Derivatives - The sophisticated satta market

Had my first class of financial derivatives (FD for short) today. The prof went gaga over how they are instruments for hedging risks as well as their random use for speculation. We were introduced to the various forms of derivatives in the forms of forwards, futures, options and swaps with the introduction session focussed on the first two.

Now we know that futures are exchange traded and have cash settlement as opposed to the forward contracts which are OTC and have physical settlement. But these forwards can be cash settled too if the contract is so made. This means I can enter and speculate on the price of a commodity, the volatility of the stock index, stocks etc. legally to enter into forward contracts with a third party.

So how different is it if I would like to extend the same to the success of India in the T20 world cup or the number of wickets taken, the probable score to be made and so on. Why is it called a satta then? Is it not the form of a futures contract in which I decide the underlying, the price, the mode of delivery as well as the payment date?

Why is speculating on stocks allowed and this termed illegal? And the argument of gambling doesn't hold as that is exactly what you do in stock trading. The future price of the stock is not actually related to the exercise price, it is just a value derived from the current price to which certain risk premiums have been adjusted and in no way reflects the spot price of the day.

So isn't this whole derivative crap a slightly sophisticated gamble??? Let's see what happens in the future classes and whether my doubts are dispelled.....

Business Ethics

Business ethics - A subject taught in a few of the B schools hoping that the new age managers would develop into ethical human beings and introduce or be a part of the change to bring business to the levels of a respectable profession. 

But aren't they forgetting that the goal of a business is to make profit. And ethics is not something that is well defined but is just the views of a person or the society as such, which are not absolute. Therefore the introduction of such a highly confusing aspect in which one cannot really separate the right from the wrong seems meaningless. Although one thing that it does is open one's mind to the various possibilities to consider for one's actions.

Here i present a few of the contradictions:

1. Whom does a firm care about the most in terms of its stakeholders?

2. Do u outsource to a country with cheap labour or is it exploitation of labour as the wages are a lot less than in your own country? what are your obligations for your own employees whom u fire?

3. Does privacy matter or company security?

4. What is CSR? How do u account for it in the balance sheets? 

And more importantly if CSR benefits the company too why is it lauded by the govt. when all that the company is doing is increasing its profits.

These and many more dilemmas exist but how do you choose? In absence of clear laws governing the country (laws are unfortunately more ambiguous coz loopholes always exist) how does one exactly decide what to do??? No clear answer exists and it is more of a damage control exercise.......