21 Sample Poses to Get You Started with Photographing Women – Part II

This article is a sequel to the previous article about posing women. If you haven’t read it, I would kindly recommend you to start with 21 Sample Poses for Photographing Women – Part I, as basic principles why and how to use these samples remains the same.

OK, let’s continue.

1. Good starting pose. And very nice way to make the model slimmer. The model should push her chin forward and tilt it slightly down while at the same time the shoulder up, but not too much! There should definitely be a little gap between chin and shoulder.

2. Most often the best poses are the simplest ones. For female models supporting body on just one leg and curving the body in an S shape is a simple starting rule.

3. Very beautiful way to utilize a wall or some object for a portrait pose. Model should gently touch a vertical surface with her hands.

4. If your model has long falling hair, try showing them in motion. Ask her to quickly spin her head to a desired position allowing the hair to continue the movement. You might want to experiment with different shutter speeds to either capture or avoid a motion blur. These are usually very positive and rewarding shots.

5. Suitable for sitting on a couch or in bed. In order to add some thematic depth, the model could hold a coffee cup in her hands, maybe implying that she is warming her fingers.

6. A nice and cozy pose, very suitable for indoors with the model sitting on a couch.

7. Another variation for a model sitting on a couch.

8. Very nice looking casual pose for a model sitting on the ground. Try different shooting angles, for example, move gradually around the model or change the shooting point’s height.

9. Sitting positions are not limited to casual shots. Don’t be afraid to try some sitting poses also for more formal shots.

10. According to some popular and commonly exploited body language rules, crossing arms and legs means putting up some barriers etc. Even if such beliefs are widespread, it doesn’t mean they are correct. In pictures crossed arms on the chest don’t send any subconscious signs or warnings at all! Crossing arms and legs in all different ways is absolutely fine for people photography.

11. Not always your model needs to “place” hands somewhere specifically. It is absolutely fine to leave them loosely by the sides. The same goes for legs, no exaggerations – one leg supports the weight, that’s the only rule you need.

12. Just another sample for a full height shot you can use as a starting point. Thumbs or hands partly in side pockets also work fine.

13. A very nice pose for summertime. Let her lose her shoes and ask her to walk slowly. Walk and take your shots slightly from behind.

14. Hands behind the back, unusual but very open gesture. She might as well stand and support herself against a wall.

15. Very easy and beautiful pose for a formal portrait. Model should turn a little bit sideways, head turned slightly down and towards the camera.

16. Placing both hands on the waist is also a very photogenic pose. Works well both for half and full height shots.

17. If available, some higher furniture or interior object might be helpful to place an arm on and slightly support the body. This will create a formal but at the same time an open and positive posture.

18. Partly sitting on some object is another very nice pose. Works well indoors as well outdoors in a city.

19. An example of a feminine and fashionable pose for a full height picture.

20. Demanding pose, because indicating model’s movement is not easy. However, if done right, very rewarding for trendy fashion or very elegant full height shots.

21. Lovely looking pose for the appropriate settings – the model is supporting herself against some fence or bridge railing or some similar object. Shooting from a side with a large aperture provides good opportunities for a shallow depth of field with a nicely blurred background.

Interesting Case Study.!!. Samosa Vendor-India!!

