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Bond introduction
Quiz by Thanh Trần Ngọc
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​What is a bond?Â
a certificate representing a loan from an investor to a corporation or government entityÂ
a certificate of ownership in a corporation, with the right to a share of the earningsÂ
a payment from an investor to a corporation for the rights to future profitsÂ
​When you buy a bond, it will give you back
fixed payments periodically
payments depending on the company's profit
What is a bond?Â
When you buy a bond, it will give you back
A bond is
Interest rate is
A bond's interest rate is also called itsÂ
Introduction to Hedging Instruments: Forwards, Futures, Options, and Swaps Hedging instruments are financial tools used by businesses and investors to mitigate risk. These instruments help protect against adverse price movements in assets such as commodities, currencies, interest rates, or securities. The four main hedging instruments are forwards, futures, options, and swaps. 1. Forwards A forward contract is a customised agreement between two parties to buy or sell an asset at a predetermined price on a specified future date. Key Characteristics: Over-the-counter (OTC): Traded directly between parties, not on an exchange. Customisation: Can be tailored to suit the needs of the parties involved. Settlement: Occurs at the end of the contract, which may involve physical delivery or cash settlement. Risk: Forwards carry counter-party risk, as there is a possibility one party may default. Example: A company that needs to import raw materials in six months may enter into a forward contract to lock in the current price, avoiding the risk of price increases. 2. Futures A futures contract is similar to a forward, but it is standardised and traded on an exchange. This standardisation eliminates counter-party risk. Key Characteristics: Standardised: Contract size, expiration, and other terms are fixed by the exchange. Mark-to-market: Gains and losses are settled daily. Liquidity: Futures are highly liquid because they are traded on exchanges. Regulation: As they are traded on formal exchanges, they are more regulated than forwards. Example: A wheat farmer may sell futures contracts to hedge against a possible decline in wheat prices before harvest. 3. Options Options provide the right, but not the obligation, to buy or sell an asset at a specified price on or before a certain date. There are two types of options: call options and put options. Call Option: Gives the holder the right to buy an asset at a predetermined price. Put Option: Gives the holder the right to sell an asset at a predetermined price. Key Characteristics: Premium: The buyer pays a premium upfront to obtain the option. Limited Risk: The maximum loss is limited to the premium paid. Flexibility: Options can be used for speculative or hedging purposes. Example: An investor holding stocks may buy a put option to protect against potential declines in the stock's price. 4. Swaps A swap is a contract in which two parties agree to exchange cash flows or liabilities over a specific period. The most common types are interest rate swaps and currency swaps. Key Characteristics: Customizable: Like forwards, swaps are often tailored to meet the needs of the parties involved. Counterparty Risk: Swaps are typically OTC instruments, exposing parties to default risk. Common Uses: Used to manage interest rate risk or currency risk. Example: A company with a variablerate loan may enter into an interest rate swap to exchange its variable payments for fixedrate payments, thus locking in stable costs. Hedging instruments are essential for managing financial risk in volatile markets. Each instrument serves different purposes, with varying levels of complexity, risk, and customization. Whether through forwards, futures, options, or swaps, businesses can better plan for the future by reducing exposure to uncertain price fluctuations. Hedging Strategies for Market Risk, Credit Risk, and Currency Risk 1. Hedging Strategies for Market Risk Market risk (also known as systematic risk) arises from fluctuations in asset prices, such as stocks, bonds, commodities, and interest rates, due to economic factors or market volatility. Key Hedging Instruments for Market Risk: Derivatives (Options, Futures, and Forwards): These instruments allow investors to hedge against unfavorable price movements in stocks, commodities, or interest rates. Example: An investor holding a large stock portfolio might buy a put option to protect against a potential market downturn. If the market declines, the put option increases in value, offsetting losses in the portfolio. Short Selling: Investors can sell borrowed assets with the expectation of buying them back at a lower price, profiting from the decline. Example: A fund manager expecting a market decline may short sell stocks to hedge a portfolio against losses. Common Hedging Strategies: Portfolio Diversification: Reducing market risk by spreading investments across various asset classes (stocks, bonds, commodities) and sectors. Using Index Futures: Large portfolios can be hedged using index futures that track the performance of the overall market. If the market declines, profits from the short position in the futures contract will offset losses in the portfolio. Risk Parity: Allocating assets based on the level of risk rather than the dollar amount invested, balancing risk exposure across asset classes. 