Training on Futures & Options

BlackSwan intends to conduct a training program on F&O during NOV 5-7,2011 and repeat the same course on NOV 19-21,2011.

1. Signals from F&O by Devangshu Datta my favorite analyst here.
2. Measuring Volatility here.
3. Another good piece by Devangshu Datta.
4. Conquering Volatility
5. Article on F&O strategies as a template for analyzing market movement.

Infact, a collection of his articles in Smart Investor of Business Standard every Tuesday will make one a well informed trader or investor in Derivatives.

First Day of IPO Listing: Wild & Spurious Volatility

IPO Listing day fluctuations are abnormal. As CNBC anchors term it there are lot of fun and games in these counters as there are no price bands on listing day.

1. Financial Express on Listing Day Volatility
2. Report on IPO listing day volatility in Business Standard
3. Prithvi Haldea of Prime database on Listing Day price bands.
4. SEBI's earlier proposal of 25% price band on first day of IPO Listing.
5. DNA on the Violence of Volatility of New Listings. One has to participate to experience the abrupt price fluctuations.
6. Will pre-opening trade help in case of IPOs Listing day fluctuations ?
7. IPO manipulation behind these violent moves ? Sucheta Dalal here
8. Research article on IPO pricing
9. Scholarly article on IPO pricing. Infact the vast amount of availability of academic literature makes the study of financial markets endlessly fascinating and intellectually satisfying. A motivated student of financial markets can grasp all aspects of an issue from various sources and form an informed opinion.
10. Another article by SSS Kumar who is an alumni of SVUSBM and a student of Dr M S REDDY who is my professor at Tirupati.
11. Information assymetry in IPO pricing may necessitate not applying price bands on Day 1.
12. Today( Oct 23,2011)'s new listing VASWANI has allegations of dummy IPO subscription.  
13. Related Article on  Vaswani
14. Always fascinating prose by Dr Ajay Shah on IPOs. He reminds me of Larry Harris of Trading & Exchanges. His articles on Indian Finance together with Dr Susan Thomas of IGIDR will be a GITA on Indian Finance & Markets. Infact Dr Susan Thomas web page contains lot of notes on Econometrics and Finance which is a feast for students of Finance and Financial econometrics.
15. Another respected thinker on Indian Finance even quoted in India's Financial Markets Book.
16. MoneyLife on IPO manipulation

Must Read Finance Authors

During my approx 20 years of fascination for the subject of  Finance & Markets , I came across many fantastic authors which I will try to recollect here.

1. Bodie, Kane, Marcus on Investments
2. Luenberger  with Investment Science
3. Paul Willmott on Derivatives & Quantitative Finance
4. Aswath Damodaran on Investment Valuation
5. Larry Harris on Trading & Exchanges
6. Victor Niederhoffer on SPECULATION
7. Brett Steenbarger on Trading Psychology
8. N N Taleb on  Hedging &  Randomness
9. Anderson & Sweeney on Statistics
10. Fabozzi on Fixed Income
11. Ajay Shah & Susan Thomas on India's Financial Markets
12. Chris Brooks on Financial Econometrics
13. Hull on Options & Futures
14. Elton & Gruber on Portfolio Theory
15. Fuller & Farrel  on Investments
16. FX Diebold on Forecasting
17. Snedcor on Statistical Methods
18. J R Verma on Derivatives & Risk Management
19. Mark Hirschey on Investments - More on the Behavorial aspect.

BlackBox Sellers of Trading Education

Today I have attended a Seminar ( rather a sales pitch !) by a person in Hyderabad who wants to sell his 3-Day workshop and Trading Software.

1. The company's 3-Day workshop is priced at approx  Rs 40000/-.
2. All techniques of influencing the audience were used by the Trading system seller. Like anchoring the seminar  benefits to Rs 200000/- worth.
3. I personally could not identify with the speaker's motivational seminar with rather using flowery analogies, exaggerated claims, quoting outliers as if they are normal!
4. You can check the company's website  here
5. I would rather refer all my friends to Dr Brett  at www.traderfeed.blogspot.com
6. You have a life time of learning resources here by Dr Brett
7. I take the liberty to recommend you the book TRADING & EXCHANGES by Larry Harris for Rs 400 at 1 % of the company's workshop.

VOLATILITY

Volatility or Vol as Market participants call it affectionately is the soul of Financial Markets. Recently I came across lot of resources on Volatility as my research also involves survey on Volatility.

