The document summarizes a theory that financial markets were previously split into two parts - price risky and price stable. This split market paradigm was disrupted in the 1970s with the introduction of over-the-counter (OTC) instruments. Had the split been maintained, it argues there would have been less risk added to the system and perhaps no financial crisis in 2007. It describes how restoring the split market through new trading technology could reduce risks.
This document provides an overview of derivatives markets and products. It discusses the origins and growth of derivatives, including the development of futures exchanges. The major types of derivatives are forwards, futures, options, warrants, and swaps. Forwards and futures require delivery of the underlying asset, while options provide the right but not obligation to buy or sell. Key differences between forwards and futures are highlighted. Settlement can occur through physical delivery or cash settlement. Derivatives allow market participants to hedge risk and provide economic benefits if properly handled.
This document provides an overview of the Indian capital market, including its key participants and regulatory structure. It discusses the primary and secondary markets, as well as the money and capital markets. It outlines the historical regulatory framework, including the Capital Issues Control Act, Companies Act, and Securities Contracts Regulation Act. It then describes the establishment of the Securities and Exchange Board of India (SEBI) in 1992 and its role in integrating regulation, liberalizing the market, and improving transparency and investor protection through new guidelines.
This document provides an overview of financial derivatives. It defines derivatives as instruments whose value is derived from an underlying asset. The four main types of derivatives are forwards, futures, options, and swaps. Derivatives allow parties to transfer risks related to price fluctuations and are used for hedging and speculative purposes. While derivatives pose risks, they also serve important economic functions like facilitating price discovery and transferring risk. Derivative markets in India operate through designated exchanges and are regulated by SEBI.
This document discusses how moving over-the-counter (OTC) derivatives contracts to central counterparties (CCPs) would require large increases in posted collateral from large banks. It estimates that up to $2 trillion of counterparty risk in the OTC derivatives market is currently under-collateralized. CCPs would require full collateralization of positions, so offloading contracts to CCPs would significantly increase collateral needs for large banks. The document also notes concentration risks if only standardized contracts are cleared through CCPs, rather than the full portfolio. It concludes regulators may need to incentivize moving contracts through capital requirements on remaining bilateral positions.
The Facts and Fictions of the Securities IndustrySam Vaknin
This document contains an introduction to a book on the securities industry. It discusses several concepts related to valuing stocks and companies, including market capitalization, management compensation, cash flows, risk, liquidity, and various valuation models. It notes that the value of stocks is based on expected future cash flows from the company, securities markets, and current market participants. Stock prices reflect risks related to the specific company as well as broader market risks. Valuation requires estimating future dividends, earnings, or free cash flows and discounting them to arrive at a present value. The document also briefly discusses the process of due diligence required when attracting foreign investment.
This document summarizes a study that examines measures of liquidity and factors that influence liquidity on the Tunisian stock market. The study analyzes various measures of liquidity like bid-ask spread, trading volume, and depth for 40 stocks traded on the Tunisian market from 2011 to 2013. The results show that measures like spread, volume, and information arrival are significantly correlated with changes in liquidity over time. The arrival of new information may be a common factor influencing different liquidity measures across stocks.
This document summarizes an experiment testing the theory of dynamic market completeness. The experiment compared portfolio choices and prices in complete versus incomplete asset markets. In an incomplete market, one asset was prohibited from trading but additional information was provided halfway through, allowing the market to potentially fulfill conditions for dynamic completeness. The experiment found portfolio choices were generally the same between markets, but some price predictions were not supported. More experiments are needed to determine if these results are typical.
Original AeFT SwapRent paper written by Ralph Y Liu in 2006Ralph 刘冶民 Liu
This document proposes a new concept called SwapRentSM to provide homeowners and commercial property owners an alternative to traditional real estate transactions and mortgages. SwapRentSM allows property owners to lock in gains or losses in their property value over a period of time without having to sell, similar to a "rent" or "yield". It aims to simplify hedging for non-sophisticated owners and also enable new types of institutional trading of property derivatives. Current options are inadequate due to complexity, costs, or inability to address risks like downward price fluctuations.
This document provides an overview of derivatives markets and products. It discusses the origins and growth of derivatives, including the development of futures exchanges. The major types of derivatives are forwards, futures, options, warrants, and swaps. Forwards and futures require delivery of the underlying asset, while options provide the right but not obligation to buy or sell. Key differences between forwards and futures are highlighted. Settlement can occur through physical delivery or cash settlement. Derivatives allow market participants to hedge risk and provide economic benefits if properly handled.
