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“Operational risk is the risk that is not inherent in financial, systematic or market-wide risk. It is blogthe risk remaining after determining financing and systematic risk, and includes risks resulting from breakdowns in internal procedures, people and systems”  defines investopedia.

Here is a classic case study how the famous brokerage firm Knight capital failed. More than 3 years ago, Knight Capital suffered a loss of nearly half a billion dollars and needed to sell itself after a defective software resulted in nearly $7 billion of wrong trades. The US SEC issued an order against Knight Capital that described exactly what happened this is interesting: View full article »

The Chinese authorities’ attempts to stabilize the country’s stock markets have been frantic—and futile. Interest ratesblog have been cut; short-selling capped; IPOs halted; share-buying schemes hatched (backed by central-bank cash).

But the rout continues: the CSI 300 big-company index has fallen by one-third since early June; ChiNext, a would-be NASDAQ, by two-fifths. Trading in over half of Shanghai- and Shenzhen-listed shares has been suspended. Yet the stock market is still small by rich-world standards. Bull or bear, it makes limited difference to the real economy. Its political importance is rather greater. View full article »

History may rhyme, it doesn’t repeat itself’ (Twain). Or that, “the only thing that is constant is change” (Heraclitus). blogThese two famous quotes apply to the financial markets as much as anything.

The way the mid and small caps in the Indian markets are trading gets to sense the equity markets are either at the start of a bull run breaking out higher or are on the verge of a break down lower.

Just correlate with layers 2007 and early 2008

  • Sub Prime issue was lingering in the mouths of traders for three years before the pain struck. Now, Greece is lingering for five years. Markets did not price in the Sub Prime issue. Now markets have under-priced Greece exit.
  • When the major markets peaked and languishing in ranges we have seen for about three months a surge in Indian equities (along with mid and small peaking to astronomical levels) then eventually Indian equities crashed.

 

Moving ahead from the Greece posts, on the famous theory of risk, return and the disappointment based on blogexpectations.

See, stocks are stocks, bonds are bonds, and cash is cash. As an investor we expect 30% returns in stocks, 9% in bonds and cash depends upon the bank where the money is parked.

The minute we set an expectation for them to break this trade of risk for return, we’re setting ourselves up to be disappointed.

Let me break the silos and narrating a simple story:

Next to a mountain trail stood a twisted, gnarly tree. Hikers loved the shade it provided, but one day, a guy with an ax came along and decided the tree could do more than provide shade. View full article »

Greece Bailout Yes or No

Ok, So the Greece just voted in a landslide to reject further austerity (Good for them). So nobody knows what’s going blogto happen next. There nothing like a financial crisis to get adrenaline pumping, Might be the chances of Grexit be higher now, but I would not dig in to detail. Would rather move away to the maverick author Nassim Nicolas Taleb who made the points for Bailouts and Prevailing culture in the financial domain

  • The main difference between government bailouts and smoking is that in some rare cases the statement “This is my last cigarette “holds true
  • The difference between banks and Mafia: banks have better legal regulatory expertise, but Mafia understands the public opinion. Or you can say”Give a man a gun and he can rob a bank. Give a man a bank and he can rob the world”

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