2. Hedging Strategies for Credit Risk Credit risk refers to the possibility that a borrower will default on a debt obligation. This is especially important for banks, lenders, and institutions dealing with bonds and loans. Key Hedging Instruments for Credit Risk: Credit Default Swaps (CDS): A financial derivative where the buyer of a CDS pays a premium to the seller in exchange for protection against a default on a loan or bond. Example: A bank holding corporate bonds can buy a CDS to ensure they are compensated if the issuing company defaults. Collateralised Debt Obligations (CDOs): These instruments pool together various debt instruments and allow risk to be distributed among multiple investors. Credit Insurance: Companies may use insurance to protect against the risk of a customer defaulting on payments. Common Hedging Strategies: Diversification of Loan Portfolio: Spreading out credit exposures across various industries, geographies, and borrower profiles reduces the overall risk of default. Tightening Lending Standards: Limiting exposure to highrisk borrowers by implementing stringent credit assessments. AssetBacked Securities: Banks can sell loans or bonds packaged as assetbacked securities to reduce their exposure to credit risk. 3. Hedging Strategies for Currency Risk Currency risk (or exchange rate risk) arises from fluctuations in foreign exchange rates, which can affect companies involved in international trade or with investments in foreign countries. Key Hedging Instruments for Currency Risk: Forward Contracts: A firm agrees to exchange a specified amount of currency at a predetermined exchange rate on a future date. Example: A U.S. exporter expecting payment in euros might enter into a forward contract to sell euros and lock in a favorable exchange rate. Currency Options: These give the right, but not the obligation, to buy or sell currency at a specific price. Example: A U.S.based company buying goods from Japan might buy a call option on the yen to hedge against the risk of yen appreciation. Currency Swaps: Two parties exchange interest payments and principal in different currencies to hedge against exchange rate fluctuations. Common Hedging Strategies: Natural Hedging: Companies can offset currency risk by balancing foreign revenue with costs in the same currency. For example, if a company generates revenue in euros, it can also incur expenses in euros, reducing exposure to exchange rate fluctuations. Multi-Currency Invoicing: Firms can invoice in their home currency, shifting the currency risk to the buyer. Currency Diversification: Holding a diversified basket of currencies can reduce exposure to large fluctuations in any one currency. Effective hedging strategies are crucial for managing various types of risks in financial markets. Market risk can be managed using instruments like futures and options, while credit risk can be mitigated through diversification and credit derivatives. Currency risk, often faced by multinational firms, can be hedged using forward contracts, options, or swaps. Each strategy helps firms and investors protect their portfolios, ensure financial stability, and reduce the impact of adverse movements in the financial markets. Portfolio Risk Management Techniques: Diversification, Asset Allocation, and Risk Budgeting Managing risk is a fundamental aspect of portfolio management. Investors use various techniques to control and reduce the risks inherent in investing. Three key techniques used in portfolio risk management are diversification, asset allocation, and risk budgeting. Each of these techniques helps in mitigating potential losses while aiming to achieve the desired return. 1. Diversification Diversification is a risk management strategy that involves spreading investments across different assets, sectors, or geographic regions to reduce exposure to any single risk. The idea is that different assets perform differently under various market conditions, so losses in one investment can be offset by gains in others. Key Benefits of Diversification: Reduction of Unsystematic Risk: Unsystematic risk, which is unique to a specific company or industry, can be reduced by holding a variety of investments that respond differently to market conditions. Improved Stability: A diversified portfolio is less volatile, as the negative performance of one asset can be balanced by the positive performance of others. Methods of Diversification: Across Asset Classes: Investing in a mix of asset classes such as stocks, bonds, commodities, and real estate. Example: A portfolio with 60% equities, 30% bonds, and 10% commodities is more diversified than one solely consisting of stocks. Within Asset Classes: Diversifying within a single asset class (e.g., holding stocks from different sectors like technology, healthcare, and energy). Geographic Diversification: Investing in assets across various countries or regions to mitigate country-specific risks. Example: Holding U.S. stocks along with emerging market equities can reduce risks related to a downturn in one country's economy. 