Comparative Analysis of Forwards and Futures Contracts

Comparative Analysis of Forwards and Futures Contracts A Mauritian Perspective Abstract This research compares the OTC derivatives market with the exchange-traded derivatives market. Forwards contracts have been used as a representative for OTC markets and Futures for organised exchanges and the costs and benefits of each one have been analysed. This research has been done being with regard to the GBOT setting up in Mauritius. Forwards are frequently used contracts relative to others, in Mauritius. Hence, it is assumed that if the users have to shift to the GBOT, they will use futures contracts as a substitute for forwards since both have similar characteristics except that futures are more sophisticated than forwards. A survey has been done on the top one hundred and twenty companies in Mauritius out of which, only 70 have responded. The questionnaire aimed at determining the current derivatives position in Mauritius and a glance at the perception of the financial officers with respect to GBOT. Even though they believe that GBOT will benefit the country, they are unwilling to enter the market; while most of the respondents are unaware of GBOT and uncertain about the futures market and trade mechanism. Unexpectedly, it was found that some firms use futures for risk management. The results have been used to conclude whether it is viable for Mauritius to introduce an exchange and what measures can be taken to ensure that GBOT is successful. With respect to this research, it seems that the Mauritian market is not ready yet, to conceive this new development in its financial system but there are some measures that can be adopted to combat the inhibitors and there are much lessons to be learned from the record of derivatives mismanagement. List of Abbreviations AML Air Mauritius Company Limited CDS Central Depository and Settlement Company Limited CBOT Chicago Board of Trade CME Chicago Mercantile Exchange CFTC Commodity Futures Trading Commission EFP Exchange of Futures for Physical FSC Financial Services Commission FX Foreign Exchange GBOT Global Board Of Trade HSBC Hongkong and Shanghai Banking Corporation Limited MTM Mark-To-Market OTC Over-The-Counter SEM Stock Exchange of Mauritius STC State Trading Corporation S0 Spot price today ST Spot price at maturity USA United States of America 1.1 Introduction The presence of derivatives market has undoubtedly improved national productivity growth and standards of living. Alan Greenspan (Chairman of the US Federal Reserve System, 2005) Derivatives have gained prominence in the past few decades and are today a vital element in finance. Although they are the latest addition to the financial world, they have been witnessing a high rate of success. They have undergone constant innovation and active trade, notwithstanding the fact that they have led to a more complex form of hedging. Electronic trading and settlement facility has revolutionised the global financial and commodity markets by attracting international investors and increasing liquidity. 1.2 Background Theory 1.2.1 Hedging Hedging is a form of insurance that uses derivatives to absorb financial risk by locking in a price for a particular good. Its essence pertains to the uncertainties associated in prices of goods. Since prices of goods cannot be predicted with certainty, people speculate. Gol (1980) states that when everyone expects a price rise, all opinions seem to converge over a price rise, such that, if speculators enter the futures market, they would also be buyers rather than sellers and their buying activity may further aggravate the price rise. Speculation helps in effective risk management but sometimes backfires; for instance, many airlines speculated a rise in fuel prices and hedged their exposure with derivatives. Unfortunately, the financial crisis 2007-2008 caused fuel prices to decrease considerably in the spot market, but the airlines had the obligation to honour their derivative contracts at relatively higher prices. 1.2.2 Derivatives market Derivatives are financial instruments that derive their value from one or more underlying assets such as stocks, bonds, currencies, interest rates, commodities and market indices; for example, an oil futures contract derives its value from the price of oil- oil being the underlying asset. Derivatives are used extensively in financial and non-financial institutions. Forward contracts are the basic derivatives that stemmed from the goods market, and have thereupon paved the way for other derivatives. Some goods traded through derivatives are base metals, precious metals, agricultural products, energy products, foreign currencies, interest rate, and stock indices among others. Other includes contracts based on carbon, commodity indices, credit, fertilizer, housing, inflation, and weather. Source: Futures Industry Magazine 2009 For this research, commodities, assets, and goods are used interchangeably, irrespective of whether they are used in the financial, commodities or foreign exchange markets. 