief Overview

How a Tree Grows - A Brief Overview Little of a trees volume is actually living tissue. Just 1% of a tree is actually alive and composed of living cells. The major living portion of a growing tree is a thin film of cells just under the bark (called the cambium) and can be only one to several cells thick. Other living cells are in root tips, the apical meristem, leaves, and buds. The overwhelming portion of all trees is made up of non-living tissue created by a cambial hardening into non-living wood cells on the inner cambial layer. Sandwiched between the outer cambial layer and the bark is an ongoing process of creating sieve tubes which transport food from leaves to roots. So, all wood is formed by the inner cambium and all food-conveying cells are formed by the outer cambium. Apical Growth Tree height and branch lengthening begin with a bud. Tree height growth is caused by the apical meristem whose cells divide and elongate at the base of the bud to create upward growth in trees with a dominant crown tip. There can be more than one developing crown if a trees top is damaged. Certain conifers cannot produce these growth cells and height growth stops at the crown tip. Tree branch growth works in a similar way using buds at the apex of each twig. These twigs become the future branches of trees. Transfer of genetic material in the process will cause these buds to grow at determined rates, creating a tree species height and form. Tree trunk growth is coordinated with the increase of tree height and width. When buds begin opening in the early Spring, cells in the trunk and limbs get the signal to increase in girth by dividing and in height by elongating. Root Cap Growth Early root growth is a function of meristematic root tissue located near the tip of the root. The specialized meristem cells divide, producing more meristem called root cap cells which protect the meristem and undifferentiated root cells while pushing through the soil. The undifferentiated cells become the primary tissues of the developing root during elongation and the process that pushes the root tip forward in the growing medium. Gradually these cells differentiate and mature into specialized cells of the root tissues.

Current home to your dream home Essay Example | Topics and Well Written Essays - 500 words

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Public Policy - Prescription Drug Abuse Essay Example | Topics and Well Written Essays - 4000 words

Public Policy - Prescription Drug Abuse - Essay Example There are intense wellbeing dangers in taking physician endorsed pills. This is the reason they are taken just under the forethought of a specialist. Furthermore and still, after all that, they must be nearly observed to evade dependence or different issues (Barnes et al, 2013). Numerous pills appear to be identical. It is to a great degree unsafe to take any pill that you are unverifiable about or was not endorsed for you. Individuals can additionally have distinctive responses to pills because of the contrasts in every individuals body science. A medication that was alright for one man could be exceptionally hazardous, even lethal, for another person. Doctor prescribed medications are alright for the people who really have the medicines for them and nobody else. According to Kraft and Furlong (2013), the rational analysis and decision-making model represents a series of analytical stages that are both comprehensive and evaluative in nature, which seek to identify important aspects and an in-depth understanding of a problem. This technique serves to provide valuable information such as defining what the problem is, identifying who it affects, factors that may have caused or contributed to the problem, highlight goals and objectives desired, examine an array of alternative solutions, individually assess each alternative to clarify its consequences, and ultimately establish which option would have the most probability to resolve the issue. It’s a multi-step approach to the policy process and a concept that follows a logical structure and affords practical application of clear and sensible methods for problem solving. Analysts ultimately seek to provide policymakers with the most pertinent and complete data necessary in order to fully un derstand the nature of an issue, as well as offer the best available options for effective problem solving. Although the sequence of steps and at what stage of the process they are applied may vary as well as

Culture Impact On International Business

Culture Impact On International Business Whereas traditional International Business research has been concerned with economic/legal issues and organizational forms and structures, the importance of culture has become increasingly important in the last two decades, largely as a result of the classic work of Hofstede (1980). Culture has been shown to impact on International Business, especially on the aspect of group performance (Gibson, 1999). This paper mainly analyzes the impact of culture on International Business. And in order to analysis it well, firstly we will talk about the definition, levels and Hofstedes theory of culture in the section 2. Then in section 3, we discuss the adverse and beneficial impact on International Business respectively in detail. Section 4 concludes. What is culture? Terpstra and David (1991, p.6) defined culture as , a learned, shared, compelling, interrelated set of symbols whose meanings provide a set of orientations for members of a society. And the aspects of culture include value and beliefs, communication, norms of behavior, customs and art, music, dance, sport (Morrison, 2006, p.169). It is essential for us to obtain the knowledge of culture because we communicate with each other through language; anticipate how business partners and customers are likely to respond; distinguish between what is considered right or wrong, acceptable or offensive and identify with other managers, provide knowledge to meet and negotiate with them. There are at least three levels of culture: National culture Nations are distinguishable from each other by a shared cultural history, such as language, religion, ethnic or racial identity. Together, these distinguishing characteristics blend into a national culture, which influences family life, education, organizational culture and economic and political structures (Morrison, 2006, p.172). Organizational or corporate culture Morrison (2006, p.195) indicated that the characteristics of organizational culture