2. Asset Allocation Asset allocation refers to the process of dividing investments among different asset classes (such as stocks, bonds, and cash) to align with an investor's risk tolerance, time horizon, and financial goals. Asset allocation plays a crucial role in portfolio risk management by determining the overall risk-return profile of the portfolio. Key Elements of Asset Allocation: Strategic Asset Allocation: A longterm approach that involves setting target allocations for different asset classes based on financial goals and risk tolerance. Example: A young investor with a longterm horizon might allocate 70% to stocks, 20% to bonds, and 10% to cash. Tactical Asset Allocation: A more active approach that involves adjusting the asset mix in response to short-term market conditions. Example: If the investor expects an economic downturn, they might temporarily reduce exposure to equities and increase exposure to bonds. Types of Asset Allocation Models: Conservative: Focuses on preserving capital with a larger allocation to bonds and cash (e.g., 20% stocks, 80% bonds). Balanced: A moderate risk approach with an equal focus on growth and income (e.g., 50% stocks, 50% bonds). Aggressive: Targets higher returns by investing predominantly in equities, accepting higher risk (e.g., 80% stocks, 20% bonds). Example of Asset Allocation: A 40 year old investor with moderate risk tolerance may allocate their portfolio as follows: 50% equities, 40% bonds, and 10% in alternative investments such as real estate or commodities. The equities provide growth potential, while the bonds and alternative assets offer stability and income. 3. Risk Budgeting Risk budgeting is a method of allocating risk across different components of a portfolio, rather than focusing solely on returns. The goal is to optimise the portfolio’s risk-return profile by distributing risk in a way that aligns with the investor’s objectives and risk tolerance. Key Concepts of Risk Budgeting: Risk Contribution: Each asset class or investment in the portfolio contributes a certain amount of risk (measured by metrics such as volatility or Value at Risk). Risk budgeting ensures that no single asset class dominates the overall risk of the portfolio. Example: A portfolio may contain 60% stocks and 40% bonds, but if the stocks are highly volatile, they may contribute 90% of the portfolio's risk. Target Risk: Investors set a maximum acceptable level of risk (e.g., a portfolio volatility of 10%) and allocate investments so that the total risk remains within this target. Techniques in Risk Budgeting: Risk Parity: Allocates risk evenly across asset classes, rather than allocating capital based solely on return expectations. Example: In a risk-parity portfolio, both bonds and stocks might be balanced in such a way that they contribute equally to the overall portfolio risk, even though the dollar investment in bonds may be larger due to their lower volatility. Value at Risk (VaR): This technique measures the potential loss in a portfolio over a specific time period, under normal market conditions, at a given confidence level. The risk budget ensures that the potential loss stays within acceptable limits. Example of Risk Budgeting: An investor targets an overall portfolio risk of 8% volatility. After analyzing the risk contribution of each asset class, they determine that equities, which currently make up 60% of the portfolio, contribute 70% of the risk. To adhere to the risk budget, the investor may reduce their equity exposure and increase their allocation to bonds or other less volatile assets. Diversification, asset allocation, and risk budgeting are complementary techniques used in portfolio risk management. Diversification reduces unsystematic risk by spreading investments across various assets. Asset allocation ensures that investments align with an investor's goals and risk tolerance. Risk budgeting focuses on managing the contribution of risk from each asset class to create a balanced and efficient portfolio. Together, these strategies help investors achieve a balance between risk and return, ensuring longterm portfolio stability. Risk Mitigation Through Insurance, Securitisation, and Other Financial Engineering Techniques Risk mitigation is a core objective in financial management, and various strategies can be employed to reduce or manage risks. Three major approaches are insurance, securitisation, and financial engineering techniques. Each of these methods helps firms and individuals transfer, reduce, or eliminate certain financial risks. 1. Insurance as a Risk Mitigation Tool Insurance is a traditional risk transfer method that protects against financial losses by shifting the risk to an insurance company in exchange for premium payments. It is widely used to mitigate various forms of risk, such as operational, liability, and property risks. Key Aspects of Insurance for Risk Mitigation: Risk Transfer: The insurer takes on the risk in exchange for a premium, thus protecting the insured party from unexpected financial losses. Indemnity: In the event of a loss, the insurance policy compensates the insured based on the terms of the contract. Customisable Coverage: Insurance policies can be tailored to address specific risks, such as property damage, business interruption, liability, or cyber risks. Types of Insurance for Businesses: Property and Casualty Insurance: Covers physical assets like buildings, machinery, and inventory from risks like fire, theft, or natural disasters. Liability Insurance: Protects businesses against legal liabilities arising from accidents, negligence, or professional errors. Business Interruption Insurance: Compensates for lost income if a business has to halt operations due to unforeseen events. Credit Insurance: Shields companies from losses due to the nonpayment of trade receivables. 