The Samosa Vendor
White Collar Vs. Blue Collar

A short, but, a real story!
Today in India its unbelievable .......
The numbers are a little difficult to
swallow, ......  But interesting nevertheless.
It was my regular train journey home from
work. I boarded the 18:50pm train at from Paranur. When the train was about
to leave Guduvanchery, a samosa vendor with an empty basket got on and
took the seat next to me. As the compartment was sparsely occupied and
my destination was still far away, I got into a conversation with him.
Me: "Seems like you've sold all your
samosas today."
Vendor (smiling): "Yes. By God's grace,
full sales today."
Me: "I really feel sorry for you people.
Don't you get tired doing this tiresome job the whole day?"
Vendor: "What to do, sir? Only by selling
samosas like this every day do we get a commission of 75 paise for each
samosa that we sell."
Me: "Oh, is that so ? How many samosas
do do sell on an average each day?"
Vendor: "On peak days, we sell 3,000
to 3,500 samosas per person. On dull days, we can't even move 1,000 samosas
a day. On an average, we sell about 2,000 samosas a day."
I was speechless.....for a few seconds.
The guy says he sells 2,000 samosas a day; at .75 paise each, he makes
about 1,500 rupees daily, or 45,000 rupees a month. That's Rs. 45,000 a
month. OMG. I intensified my questioning and this time it was not for time
pass.
Me: "Do you make the samosas yourself?"
Vendor: "No Sir. Our proprietor gets
the samosas through a samosa manufacturer and we just sell them. After
selling we give him the money and gives us 75 paise for each samosa that
we sell."
I was unable to speak a single word more
but the vendor continued...but one thing...most of our earnings are spent
on living expenses. Only with the remaining money are we able to take care
of other business.
Me: "Other business? What is that?"
Vendor: "It is a land business. In
2007 I bought 1.5 acres in Urupakkam for 3 lakh rupees and I sold it a
few months back for 15 lakhs. Now I have bought land in Uthiramerur for
5 lakh rupees."
Me: "What did you do with the remaining
amount?'
Vendor: "Of the remaining amount, I
have set aside 6 lakhs for my daughter's wedding. I have deposited the
other 4 lakhs in the bank."
Me: "How much schooling have you had?"
Vendor: "I studied up to third standard;
I stopped my studies when I was in the 4th standard. But I know how to
read and write. Sir, there are many people like yourself, who dress well,
wear a tie, wear shoes, speak English fluently and work in air-conditioned
rooms. But I don't think you guys earn as much as we do wearing dirty clothes
and selling samosas."
At this point, what could I reply. After
all, I was talking to a millionaire! The train chugged into Chromepet station
and the samosa vendor got up from his seat.
Vendor: "Sir, this is my station...have
a good day."
Me: "Take care."
What more is there to say...!

10 Things You Need To Know About Your Job Interviewer

Ever wonder what's going through the mind of the person sitting across from you at your job interview? Here are 10 things that you might not realize about your job interviewer.

1. We want to find the best person for the job. Because interviews are stressful, it's easy for a job candidate to start feeling like the interviewer is an adversary, but it's really the opposite—interviewers go into every interview hoping you'll be the right candidate. After all, we have a vacancy on our team, and we're highly motivated to find someone who's a great fit to fill it. We don't want to put you in a job you won't excel in.

2. We're busy. Interviewers don't always have time to respond to follow-up emails or calls to check the status of your application. Considerate interviewers will eventually get back to anyone who invested time in interviewing, but it might take longer than you'd like. And time constraints and higher priorities mean that your attempts to check in after your interview but before a decision has been made might go unanswered. You shouldn't take it personally. 

3. We might have our hands tied by human resources. If you've ever encountered an interviewer who doesn't deviate from a set list of questions, or who won't give you any feedback, or who refuses to commit to a timeline for next steps, the problem might be HR. In some companies, HR issues unreasonable rules that restrict how candid hiring managers can be. 

4. We're afraid of making the wrong hire. The costs of hiring the wrong person are high—work not being done properly, disruption to our team, potentially months of counseling and warnings, and the awfulness of having to fire someone. We're scrutinizing you to make sure that hiring you won't be a mistake.

5. We want to hire someone we get along with. Hiring isn't just about who has the best skills to do the job; it's also about who will fit in best with the workplace. Interviewers think about the fact that we're going to be around whoever we hire quite a bit, and no matter how skilled you are, we're not going to want to hire you if you're arrogant or whiny or otherwise unpleasant.

6. We're trying to figure out what you'll be like to manage. Smart hiring managers probe for insights into what you'll be like to manage: Will you require detailed reasoning for every little request or just get it done? Will you be a yes-man who never reveals what you really think, or a straight shooter we can count on for the truth? Will you require hand-holding, sulk when you get feedback, or complain about petty problems with your co-workers? We're on the lookout for signs of all of this.

7. We want you to help us figure out why we should hire you. Interviewing people is hard work. It's even harder if you have to drag answers and relevant information out of a candidate. You can help us see that you're right for the job by coming prepared with real-life examples of how you've excelled in the areas the job requires.

