As wemove along the risk scalelooking at alternatives withincreasing risk - right from the

almost zero risk Bank Savings Deposits,all the way up to the Equity Shares atthe summit of the risk scaleyoumightwonder: Ought we stop there? Is therenothing beyond, with even higher risk?We all know there is; there is a whole

territory of financial products that nor-mally goes under the name of deriva-tives. But that is a territory I fear totread. I knowmost of the investmentexperts will not agree withme on that.But I strongly believe that unless one istrained for that sort ofmountaineering,onemust not indulge in that sport. Sothat leaves outmost of us.But, this is not just a trepidation of a

novice. I have been significantly influ-enced inmy conviction byTaleb (Nas-simNicholasTaleb, the author ofFooled by Randomness, The BlackSwan, etc) and Prof. RaghuramRajan,who now happens to be the Governorof RBI. I shall share with you the viewsof Rajan, withTaleb at the back of themind, some day; at a later point proba-bly we could return to the understand-ing of risk a laTaleb.Where do I draw the lakshman rekha

then? I draw the line where the equityspace ends andwhere the derivativespace begins. The reason is very simple:up to there we deal with natural prod-ucts likedebt instruments or equityshares; derivatives are synthetic prod-ucts.What is this natural v/s syntheticdistinction?To understand that let ustake some examples. A bond is a finan-cial instrument that gets createdwhena person A borrows from a person B(persons A and B could be individuals,companies or governments); it is basi-cally an obligation to pay a certainamount.This instrument embodying the obli-

gation is traded; the holder of thatinstrument gets the right to receive thepayment; that is why the holder pays aprice for it. In a similarmanner an equi-ty share gets createdwhen a personcontributes a certain part to the capitalof a business enterprise acquiring theright to share in the profits and loss ofthat enterprise.A synthetic financial product, on the

other hand, is an instrument that isdeliberately created tomimic featuresof a natural financial product. It isdesigned tomimic some features, butnot others; and it ismade tomimicselected features of different products.That is precisely the reason they arecalled derivatives - because they arederived from other products. Goingfurther, a synthetic productmay be

constructed out of other syntheticproducts, and so on; there is no limit tohow far a derivative chain can go.Let us take a simple derivative: an

option. An option is a contract to buy orsell a specific financial product, say anequity share. The share is then calledthe underlying instrument for theoption. An option contract that givesyou the right but not the obligation toBUY the underlying security at a speci-fied price for a certain, fixed period oftime is called a Call Option.

Similarly an option contract that givesyou the right but not the obligation toSELL the underlying security at a speci-fied price for a certain, fixed period oftime is called a Put Option.The instru-ment that you call an option, andwhichis traded, is not the share itself; theinstrument embodies only a right tobuy or sell a share. But this right is trad-ed like a share.You see the differencehere: the share that underlies the optionis a natural financial product; the optionthat is constructed on the share is a syn-

thetic financial product. The option isderived from a share. It is artificially cre-ated by thewriter of the option.What is the problem?The problem is

basically of knowledge. Natural prod-ucts are easy to understand; syntheticproducts are not so easy. Try it for your-self. Above, we have an explanation of ashare and an explanation of an option.Which do you findmore intuitivelyunderstandable?But the problem is not just that. The

derivative chains, as we said before, can

get any long; and longer the chain gets,more complex the derivative becomes.There is no limit on how complex aderivative can become. Andmore com-plex the derivative becomes,more diffi-cult to understand it becomes. In reali-ty, beyond a certain point, the deriva-tives are constructed only by engineers,because they require knowledge ofphysics andmathematics that ordinarymortals cannot grapple with; and theyare designedwith the help ofmachinesthat are used to sendmissions to theMars; andmost of us do not own thosemachines and do not know to runthem.The result is a problem: an asymmetry

of knowledge between those whoman-ufacture the derivative products andthose who consume them.When common investors buy the

derivatives, sold by smart salesmen inthemarket, they buy products that theylittle understand. This is true of alltechonologically advanced products.Whenwe buy a gas stove, wemore orless understand how it works; whenwebuy a frost free refrigerator we under-stand a little less; whenwe buy a Plas-maTVwe understand even less; and soon. But with such gadgets the risk is rel-atively less. Because we can test them -we can try themout in the show roombefore we buy; andwe can get thedefects attended to during the warran-ty period.But with financial products there is no