2. Securitisation as a Risk Mitigation Technique Securitisation is a financial engineering process that involves pooling various financial assets (such as loans, mortgages, or receivables) and converting them into marketable securities. This process allows firms to transfer risk to investors, thereby reducing their exposure. Key Elements of Securitisation: Risk Transfer: By securitising assets, companies can transfer the risk of default or nonpayment to investors who purchase the securities. Liquidity Creation: Securitisation converts illiquid assets (like mortgages or loans) into liquid, tradeable securities, improving cash flow for the originating firm. Diversification of Risk: Pooling assets with different risk profiles reduces the impact of individual defaults, spreading the risk across multiple investors. Common Forms of Securitisation: MortgageBacked Securities (MBS): Pools of mortgages are bundled and sold as securities to investors, transferring the risk of mortgage defaults. Example: A bank that issues home loans can bundle those loans into MBS and sell them to investors, transferring the credit risk of potential defaults. Asset-Backed Securities (ABS): Similar to MBS, but backed by other types of assets like credit card receivables, auto loans, or student loans. Collateralised Debt Obligations (CDOs): Structured financial products that pool different types of debt, such as loans and bonds, and sell them as securities with varying risk levels. Example: A bank may issue a portfolio of auto loans and then pool these loans into an assetbacked security (ABS). The ABS is sold to investors, who take on the risk of loan defaults. By securitising the loans, the bank reduces its exposure to credit risk and generates immediate cash flow. 3. Financial Engineering Techniques for Risk Mitigation Financial engineering involves the use of complex financial instruments, derivatives, and structured products to manage or mitigate financial risks. These techniques allow firms to hedge against specific risks, optimize capital structure, and improve financial stability. Common Financial Engineering Techniques: Derivatives: Financial instruments like futures, forwards, options, and swaps are used to hedge against price fluctuations, interest rate changes, or currency movements. Example: A company with significant foreign exchange exposure may use currency forwards or options to hedge against exchange rate fluctuations, ensuring predictable cash flows. Options and Futures: Options: Provides the right (but not the obligation) to buy or sell an asset at a predetermined price, allowing firms to hedge against unfavorable price movements. Example: An airline company can buy options on jet fuel to hedge against rising fuel prices. Futures: Standardized contracts to buy or sell an asset at a set price on a future date, commonly used to hedge commodities or financial assets. Example: A wheat producer may use futures contracts to lock in a favorable price for its crop, hedging against a potential price drop. Swaps: These involve the exchange of cash flows between two parties, often used to manage interest rate risk or currency risk. Interest Rate Swaps: Firms can exchange floatingrate interest payments for fixedrate payments to hedge against rising interest rates. Currency Swaps: Used to hedge exchange rate risk in crossborder transactions by exchanging principal and interest payments in different currencies. Example: A company with a variablerate loan may enter into an interest rate swap to exchange its variable payments for fixedrate payments, locking in stable costs. Structured Products: These are customised financial instruments designed to achieve specific riskreturn objectives. They often combine derivatives with other securities to create tailored risk exposures. Example: A structured note that combines a bond with an embedded option, offering downside protection while allowing for potential upside linked to the performance of an equity index. Credit Derivatives: Tools like credit default swaps (CDS) allow investors to transfer credit risk to other parties. Example: A bondholder worried about a company’s potential default may purchase a CDS, which pays out in case of a default event. Example: A company may issue a bond with an embedded call option, allowing it to repurchase the bond if interest rates decline. This financial engineering tool enables the company to mitigate the risk of rising interest rates, reducing future borrowing costs. Risk mitigation through insurance, securitisation, and financial engineering offers businesses a variety of tools to manage and transfer risks. Insurance allows for the direct transfer of risk to an insurer, while securitisation helps companies offload risk by packaging and selling assets as securities. Financial engineering techniques, including derivatives, swaps, and structured products, provide sophisticated ways to hedge market, interest rate, and currency risks. Each approach helps organizations improve financial stability, enhance liquidity, and manage potential losses in a volatile market environment.Make mcq quiz with 4 option in which one is correct -'10 Basis of Material Science • .....;;;";;;"~~;;,,;;,,,,;.;.,,;;,,,;,,;.;,.,------------ 6. Temporary materials: Some materials are meant to be placed in the oral cavity for a short period of time for different reasons. • Temporary crowns: While a permanent crown is prepared in the dental laboratory, the patient must wait for few days before it can be fabricated and cemented into place. Does patient experience any