8. We won't always tell you what we really think. We might nod encouragingly while you badmouth your last boss, but we're really noting that you're willing to trash talk your employers. Or you might give an answer that's an instant deal-breaker, but you probably won't hear that on the spot—or even be able to tell. Part of interviewing is encouraging people to reveal themselves, which often means not showing any judgment during the meeting.

9. We're wondering what you're not telling us. We know candidates aren't always completely candid in interviews, and we're wondering what you are revealing. Is it something minor, like the fact that you really left your last job because your boss was a tyrant, or major, like the embezzling charge you narrowly avoided last year?

10. We hate rejecting people. In fact, some interviewers hate it so much that they don't do it, which is rude and unfair to candidates. But the rest of us do it, knowing all the while that you might have really wanted this job, even have been counting on it, and we hate it. We do know that our decisions have big impacts on other people's lives.

 

Taken from: US News & World Report.

What to do if you can’t stop preparing for job interviews….

Top job interview tips from around the globe

Two days ago I wrote a blog post about a dilemma I had with a client.  He was a highly intelligent job seeker who came to me for interview training – trouble was he’d done too much already, and was way too over prepared. The more I worked with him, the more I compounded the problem, as he seemed to want to memorise each tip I gave him. I thought I’d use social media to help me help him. I reached out to several people around the globe who write on careers and whose views I greatly respect.

Here’s a summary of the amazing interviewing advice they gave me about helping my client.

Melissa Cooley who blogs at The Job Quest wrote:

“Perhaps taking a notepad with him to the interview would help. If he writes down a few notes on what they are saying, it could slow his mind down just a bit and be easier to blend what he already knows into an answer that will be more what the interviewers would be looking for. Another thing is to remind him that pauses after a question aren’t necessarily bad. Though they may seem like an eternity from the candidate’s end, they convey to the interviewers an ability to be thoughtful and to weigh the choices, not just have a knee-jerk reaction.”

Jorgen Sundberg who set up The Undercover Recruiter said:

“If I were the interviewer in this situation I would want to find ‘human’ candidates. I would expect they get lots of clever clogs and professor types, which is great but they will want to pick someone that can work with a team and well with patients. Everyone that gets picked to the interview has the potential of doing this but it will come down to personal traits methinks. So my advice for him would be to do a check of how he likes to help people, what he is passionate about, what he does in his spare time, family stuff etc and then project that in the interview. If he still doesn’t get the gig, forgetta bout it as I wouldn’t want it in that case!”

Hannah Morgan aka  The Career Sherpa suggested:

“I’ve seen this happen before as well. I think there are several things you may want to suggest your client try. First, I agree with Jorgen’s point about focusing on the interpersonal skills and highlighting his passion. That’s hard to practice with someone you know. Perhaps having him practice the relationship building skills of asking questions about the interviewer would be a good tactic. Also, I am sure you’ve coached him to use STAR/PAR/accomplishment stories when he answers question. When he tells these stories, you should see his “eyes twinkle” and he should be smiling from pride or self-worth. If that’s not happening, could it be he doesn’t love what he does? Second, you want him to use spoken language, not resume-ese. Ask him to re-script his answers using the spoken language. And third, if he has over practiced, then changing up his scripting might make him sound less stale. You might ask him to tell totally different stories, use a different introduction, and have different answers to the typical questions.”

Steven Solodky a career coach in Melbourne and Founder of Career Muk said:

“He could be projecting what he thinks the interviewer wants to hear. I work on challenging this assumption by discussing what is actually assessed. I want to know what you really think and feel, not what you think I want to hear. It could also be a cover for nerves. I point out that nervousness is normal and that I become concerned if a candidate is not nervous, as it could point to a lack of self awareness or an underlying personality distortion such as inflated confidence, lack of empathy or aggression. I then would work on how to express nervousness in an interview and how this is very normal and nothing that requires a great deal of attention – who wouldn’t be nervous and it only shows how much you care about the role. Nerves pass in their own time and they arise as a normal human function when one is exposed to a new situation. I encourage the client to bring awareness to their thoughts and feelings. What are you thinking right now? What feelings are arising right now? I ask them to bring in a job they want to apply for and go through the same process – what do you think about this role? What do you feel about it? It’s subtle, but hopefully they start to relax by this point and can talk more openly by by-passing conceptual thought. I will also challenge if needed – you say this, but what do you really think? That’s funny, the last candidate told me that, give me something new? That’s nice, tell me something that I don’t know etc (supportive of course). Who is talking now, you or your mind again?”