1.2.3 Types of derivatives There are two distinct groups of derivative instruments: forward-based products and option-based products. Forward-based products are termed linear derivatives as they offer a linear payoff and include futures, forwards, and swaps. Conversely, option-based products are non-linear derivatives since they offer a non-linear payoff and include puts, calls, caps, floors, and collars. Other derivatives, such as options on futures, swaptions, and forward caps, combine the features of both forward and option contracts. Derivatives trade in over-the-counter (OTC) markets or in organised exchanges. OTC trading occurs among a few dealers via phone or electronic messages. OTC contracts are mutual agreements made through private negotiations and transacted outside a trading platform. However, some OTC derivatives are cleared via exchanges (e.g. in the Chicago Mercantile Exchange). Swaps, forwards, and customised options are OTC contracts. Exchange-traded derivatives are standardised in terms of quantity and quality (the amount and quality of the good is fixed) and negotiation is not possible. Organised exchanges employ both open outcry system and electronic order matching systems and share similar purposes to securities exchanges. They design the contract terms and operate a clearinghouse, which acts as a guarantor, settles all contracts, and regulates trading. Large securities firms and commercial banks act as derivatives dealers. Futures and standardised options are traded on exchanges. 1.2.4 Players The three broad categories of traders in the derivatives market are hedgers, speculators, and arbitrageurs. Hedgers use derivatives to reduce the risks that they face from adverse movements in prices of goods while speculators take a position to realise gains with a relatively small initial outlay. Arbitrageurs enter the market to realise gains without risking their own capital. Conclusively, hedgers transfer their risk to speculators and arbitrageurs and thus, boost liquidity on the market. 1.3 Objective of Study A well-regulated organised derivatives market encourages a sustainable financial development and increases savings and investment in the long-run, thereby promoting economic growth. However, the concern is how and when to discern the time for its implementation in small economies. This dissertation aims at analysing the benefits and drawbacks of using forwards and futures contracts. Forwards contracts can be used by minority users, without major procedures and regulation. Contrarily, futures require significant concern and assistance of the government to support and ensure a good operating system. The research is carried out with regard to the commodities market being set up in Mauritius. Forwards laid the groundwork for futures, hence, both are treated simultaneously throughout this study. Futures (exchange-traded) are enhanced forms of forwards (OTC) but differing somewhat in the way they are traded. The costs and benefits of the two instruments are analysed and compared. This will indicate whether it is viable for Mauritius to introduce a derivatives exchange and suggests the measures that can be adopted to ensure that its objectives are attained. Swaps and options are excluded from the study because they operate differently and due to word constraint. Forwards and futures are relatively simpler and typically alike, thus, rendering comparison easier. 1.4 Overview of Remaining Chapters Chapter 2 deals with the literature review while Chapter 3 is an overview of the derivatives market in Mauritius. Chapter 4 covers the research methodology section. Chapter 5 presents the analysis and findings of the research, followed by Chapter 6, which concludes this study and includes some recommendations. chapter two: literature review 2.1 Importance of Derivatives Market Several factors such as size, leverage, asset-liability duration, and taxes amongst others, affect the hedging decision of a firm. The Miller and Modigliani theory posits that hedging is fruitless in perfect financial markets. In reality though, markets are imperfect and hedging alters a firms value by influencing its investment decisions. Bessembinder (1991) distinguishes that hedging corporate risk with forward contracts increases firms value by reducing incentives to under-invest. He also advocates that large institutions are more likely to use derivatives due to informational economies of scale. Likewise, Haushalter (2000) finds a positive correlation between hedging decision and total assets and characterises it as the economies of scale in information and transaction costs of hedging. Hedging also enables a firm to negotiate with its customers, creditors, and managers, which improves contract terms. A research on African countries suggests that volatile international capital flows have the tendency to destabilise shallow markets and precipitate a crisis if there is a change in investors appetite and urges adoption of stronger domestic policies and local derivatives markets for financial risk management purposes (Adelegan, 2009). Hedging is a zero-sum game; one does not gain from trade unless another faces a loss. The gain to the buyer will be exactly equal to the loss to the seller of the forward contract, whilst the gain to the seller will be exactly equal to the loss to the buyer. Hieronymus (1971) defines hedging as taking a position in a futures market that is equal in size and opposite to a predetermined position in the cash market. Hence, a loss in one market is offset by a gain in the other market. This principle works since cash prices and futures prices of a commodity are expected to converge as the contract reaches expiry. Anderson and Danthine ( 1981) define a pure hedge term equal to the risk-minimising futures position corresponding to a predetermined cash position. A hedger, thus, uses the possibilities offered by futures markets to minimise his risk. 2.2 Forwards Market A forward contract is a bilateral binding agreement to buy or sell a specific quantity and quality of an asset, at a pre-determined price and pre-determined future