problems during this time period? If the tooth is vital (the pulp is alive), the patient is likely to experience pain and sensitivity while eating and drinking, also it looks unesthetic. What can be done to solve this problem? A temporary crown is placed before the patient leaves the clinic. It is constructed and luted in the same appointment in which the crown preparation is done. Temporary crowns are not very strong or esthetic but they serve adequately till the permanent crown is ready to be cemented. • Temporary restorations: Sometimes it is difficult to decide immediately the best line of treatment for a particular tooth. The exact condition of the pulp may not be obvious to the dentist from the patient's symptoms. A dentist removes all or part of the decay and then places a temporary restoration to have time to observe the behaviour of the pulp or to give the pilip time to heal before deciding the further treatment required. Classification based on Location of Fabrication 4,9 Materials can be classified based on the location of fabrication into: • Direct restorative materials. • Indirect restorative materials Direct restorative materials: They include those materials which are used to restore cavity preparations directly in the oral cavity (Box 1.5). Box 1.5: Examples of direct restorative materials Amalgam, composites, glass ionomer and other materials, which set by chemical reactions in the mouth. Indirect restorative materials: It includes those restorations which must be fabricated outside the mouth, indirectly on a cast/ model/ die, because their processing condition would harm oral tissues. Materials used in the construction of such prosthesis are called indirect restorative materials (Box 1.6). Box 1.6: Examples of indirect restorative materials Gold inlays, crowns of metal, ceramic and polymers, which are processed at elevated temperatures. Some indirect composite restorations can be processed under specific wavelength of light, e.g. Ceramage. Classification based on Longevity of Use 1. Permanent restorations: These restorations are not planned to be replaced for a particular time period. Though they are referred to as permanent, actually they are not, e.g. fillings, crowns, bridges and dentures do not last forever (Fig. 1.5). 2. Temporary restorations: These restorations are planned to be replaced in a short period of time, such as few days to weeks. For ~ Permanent C/) c c -.2 0 c- :;::; Cll co Interim ~ Q; 0 .8ll::1iJ C/) o~ Cll a:: c:=:J Temporary Time period Fig. 1.5: Diagram depicting the time period of use of a restoration. (Arrow in permanent restoration depicts that such restorations are not planned to be replaced for a long period of time.) Introducton to Dental Materials Dental materials Box 1.7: Characteristics of metals 1. High thermal and electrical conductivity 2. Ductility (pure metals are very soft and they can be bent without breaking) 3. Opacity (they do not transmit light) 4. Luster (they have a surface that strongly reflects light and appears bright and shiny) 5. They tend to dissolve to some extent in water or other aqueous solutions, producing cations. 6. All metals are white (actually gray) except for gold, which is yellow, and copper, which is reddish. 7. All metals are solid at room temperature except mercury, which is liquid at room temperature and is used with silver alloys as amalgam. 8. All metals have high melting temperatures because of high strength of the metallic bond that holds the atoms together. 3. Polymers 4. Composites Composites are mixtures of two or more of the first three classes in which the different components remain distinct from one another in the final structure. A common example is composite resin. Fig. 1.7a: Three-dimensional structure of iron (metal) Metals Metals are the oldest of the three classes of materials that have been used as dental materials. Metals are characterized by metallic bonds (Box 1.7) which will be discussed in the next chapter. Metals solidify with their atoms in a regular or crystalline arrangement (see Chapter 2), often in the form of a cube (Fig. 1.7a). example, temporary fillings done in a tooth during root canal treatment, which have to be replaced within 2-4 days during subsequent visits. They are used to protect the tooth and provide function till the final restoration is done. 3. Interim restoration: At times, dental treatment requires "long-term" definite temporary restorations or "interim" restorations. For examle, a 7-year-old child, met with trauma and fractured one of his central incisors. A large composite build- up may serve his immediate requirement until the root formation is completed and a permanent crown is placed. 5 Classification based on the Chemical Nature of the Material These are the atoms that make up a material and the way they are bonded together determine the properties of that materiaLS Weak bonds make for weak materials and vice versa (Table 1.4). Materials can be classified into different categories based on their primary atomic bonds (Fig. 1.6): 1. Metals 2. Ceramics Fig. 1.6: Classification of dental materials based on chemical nature 12 Basis of Material Science Box 1.9: Benefits of ceramics in dentistry 1. Many ceramic oxides are used as pigmenting agents. These oxides produce good range of colors. Due to this characteristic, we are able to match almost any tooth color with good esthetic results. 2. They are inert, i.e. not chemically reactive. This quality provides ceramics with good bio- compatibility. 