include: Common language and shared terminology; Norms of behavior, such as relations between management and employees; Preferences for formal or informal means of communication within the company and with associated companies; Dominant values of the organization, such as high product quality and customer orientation; Degree of empowerment of employees throughout the organization; and Systems of rules that specify dos and donts of employee behavior. Professional culture Professional cultures form as people, who span individual organizations, share a set of norms, values and beliefs related to their occupation (Van Maanen and Barley, 1984; Jordan, 1990; Trice and Beyer, 1993) Morrison (2006, p.191-192) mentioned that differences in national values and attitudes have been the subject of considerable research. Hofstede (1994) has developed a theory to categorize and quantify cultural differences between nations, which allowing us to compare national cultures. The cultural dimensions are: Power distance: the extent to which members of society accept the unequal distribution of power inside organizations. Uncertainty avoidance: how members of a society cope with the uncertainties of everyday life. Individualism: the extent to which individuals perceive themselves as independent and autonomous beings (as opposed to collectivism, in which people see themselves as integrated into ingroups). Masculinity: the degree to which people prefer values of success/competition over modesty/concern for others (as opposed to femininity, which denotes sensitivity, caring and an emphasis on quality of life). Long-term vs. short-term orientation: peoples time perspectives in their daily lives. How does culture impact on International Business? International business refers to business activities that straddle two or more countries (Morrison, 2006, p.5). As the rapid growth of globalization, more and more international business such as Joint Venture have emerged and developed fast. Therefore, it is very essential to talk about the elements which influence the international business. And one of the crucial elements will be analyzed in this paper is culture. As discussed above, cultures are different from countries to countries. For international business, grasping the cultural differences between the global and the local is the key to build long-term relationship and obtain success. For example, in Asian cultures, doing business is not confined merely to working hours, but blends into social occasions such as meals together, where bonds of trust are built and where sensitivity to cultural values and norms can be critical (Morrison, 2006, p.169). The other example is in joint ventures, the need for cooperation and trust between partners is the key to long-term success. Blending the culture of different locations into a distinctive corporate culture can strengthen the sense of corporate identity, but poses considerable challenges for international managers. The global merger-between countries of different national cultures-is an illustration of the difficulties that can arise when strong national cultures clash (Morrison, 2006, p.195-196) In each case, achieving a successful outcome, in both the initial agreement and the long-term business relationship, will depend on sensitivity to differences in languages, value systems and norms of behavior between themselves and their hosts. In short, being attuned to cultural differences can directly affect the success or failure of the project (Morrison, 2006, p.168). Pothukuchi et al.s (2002) findings suggest that cultural differences stemming from national, organizational and professional cultures have influence on international alliance performance. Li, Lam and Qian (2001) also pointed out that national culture can influence managerial decision-making, leadership style and human resource management practices and all these factors influence a firms performance in acquiring and deploying resources (Puffer, 1993; House, Hanges, et al. 1999). The adverse effect of culture in International Business Sirmon and Lane (2004) explained that the influence of national culture is strong and long lasting. For example, Hofstede (1991) found that national culture explains 50% of the differences in managers attitudes, beliefs, and values. Thus, national culture differences between alliance partners can challenge the development of successful relationships. Park and Ungson (1997) supplemented that these challenges result partially from the lack of shared norms or values and this lack of common understanding may undermine the partners interpretation of each others strategic intent, which is crucial in global markets and partnerships (Hitt et al., 1995). Further, a lack of shared norms and values may reduce effective communication (Rao and Schmidt, 1998), trust (Aulakh et al., 1996; Doney et al., 1998) and knowledge sharing in joint ventures (Parkhe, 1991; Mohr and Spekman, 1994; Lyles and Salk, 1996). These problems, in turn, have been found to lead to lower alliance performance (Lane et al. , 2001). Whats more, differences in national culture can disrupt collaboration and learning between alliance partners (Lane and Beamish, 1990; Parkhe, 1991; Lyles and Salk, 1996; Hennart and Zeng, 2002). Sirmon and Lane (2004) explained this opinion in detail as following: an international alliances performance is driven by the alliances effectiveness in achieving its primary value-creating activities. Resource complementarity between alliance partners is often a necessary condition to optimize this value creation (Harrison et al., 2001). However, in order to share, combine and leverage complementary resources, the partners employees must interact effectively. And the cultural differences inhibit international alliance partners employees ability to interact effectively. Not only that national culture differences between alliance partners can challenge the development of successful relationships and the achievement of effectiveness in the alliances primary value-creating activities, but also the organizational culture differences can. Whereas national culture relates primarily to deep-seated values, organizational culture relates primarily to shared beliefs in organizational practices and processes (Hofstede et al., 1990). Sirmon and Lane (2004) found that organizational culture is important to the success of mergers and acquisitions. Weber et al. (1996) found that dissimilar organizational cultures between acquirer and target decreased top managers cooperation and