This suggestion comes from Deborah Barit of Impressive Interviews:

“I would suggest your client takes a step back and considers the following: If he was on the interview panel what would he want the candidate to say for the panel to go YES and formulate the answers accordingly. This is not a competition.  He needs to focus on their qualifications, experience and personal attributes which makes him stand out in the crowd. The most important part of preparing is to focus only on what he has to offer. It is essential not to memorise answers but focus on the key points for each answer and prepare examples from experience to demonstrate the point.

Expect the unexpected and hence stop worrying about it.”

Mary Goldsmith, Founder of Career Sheila recommends:

“Is your candidate already using a formula such as CAR or STAR to present examples of his best achievements during the interview? Has he seen a recording of himself in action? If not, that may be a wake up call!”

Phyllis Mufson found at Phyllis Mufson wrote:

“Just jotting down a few notes of what has helped clients who don’t sound like themselves – they come across overscripted, or sounding like a role rather than a person, too authoritarian or conversely sounding like a scared rabbit, to name a few. The person is usually scared. So start out what they’re afraid of and address that. The goal here is to get them to the point where they are willing to be authentic even if nervous. Point out that the purpose of rehearsal is to make sure that if they are nervous at the interview they will still remember some of their points, and not to sound like a TV newscaster (unless that’s the job they are interviewing for. Focus prep on choosing their strongest points and illustrating their points with stories – more memorable than a string of facts. Record them answering questions and give feedback. They can hear the difference between an over-scripted (or whatever the initial problem was) manner and being genuine. They have much more impact when they are being themselves and telling compelling stories.

Give them the assignment that first priority in the interview is to connect with the interviewer.”

Tim Tyrell Smith from Tim’s Strategy suggested:

“In the end, I think it is about learning to relax and be yourself. I think if you can do those two things, the fit (or non-fit) will become obvious. It allows you as the candidate to be more conscious in the conversation. And you’ll get more of Hannah’s “eye-twinkling” (great phrase). As an interviewer, I always liked to watch someone think – to pause before an answer. Too quick and it feels rehearsed (like you mentioned). Too long and it seems selfish. My advice is to prepare as best you can then relax and let go. Give short/crisp answers and be ready with longer, more interesting ones as interest from the interviewer is apparent. Focus on a more conversational interview. An exchange of ideas . . .”

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Start Sending Smart Emails at Work

We've all fallen victim to being misunderstood in an email. The problem with emails is that they don't convey emotion well, and often your words can be misconstrued as a result. There are plenty of email pitfalls of which we've all been guilty. At work, this can be dangerous, and can even cost you your job if you're not careful. Use these tips to make sure you remain professional via email at all times.

1. Check your tone. It's easy, even satisfying, to type out an email in the wake of anger. But the next time this happens, take a pause before clicking "Send." Take some time to cool down, then reread the email to see if your frustration comes through. If it does, rewrite it so that you keep emotion out of the note.

2. Consider how it will be received. You may be the queen of sarcasm, but realize that your sarcastic personality may not come across jokingly in an email, and your recipient might take offense. Without the context that comes with a vocal conversation, you can see that someone might be put off if they received this in an email. If you're not sure how something will be perceived, find a better way to write it.

3. Take it offline. Some conversations are better not shared via email. If you're discussing a sensitive subject, or if the conversation has gotten derailed due to misunderstandings, pick up the phone or stop by that person's office. It can usually be a lot easier to finish the discussion in person, and you don't make any assumptions about the other person's intent.

4. Stay professional. Even if you're casual with co-workers after hours, keep your business-related emails professional at all times. Remember that your company might monitor your emails, so you certainly don't want any record of you being anything but professional.

