Archive for the ‘business tips’ Category

What is a proper credit orientation February 23rd, 2010

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76Win-Win Orientation

If you scored low in this attribute, you probably use a win-lose style of conflict resolution and problem solving. This is especially true if you are a competitive person. Competitive conflict resolution and problem-solving techniques, by their very nature, are designed to help one side meet its needs. In a partnership, this is destructive behavior. If you scored high in this attribute, you are more likely to use a winwin style for conflict resolution and problem solving. People with this style generally have a higher ability to trust and feel more comfortable being interdependent with others.

Ability to Trust

If you scored low in this attribute, you tend to have a low ability to trust that people will do what they promise. Certain people do condition us to expect the worst of them. But when we get caught up in that kind of thinking, a series of cascading events can actually set up the expected disappointment. People who have a low ability to trust also tend to have a high need for independence, rely on a past orientation in their decision-making style, and use a win-lose style of conflict resolution and problem solving. If you scored high in this attribute, you generally trust that people will do what they say. In turn you may tend to use a future-oriented decision-making style, be comfortable with interdependence, and be predisposed to using a win-win style of conflict resolution and problem solving.

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Flat credit curves imply stable spreads November 5th, 2009

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It is important to note that upward sloping credit curves imply a widening of spreads, flat credit curves imply stable spreads and inverse credit curves imply tightening spreads. Again, as with government bonds implied spreads differ from expected future spreads. Longer term corporate bonds should not only contain a premium that compensates investors for accepting higher price volatility, but also for taking on additional credit risk.

A second observation with respect to forward credit curves is related to the slope: The steeper a credit curve is, the larger is the implied spread widening. If the spread widens less or more than indicated by forward spreads over the holding period, certain bonds will perform better than others. Portfolio managers who have a strong view on the spread changes they expect for an issuer’s bonds may benefit from this fact. If, for example, they expect the bonds of an issuer with an upward sloping credit curve, as France Telecom, to widen less than implied by forward spreads, they would prefer to own longer term bonds, because the additional carry should overcompensate the capital loss due to the expected spread widening.

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