Common Forms of Credit Derivatives

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Credit Derivatives

Based in the New York-New Jersey region, Rao Chalasani has held directorships with Merrill Lynch and Bank of America-Merrill Lynch. Before assuming these roles, Rao Chalasani served as vice president of global derivatives technology with Deutsche Bank, where he focused primarily on credit derivatives and IR derivatives.

A financial instrument involving the transfer of credit risk without changing ownership of the underlying entity, credit derivatives come in many different forms. Credit default swaps (CDS), which rank among the most common credit derivatives, allow a buyer to receive compensation from the seller in the event of a default. The value of a CDS depends on a number of factors, including the credit quality of both the writer and the underlying entity.

Total return swaps are similar to credit default swaps, except they also incorporate the economic exposure of the underlying asset. Credit spread options feature variable payoffs that depend on fluctuations in the credit spread, while asset swaps exchange a bond’s coupon for LIBOR cash flows and a spread.

Women Gaining Financial Power Worldwide

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Women and Finance

Rao Chalasani is a New Jersey resident with a range of professional experience in finance. For many years, Rao Chalasani has worked in various capacities for Merrill Lynch, the wealth management division of the Bank of America in New York, NY.

Merrill Lynch recently reported on the rise of women in the global economy. While there is still a wage gap, especially for women of color, the number of US women making six figures is rising more than three times faster than that of men.

In developing nations, women’s income is growing by 8.1 percent while men’s is growing by only 5.8 percent. The proportion of jobs held by women in the US rose from 37 percent in 1970 to 48 percent in 2007.

This could be good news for everyone, since without this growth, the US economy would likely be 25 percent smaller than it is right now. Boosting female employment rates to match that of men could mean a five percent boost to the US gross domestic product.

Nearly a billion women are likely to enter the global economy within the next ten years, and as more women enter the global marketplace, industries may adjust their focus on gender and change the way things are bought and sold. Even the structure of families may continue to change in coming years, for example with more dual income households, more women acting as breadwinners, and a higher percentage of single parents with financial independence.

Enterprise Risk Management – An Overview

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Enterprise Risk Management System

Financial executive Rao Chalasani most recently served as chief technology officer and risk strategy director with Bank of America-Merrill Lynch in New York City, NY. During his time with the firm, Rao Chalasani invented a US patent pending “Enterprise Risk Management System.”

A strategic business discipline designed to evaluate and manage firmwide risk, enterprise risk management (ERM) also looks at the combined impact of risk in an aggregated risk portfolio.

Unlike more traditional approaches to risk management, ERM looks at the totality of risk rather than individual “silos” of seemingly unrelated risk. As a result, ERM involves all aspects of organizational risk, from compliance and governance to financial and reputational risk.

In practice, ERM collects risk information from internal and external environments, using it to develop structured risk management processes. Because many business leaders see ERM as a way to gain a competitive advantage, risk management often plays a central role in key decisions at all levels of the business organization.

Types of Risk Management Strategies

Specializing in business and technology, New Jersey resident Rao Chalasani worked at Bank of America (BofA) in New York, NY, in the capacities of director of trading in risk management and business, and chief technology officer (CTO). At BofA, Rao Chalasani’s responsibilities comprised developing and implementing a company-wide risk management platform.

Risk management is a wheel with many spokes. Depending on a company’s goals and needs, risk management experts may invoke strategies such as risk acceptance, risk avoidance, and risk transference. Risk acceptance does not involve any mitigation; companies choose this option when they do not want, or do not have, resources to spend on implementing other strategies. They accept the risks and forge ahead, hoping that achieving success proves worthwhile.

Risk avoidance lies at the opposite end of the spectrum. Rather than brace for impact, companies spend resources on any and all actions that can mitigate risks. As a result, risk avoidance is usually the most expensive risk management strategy.

Falling somewhere in between risk acceptance and risk avoidance, risk transference involves the responsibility and ramifications of a given risk being handed to a willing third party. Examples include outsourcing operations such as customer service to other businesses, rather than handling it in-house. Risk transference works best for companies willing to admit that a particular operation is not its forte, and should be handled by more knowledgeable parties.