3. Ceramic materials are translucent, like natural teeth. This translucency gives the ceramic crown a more natural appearance than any other dental material. Fig. 1.7b: Internal arrangement of tetrahedral structure of ceramic (silica) four large oxygen atoms surround smaller silicon atom Ceramics A ceramic is a compound formed by the union of a metallic and a non-metallic element (Box 1.8). Most of these materials are oxides, formed by the union of oxygen with metals such as silicon, aluminum, calcium and magnesium (Fig.1.7b). Ceramics may be simple or complex. Examples of simple ceramics are alumina and silica. Examples of complex ceramics are feldspar (potassium aluminum silicate) and kaolin (hydrated aluminum silicate). Ceramics may be crystalline or non- crystalline (i.e. amorphous). Porcelain is a specific type of ceramic used extensively in dentistry (Box 1.9). Box 1.8: Characteristics of ceramics 1. High melting points. 2. Brittleness, which means they cannot be bent or deformed (no sliding) to any extent without actually cracking and breaking. 3. They are poor conductor of heat and electricity. 4. They are chemically inert. 5. They have excellent esthetic result in terms of matching natural teeth. Fig. 1.8: Stucture of synthetic polymer Polymers They are the latest addition (early to mid- 1900s) to dental materials. Most of the polymers are nowadays synthesized by humans. Polymers are giant, long-chain organic molecules (Fig. 1.8). Polymers are characterized by covalent bonds within each molecule, giving them tremendous strength in a single direction. Try to break a nylon rope by pulling it! They are poor conductors of heat and electri- city. Most polymers have a structure containing thousands of carbon atoms linked together like beads on a string. Others, such as silicone polymers are formed with silicon-oxygen bonds. Introducton to Dental Materials Table 1.4: Characteristics of different materials 13 Characteristics Bond Properties Crystal structure Metals Metallic bonding High strength and hardness, high electrical and thermal conductivity BCC, FCC, or HCP unit cells Ceramics Ionic or covalent bonding, or both High hardness and stiffness, electrically insulating, refractory, and chemically inert Crystalline or amorphous Polymers Covalent bonding Low sensitivity, high electrical resistivity, and low thermal conductivity, strength and stiffness vary widely Amorphous and crystalline Composites Composites are combinations of any of the basic ceramic, metallic and polymeric materials (Box 1.10). Each material that makes up composites is called a phase. Their properties tend to be somewhere between those of their basic constituents and are used to enhance their performance, longevity and handling chracterstics. Box 1.10: Types of composites in dentistry 1. Ceramic - metallic composite: Tungsten carbide bur. 2. Metal - polymer composite: Die materials in dental laboratory. 3. Ceramic - polymer composite: Enamel, dentin, bone and restorative composites. A composite is a kind of "combination" of materials, which compliment each other. The properties lacking in one material are compensated by those of the other material. For example, restorative composite has two phases, namely resin and fillers. Teeth and bones are examples of natural composites. Enamel is a composite of hydroxyapatite (which is a ceramic material) and protein (which is a polymer). EVALUATION OF DENTAL MATERIALS Most manufacturers of dental materials maintain a quality assurance programme (As per international standard like ADA specifications) and materials are thoroughly tested before being released into the market for dental practitioner (Fig. 1.9). Laboratory Evaluations Most ADA/ ANSI specifications involve laboratory tests. The tests performed as per these specifications are useful but they all are performed in vitro, (carried out in the laboratory away from the clinical conditions) which have a lot of limitations in clinical practice.lO Clinical Notes 1. For example, most of the direct restorative materials are tested for their compressive strength but ultimately the material is subjected to a combination of compressive, tensile and shear stresses, which may decide the final success or failure of the material under masticatory load. 2. Similarly upper dentures mostly fracture along the midline because of bending. Hence a bending or transverse strength ~B-a-s-is-o-f-M-a-t-e-ria-I-S~c-ie-n-c-e-------------- ---------. test is far more meaningful for denture base materials than a compression test. Clinical Trials The majority of new materials are subjected to extensive clinical trials normally in co-operation with a dental college or hospital departments prior to their release. CONCLUSION As the number of available materials is going up, it is important that the dentist remains more aware about new products so that their judgement about the selection of material remains successful. Materials which have not been thoroughly evaluated should be avoided, specially with clinical dentistry falling under Consumer Protection Act (CPA). I Research and development I iI Manufacturer/analysis Ideal requirements for clinical use: Thermal, optical, mechanical, chemical, biological Available materials and their properties are evaluated Launch of new I product Choice and selection of material by the dentist Critical assessment based on clinical performance I I H feedback to IBond Energy Bond ordervalence bond theoryJames BondCalculate bond energyNumber Bond