time. Normally, contracts specifying settlement in excess of 30 days after the trade date are forward contracts. Forwards are the first and simplest derivatives that sprouted in the sixteenth century in the agricultural markets, wherein they were used primarily to resist adverse price movements. Dong and Liu (2005) advocate that the equilibrium forward reduces commodity price risk; the buyer and seller will transact at the price specified in the contract, whatever the price of the underlying asset in the spot market at maturity. A forward agreement is somewhat like a legal contract, customised with respect to the needs of the particular buyers and sellers, obligating delivery of the underlying asset under the conditions specified in the contract. The buyers and sellers negotiate over the contract terms. Anderson and Danthine (1981) claim that, in the forwards market, speculators are assumed to be risk-neutral, bidding competitively to exercise arbitrage opportunities. 2.2.1 Benefits of Forward Contracts 2.2.1.1 Risk Management Typically, a forward contract alleviates financial risks, thereby protecting traders. There is no initial investment in the forwards market since cash changes hand only on settlement of the contract at maturity. This causes less volatility in cash transactions, rendering cash flows easy to manage. 2.2.1.2 Settlement Facility Cases wherein the seller defaults for some reason, contracts may be mutually settled in cash. Duffie (1989) finds that in practice, only a small fraction of forward positions are actually delivered while most are closed out before delivery by a cash settlement. Sometimes, initial traders are able to transfer their contracts to someone willing to take their obligation. Per se, it offers a certain degree of flexibility. 2.2.1.3 Trade Linkages and other benefits Forwards allows negotiation on the contracting terms, which benefits traders, builds up trust, and strengthens trade links between parties. Wolak (2007) analyses an electricity company and concludes that forward contracts reduce the cost of production as well as its volatility, and increase pro?t. Likewise, Dong and Liu (2005) show that forward contracts in non-storable goods benefit both producers and suppliers. 2.2.2 Costs of Forward Contracts 2.2.2.1 Counterparty Default Risk Forward contracts mitigate financial risks but give rise to counterparty risk (risk of default), which is one of the prominent risks in OTC derivatives. Counterparty risk can cause huge losses. 2.2.2.2 Transaction Costs In order to ensure guaranteed deals, parties with good credit ratings should be identified, which is a very costly task. Nevertheless, these firms do have a possibility to default for reasons such as insolvency or bankruptcy. An ideal illustration is the collapse of the Lehman Brothers investment bank that has created the biggest turmoil in the worlds history; following which, more concern has shifted to the OTC market. 2.2.2.3 Legal procedures Once the terms and conditions of the contract are accepted, they must be adhered to otherwise legal procedures may entail. Forwards market is an unorganised form of trade with no ability to deal with conflicts other than seeking legal recourse that may be too costly. Influential and wealthy parties only may recourse to such practices. Besides, it causes damage to the dealers reputation. 2.2.2.4 Liquidity and Transparency issues There is no possibility of closing out or reversing a forward contract. Thus, forwards lack flexibility and liquidity and forward delivery is not guaranteed in the absence of a regulator. Additionally, since the contract involves only two entities, there is reduced transparency and possibility of mispricing the goods since not all the forces are at work. 2.2.2.5 Market Power and Bargaining Power Market power and bargaining power affect the capacity for negotiation along with the forward equilibrium price. As such, small investors with lesser power may suffer. Dong and Liu (2005) show that the forward equilibrium moves in favour of the participant with high market power, such that he gains from the contract. However, when negotiation costs are very high, both producers and buyers face a loss regardless of market power and use forward contracts for risk management rather than for gains. 2.2.2.6 Informational Inefficiency A study by Mahenc and Meunier ( 1983) stipulates that there is no proper information dissemination in the forward market but under conditions of imperfect information, forward trading indirectly creates efficiency in the spot market. The necessity to deal with the shortcomings of forward contracts led to the emergence of the futures market. 2.3 Futures Market A futures contract is an agreement between two parties to buy or sell a fixed amount of an asset at a pre-decided price and date. In this respect, futures share the same characteristics as forwards; for instance, they help buyers and sellers with long term planning by locking in a price. However, futures are more sophisticated than forwards. Financial futures were traded on shares of the Dutch East India Company in the seventeenth century, but modern futures markets originated in Japanese rice futures, which were traded in Osaka in the eighteenth century. Futures emerged with the grading system, which purported to ensure that at maturity, the quality of goods delivered was as specified in the contract, which eventually led to standardisation of futures contracts. Futures are standardised contracts in respect of quantity, quality, delivery date, and location. They trade on organised exchanges, which are responsible for setting the quantity, quality of the underlying asset in the contract. Moreover, the exchange sets the terms and conditions of the contract, which are non-negotiable by the traders. All investors are treated equally; small investors are also able to hedge without difficulty. 