Archive for July, 2015


“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: Continue reading

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. Continue reading

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.

 

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”

Continue reading

The endeavour below is to – explain a very complicated circular trading (round tripping algorithm) nonsense that 150701124628-greek-crisis-cartoon-exlarge-169became a crisis – in a simple way.

MARY is the proprietor of a bar in Dublin. She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar – she will go broke.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Word gets around about Mary’s ‘drink now, pay later’ marketing strategy and, as a result, increasing numbers of customers flood into Mary’s bar. Continue reading

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