increased negative attitudes toward the merger. Generally, similarity of partners organizational culture increases partner learning, satisfaction and effectiveness of interactions, whereas differences in organizational culture decrease these positive outcomes. In short, decreased learning, satisfaction and effectiveness of interactions impede the business processes used to share combine and leverage resources such as knowledge, relationships and physical assets. Thus partners with dissimilar organizational cultures will be less likely to effectively achieve the alliances primary value-creating activities. Research suggested that national and organizational culture differences between the employees of international companies affect their interactions, but Sirmon and Lane (2004) expanded the consideration of cultural differences to include professional culture differences. They stated that professional culture differences are often the most relevant and salient cultural differences that the interacting employees face, and thus professional culture differences are the most disruptive to the alliances effectiveness in achieving its primary value-creating activities. Professional cultures develop through the socialization that individuals receive during their occupational education and training (Van Maanen and Barley, 1984; Jordan, 1990) This initial socialization is then reinforced through their professional experiences and interactions that lead to a broad understanding of how their occupation should be conducted (Brown and Duguid, 1991; Lave and Wenger, 1991). Sirmon and Lane (2004) stated that it is disappointing when international alliance partners require employees from different professional cultures to interface in the primary value-creating activity of the alliance. The reason is because these employees lack a common basis from which to interact effectively due to their distinct occupational socialization and resulting professional cultures. First, individuals from separate professional cultures lack a shared set of basic knowledge because their occupational socialization involved different content material, which is reinforced by different professional experiences. Second, these individuals often lack experience communicating with an auditing audience outside their professional culture. Thus communication between individuals from separate professional cultures is impaired. Both of these factors impede the finding of common ground from which the relationship can develop and produce value (Lane and Lubatkin, 1998). In such cases, the development of basic routines is required to help establish a base of shared knowledge in order to communicate adequately. Developing such routines requires time, which leads to increased expenses and could lead to increased frustration (Park and Ungson, 1997). Even if these two obstacles can be adequately overcome, individuals from different professional cultures may still have deeply ingrained preferences in their approach to solving problems (Brown and Duguid, 1991; Lave and Wenger, 1991). These differences may be difficult to overcome, as the employees may reflect the not-invented-here syndrome, which is the resistance to the utilization of knowledge created elsewhere (Michailova and Husted, 2003). Further, attempts to compromise in the approach taken in problem-solving is likely to lead to less desirable outcomes. For example, if a compromise is reached, and members from both professional cultures abandon their preferred problem-solving approach, both effectively eliminate a significant amount of their valuable tacit knowledge. Likewise, if either member abandons their preferred problem-solving approach, the alliance has effectively lost the expertise of one half of its contributing members. The challenges discussed above inhibit the effective interaction of individuals from different professional cultures within an international alliance. This then decreases the likelihood that the alliances pooled complementary resources will be shared, combined and leveraged in a manner that effectively achieves the alliances primary value-creating activities. In one noteworthy study, Barkema and Vermeulen (1997) examined the influence of differences in partners national cultures on international alliance performance using Hofstedes (1980, 1991) dimensions of national culture. They found that partner differences in two of the dimensions (uncertainty avoidance and long-term orientation) had a strong negative relationship with the survival of the collaboration over several different periods. However, the other three dimensions of national culture (individualism, power distance, masculinity) did not. Differences in uncertainty avoidance and long-term orientation could represent differences in how partners perceive and adapt to opportunities and threats in their environment (Schneider, 1991; Schneider and De Meyer, 1991), and thus may be more difficult to resolve than differences along the other three dimensions, which represent attitudes towards personnel. In conclusion, cultural differences have adverse impact on the performance of international business. The beneficial effect of culture in International Business Sirmon and Lane (2004) stated that other evidence suggests that differences in national culture can be beneficial. Because managers tend to be more aware of the potential challenges when working with foreign partners, they may be more willing to spend effort on avoiding misunderstandings in international alliances than they would in domestic alliances (Very et al., 1996). In such cases, differences in national culture can lead to high-level communication and a more sustained collaboration (Shenkar and Zeira, 1992; Park and Ungson, 1997). Thus, in some cases, increased national culture differences can lead to higher international alliance performance (Morosini et al., 1998). In addition, societal culture per se may also be seen as part of a firms resources, leading to a competitive advantage (Porter, 1991; Dunning and Bansal, 1997). Porter (1991) pointed out that the competitive advantage of firms could be derived from the greater commitment. Dunning and Bansal (1997) further suggested that this greater commitment might well be based on cultural values observed in some countries, and not in others. For example, many individualistic cultures, such as US, may have an advantage in technological assets, whilst many collectivistic cultures, such as Japan, may benefit from the ways in which they organize their workforce