This document provides an overview of the Indian capital market, including its key participants and regulatory structure. It discusses the primary and secondary markets, as well as the money and capital markets. It outlines the historical regulatory framework, including the Capital Issues Control Act, Companies Act, and Securities Contracts Regulation Act. It then describes the establishment of the Securities and Exchange Board of India (SEBI) in 1992 and its role in integrating regulation, liberalizing the market, and improving transparency and investor protection through new guidelines.
This document provides an overview of financial derivatives. It defines derivatives as instruments whose value is derived from an underlying asset. The four main types of derivatives are forwards, futures, options, and swaps. Derivatives allow parties to transfer risks related to price fluctuations and are used for hedging and speculative purposes. While derivatives pose risks, they also serve important economic functions like facilitating price discovery and transferring risk. Derivative markets in India operate through designated exchanges and are regulated by SEBI.
This document discusses how moving over-the-counter (OTC) derivatives contracts to central counterparties (CCPs) would require large increases in posted collateral from large banks. It estimates that up to $2 trillion of counterparty risk in the OTC derivatives market is currently under-collateralized. CCPs would require full collateralization of positions, so offloading contracts to CCPs would significantly increase collateral needs for large banks. The document also notes concentration risks if only standardized contracts are cleared through CCPs, rather than the full portfolio. It concludes regulators may need to incentivize moving contracts through capital requirements on remaining bilateral positions.
The Facts and Fictions of the Securities IndustrySam Vaknin
This document contains an introduction to a book on the securities industry. It discusses several concepts related to valuing stocks and companies, including market capitalization, management compensation, cash flows, risk, liquidity, and various valuation models. It notes that the value of stocks is based on expected future cash flows from the company, securities markets, and current market participants. Stock prices reflect risks related to the specific company as well as broader market risks. Valuation requires estimating future dividends, earnings, or free cash flows and discounting them to arrive at a present value. The document also briefly discusses the process of due diligence required when attracting foreign investment.
This document summarizes a study that examines measures of liquidity and factors that influence liquidity on the Tunisian stock market. The study analyzes various measures of liquidity like bid-ask spread, trading volume, and depth for 40 stocks traded on the Tunisian market from 2011 to 2013. The results show that measures like spread, volume, and information arrival are significantly correlated with changes in liquidity over time. The arrival of new information may be a common factor influencing different liquidity measures across stocks.
This document summarizes an experiment testing the theory of dynamic market completeness. The experiment compared portfolio choices and prices in complete versus incomplete asset markets. In an incomplete market, one asset was prohibited from trading but additional information was provided halfway through, allowing the market to potentially fulfill conditions for dynamic completeness. The experiment found portfolio choices were generally the same between markets, but some price predictions were not supported. More experiments are needed to determine if these results are typical.
Original AeFT SwapRent paper written by Ralph Y Liu in 2006Ralph 刘冶民 Liu
This document proposes a new concept called SwapRentSM to provide homeowners and commercial property owners an alternative to traditional real estate transactions and mortgages. SwapRentSM allows property owners to lock in gains or losses in their property value over a period of time without having to sell, similar to a "rent" or "yield". It aims to simplify hedging for non-sophisticated owners and also enable new types of institutional trading of property derivatives. Current options are inadequate due to complexity, costs, or inability to address risks like downward price fluctuations.
This document summarizes key aspects of financial derivatives for balance of payments statistics. It defines financial derivatives as instruments linked to an underlying financial asset or indicator that allow trading of specific financial risks. There are two broad classes - forward-type contracts where parties agree to exchange assets at a future date, and option contracts where one party purchases the right but not obligation to buy or sell an asset. Transactions in financial derivatives should be recorded separately from any underlying transactions for statistical purposes.
Here Are Some Secret Techniques To Earn Massive Profits From Trading. Trading Can Make You Millionaire. Here Are Some Proven Ways To Earn Explosive Money From Trading.
Simply put, forex is the trading of currency, buying low and selling
high. There are some levels of risks involved as in all other risky
dealings but the rewards can be very good indeed.
The document provides an overview of price risk management and hedging strategies. It discusses the outlook for commodity prices including oil, analyzes counterparty credit risk during the credit crunch, and reviews different hedging policies and instruments that can be used in volatile markets. Specific hedging programs like discretionary, ratable, and structured opportunistic are defined and examples are given. Current market conditions and factors influencing prices are also assessed.
