The cost of credit default swaps (CDSs) for 10 year US Treasury bonds have reached an all-time high, trading at as high as 24 basis points. In this regard, what should we use as the risk-free rate ( Read more... )

Having decided that I'm exceptionally poor at picking stocks, for the last year or so I've been investing mostly in Mutual Funds. I invest a total of Rs. 12000 every month in three different mutual funds. The three SIPs take the money out on 2nd, 9th and 27th of each month, I think.

On a number occasions in the recent past, to my bad luck, the stock ( Read more... )

This is a tubelight post. Was supposed to have written this two months back.

I sometimes wonder if the US Fed did the right thing by encouraging JP Morgan to buy out Bear Stearns rather than to just let the latter fail. I know letting it fail would have had significant negative impact on the already struggling financial sector. But wouldn't it have ( Read more... )

I propose a new business model. Make a seemingly outrageous long-range prediction. It could just be anything, but you might want to stick to the financial world. Once you have decided on the prediction to make, think up of about six possible reasons why this prediction could come true. Given that the prediction in itself is outrageous, it shouldn't ( Read more... )

She is still an out-of-money option - quite ordinary for most of the time, offering nothing, or mildly negative returns; but once in a very long time you get great value, making the long periods of mediocrity worth their while.

Another amazing insight from fooled by randomness. The essence of this is that if you are a passive investor, the more often you track your portfolio, the more your headache. Suppose you have invested in a portfolio where the expected annual return is R%, and the volatility is V%. The insight is that the more often you track your portfolio, the ( Read more... )

I'm currently reading Nassim Nicholas Taleb's Fooled by randomness. Have read some fifty pages so far. Like his later book The Black Swan, this too contains totally awesome fundaes. And contrary to reports that I've heard, it's extremely easy reading. Either it's because of my familiarity with derivatives or because I'm just coming off Chaos by ( Read more... )

There has been no shortage of conspiracy theories regarding the finance minister's announcement of the Rs. 60000 crore farm loan waiver. Let me add one more theory to it.

According to a survey done by the Business Standard, which got published today, the total outstanding bad farm debt in the books of commercial banks totals Rs. 11000 Crore. The ( Read more... )

Last week, out of sheer enthu, I picked up that xerox copy of Paul Wilmott on Quantitative Finance which was lying torn and dusty in a remote corner of my bedroom, cleaned it and started reading it. I glossed over some of the derivations, ignored the quantitative part of this quantitative book, and found it to be an excellent read. The guy has ( Read more... )

through some data i managed to scrouge out of some investment banker friends, I estimate the total amount of subprime loans doled out in 2005 alone comes up to around USD 150 billion ( Read more... )