1. Nobel Laureate Robert F Engle  on VOLATILITY. His FT Lectures here.
2. R F Engle's take on Financial Market Volatility on Youtube.
3. Interview with Engle by FX Diebold.
4. In fact I am greatly influenced by Dr K Kiran Kumar of NISM for introducing me and being a teacher of  Financial Econometrics at NISM in his EERF Summer Schools. Engle has actually participated in a conference at NISM two years back.
5. One book that is extremely lucid in explaining financial econometrics is  Chris Brooks.

NEWTON LINCHEN ON INDEPENDENT TRADER

Dear Professor,

Namastê!

It has been occurring some improvements to this issue: I only day trade now patterns I had worked with comprehensive statistics.

This means a lot in terms of reducing overtrading and the emotional factor of trading.

Notice that when you analyse trade by trade, you're "right" or "wrong", depending whether the trade works out or not. That kills traders, for we misinterpret random events with a "failure" of our judgment skills... When you only trade with statistical setups, you don't feel bad anymore about losing trades (you're acquainted now with the histogram of the distribution of the series of trades - losses and gains), and you also don't feel exhilarated when the trade is a win, because, remember, it was not the fruit of your recent workout in analysis or judgment. It was the result of the distribution of the series of trades, according to the statistical pattern.

In other terms, when the statistical trades works well, it's just normal. When it produces a loss, it's not your fault.

: )

Interesting Readings

I found the following to be of interest to Traders and students of Markets.

1. How to become a professional Trader 
2. Developing a daily game plan
3. Scholarly article on Market Quality . I remain fascinated with Market Microstructure - the study of internal workings of the market.

25 Hours Trading Course @ BlackSwan

BlackSwan  has scheduled a 3-Day, 25 Hrs Trading Course during August 13-15, 2011.

1. The details of the Course is given here.
2. This is a full time course from 9.30 am - 5.30 pm. Includes Tea, Snacks & Lunch
3. It covers Technical Analysis & Derivative Strategies.
4. The inspiration is from  SMB Training, Dr Brett, Afraid to Trade.

Concepts of Finance

I was reading or rather forced to read Concepts of Physics by  H C VERMA  by my daughter Gangineni Hita studying 8th Class at Sri Chaitanya Techno Schools. Her aim is to get into the prestigious IITs through their JEE Exam.

1. I wonder whether a distilled concepts of Modern Finance as articulated by Susan Thomas, JR Verma is needed for B-Schools.
2. Modern Finance is predicated on lot of Concepts like No-Arbitrage Pricing, EMH, Time Value of Money etc.
3. Excellent article by J R Verma on Teaching of Finance
4. Dr Susan Thomas Opines on Modern Finance
5. Essential reading on New Facts of Finance
6. One of my most liked book for concepts of markets and Trading is by Larry Harris. Even Victor recommends it as an outstanding must read.

The Independent Trader

Trading the markets is one of the most challenging endeavors. This is a field where only the best can survive unlike other professions where average can also make a reasonable livelihood.

1. SMB Training elaborates on the daily life of an Independent Trader.
2. Some psychological aspects of Trading
3. Difference between professional and amateur traders by Dr Brett
4. How to become an independent stock trader
5. One of the most tough tasks in becoming a profitable day trader is overcoming Transaction Costs.

NISM - EERF as a Platform for Finance Researchers

I had a very good experience at NISM attending the yearly EERF 2011 workshop.

1. I have no hesitation in recommending any researcher,teacher of finance, Market practitioner, Scholarly investor, Corporate executives in financial markets research and practice to attend it at least once. I have attended twice and thoroughly enjoyed it.
2. I think only comparable programe is by Susan Thomas at IGIDR namely Statistics for Financial Practitioners. But I am not sure of its frequency and accessibility.
3. EERF can act as a very good platform for budding researchers in Finance. I came to know many researchers in this area through this venue.
4. I highly appreciate an almost encyclopediac view of financial markets related research by Dr K Kiran Kumar of NISM  ( ex- ISB, IISC)

MBA/BBA in Financial Markets

A welcome trend is developing in Financial Markets Education. Super specialization and focused curriculum,industry tie-ups are becoming important  for good business education.