This document describes the Hilbert-Huang transform (HHT) and its application to financial time series prediction. The HHT is a two-step process that first uses empirical mode decomposition (EMD) to decompose a time series into intrinsic mode functions (IMFs) representing different oscillatory modes, from high to low frequency. It then applies Hilbert spectral analysis to characterize the IMFs in a time-frequency distribution. The document focuses on using only the EMD step to develop trading strategies. It outlines how EMD can extract meaningful periodic patterns from financial data and proposes several strategies exploiting periodicity in the low-frequency IMFs. Backtests of the strategies on markets like volatility indices, stocks and commodities show positive performance results
This document is a paper written by M Ahnaf Khan for their final project at Bard College on high frequency trading. It discusses the emergence of high frequency trading, various trading strategies used by HFT firms like market making and arbitrage, the impact of HFT on price discovery and liquidity, and various regulations implemented in response to events like the 2010 Flash Crash. The paper aims to analyze the effect of HFT on market prices and propose a new regulation of implementing a financial transaction tax.
This document provides an overview of derivatives and the derivatives market in India. It begins with definitions of derivatives and describes their key characteristics, including that their value is derived from an underlying asset. It then discusses the major types of derivatives - forwards and futures - and compares their features. Forwards are customized bilateral contracts while futures are standardized exchange-traded contracts. The document also outlines the major players in the derivatives market, including hedgers, speculators, and arbitrageurs. Finally, it discusses margin requirements and daily marking to market in futures contracts to manage risk.
The document discusses derivatives and their role in emerging markets. It then evaluates arguments that have been made against derivatives from an Islamic perspective. Specifically:
1) It addresses concerns about speculation in derivatives markets, explaining that large trading volumes are due to risk dissipation, not solely speculation.
2) It discusses arguments around non-delivery in derivatives contracts, noting that even hedgers may prefer cash settlement to physical delivery.
3) It explains that cash settlement provides convenience and reduces costs for both parties, while also preventing market cornering attempts. The document concludes by examining salam and istisna contracts as potential Islamic alternatives to conventional forward contracts.
The document analyzes the impact of stock split announcements on stock prices of companies listed on the CNX Nifty index of the National Stock Exchange of India from 2006 to 2013. Using an event study methodology, it calculates abnormal returns for 15 companies around the announcement dates. The results show that stock split announcements have a positive impact on stock prices around the announcement dates, though some individual company returns vary.
A stock split increases the number of a company's outstanding shares by issuing more shares to existing shareholders, which decreases the price per share while keeping the company's total market value constant. Common stock splits include 2-for-1 and 3-for-1. While a stock split lowers the per-share price, it aims to increase liquidity and make the stock more affordable to small investors. However, it does not impact the underlying value of the company.
NON-ISOLATED SOFT SWITCHING DC-DC CONVERTER AND LOAD AT FULL RANGE OF ZVS IAEME Publication
A non isolated soft switching DC–DC converter and load at full range of zero-voltage
switching (ZVS) characteristic is proposed. The proposed converter consists of an auxiliary circuit,
an inductor, two switches, and 2 diodes to achieving high efficiency at full range of load. At low
and heavy loads, ZVS of switching device is achieved by energy storing component. The inductor
energy stored varies with load and hence results in minimizes conduction loss. This leads to
switching of device for full range of load. The proposed DC - DC converter achieves high
efficiency as switching loss is reduced due to soft switching and ZVS operation which severe to
reduce conduction loss. The efficiency is improved about 4% in boost mode (2.5% in buck mode) at
full range of load. To verify the performance of the proposed converter, experimental results
prototype are presented.
This paper presents the design and the implementation of a new microcontroller-based solar
Power inverter. The aim of this paper is to design single phase inverter which can convert DC voltage
to AC voltage at high efficiency and low cost. Solar and wind powered electricity generation are
being favored nowadays as the world increasingly focuses on environmental concerns. Power
inverters, which convert solar-cell DC into domestic-use AC, are one of the key technologies for
delivering efficient AC power The hardware and software design are oriented towards a single-chip
microcontroller-based system, hence minimizing the size and cost. With this new approach the
modularization of the conversion from solar power to electric power at its maximum power point can
be made more compact and more reliable.
This document describes the design of a control system for the takeoff and landing phases of flight for an aircraft. It discusses using MATLAB/Simulink software to model and simulate the aircraft's attitude, altitude, and other parameters during takeoff and landing. The simulation results show that the designed control system performs well for maintaining stability and achieving the desired trajectories. The document aims to advance aircraft control system design from conventional mechanical systems to electrical fly-by-wire systems using low-cost components.