5. Skip the emoticons. Save the smiley faces for your personal email after work. Cute images have no place in work email. Period.

6. Pay attention to your reply all. Many of us have mistakenly replied to everyone included on an email when we shouldn't have. Make sure if you want to email one person you don't click "Reply All," or you risk irritating a slew of other folks.

7. Don't rush. You're busy. But rushing through an email often leads to many mistakes, such as sending it to the wrong person, or leaving off an attachment. Take a moment with each email to make sure you're sending it to the intended recipient, and that you've spell-checked it. It's worth the 30 seconds it takes to make sure you come off as professional.

8. Take your time to respond. We live in a world of near instant gratification, and email is no exception. When you get an email, make sure you respond when you have good reason to. If you've been asked to provide a document that's not ready, consider whether the person who sent the email needs an immediate response or if it can wait until later in the day when the document is ready. We all have enough in our inboxes that we would gladly skip that short quick response in favor of a return email with the information requested.

9. Use an effective subject line. It's all too easy to just hit "Reply" and go with the subject line Re:. But if your recipient needs to quickly ascertain what your email is about, this won't help her. Instead, identify the subject you cover in the email and label the subject accordingly. This is also helpful when she needs to search to find an email you've sent.

10. Use email as only one communication tool. We often rely too heavily on email, and don't have enough face-to-face interaction. Make an effort to connect with others you work with in other ways. Invite a colleague to coffee. Go on-site to visit a client. Keep your relationships multifaceted so

that you build rapport with people, both online and off.

Author: Lindsay Olson is a founding partner and public relations recruiter with Paradigm Staffing and Hoojobs.com, a niche job board for public relations, communications, and social media jobs.

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Credit Linked Notes

Certain investors are prevented from entering into derivatives contracts, either by law or by internal investment policies. Credit Linked Notes (CLNs) allow such investors to derive some of the benefits of credit derivatives.

Credit Linked Notes (CLNs) are regular debt obligations with an embedded credit derivative. They can be issued either directly by a corporation or bank or by highly rated special purpose vehicles created by dealers. The coupon payments made by a CLN effectively transfer the cash flow of a credit derivatives contract to individual investors.

Credit Linked Notes are best understood by a simple example: ABC Investments would like to take on the risk associated with the debt of XYZ Corp., but all of XYZ’s debt is composed of bank loans and ABC Investments cannot simply sell protection in a Credit Default Swap (CDS) because its investment policy prevents it from entering into a derivatives contract. Let us assume that the size of ABC Investments desired exposure to XYZ Corp. is $100 million. One way of gaining the desired exposure to XYZ’s debt is for ABC Investments to purchase $100 million in Credit Linked Notes that reference XYZ Corp. The issuer of the notes may take ABC Investments’ $100 million and buy highly-rated debt obligations to serve as collateral for its CLN liability towards ABC Investments. At the same time, the CLN issuer enters into a credit default swap with a third party, selling protection against a default by XYZ Corp. From that point on, the CLN issuer will simply pass through the cash flows associated with the credit default swap to ABC investments. In the event of default by XYZ Corp., the CLN issuer will pay its default swap counterparty and the Credit Linked Note terminates with ABC Investments receiving only the recovery value of XYZ’s defaulted debt. If no default occurs, ABC Investments will continue to receive the coupon payments associated with the Credit Linked Note until its maturity date, at which point it will also receive its principal back. It should then be clear that a credit linked note is simply a funded way of entering into a credit derivatives contract.

Source: Report of the working group on introduction of credit derivatives in India.

Uses of Credit Linked Notes

1. Credit Linked Notes allow the cash flows of derivatives to be “repackaged” into securities that can be bought and sold in the market place. This is especially useful for some classes of institutional investors like mutual funds.
2. Investors who do not have master credit derivatives agreements with dealers are attracted to credit linked notes as they generally require less documentation and lower set up costs than outright derivatives contracts. They can also be tailored to meet specific needs of investors.
3. They can help increase the liquidity of certain otherwise illiquid assets. For instance, CLNs that reference a pool of bank loans can be trade in open market without restrictions, whereas actual sales of loans might be subject to restrictions and approval by the borrowers.
4. Bankers/ dealers too find value in the issuance of CLNs as they provide dealers with an additional vehicle to hedge their exposures in other credit derivatives positions.