and establish relations between contractors, suppliers and joint venture partners (Dunning and Bansal, 1997). With their different competitive advantages, firms may adopt different strategies. If manager of these firms adopt appropriate strategies by making use of the competitive advantages derived from cultural values, these firms may achieve great success. There is another example exhibit the beneficial effect on the International Business. According to Hofstedes dimensions of national culture Li, Lam and Qian (2001) stated that, long-term orientation means focusing on the future. With this long-term orientation, people in East Asia such as China are more likely to emphasize education and training, and practice persistence, thriftiness and the delay of immediate gratification. Wuhan City, which is known as Chicago in China contacted New World, a major Hong Kong developer, to negotiate a loan to complete an airport-linking expressway project. Focusing on building a long-term relationship with Wuhan City, New World soon agreed to provide the loan without discussing details traditionally seen in western-style negotiations. According to Cheng (1997), an impassioned plea for help from Wuhans public work chief, Zhang Ke Xiao, led to a handshake gamble without sight of a feasibility study or a contract. (p.30). With this relationship-oriented negotiation, New World set up good ties with the government in Wuhan City and other Chinese cities. These relationships proved very helpful during later negotiations in China. In fact, many overseas Chinese firms adopt a similar approach. Tung (1982) has also observed this long-term perspective, claiming that the Chinese have a different concept of time, as compared to that of the Western world, they are interested in building the basis for long-term relationships. Essentially, this means that once a foreign firm has gained their trust and has demonstrated its goodwill and willingness to lend assistance to the country, the Chinese will try to reciprocate in kind, whenever possible. (p. 30) In conclusion, cultural differences also have beneficial impact on the performance of international business. Conclusion This paper analyzes how culture impact on the International Business. It turns out that culture has either adverse or beneficial effect on the International Business performance. On the adverse aspect of culture, Sirmon and Lane (2004) indicated that national culture differences between alliance partners can challenge the development of successful relationships. Further, a lack of shared norms and values may reduce effective communication (Rao and Schmidt, 1998), trust (Aulakh et al., 1996; Doney et al., 1998) and knowledge sharing in joint ventures (Parkhe, 1991; Mohr and Spekman, 1994; Lyles and Salk, 1996). These problems, in turn, have been found to lead to lower alliance performance (Lane et al., 2001). Whats more, Weber et al. (1996) found that dissimilar organizational cultures between acquirer and target decreased top managers cooperation and increased negative attitudes toward the merger. Sirmon and Lane (2004) expanded the consideration of professional culture differences, which are often the most relevant and salient cultural differences that the interacting employees face. And it is disappointing when international alliance partners require employees from different professional cultures to interface in the primary value-creating activity of the alliance. The reason is because these employees lack a common basis from which to interact effectively due to their distinct occupational socialization and resulting professional cultures. On the beneficial aspect of culture, managers may be more willing to spend effort on avoiding misunderstandings in international alliances than they would in domestic alliances. In such cases, differences in national culture can lead to high-level communication and a more sustained collaboration (Shenkar and Zeira, 1992; Park and Ungson, 1997). In addition, Porter (1991) pointed out that the competitive advantage of firms could be derived from the greater commitment based on cultural values observed in some countries, and not in others. For example, the long-term orientation in China leads to a helpful long-term relationship between international businesses.

Review of related literature about billing system Essay

Create editable sequence diagram with Rational Software Architect Create editable sequence diagrams with Rational Software Architect What’s new in Rational Software Architect 8.5 and Design Manager 4 beta Notice the wording in my statement above: â€Å"Adopted 2.0 Draft Specification of UML.† It is true that the specification is still in draft status, but the key is that the Draft Specification has been adopted by OMG, a consortium that does not adopt new standards until they become pretty solid. There will be some changes to the specification before UML 2 is completely adopted, but these changes should be minimal. The main changes will be in the internals of UML–involving features typically used by software companies who implement UML tools. The main purpose of this article is to continue our focus on the essential UML diagrams; this month, we take a close look at the sequence diagram. Please note, again, that the examples provided below are based on the new UML 2 specification. The diagram’s purpose The sequence diagram is used primarily to show the interactions between objects in the sequential order that those interactions occur. Much like the class diagram, developers typically think sequence diagrams were meant  exclusively for them. However, an organization’s business staff can find sequence diagrams useful to communicate how the business currently works by showing how various business objects interact. Besides documenting an organization’s current affairs, a business-level sequence diagram can be used as a requirements document to communicate requirements for a future system implementation. During the requirements phase of a project, analysts can take use cases to the next level by providing a more formal level of refinement. When that occurs, use cases are often refined into one or more sequence diagrams. An organization’s technical staff can find sequence diagrams useful in documenting how a future system should behave. During the design phase, architects and developers can use the diagram to force out the system’s object interactions, thus fleshing out overall system design. One of the primary uses of sequence diagrams is in the transition from