2.3.1 Structure of the Futures Market Futures exchanges share the same purpose as securities exchanges. They usually have an integrated clearinghouse for clearing and settlement facility. Brokers, who are also members of the exchange, are responsible to match the buy and sell orders without buyers meeting sellers and vice-versa. Only members are allowed to trade on the platform, thus, a non-member wishing to deal in futures, should trade through a broker. The exchange connects buyers and sellers worldwide, communicates and keeps parties joint and ensures compliance with the terms and conditions of the contracts. Exchanges use open outcry in pits or electronic order matching systems or some use both, such as The Chicago Mercantile Exchange. Some authors argue that the open outcry system is more liquid and transparent than the automated system. Traders need to deposit a margin with the exchange prior to trade. The demand for margin (a percentage of the value of the contract) is referred as collateral or as a good faith deposit (Gay, Hunter, and Kolb 1986). All traders are required to have a minimum stated sum of money in their accounts. Contracts are settled on a daily basis: the mark-to-market system (MTM) which affects the contract price. If price of contract increases on a particular day, the holder makes a profit, which he can withdraw from his account, whereas if price decreases, he makes a loss and the amount is deducted from his account. As such, he is required to deposit a margin, referred as a call margin, to replenish his account to the threshold level, known as the variation margining system. Futures contract protect the value of inventories and partly finances the cost of storage since the future price of a commodity is dependent upon its cost of carry (Future price = cash price +cost of carry). This helps to improve marketing policies, financial planning, and long-term forecasting of prices. If ST is expected to be higher than current S0, then the current futures price will be set at a high level relative to the current S0. Likewise, if ST is expected to be lower at maturity, current futures price is set low. 2.3.2 Benefits of Futures Contracts Fundamentally, futures market confers two main purposes: price discovery and price risk management. The market provides protection against default, manipulation, and abuse. 2.3.2.1 Risk Management and Settlement Guarantee Moser (1998) reckons that futures contracts counteract default risk and protect traders through a set of rules. Firstly, standardisation protects traders as it ensures that the quality of the goods delivered is as specified in the contract. Moreover, the exchange can order its members to produce their financial accounts for inspection if their solvency is doubted. In 1873, the CBOT decided to expel any member who refused to abide by this rule (Andreas 1894). The margining and MTM system also contribute to curtail counterparty default risk as traders are called to supplement their account for the losses incurred on their contracts within 24hours; failure to do so causes their positions to be liquidated. There is a settlement guarantee in case of default while a tight regulation ensures that manipulation and abuse is virtually absent. 2.3.2.2 Price Discovery Futures market is transparent; pricing of commodities are fair and manipulations very difficult. Electronic trading on the exchange platform pools together all forces affecting the price of a commodity, leading to price discovery mechanism, which improves efficiency and lowers costs. Technology renders the exchange highly competitive since the market reacts very fast; prices and transactions are monitored constantly while information is captured continuously and incorporated in the intrinsic value of a good. Telser and Higinbotham (1977) concur that, futures market pools trade from diverse area into a central market, thereby increasing the heterogeneity of potential transactions. They proclaim that futures are liquid as transaction occurs readily at mutually acceptable prices and that homogenisation and clarity of the terms and conditions boost liquidity. 2.3.2.3 Liquidity One need not possess the underlying asset to sell futures while one may not be in need of a commodity to buy futures. Speculators and arbitrageurs enter the futures market without possessing or the intention of buying the commodity. Thus, the transfer of risks to different players in the market increases liquidity and maintains the equilibrium in demand and supply. Telser and Higinbotham (1977) statistically demonstrate that as the number of traders in the market increases, the market clearing prices become normal. Futures can be squared-off (reverse a position) without negotiation, thus making delivery non-mandatory. Positions can also be rolled-over. If period for hedge is later than the expiry date of the current futures contract, the hedger can rollover the hedge position by closing the existing position in a futures contract and simultaneously taking a new position in another futures contract with a latter expiry date. 2.3.2.4 Transactional and Informational Efficiency Futures market increases the informational efficiency of cash market and promotes import and export competitiveness. Cox (1976) empirically demonstrates that futures trading increases traders information about forces affecting supply and demand. His analysis rejects the claim that futures trading impose costs on producers, consumers, and others who handle the physical commodity. Additionally, evidences from more fully informed traders suggest that futures trade increases efficiency in spot markets. 