Source: Credit Derivatives-Research Report

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It's More Important to Be Kind than Clever

One of the more heart-warming stories to zoom around the Internet lately involves a young man, his dying grandmother, and a bowl of clam chowder from Panera Bread. It's a little story that offers big lessons about service, brands, and the human side of business — a story that underscores why efficiency should never come at the expense of humanity.

The story, as told in AdWeek, goes like this: Brandon Cook, from Wilton, New Hampshire, was visiting his grandmother in the hospital. Terribly ill with cancer, she complained to her grandson that she desperately wanted a bowl of soup, and that the hospital's soup was inedible (she used saltier language). If only she could get a bowl of her favorite clam chowder from Panera Bread! Trouble was, Panera only sells clam chowder on Friday. So Brandon called the nearby Panera and talked to store manager Suzanne Fortier. Not only did Sue make clam chowder specially for Brandon's grandmother, she included a box of cookies as a gift from the staff.

It was a small act of kindness that would not normally make headlines. Except that Brandon told the story on his Facebook page, and Brandon's mother, Gail Cook, retold the story on Panera's fan page. The rest, as they say, is social-media history. Gail's post generated 500,000 (and counting) "likes" and more than 22,000 comments on Panera's Facebook page. Panera, meanwhile, got something that no amount of traditional advertising can buy — a genuine sense of affiliation and appreciation from customers around the world.

Marketing types have latched on to this story as an example of the power of social media and "virtual word-of-mouth" to boost a company's reputation. But I see the reaction to Sue Fortier's gesture as an example of something else — the hunger among customers, employees, and all of us to engage with companies on more than just dollars-and-cents terms. In a world that is being reshaped by the relentless advance of technology, what stands out are acts of compassion and connection that remind us what it means to be human.

As I read the story of Brandon and his grandmother, I thought back to a lecture delivered two years ago by Jeff Bezos, founder and CEO of Amazon.com, to the graduating seniors of my alma mater, Princeton University. Bezos is nothing if not a master of technology — he has built his company, and his fortune, on the rise of the Internet and his own intellect. But he spoke that day not about computing power or brainpower, but about his grandmother — and what he learned when he made her cry.

Even as a 10-year-old boy, it turns out, Bezos had a steel-trap mind and a passion for crunching numbers. During a summer road trip with his grandparents, young Jeff got fed up with his grandmother's smoking in the car — and decided to do something about it. From the backseat, he calculated how many cigarettes per day his grandmother smoked, how many puffs she took per cigarette, the health risk of each puff, and announced to her with great fanfare, "You've taken nine years off your life!"

Bezos's calculations may have been accurate — but the reaction was not what he expected. His grandmother burst into tears. His grandfather pulled the car off to the side of the road and asked young Jeff to step out. And then his grandfather taught a lesson that this now-billionaire decided to share the with the Class of 2010: "My grandfather looked at me, and after a bit of silence, he gently and calmly said, 'Jeff, one day you'll understand that it's harder to be kind than clever.'"

That's a lesson I wish more businesspeople understood — a lesson that is reinforced by the reaction to this simple act of kindness at Panera Bread. Indeed, I experienced something similar not so long ago, and found it striking enough to devote an HBR blog post to the experience. In my post, I told the story of my father, his search for a new car, a health emergency that took place in the middle of that search — and a couple of extraordinary (and truly human) gestures by an auto dealer that put him at ease and won his loyalty.

"What is it about business that makes it so hard to be kind?" I asked at the time. "And what kind of businesspeople have we become when small acts of kindness feel so rare?"

That's what's really striking about the Panera Bread story — not that Suzanne Fortier went out of her way to do something nice for a sick grandmother, but that her simple gesture attracted such global attention and acclaim.