REDUCTION OF HARMONIC DISTORTION IN BLDC DRIVE USING BL-BUCK BOOST CONVERTER ...IAEME Publication
The document summarizes a study comparing the performance of a bridgeless buck-boost converter fed brushless DC motor drive to a conventional boost converter drive. The key findings are:
1. The proposed BL buck-boost converter provides power factor correction, reducing the total harmonic distortion of the supply current to around 4% and improving the power factor to nearly 0.98.
2. In comparison, a conventional BLDC drive using a diode bridge rectifier and boost converter has total harmonic distortion of around 65% and power factor of only 0.8.
3. Simulation results show the proposed drive maintains low total harmonic distortion of around 4% over variations in DC link voltage and supply voltage.
Searching is one of the important operations in computer science. Retrieving information from
huge databases takes a lot of processing time to get the results. The user has to wait till the completion
of processing to find whether search is successful or not. In this research paper, it provides a detailed
study of Binary Search and how the time complexity of Binary Search can be reduced by using Odd
Even Based Binary Search Algorithm, which is an extension of classical binary search strategy. The
worst case time complexity of Binary Search can be reduced from O(log2N) to O(log2(N-M)) where
N is total number of items in the list and M is total number of even numbers if search KEY is ODD
or M is total number of odd numbers if search KEY is EVEN. Whenever the search KEY is given, first
the KEY is determined whether it is odd or even. If given KEY is odd, then only odd numbers from
the list are searched by completely ignoring list of even numbers. If given KEY is even, then only
even numbers from the list are searched by completely ignoring list of odd numbers. The output of
Odd Even Based algorithm is given as an input to Binary Search algorithm. Using Odd Even Based
Binary Search algorithm, the worst case performances in Binary Search algorithm are converted
into best case or average case performance. Therefore, it reduces total number of comparisons, time
complexity and usage of various computer resources.
Hydraulics now a days is a very distinguished area which has lot of major challenges often came in its
progress due to the realistic changes affecting on applicable working fluid viz. Water. Most occasions,
Water can be easily available but in certain times it may be scarce also. The available water vary according
to its properties. It exists in normal conditions as well as salty or hardy due to deposits. Majority of Water
is contaminated with minerals, dust or dirt. Often pure water which may be acidic or alkaline can be used
for making discharges through the Turbines
1) The document summarizes Christopher Whalen's testimony before the Senate regarding regulation of over-the-counter (OTC) derivatives markets.
2) Whalen argues that flaws in the business models of large dealer banks like JPMorgan, Bank of America, and Goldman Sachs have led to the current unregulated structure of the OTC derivatives market.
3) He claims that supra-normal returns in the closed OTC market effectively act as a tax on other market participants and taxpayers who are left paying for periodic failures of OTC derivatives users like AIG and Citigroup.
This document provides an overview of derivatives markets and products. It discusses the origins and growth of derivatives, including the development of futures exchanges. The major types of derivatives are forwards, futures, options, warrants, and swaps. Forwards and futures involve an agreement to buy or sell an asset at a future date, while options provide the right but not obligation to buy or sell an asset. Swaps involve an exchange of cash flows between two counterparties. The document focuses on forwards and futures contracts in more detail, covering key differences, settlement procedures including physical delivery or cash settlement, and features such as customization and counterparty risk.
This document provides an overview of modern market making. It discusses the economics and microstructure of market making, the roles played by market makers in providing liquidity. It describes the process of market making, where market makers set bid and ask prices to facilitate trades between buyers and sellers. Recently, there has been a shift to electronic market making, where algorithms and computer programs set prices instead of humans. The document focuses on pricing models used by electronic market makers and compares different models. It examines alternatives to traditional market making and provides a conclusion on the topic.
Derivatives have played a role in several major corporate collapses and financial crises. While derivatives can be used to hedge risks, they must be properly regulated to prevent excessive risk taking. This document provides an overview of derivatives, including the main types of derivative contracts, the underlying assets they are based on, and the exchange-traded and over-the-counter markets in which they are traded. It also discusses some recent credit events where counterparty risk from derivatives contributed to the problems.
This document provides an overview of the structure and key points that will be discussed in a paper on central clearing of derivatives and the benefits of loss mutualization. It discusses the history and operation of clearinghouses, comparing clearing of securities and derivatives. Central clearing of derivatives provides benefits like loss mutualization, where losses from a member default are shared across other members. The document analyzes how loss mutualization functioned in the Panic of 1907 and how its absence contributed to the 2008 crisis. It also discusses Dodd-Frank reforms and debates around segregation of customer collateral.