2.3.2.5 Increase Export Competitiveness When entering forward contracts, exporters do not, usually, possess the entire stocks for export. Futures market enables them to hedge their projected purchase, until they have to buy in the physical market for exporting. Taking a position in the futures market will help to offset the gain/loss in the physical market; that is, at maturity the net loss/gain in futures market offsets the gain/loss in the physical market. Thus, exporters can accept contracts with longer duration and increase their competitiveness. 2.3.2.6 Offsetting gains and losses in the physical market Futures market also allows a hedger to take a position in the futures market opposite to the position he takes in an over-the-counter market. Such a transaction is termed: exchange of futures for physical (EFP). The OTC and futures positions should be for the same underlying assets or at least similar in terms of value and quantity. This results in the flexibility of customising the physical market with respect to the needs of traders, parallel to the OTC market and at the same time enjoying settlement guarantee in an exchange. Usually, margin requirements for EFP transactions are lower. EFP may seem appealing but is inefficient in fair pricing. Exchange Officials apprehend that EFPs would harm the futures market by reducing volume and liquidity and inhibit fair price discovery. 2.3.2.7 Diversification of portfolios Futures on commodities serve to diversify portfolios, since they are less volatile than financial securities. Bodie and Rosansky (1980) report an average excess return of 9.5% per annum for an equally weighted portfolio of commodity futures between 1950 and 1976. Their analysis reveals that equities are riskier than commodity futures. Furthermore, total return of the equally weighted commodity futures was negatively correlated with the return on long-term bonds, suggesting that commodity futures are effective in diversifying equity and bond portfolios. The benefits of diversification from commodity futures tend to be larger for longer holding. A similar analysis carried out by Gorton and Rouwenhorst (2005) confirms that commodity futures returns have been effective in providing diversification of both stock and bond portfolios. Weiser (2003), on the other hand, contends that commodity futures returns vary with the stage of the business cycle. He finds that commodity futures usually perform well in the early stages of a recession while stock returns are generally disappointing and in later stages of recessions, commodity returns fall while equities perform well. 2.3.3 Costs of Futures Contracts 2.3.3.1 Complexity Despite appealing benefits, futures contracts inherit some costs and the prime one is the complexity of handling them. Futures were generated to deal with the limitations of forwards but, in so doing, they brought a more complex form of hedging. Proper knowledge of the market is crucial; otherwise, hedgers may face unwanted losses. 2.3.3.2 Basis Risk Basis risk (the difference between spot and futures price) is inbuilt in futures market. Hedge positions are usually not perfect due to this difference. Working (1962) emphasises that the existence of basis risk prevents the elimination of all risks. Brorsen (1995) finds that changes in basis can cause forwards to be cheapest in some periods and futures to be cheapest in others. Therefore, the benefits of hedging can be enjoyed when the market is well understood. Advanced futures concepts about hedge positions, hedge ratios, and types of hedges should also be mastered as they benefit hedgers differently in different markets. 2.3.3.3 Mark-to-Market System (MTM)-cash drain out The transaction costs involved, such as, initial margin and variation margin in the MTM system freezes up working capital that could have yielded interest. Furthermore, the margin call should be paid before next opening of the market- a very short delay. These daily settlements make transactions volatile and cash flows cumbersome to maintain. Margin costs and brokerage commission discourage some investors, especially small traders, to enter the market. Williams (1986, 1987) shows that risk-neutral firms will hedge if transaction costs are lower in the futures market than in the cash market. Moreover, instances of dual trading exist, whereby brokers trade on behalf of their clients to earn a commission, without improving the customers position. 2.3.3.4 Large Number of Participants needed Futures contracts fail for lack of interest by market participants, that is, a low trading volume. Telser and Higinbotham (1977) statistically demonstrate that the benefit of an organised market is an increasing function of the number of potential participants and hence, an increasing function of the turnover of the potential participants in that market. They conclude that an organised futures market survive only if it is perfectly competitive, which is achieved when there are many participants. If the open interest (number of contracts outstanding) in the futures market declines, the volume of trade falls relative to the open interest. The commission and the margin are raised consequently. They even assert that there is a cost to the emergence and survival of an organised exchange. 