requirements expressed as use cases to the next and more formal level of refinement. Use cases are often refined into one or more sequence diagrams. In addition to their use in designing new systems, sequence diagrams can be used to document how objects in an existing (call it â€Å"legacy†) system currently interact. This documentation is very useful when transitioning a system to another person or organization. Back to top The notation Since this is the first article in my UML diagram series that is based on UML 2, we need to first discuss an addition to the notation in UML 2 diagrams, namely a notation element called a frame. The frame element is used as a basis for many other diagram elements in UML 2, but the first place most people will encounter a frame element is as the graphical boundary of a diagram. A frame element provides a consistent place for a diagram’s label, while providing a graphical boundary for the diagram. The frame element is optional in UML diagrams; as you can see in Figures 1 and 2, the diagram’s label is placed in the top left corner in what I’ll call the frame’s â€Å"namebox,† a sort of dog-eared rectangle, and the actual UML diagram is defined within the body of the larger enclosing rectangle. Figure 1: An empty UML 2 frame element In addition to providing a visual border, the frame element also has an  important functional use in diagrams depicting interactions, such as the sequence diagram. On sequence diagrams incoming and outgoing messages (a.k.a. interactions) for a sequence can be modeled by connecting the messages to the border of the frame element (as seen in Figure 2). This will be covered in more detail in the â€Å"Beyond the basics† section below. Figure 2: A sequence diagram that has incoming and outgoing messages Notice that in Figure 2 the diagram’s label begins with the letters â€Å"sd,† for Sequence Diagram. When using a frame element to enclose a diagram, the diagram’s label needs to follow the format of: Diagram Type Diagram Name The UML specification provides specific text values for diagram types (e.g., sd = Sequence Diagram, activity = Activity Diagram, and use case = Use Case Diagram). Back to top The basics The main purpose of a sequence diagram is to define event sequences that result in some desired outcome. The focus is less on messages themselves and more on the order in which messages occur; nevertheless, most sequence diagrams will communicate what messages are sent between a system’s objects as well as the order in which they occur. The diagram conveys this information along the horizontal and vertical dimensions: the vertical dimension shows, top down, the time sequence of messages/calls as they occur, and the horizontal dimension shows, left to right, the object instances that the messages are sent to. Lifelines When drawing a sequence diagram, lifeline notation elements are placed across the top of the diagram. Lifelines represent either roles or object instances that participate in the sequence being modeled. [Note: In fully modeled systems the objects (instances of classes) will also be modeled on a system’s class diagram.] Lifelines are drawn as a box with a dashed line descending from the center of the bottom edge (Figure 3). The lifeline’s name is placed inside the box. Figure 3: An example of the Student class used in a lifeline whose instance name is freshman The UML standard for naming a lifeline follows the format of: Instance Name : Class Name In the example shown in Figure 3, the lifeline represents an instance of the class Student, whose instance name is freshman. Note that, here, the lifeline name is underlined. When an underline is used, it means that the lifeline represents a specific instance of a class in a sequence diagram, and not a particular kind of instance (i.e., a role). In a future article we’ll look at structure modeling. For now, just observe that sequence diagrams may include roles (such as buyer and seller) without specifying who plays those roles (such as Bill and Fred). This allows diagram reuse in different contexts. Simply put, instance names in sequence diagrams are underlined; roles names are not. Our example lifeline in Figure 3 is a named object, but not all lifelines represent named objects. Instead a lifeline can be used to represent an anonymous or unnamed instance. When modeling an unnamed instance on a sequence diagram, the lifeline’s name follows the same pattern as a named instance; but instead of providing an instance name, that portion of the lifeline’s name is left blank. Again referring to Figure 3, if the lifeline is representing an anonymous instance of the Student class, the lifeline would be: † Student.† Also, because sequence diagrams are used during the design phase of projects, it is completely legitimate to have an object whose type is unspecified: for example, â€Å"freshman.† Messages The first message of a sequence diagram always starts at the top and is typically located on the left side of the diagram for readability. Subsequent messages are then added to the diagram slightly lower then the previous message. To show an object (i.e., lifeline) sending a message to another object, you draw a line to the receiving object with a solid arrowhead (if a synchronous call operation) or with a stick arrowhead (if an asynchronous signal). The message/method name is placed above the arrowed line. The message that is being sent to the receiving object represents an operation/method that the receiving object’s class implements. In the example in Figure 4, the analyst object makes a call to the system object which is an instance of the ReportingSystem class. The analyst object is calling the system object’s getAvailableReports method. The system object then calls the getSecurityClearance method with the argument of userId on the secSystem object, which is of the class type SecuritySystem. [Note: When  reading this sequence diagram, assume that the analyst has already logged into the system.] Figure 4: An example of messages being sent between objects Besides just showing message calls on the sequence diagram, the Figure 4 diagram includes return messages. These return messages are optional; a return message is drawn as a dotted line with an open arrowhead back to the originating lifeline, and above this dotted line you place the return value from the operation. In Figure 4 the secSystem object returns userClearance to the system object when the getSecurityClearance method is called. The system object returns availableReports when the getAvailableReports