trying out and there is nowarranty.Wehave to buy them on the informationprovided, and hope that they work

when the time comes. And as thederivatives getmore andmoretechnologically advanced, ourhelplessness increases.There is thus an acute asym-

metry of knowledge betweenthe financial wizards whomanufacture the syntheticfinancial products and thecommon investors who con-

sume them.The asymmetryincreases as the complexity of the

products increases. Thus the commoninvestormay be at relatively low disad-vantage, and therefore at a relativelylow risk, while investing in simple deriv-ative products; but she is at an increas-ingly high risk as the complexity of theproducts invested in grows.Worse still, since the investor does not

understand the product, she does noteven know how complex the product is,and therefore, what the risk is. In such asituation, the smart solution is to drawthe laxman rekha at the very beginning- where the equity space ends andwhere the derivative space begins.

The problem is basically of knowledge.

Natural products are easy to

understand; synthetic products are

not so easy, writes TENSING RODRIGUES.

There are times whenit becomes unavoid-able to take antibi-

otics. While these maycure you of your diseases,they leave you with nastyside effects like bloating,belching, gas, constipa-tion and diarrhoea, saysIANS.As the very name antibi-

otics suggests, it kills bac-teria. Unfortunately, italso kills friendly bacteriawhich are so very valuablefor your health. Full oneto two kg of friendly bac-teria and yeast are presentin your intestines. Thefriendly bacteria not onlyaid in digestion but alsolend a helping hand inmanufacturing B vitamins.Not only that, these keep

the omnipresent yeast atbay, thus fighting infec-tion. As a result of theintake of antibiotics,yeasts grow uncheckedinto large colonies, caus-ing a condition called dys-biosis. These weaken yourimmune system.Here are a few simple

steps which can ease thesituation considerably.The first line of defence iscut out factors whichforced you to take antibi-otics in the first place.Quit smoking and drink-ing. Dump all soda. Putaside those chocolates,sugary and starchy foods.Also out are dairy prod-

ucts, fatty and spicy foods,tea and coffee. Increasewater intake.Don't guzzle orange juice.

Vitamin C is betterobtained from oranges.Taking it through juices willonly supply you excesssugar, which will ratherworsen your condition.Start taking probiotics in

the shape of yoghurt on aregular basis, wheneveryou have a course ofantibiotics. Probioticsmust be continued longafter the course has com-pleted. Even otherwise, itis a good idea to makeprobiotics a regular part ofyour diet.Fermented foods like

pickles, pickled turnipsand carrots contain natu-ral probiotics. That earthyKanji that your grand-mother used to make willbe perfect during yourpost-antibiotic days.Eat light, easily

digestible food becauseyour digestion will be inbad shape for severalmonths after taking thosetiny pills. Boil five mintleaves, an inch of gingerand about half a teaspoonof Ajwain (carom seeds orbishop's weed) in a glassof water till the water isreduced to half. Drink halfa glass thrice a day.Light exercise is equally

important.What matters isregularity. Another won-derful remedy in yourkitchen is garlic. Allicinpresent in it gets rid of theantibiotics in the body.Vitamins A, C, E, zinc andselenium are a great help.Aloe vera juice protectsintestinal lining.Make sure that you don't

get constipated. Psylliumhusk and flax seed will notonly aid in bowel move-ment but will also relievediarrhoea by absorbingexcess water. Antibacterialoregano oil taken thrice aday provides considerablehelp.

(Amar Chandel is theauthor of two self-help

books. The views expressedare personal. He can be

reached atasknature@gmail.com)

27 / 2015 Amrita Bharati, Bharatiya Vidya Bhavan; e-mail: amritabharati@vsnl.com

LAUGH OUT LOUD

STORYTIME

INFO BYTE

The Ass, the Cock and the LionA hungry lion saw an ass in a

farmyard and his stomach

growled. Creeping stealthily

through the fence, he managed

to get inside without being

seen. Just as he was about to

spring upon the ass, a cock

began to crow. The sudden

sound startled the lion and he

fled away as fast as he could.

The ass was puzzled. If the

lion is scared of a cock, why

should I be afraid of him? he

thought. Ill give him such a

chase that he will never again

come to attack me.