1. NSE has tied up with Punjabi University, MDU for BBA/ MBA in Financial Markets.
2. BSE Training Institute is offering MBA- Financial Markets in association with IGNOU
3. FTKMC an associate of MCX is also offering PGD in Financial Markets Practice
4. DMC institute of Capital Markets is also in the process of starting MBA & BBA in Financial Markets
5. ITM institute of financial Markets has a PGDM - Financial Markets course
6. NISM has  a well regarded  1-Yr course called PGPSM
7. BLB Institute of Financial Markets has MBA/BBA in Financial Markets in association with MS University
8. Business India Institute of Finance has a 1-Yr course in Financial Markets
9. IFMR has a highly reputed PGDM- Financial Engineering
10. NMIMS has an MBA in capital markets program in association with BSE

This is only a partial list. Financial Market education is on the rise on the back of NSE's Ravi Narain's comments.

Some project Ideas for MBA Finance students

I would like to list out some ideas for Project work and also empirical study. Pl note that these are are borrowed extensively from the existing financial markets literature.

1. Stock Index Futures Market in India
2. Single Stock Futures Market in India
3. Index Options Markets in India
4. Stock Options Market in India
5. Commodity Futures Market in India
6. Risk Management at NSE
7. Risk Management Using Derivatives at NSE
8. Study of Selected Mutual Fund Schemes in India
9. Study of selected ULIP schemes in India
10. Technical analysis- A study of selected Indicators
11. Study on On-line Trading, Clearing & Settlement
12. Comparitive analysis of  internet trading schemes of Selected Stockbroking firms in Hyderabad
13. Sub-Brokers at NSE : A study in Hyderabad
14. Currency Futures Market in India
15. Currency Options Market in India
16. Study on Commodity Exchanges in India
17. Study of Indian Capital Markets at NSE
18. Study on  Regulation of Indian Securities Market - Case study of SEBI
19. Indian Stock Market Volatility - A Study
20. FII impact on Indian Stock Market
21. A Study on Exchage Traded Funds ( ETFs)
22. Fundamental analysis of different Companies
23. Beta analysis of selected Nifty stocks
24. Study on IPOs at NSE
25. Dividend analysis of Selected Companies
26. Study of Single Index Market Model on selected Nifty Stocks
27. India VIX- A study on Volatility Index
28. Study on PMS Schemes in India
29. Portfolio Construction & Management
30. Study on selected M&A's in India
31. Study of Market Efficiency in India
32. Indian Stock Market Integration with Selected Countries
33. Study on Investor Behavior in Hyderabad

MARKET QUALITY

My research topic revolves around assesing the impact of Microstructure innovations on Market quality at NSE.

1. I am proposing to examine the issue from three stand points
2. Market quality in terms of a) Informational Efficiency b) Market Volatility c) Market Integration
3. I want to examine how various metrics can be used as proxy for these measures.
4. Presently I am doing a survey of literature.

Basic Skills for MBA ( Finance) students

I hope that many students doing project work for their MBA ( Finance) brush up on their following skills.

1. How to type in MS-Word, Using MS-Excel for simple tasks of forming a table etc
2. Browsing for required information on google and othe search engines.
3. Getting required data from websites like http://www.nseindia.com,www.bseindia.com,www.sebi.gov.in/ and othe sites mentioned in a previous post.
4. Basic report writing skills. 

My role models in Indian Academic Finance

I would like to share my role models in Academic Finance. Of course this cant be an exhaustive list. I tried to put whom ever I came across or read personally or through their writings.

1. Ajay Shah definitely one of the top most thinkers in finance, economics and policy. His book on India's Financial Markets is a must read for any body remotely connected with Indian Finance.The book is full of empirical justifications rather than empty opinion.
2. Susan Thomas . I admire for her clarity and depth in econometric treatment of financial markets. She has lot of top quality finance materials online for free download.
3. J R Verma . Famous for Derivatives. I have used his book on DERIVATIVES & RISK MANAGEMENT for my class at VJIM.
4. Kotha Kiran Kumar of NISM. I have attended two summer schools on EERF just to listen to his interpretation of Market Microstructure research and his unique way of analysing research papers. He shows you how to connect econometrics with finance.
5. Prasanna Chandra . I have heard his lectures at my initial days at ICFAI.
6. NJ Yasaswy for pioneering the the financial education revolution in India through ICFAI.
7. SSS Kumar who is an alumni of SVUSBM whre I have also studied.
8. M S Reddy has made initial impression on me at my SV University MBA days for his way of questioning.