method is called. Again, the return messages are an optional part of a sequence diagram. The use of return messages depends on the level of detail/abstraction that is being modeled. Return messages are useful if finer detail is required; otherwise, the invocation message is sufficient. I personally like to include return messages whenever a value will be returned, because I find the extra details make a sequence diagram easier to read. When modeling a sequence diagram, there will be times that an object will need to send a message to itself. When does an object call itself? A purist would argue that an object should never send a message to itself. However, modeling an object sending a message to itself can be useful in some cases. For example, Figure 5 is an improved version of Figure 4. The Figure 5 version shows the system object calling its determineAvailableReports method. By showing the system sending itself the message â€Å"determineAvailableReports,† the model draws attention to the fact that this processing takes place in the system object. To draw an object calling itself, you draw a message as you would normally, but instead of connecting it to another object, you connect the message back to the object itself. Figure 5: The system object calling its determineAvailableReports method The example messages in Figure 5 show synchronous messages; however, in sequence diagrams you can model asynchronous messages, too. An asynchronous message is drawn similar to a synchronous one, but the message’s line is drawn with a stick arrowhead, as shown in Figure 6. Figure 6: A sequence diagram fragment showing an asynchronous message being sent to instance Guards When modeling object interactions, there will be times when a condition must be met for a message to be sent to the object. Guards are used throughout UML diagrams to control flow. Here, I will discuss guards in both UML 1.x as well as UML 2.0. In UML 1.x, a guard could only be assigned to a single message. To draw a guard on a sequence diagram in UML 1.x, you placed the guard element above the message line being guarded and in front of the message name. Figure 7 shows a fragment of a sequence diagram with a guard on the message addStudent method. Figure 7: A segment of a UML 1.x sequence diagram in which the addStudent message has a guard In Figure 7, the guard is the text â€Å"[pastDueBalance = 0].† By having the guard on this message, the addStudent message will only be sent if the accounts receivable system returns a past due balance of zero. The notation of a guard is very simple; the format is: [Boolean Test] For example, [pastDueBalance = 0] Combined fragments (alternatives, options, and loops) In most sequence diagrams, however, the UML 1.x â€Å"in-line† guard is not sufficient to handle the logic required for a sequence being modeled. This lack of functionality was a problem in UML 1.x. UML 2 has addressed this problem by removing the â€Å"in-line† guard and adding a notation element called a Combined Fragment. A combined fragment is used to group sets of messages together to show conditional flow in a sequence diagram. The UML 2 specification identifies 11 interaction types for combined fragments. Three of the eleven will be covered here in â€Å"The Basics† section, two more types will be covered in the â€Å"Beyond The Basics† section, and the remaining six I will leave to be covered in another article. (Hey, this is an article, not a book. I want you to finish this piece in one day!) Alternatives Alternatives are used to designate a mutually exclusive choice between two or more message sequences. [Note: It is indeed possible for two or more guard conditions attached to different alternative operands to be true at the same  time, but at most only one operand will actually occur at run time (which alternative â€Å"wins† in such cases is not defined by the UML standard).] Alternatives allow the modeling of the classic â€Å"if then else† logic (e.g., if I buy three items, then I get 20% off my purchase; else I get 10% off my purchase). As you will notice in Figure 8, an alternative combination fragment element is drawn using a frame. The word â€Å"alt† is placed inside the frame’s namebox. The larger rectangle is then divided into what UML 2 calls operands. [Note: Although operands look a lot like lanes on a highway, I specifically did not call them lanes. Swim lanes are a UML notation used on activity diagrams. Please refer to The Rational Edge’s earlier article about Activity Diagrams.] Operands are separated by a dashed line. Each operand is given a guard to test against, and this guard is placed towards the top left section of the operand on top of a lifeline. [Note: Usually, the lifeline to which the guard is attached is the lifeline that owns the variable that is included in the guard expression.] If an operand’s guard equates to â€Å"true,† then that operand is the operand to follow. Figure 8: A sequence diagram fragment that contains an alternative combination fragment As an example to show how an alternative combination fragment is read, Figure 8 shows the sequence starting at the top, with the bank object getting the check’s amount and the account’s balance. At this point in the sequence the alternative combination fragment takes over. Because of the guard â€Å"[balance >= amount],† if the account’s balance is greater than or equal to the amount, then the sequence continues with the bank object sending the addDebitTransaction and storePhotoOfCheck messages to the account object. However, if the balance is not greater than or equal to the amount, then the sequence proceeds with the bank object sending the addInsuffientFundFee and noteReturned Check message to the account object and the returnCheck message to itself. The second sequence is called when the balance is not greater than or equal to the amount because of the â€Å"[else]† guard. In alternative combination fragments, the â€Å"[else]† guard is n ot required; and if an operand does not have an explicit guard on it, then the â€Å"[else]† guard is to be assumed. Alternative combination fragments are not limited to simple â€Å"if then else† tests. There can be as many alternative paths as are needed. If more alternatives are needed, all you must do is add an operand to the  rectangle with that sequence’s guard and messages. Option The option combination fragment is used to model a sequence that, given a certain condition, will occur; otherwise, the sequence does not occur. An option is used to model a simple â€Å"if then† statement (i.e., if there are fewer than five donuts on the shelf, then make two dozen more donuts). The option combination fragment notation is similar to the alternation combination fragment, except that it only has one operand and there never can be an â€Å"else† guard (it just does not make sense here). To draw an option combination you draw a frame. The text â€Å"opt† is placed inside the frame’s namebox, and in the frame’s content area the option’s guard is placed towards the top left corner on top of a lifeline. Then the option’s sequence of messages is placed in the remainder of the frame’s content area. These elements are illustrated in Figure 9. Figure 9: A sequence diagram fragment that includes an option combination fragme nt Reading an option combination fragment is easy. Figure 9 is a reworking of the sequence diagram fragment in Figure 7, but this time it uses an option combination fragment because more messages need to be sent if the student’s past due balance is equal to zero. According to the sequence diagram in Figure 9, if a student’s past due balance equals zero, then the addStudent, getCostOfClass, and chargeForClass messages are sent. If the student’s past due balance does not equal zero, then the sequence skips sending any of the messages in the option combination fragment. The example Figure 9 sequence diagram fragment includes a guard for the option; however, the guard is not a required element. In high-level, abstract sequence diagrams you might not want to specify the condition of the option. You may simply want to indicate that the fragment is optional. Loops Occasionally you will need to model a repetitive sequence. In UML 2, modeling a repeating sequence has been improved with the addition of the loop combination fragment. The loop combination fragment is very similar in appearance to the option combination fragment. You draw a frame, and in the frame’s namebox the text â€Å"loop† is placed. Inside the frame’s content area the loop’s guard is placed towards the top left corner, on top of a  lifeline. [Note: As with the option combination fragment, the loop combination fragment does not require that a guard condition be placed on it.] Then the loop’s sequence of messages is placed in the remainder of the frame’s content area. In a loop, a guard can have two special conditions tested against in addition to the standard Boolean test. The special guard conditions are minimum iterations written as â€Å"minint = [the number]† (e.g., â€Å"minint = 1†) and maximum iterations written a s â€Å"maxint = [the number]† (e.g., â€Å"maxint = 5†). With a minimum iterations guard, the loop must execute at least the number of times indicated, whereas with a maximum iterations guard the number of loop executions cannot exceed the number. Figure 10: An example sequence diagram with a loop combination fragment Larger view of Figure 10. The loop shown in Figure 10 executes until the reportsEnu object’s hasAnotherReport message returns false. The loop in this sequence diagram uses a Boolean test to verify if the loop sequence should be run. To read this diagram, you start at the top, as normal. When you get to the loop combination fragment a test is done to see if the value hasAnotherReport equals true. If the hasAnotherReport value equals true, then the sequence goes into the loop fragment. You can then follow the messages in the loop as you would normally in a sequence diagram Back to top Beyond the basics I’ve covered the basics of the sequence diagram, which should allow you to model most of the interactions that will take place in a common system. The following section will cover more advanced notation elements that can be used in a sequence diagram. Referencing another sequence diagram When doing sequence diagrams, developers love to reuse existing sequence diagrams in their diagram’s sequences. [Note: It is possible to reuse a sequence diagram of any type (e.g., programming or business). I just find that developers like to functionally break down their diagrams more.] Starting in UML 2, the â€Å"Interaction Occurrence† element was introduced. The addition of interaction occurrences is arguably the most important innovation in UML 2 interactions modeling. Interaction occurrences add the  ability to compose primitive sequence diagrams into complex sequence diagrams. With these you can combine (reuse) the simpler sequences to produce more complex sequences. This means that you can abstract out a complete, and possibly complex, sequence as a single conceptual unit. An interaction occurrence element is drawn using a frame. The text â€Å"ref† is placed inside the frame’s namebox, and the name of the sequence diagram being referenced is pl aced inside the frame’s content area along with any parameters to the sequence diagram. The notation of the referenced sequence diagram’s name follows the pattern of: sequence diagram name Two examples: 1. Retrieve Borrower Credit Report(ssn) : borrowerCreditReport or 2. Process Credit Card(name, number, expirationDate, amount : 100) In example 1, the syntax calls the sequence diagram called Retrieve Borrower Credit Report and passes it the parameter ssn. The Retreive Borrower Credit Report sequence returns the variable borrowerCreditReport. In example 2, the syntax calls the sequence diagram called Process Credit Card and passes it the parameters of name, number, expiration date, and amount. However, in example 2 the amount parameter will be a value of 100. And since example 2 does not have a return value labeled, the sequence does not return a value (presumably, the sequence being modeled does not need the return value). Figure 11: A sequence diagram that references two different sequence diagrams Figure 11 shows a sequence diagram that references the sequence diagrams â€Å"Balance Lookup† and â€Å"Debit Account.