2.3.3.5 Standardisation issues Standardised nature of contracts may cause over-hedging or under-hedging. For example, a contract specifies  £1000 to be sold while a hedger may need only  £800. Therefore, he over-hedges by  £200. Conversely, say a hedger needs  £1100, he under-hedges by  £100. 2.3.3.6 Uninformed Investors Increase Volatility Uninformed investors may increase price volatility in the futures market. If the market is inefficient in information, futures prices become biased predictors of future spot prices and causes cash prices and future prices to diverge rather than converge. Usually, futures contracts with longer maturity are closer to spot prices since time is required to assimilate unanticipated shocks. However, Kaminsky and Manmohan (1990) suggest that it is impractical to make any generalisations about the short-term and long-term horizons in commodity futures market. They find that for longer periods several markets are not fully efficient. In addition, Chernenko et al. (2004) study a wide range of futures and forward rates from financial markets and conclude that forward and futures prices are not generally pure measures of market expectations; per se, they may not be an efficient forecast of the future prices of assets. 2.3.3.7 Losses Faced By Investors Other studies indicate that large scale, professional speculators can profitably forecast commodity prices, but small traders cannot. Stewart (1949) considers futures-trading accounts for small-scale speculators and discovers that they face huge losses. Moreover, Houthakker (1957) and Rockwell (1967) find that large speculators earned profits and small speculators incurred losses for a particular set of data. Similarly, Working (1931) estimated that speculators in wheat futures, incurred losses. Empirical research shows that, for cattle and wheat producers, futures markets have lower transaction costs than forward contracts, while for small firms like farmers, the contracting costs might be higher because of opportunity cost of time in learning about futures, setting up a brokerage account, and managing margin calls. It would be unnecessary for small groups of traders, well acquainted with each other to transact among themselves than use futures. 2.3 Derivatives Mishaps The history of derivatives has witnessed some spectacular losses in the derivatives markets, which includes losses made by both financial (e.g. Amaranth hedge fund, Barings Bank) and non-financial institutions (e.g. Orange country, Shell, Metallgesellschaft). The Metallgesellschaft (MG) is a German oil company, which used futures to hedge its exposure in its early 1990s. MG hedged its position with long positions in short-dated futures contracts that were rolled forward. However, the price of oil fell and then came the margin requirements, which caused short-term cash flow pressures. Members of MG claimed that these were short-term cash outflows and in the long-run, there would be a cash inflow. However, this led to a serious issue as huge cash was drained out of the system. Consequently, MG executives closed out all their hedged positions. Therefore, one lesson to be learned is to be alert at all ti

Complexometric Determination Essay

Introduction Using a Lewis base neutral molecule to donate electron pairs (ligands) to a Lewis acid metal ion center to form a single cluster (complex) ion. When the complex ions forms with a metal ion (chelation) the ligand used is called the (chelating agent). EDTA acts as a great chelating agent due to the Nitrogen and Oxygen donating an electron pair to the metal ion center to form an octahedral complex. The metal ions especially with a +2 charge or higher are the reason for water hardness to form on various objects known as â€Å"scum†. Calcium ions are typically the most common contributing factor for water hardness so this experiment uses CaCO3 (Calcium Carbonate) to analyze the hardness of an unknown sample. A scale of water hardness identifies â€Å"soft† water with a value less than 60 ppm (parts per million) and â€Å"hard† water with a value more than 200 ppm. 3 mL of ammonia/ammonium chloride buffer (pH 10) is added to the mixture prior to the titration to capture the calcium metal ions so the indicator can work properly. The experiment adds 4 drops of Eriochrome Black T as the indicator to visually see the color change as complexes are formed and the solution undergoes chelation of metal impurities. The color change from indicator starts as pink and changes to a violet then light blue color to signify the chemical phase changes throughout the reaction until the endpoint. 3 titrations are experimentally conducted to calculate the mean average of the Na2 EDTA for experimental accuracy. The EDTA mean average is then used to calculate the water hardness of an unknown water sample (#97) using 3 more titrations to calculate a mean average of the unknown water sample. An absolute deviation is calculated for each titration experiment to calculate the experimental estimated precision. The final experimental result is then compared to the city of Tempe standard for water hardness and acceptable standards. Principle (Spurlock, 2014) (Spurlock, 2014) â€Å"A complex ion is an ion containing a central metal cation bonded to one or more molecules or ions† (Chang, 2013). Just like complex ions, a ligand is a molecule or ion that is bonded to the metal ion in a complex ion (Chang, 2013). A chelating agent is a substance that forms complex ions with metal ions in a solution (Chang, 2013). The process of the chelating agent forming is called