So by all means, encourage your people to embrace technology, get great at business analytics, and otherwise ramp up the efficiency of everything they do. But just make sure all their efficiency doesn't come at the expense of their humanity. Small gestures can send big signals about who we are, what we care about, and why people should want to affiliate with us. It's harder (and more important) to be kind than clever.

Author: Bill Taylor (William C. Taylor is cofounder of Fast Company magazine and author of Practically Radical: Not-So-Crazy Ways to Transform Your Company, Shake Up Your Industry, and Challenge Yourself, published January 4, 2011.)

Credit Derivative – Meaning and Definition

Our present society lives on credit. Credit allows us to consume far more than what our savings can sustain. Therefore, credit is the very basis of consumerism. Our economy drives on the basic force of credit. What exactly is credit? Credit is parting with value today against a promise for value in future and this credit has inherent risk in it which is known as credit risk. Credit risk is the risk that the promise of payment in future may be broken. In other words, credit risk is an investor’s risk of loss arising from a borrower who does not make payments as promised. When the borrower fails to make payments, it is termed as default. So, credit risk is also known as default risk. This concept of credit risk can be looked at from two perspectives. Credit risk on the loans granted by banks and also on the bonds issued by corporate. In case of banks, credit risk occurs when the borrower defaults on loan repayment and in the event of default, the lender (bank) suffers from a loss. In case of Corporate (bond issuers), credit risk occurs for the bond investors when the corporate fail to make interest payments on the bonds. Credit risk affects any party making or receiving a debt payment. Examples include bond issuers, bond investors and commercial banks. Bond issuers are affected by credit risk because their cost of borrowing depends upon their risk of default, these bond issuers are rated by credit rating agencies and these credit ratings reflect their credit quality. Investors in individual bonds are exposed to the risk of a decline in the bond’s credit rating. A downgrade in a credit rating will increase the bond’s credit risk premium and reduce the value of the bond. Banks are exposed to the risk that borrowers will default on their loans. The credit risk faced by banks is relatively high as compared to other risks faced by banks because banks tend to concentrate their loans geographically or in particular industries, which limits their ability to diversify credit risks across borrowers.

How to manage credit risk is the next question facing the banks today. Various methods are available to manage credit risk. Traditional methods have focused mainly on diversification. Over the past ten years, an alternative approach to managing credit risk has concentrated on selling assets with credit risk. Banks can sell their loans directly or they can securitize, pool together assets with credit risk and sell them to investors in parts. Unfortunately, the securitization approach is well suited only for loans that have uniform payment schedules and similar credit risk features, such as home mortgages and automobile loans. Loans for commercial and industrial purposes, in contrast, have diverse credit risks. In cases such as these, banks have to resort to other methods of controlling credit risk. Thus, credit derivatives emerged as new financial instruments to mitigate credit risk when it was impossible for loan sales or securitization to do so.

Meaning of Credit Derivatives

Credit derivatives, instruments that emerged around 1990′s, are a part of market for financial derivatives. Since credit derivatives are presently not traded on any of the exchanges, they are a part of Over-the-Counter (OTC) derivatives market. Credit derivatives are bilateral financial contracts that transfer credit risk from party to another counterparty without the ownership of underlying asset. Credit derivatives are off-balance sheet financial instruments that permit one party (beneficiary) to transfer credit risk of a reference asset, which it owns, to another party (guarantor) without actually selling the asset. It, therefore, “unbundles” credit risk from the credit instrument and trades it separately. The counterparty to derivative contract can either be a market participant or could be the capital market through the process of securitization. Possible features of this contract are the underlying (reference asset), the strike price, liquidity, maturity, default, credit event and protection payment.

Credit derivatives have several applications. Some of the uses of credit derivatives are that they help banks to reduce their credit exposure, facilitate trading of credit risk, help in the management of credit lines and they also increase liquidity of the market. Credit derivative product namely credit default swap can be very useful for the Indian corporate debt market. This product not only transfers credit risk but also acts as insurance against default. Credit default swaps have other advantages too. They enhance investment and borrowing opportunities and at the same time reduce transaction costs, hence, these products can prove extremely helpful in eliminating the deficiencies of corporate debt market and they have the potential to make corporate debt market more efficient.

Credit Derivatives-Research Report