† The sequence starts at the top left, with the customer sending a message to the teller object. The teller object sends a message to the theirBank object. At that point, the Balance Lookup sequence diagram is called, with the accountNumber passed as a parameter. The Balance Lookup sequence diagram returns the balance variable. Then the option combination fragment’s guard condition is checked to verify the balance is greater then the amount variable. In cases where the balance is greater than the amount, the Debit Account sequence diagram is called, passing it the accountNumber and the amount as parameters. After that sequence is complete, the withdrawCash message returns cash to the customer. It is important to notice in Figure 11 that the lifeline of theirBank is hidden by the interaction occurrence Balance Lookup. Because the interaction occurrence hides the lifeline, that means that the theirBank lifeline is referenced in the â€Å"Balance Lookup† sequence diagram. In addition to hiding the lifeline in the interaction occurrence, UML 2 also specifies that the lifeline must have the same theirBank in its own â€Å"Balance Lookup† sequence. There will be times when you model sequence diagrams that an interaction occurrence will overlap lifelines that are not referenced in the interaction occurrence. In such cases the lifeline is shown as a normal lifeline and is not hidden by the overlapping interaction occurrence. In Figure 11, the sequence references the â€Å"Balance Lookup† sequence diagram. The â€Å"Balance Lookup† sequence diagram is shown in Figure 12. Because the example sequence has parameters and a return value, its label —lo cated in the diagram’s namebox—follows a specific pattern: Diagram Type Diagram Name Two examples: 1. SD Balance Lookup(Integer : accountNumber) : Real 2. SD Available Reports(Financial Analyst : analyst) : Reports Figure 12 illustrates example 1, in which the Balance Lookup sequence uses parameter accountNumber as a variable in the sequence, and the sequence diagram shows a Real object being returned. In cases such as this, where the sequence returns an object, the object being returned is given the instance name of the sequence diagram. Figure 12: A sequence diagram that takes the parameter of accountNumber and returns a Real object Figure 13 illustrates example 2, in which a sequence takes a parameter and returns an object. However, in Figure 13 the parameter is used in the sequence’s interaction. Figure 13: A sequence diagram that uses its parameter in its interaction and returns a Reports object Larger view of Figure 13. Gates The previous section showed how to reference another sequence diagram by  passing information through parameters and return values. However, there is another way to pass information between sequence diagrams. Gates can be an easy way to model the passing of information between a sequence diagram and its context. A gate is merely a message that is illustrated with one end connected to the sequence diagram’s frame’s edge and the other end connected to a lifeline. A reworking of Figures 11 and 12 using gates can be seen in Figures 14 and 15. The example diagram in Figure 15 has an entry gate called getBalance that takes the parameter of accountNumber. The getBalance message is an entry gate, because it is the arrowed line that is connected to the diagram’s frame with the arrowhead connected to a lifeline. The sequence diagram also has an exit gate that returns the balance variable. The exit gate is known, because it’s a return message that is connected from a lifeline to the diagram’s frame with the arrowhead connected to the frame. Figure 14: A reworking of Figure 11, using gates this time Figure 15: A reworking of Figure 12, using gates this time Combined fragments (break and parallel) In the â€Å"basics† section presented earlier in this paper, I covered the combined fragments known as â€Å"alternative,† â€Å"option,† and â€Å"loop.† These three combined fragments are the ones most people will use the most. However, there are two other combined fragments that a large share of people will find useful à ¢Ã¢â€š ¬Ã¢â‚¬Å" break and parallel. Break The break combined fragment is almost identical in every way to the option combined fragment, with two exceptions. First, a break’s frame has a namebox with the text â€Å"break† instead of â€Å"option.† Second, when a break combined fragment’s message is to be executed, the enclosing interaction’s remainder messages will not be executed because the sequence breaks out of the enclosing interaction. In this way the break combined fragment is much like the break keyword in a programming language like C++ or Java. Figure 16: A reworking of the sequence diagram fragment from Figure 8, with the fragment using a break instead of an alternative Breaks are most commonly used to model exception handling. Figure 16 is a  reworking of Figure 8, but this time Figure 16 uses a break combination fragment because it treats the balance < amount condition as an exception instead of as an alternative flow. To read Figure 16, you start at the top left corner of the sequence and read down. When the sequence gets to the return value â€Å"balance,† it checks to see if the balance is less than the amount. If the balance is not less than the amount, the next message sent is the addDebitTransaction message, and the sequence continues as normal. However, in cases where the balance is less than the amount, then the sequence enters the break combination fragment and its messages are sent. Once all the messages in the break combination have been sent, the sequence exits without sending any of the remaining messages (e.g., addDebitTransaction). An important thing to note about breaks is that they only cause the exiting of an enclosing i nteraction’s sequence and not necessarily the complete sequence depicted in the diagram. In cases where a break combination is part of an alternative or a loop, then only the alternative or loop is exited. Parallel Today’s modern computer systems are advancing in complexity and at times perform concurrent tasks. When the processing time required to complete portions of a complex task is longer than desired, some systems handle parts of the processing in parallel. The parallel combination fragment element needs to be used when creating a sequence diagram that shows parallel processing activities. The parallel combination fragment is drawn using a frame, and you place the text â€Å"par† in the frame’s namebox. You then break up the frame’s content section into horizontal operands separated by a dashed line. Each operand in the frame represents a thread of execution done in parallel. Figure 17: A microwave is an example of an object that does two tasks in parallel While Figure 17 may not illustrate the best computer system example of an object doing activities in parallel, it offers an easy-to-understand example of a sequence with parallel activities. The sequence goes like this: A hungryPerson sends the cookFood message to the oven object. When the oven object receives that message, it sends two messages to itself at the same time (nukeFood and rotateFood). After both of these messages are done, the hungryPerson object is returned yummyFood from the oven object.