chelation. E.D.T.A. (ethylenediaminetetraacetic acid) is a common chelating agent that will be used in this experiment to chelate the metal ions. Tetraamminecopper (II) [Cu(NH3)4]2+ will be the complex ion in this lab experiment. In chapter 11.1-3 the â€Å"Kinetic Molecular Theory† is being tested in this experiment (Chang, 2013). Solids are denser than liquids and allow very little empty space to exist between molecules limiting the freedom of motion. The liquids are less dense than solids, held closely together with little space between molecules (less than solids), however, the mo lecules in liquid do not break away from the attractive forces allowing them to move past each other freely. Gases are the least dense and have the largest amount of distance between molecules allowing them to move around more freely. According to the theory, the experimental Carbon, Hydrogen, Nitrogen and Oxygen ions are able to quickly attract and find the metal ion in the liquid by donating their electron pair to the metal ion center creating the complex. These complex ions in the experiment use intermolecular and intramolecular forces to break and hold chemical bonds thru the experimental process of chelation to identify the hardness of the unknown sample. After the reaction is complete, when evaporation and or vaporization of the liquid and gas in the molecules is separated the remaining metal impurities known as â€Å"scum† are left. In chapter 4.1 hydration is used to orient the negative poles of the diatomic gases to the positive pole of the Hydrogen and metal impurities in the solution creation the complex cluster. Chapter 4 is also used for titration of redox reactions using a standard solution (Na2 EDTA) to add into another solution of unknown concentration (unknown sample + ammonia/ammonium  chloride buffer + Eriochrome Black T) until the equivalence point is reached (has fully reacted) as visually identified by the indicators (Eriochrome Black T) from the color change of pink to violet to blue. Procedure 1. â€Å"Prepare about 500mL of approximately 0.004M disodium EDTA solution. To prepare your solution, weigh out 0.7-0.8g of Na2EDTA and dissolve in about 500mL deionized water in your plastic bottle. Seal the bottle and shake vigorously for a few minutes to dissolve the salt. 2. Standardize the Na2EDTA solution using a stock calcium ion solution as the primary standard: a. Use a 10-mL transfer pipet to add 10.00 mL of standardized calcium ion stock solution (1.000g CaCO3/L solution) to a 250-mL Erlenmeyer flask. b. Add about 30 ml of deionized water to this titration flask. c. Add a magnetic stir-bar, place on a magnetic stirrer and begin stirring. A piece of white paper under the flask gives good contrast for easier detection of the indicator color change. d. Inside the fume hood, add about 3mL of ammonia/ammonium chloride buffer (pH 10). The buffer is an inhalation irritant. Stir for 30 seconds. e. Just prior to titrating the flask, add four drops of Eriochrome Black T indicator solution. Continue stirring for another 30 seconds and then titrate this solution with your disodium EDTA solution within 15 minutes. f. Slow down your titration near the endpoint, as the color change takes 3-5 seconds to develop. At the end point, the color changes from pink to violet to blue. If you feel unsure whether you’ve reached your endpoint, read and record the volume delivered and then add another drop of titrant to check for a complete color change. g. Repeat this titration two more times. Calculate the molarity of your disodium EDTA from each titration. Average your molarities from the three trials and calculate your precision. 3. Choose one prepared unknown water sample as provided. Record the unknown code in your notebook, then titrate this water sample with your standardized disodium EDTA solution: a. Transfer 25.00mL of the prepared water sample to a 250-mL Erlenmeyer flask. b. Add about 20ml of DI water to the titration flask. c. Add a magnetic stir-bar. Place the flask on a magnetic stirrer and begin stirring. d. Inside the fume hood, add about 3mL of ammonia/ammonium chloride buffer (pH 10). Stir for 30 seconds. e. Just prior to titrating,  add four drops of Eriochrome Black T Indicator solution to your flask. Continue stirring for another 30 seconds and then titrate this solution with your standardized disodium EDTA solution within 15 minutes. f. Repeat this titration twice more. Calculate the hardness (mg CaCO3/L) of the prepared water sample from each of your titrations. Calculate your average hardness and your experimental precision from the three trials. 4. Compare your results to the expected range for municipal water hardness. Check your city’s water quality lab website (e.g. http://www.tempe.gov/waterquality/typical_values.htm)† (Complexometric Determination of Water Hardness Lab, n.d.). Observations Upon adding the preparing the Na2EDTA solution the Na2EDTA solid was quickly dissolved into the DI water to create a clear solution. Later on in the procedure stage of adding the ammonia/ammonium chloride buffer into the 250 mL flask, a visual chemical reaction was observed as the ammonia buffer was mixing into the flask with CaCO3 and the unknown solution in both procedures. Upon adding the Eriochrome Black T indicator the color was visually changed from clear to light pink in both procedures. During titration of both procedures the visual color change was observed from light see-through pink to see-through violet when the process was close to ending, then from see-through violet to see-through light blue signaling then end of the reaction process.