SOURCES OF FINANCIAL INFORMATION

Much of the information required by MBA students for their project work can be found on the web.Some of the frequently used sources are

1. Government Owned websites : Securities and Exchange Board of India (SEBI) http://www.sebi.gov.in/
2. Reserve Bank Of India   http://www.rbi.org/
3. Ministry Of Finance  http://www.finmin.nic.in/
4. Stock Exchange Websites : National Stock Exchange ( NSE) http://www.nseindia.com/
5. Bombay Stock Exchange http://www.bseindia.com/
6. Multi Commodity Exchange http://www.mcxindia.com/
7. Financial Magazine / Newspaper websites: Business Standard  http://www.businessstandard.co.in/
8. Hindu Business Line  http://www.thehindubusinessline.com/
9. Financial Express  http://www.financialexpress.com/
10. Wall street Journal  http://www.india.wsj.com/
11. Financial Times  http://www.ft.com/
12. Economic Times http://www.economictimes.indiatimes.com/
13. Mint http://www.livemint.com/
14. Business Today http://www.businesstoday.intoday.in/
15. Business India  http://www.businessindiagroup.com/
16. Economist  http://www.economist.com/
17. Capitalmarket  http://www.capitalmarket.com/
18. Indiainfoline  http://www.indiainfoline.com/
19. Equitymaster  http://www.equitymaster.com/
20. CRISIL  http://www.crisil.com/
21. Moneycontrol  http://www.moneycontrol.com/
22. CARE  http://www.careratings.com/
23. Myiris  http://www.myiris.com/
24. Bloomberg  http://www.bloomberg.com/
25. Reuters      http://www.reuters.com/

What PRICE should we use?

There are four prices observed in the market. Financial press reports OPEN,HIGH,LOW,CLOSE.

1. There is a difference between Closing Price and Last Traded Price(LTP). NSE provides Closing price as last half an hour VWAP(Volume Weighted Average Price).

2.If Corporate actions(Bonus,Stock Split,Rights) happen how to adjust the price so that when we caluculate returns it does not give a wrong picture ?

3. CMIE-PROWESS gives ACP( Adjusted Closing Price). Yahoo Finance also gives Adj Close data.

Essential Econometrics for Research in Finance @ NISM

I had the pleasure to attend  EERF 2011 @ NISM, Mumbai.

1. The program is from  Apr 30 - May 10,2011
2. I have met many interesting people from academics including  Mr D N RAO ( who has published widely on Mutual Funds), Dr Pandikumar ( PSGIM) .
3. On Day 1, interesting class sessions & discussion on Financial Data by Dr Kiran Kumar ( earlier with ISB) though afternoon session is a bit lacking in Financial examples .
4. Road map of Econometric tools and Statistical Thinking by  Dr K K on Day 1.
5. Most of the examples relate to Financial Markets and Market Efficiency and Microstructure. I hope to get some inspiration for my PhD Thesis.

MBA Finance Projects @ BlackSwan

I have the pleasure to interact with MBA Finance students advising on their Projects.

1. Most of the projects deal with  Indian Financial Markets, Risk Management at NSE, Performance Evaluation Of MF Schemes,Fundamental Analysis of Companies, Study of Commodities Markets,Risk Management using Derivatives,Study of F&O Market in India etc.
2. Indian market data is freely available at http://www.nseindia.com,www.bseindia.com,www.mcxindia.com/ and individual MF websites and Company websites for financial data/ Annual Reports.
3. Even though the project study appears simple at conceptual stage, there are lot of details at the implementation level. For ex when trying to do a study on " Performance evaluation of MF Schemes" we have come across the following issues.
4. Which Bench mark to consider ? NIFTY/ BSE 200/ CNX 100
5. NAV frequency ? Daily/ Weekly/ Monthly
6. What is the Risk free Return ?  RBI rate/ SBI term deposit rate
7. Various MF data sources are available. For eg  http://www.amfiindia.com,www.%20mutualfundsindia.com,value/ research, CRISIL, http://www.mf.economictimes.com/, SEBI, Business world and Business Standard sites.
8. For Capital Market related projects  ISMR 2009, NSE Fact Book, Risk Management guidelines are very useful.
9. Some common enquiries students can undertake is regarding examination of Return and Risk of selected instruments ( Equity Futures, Commodity Futures) and compare them on the basis of Volatility.
10. One fruitful study is adequate characterisation of Risk Containment Measures by exchanges ( NSE) in terms of Margins, Capital adequacy norms and their detailed calculation.