The ass ran after the lion. The

lion saw this and ran faster to get the

ass away from the farm, and once

they were on safe grounds, he turned

around and pounced on the animal.

Moral of the Story: A false sense of

confidence often leads to danger.

GITAS English teacher asked

her to write an essay on 'What

would you do if you became a

millionaire'. Gopi handed over a

blank sheet of paper. The

teacher yelled, "You've done

NOTHING! Why?" "Because if I

became a millionaire, that's

exactly what I would do" said

Gita happily.

CROSSWORD

WORLD WAR II pilots set a new

trend with their leather bomber

jackets. Fitted with snug cuffs

and waists, they are perfect for

the winter season. They are worn

by both men and women over

smart casual clothes. The short

warm jacket is best paired with

denims and boots for making the

right style statement.

PUZZLER

Answer:

Saw. It is not a

gardening tool.

Trend Track

Clues

Across

1. Danger (6)

5. Small

horse (4)

7. Young

woman (4)

8. Depressed

(6)

Across:1. Hazard 5.Pony7. Lass

8. Morose

Down: 2. Zaps 3. Dry ice 4. Clam

6. Oslo

Down

2. Destroys (4)

3. Solid carbon

dioxide (3,3)

4. Edible

mollusk (4)

6. Norway

capital (4)

Answer:

Observe the

picture carefully

and find the odd

one out.

1

4 5

2 3

6

7

8

WRITE TO: Ketan Tanna, Feature Editor, Free Press Journal, Free Press House, First Floor, 215,

Free Press Journal Marg, Nariman Point, Mumbai - 21. Telephone: 022-22874566. E-mail:

features@ fpj.co.in Reg. No. MCS/048/2015-17; RNI No. 46955/88.

w w w . f r e e p r e s s j o u r n a l . i n

Kids Corner

THEFREEPRESSJOURNAL

weekend8 LIFESUNDAY | MAY 10, 2015

Are you sensitive?Blame it on yourgenes, says study

TheYour genesmay influencehow sensitive you are to emo-tional information, according

to a new research. The study fromthe University of British Columbiafound that carriers of a certaingenetic variation perceived positiveand negative imagesmore vividly,and had heightened activity in cer-tain brain regions, reports PTI."For people with this gene varia-

tion, the emotionally relevant thingsin the world stand outmuchmore,"said lead author RebeccaTodd, aprofessor in UBC's Department ofPsychology. The gene in question isADRA2b, which influences the neu-rotransmitter norepinephrine, Toddsaid. Previous research byToddfound that carriers of a deletion vari-ant of this gene showed greaterattention to negative words.Her latest research is the first to use

brain imaging to find out how thegene affects how vividly people per-ceive the world around them. "Wethought, from our previous research,that people with the deletion variantwould probably show this emotion-ally enhanced vividness, and theydidmore than we would even havepredicted," said Todd.She scanned the brains of 39 par-

ticipants, 21 of whomwere carriersof the genetic variation. Carriers ofthe gene variation showed signifi-cantly more activity in a region ofthe brain responsible for regulatingemotions and evaluating both pleas-ure and threat.Todd believes this may help

explain why some people aremoresusceptible to PTSD and intrusivememories following trauma. Thestudy participants were asked toestimate the amount of 'noise', orpixelation, applied to images thathad either positive, negative or neu-tral emotional content.Compared to non-carriers, carriers

of the ADRA2b deletion variant geneestimated lower levels of noise onpositive and negative images, rela-tive to neutral images, indicatingemotionally enhanced vividness, orEEV.

XXXXXXXXXXXXXXXXXX

HOW TO COUNTERSIDE EFFECTSOF ANTIBIOTICSAs the very name antibiotics suggests, it killsbacteria. Unfortunately, it also kills friendlybacteria which are so very valuable for your

health, says AMAR CHANDEL.

BEYOND

THE

DANGER ZONE

PIC:THECREATIVEBAR.COM

PIC:INOH.ORG

START TAKING PROBIOTICS IN THE SHAPE OFYOGHURT ON A REGULAR BASIS, WHENEVER YOUHAVE A COURSE OF ANTIBIOTICS. PROBIOTICSMUST BE CONTINUED LONG AFTER THE COURSEHAS COMPLETED.

Envision