The Search for an Alternative to Aluminium Based Vaccines

Reported incidences of toxicity due to aluminium based vaccines have always been a concern (Clements, 1996; Clements and Griffiths, 2002; Edleman, 1997). Therefore, there has always been a constant effort to search for alternative adjuvants. Polymeric micro and nanoparticles can act as a delivery vehicle and along with their adjuvanting capabilities may enhance the efficacy of the vaccine (Gregory et al., 2013; Koping-Hoggard et al., 2005; Panyam and Labhasetwar, 2003). Biodegradable polymeric nanoparticles have been studied as potential adjuvants by many researchers but no considerable success has been achieved in this direction. Moreover, in none of these studies, immunised test animals were exposed to the actual disease causing agent and efficacy of the formulations was demonstrated only by the presence of anti-tetanus antibodies by ELISA (Johansen et al., 2000; Katare and Panda, 2006; Raghuvanshi et al., 2001). Absolute estimation of vaccine efficacy should also be made by expos ing the vaccinated individual to the actual disease causing agent. Furthremore, for a vaccine to be used in pre-clinical or clinical studies, potency testing of vaccine should be undertaken as per WHO and/or pharmocopoeial guidelines for ensuring its efficacy and acceptability (European Pharmacopoeia, 2008; Indian Pharmacopoeia, 2010; World Health Organisation, 1990). In our study, the efficacy of the test formulations was evaluated by ELISA as well as challenge method and synergistic effect ofShow MoreRelatedAlumnium-based Adjuvants Produce Long-lasing Vaccinations1233 Words   |  5 Pages1.0 INTRODUCTION Aluminium based adjuvants have been used extensively to induce long lasting protective immunity through vaccination and billions of doses have been administered over the years (Lindblad, 2004). But reported incidences of toxicity and side effects of aluminium have raised concerns regarding their safety in childhood vaccines. These effects include minor local reactions such as pain and erythema, a nodule at the site of injection and systemic reactions which may entail fever, malaiseRead MoreGsk Annual Report 2010135604 Words   |  543 Pagesany forward-looking statement. Such factors include, but are not limited to, those discussed under ‘Risk factors’ on pages 53 to 57 of this Annual Report. GSK Annual Report 2010 02 GSK at a glance We are one of the world’s leading research-based pharmaceutical and healthcare companies. We are committed to improving the quality of human life by enabling people to do more, feel better and live longer. How we do it GSK has focused its business on the delivery of three strategic priorities,Read MoreIkea at a Glance26682 Words   |  107 Pagesdevelopment, and we adapt better to a changing world by taking help from others in exploring what the future holds for IKEA and society in general. A three-day â€Å"Future Search† workshop with both internal and external stakeholders was a milestone that gave us invaluable input to our strategic direction for FY10-15 and beyond. Future Search gathered 75 of our co-workers, suppliers, organisations and experts – including WWF, Greenpeace, UNICEF, Save the Children and Oxfam – to examine and challenge theRead MoreExploring Corporate Strategy - Case164366 Words   |  658 Pagesmanagement for business excellence. Sony (A) – a diverse hi-tech multinational responds to change with repeated reorganisations. Arts Council – changes in structure and responsibilities in funding the arts in the UK. Tetra Pak – success throu gh a project-based organisation structure. Fed-Ex – packaging new business models to deliver competitive advantage. Forestry Commission – from forestry management to service provider: the challenge of managing change. Marks Spencer (A) – can new initiatives and new

Critique on Leadership A Communication Perspective

Critique on Leadership: A Communication Perspective Summary â€Å"Effective leadership is the product of the creation and delivery of inspiring and compelling messages.† (Hackman Johnson, 2009, p. 336). This book is a comprehensive review of historical insights, current theories and recent research on leadership theories and leadership issues, with an emphasis upon how effective leaders communicate. Leadership: A Communication Perspective is based on the current and somewhat American idea that leadership can be learned and anyone can be a leader. Leadership is viewed as an interaction between leaders and followers, in which shared goals are discovered. Humans are unique in their use of symbols. As leaders, this ability to create†¦show more content†¦Hackman and Johnson (2009) provide the needed communication techniques, characteristics and goals to become effective in each of these areas. They also practically provide insight into ineffective techniques, the styles and characteristics that need to change for an individ ual to effectively lead. After a comprehensive review of historical and current theories, the authors discuss practical implementations of leadership in such areas as diversity, crisis management, and leadership development. Personal Response Leadership: A Communication Perspective was clear, comprehensive and easy to read. The use of examples of successful leaders who had implemented each theory was inspirational and helped to further explain each theory’s implementation. The use of case studies, self assessments, and application exercises kept the focus on how the reader can change and become a more effective leader. The use of â€Å"Spotlight on Technology† and â€Å"Leadership on the Big Screen†, kept it interesting and made it more personally applicable. This writer is interested in other cultures and especially enjoyed the sections on â€Å"Cultural Connections† with its emphasis upon how cultural values impact the effectiveness of many theories or strategies. By emphasizing the spiritual and ethical dimensions of leadership the book demonstrates that leadership is more than behavior. Stephen Covey’s â€Å"The 7 Habits of Highly EffectiveShow MoreRelatedThe Timeless Quality of the Foundations of Excellent Leadership1177 Words   |  5 PagesFoundations of Excellent Leadership Are Timeless Introduction It is often said that a manager is what one does and leader is who one is. This is especially the case during times of turbulent economic, social and political change. 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