This document summarizes key aspects of financial derivatives for balance of payments statistics. It defines financial derivatives as instruments linked to an underlying financial asset or indicator that allow trading of specific financial risks. There are two broad classes - forward-type contracts where parties agree to exchange assets at a future date, and option contracts where one party purchases the right but not obligation to buy or sell an asset. Transactions in financial derivatives should be recorded separately from any underlying transactions for statistical purposes.
Here Are Some Secret Techniques To Earn Massive Profits From Trading. Trading Can Make You Millionaire. Here Are Some Proven Ways To Earn Explosive Money From Trading.
Simply put, forex is the trading of currency, buying low and selling
high. There are some levels of risks involved as in all other risky
dealings but the rewards can be very good indeed.
The document provides an overview of price risk management and hedging strategies. It discusses the outlook for commodity prices including oil, analyzes counterparty credit risk during the credit crunch, and reviews different hedging policies and instruments that can be used in volatile markets. Specific hedging programs like discretionary, ratable, and structured opportunistic are defined and examples are given. Current market conditions and factors influencing prices are also assessed.
This document describes the Hilbert-Huang transform (HHT) and its application to financial time series prediction. The HHT is a two-step process that first uses empirical mode decomposition (EMD) to decompose a time series into intrinsic mode functions (IMFs) representing different oscillatory modes, from high to low frequency. It then applies Hilbert spectral analysis to characterize the IMFs in a time-frequency distribution. The document focuses on using only the EMD step to develop trading strategies. It outlines how EMD can extract meaningful periodic patterns from financial data and proposes several strategies exploiting periodicity in the low-frequency IMFs. Backtests of the strategies on markets like volatility indices, stocks and commodities show positive performance results
This document is a paper written by M Ahnaf Khan for their final project at Bard College on high frequency trading. It discusses the emergence of high frequency trading, various trading strategies used by HFT firms like market making and arbitrage, the impact of HFT on price discovery and liquidity, and various regulations implemented in response to events like the 2010 Flash Crash. The paper aims to analyze the effect of HFT on market prices and propose a new regulation of implementing a financial transaction tax.
This document provides an overview of derivatives and the derivatives market in India. It begins with definitions of derivatives and describes their key characteristics, including that their value is derived from an underlying asset. It then discusses the major types of derivatives - forwards and futures - and compares their features. Forwards are customized bilateral contracts while futures are standardized exchange-traded contracts. The document also outlines the major players in the derivatives market, including hedgers, speculators, and arbitrageurs. Finally, it discusses margin requirements and daily marking to market in futures contracts to manage risk.
The document discusses derivatives and their role in emerging markets. It then evaluates arguments that have been made against derivatives from an Islamic perspective. Specifically:
1) It addresses concerns about speculation in derivatives markets, explaining that large trading volumes are due to risk dissipation, not solely speculation.
2) It discusses arguments around non-delivery in derivatives contracts, noting that even hedgers may prefer cash settlement to physical delivery.
3) It explains that cash settlement provides convenience and reduces costs for both parties, while also preventing market cornering attempts. The document concludes by examining salam and istisna contracts as potential Islamic alternatives to conventional forward contracts.
The document analyzes the impact of stock split announcements on stock prices of companies listed on the CNX Nifty index of the National Stock Exchange of India from 2006 to 2013. Using an event study methodology, it calculates abnormal returns for 15 companies around the announcement dates. The results show that stock split announcements have a positive impact on stock prices around the announcement dates, though some individual company returns vary.
A stock split increases the number of a company's outstanding shares by issuing more shares to existing shareholders, which decreases the price per share while keeping the company's total market value constant. Common stock splits include 2-for-1 and 3-for-1. While a stock split lowers the per-share price, it aims to increase liquidity and make the stock more affordable to small investors. However, it does not impact the underlying value of the company.
NON-ISOLATED SOFT SWITCHING DC-DC CONVERTER AND LOAD AT FULL RANGE OF ZVS IAEME Publication
A non isolated soft switching DC–DC converter and load at full range of zero-voltage
switching (ZVS) characteristic is proposed. The proposed converter consists of an auxiliary circuit,
an inductor, two switches, and 2 diodes to achieving high efficiency at full range of load. At low
and heavy loads, ZVS of switching device is achieved by energy storing component. The inductor
energy stored varies with load and hence results in minimizes conduction loss. This leads to
switching of device for full range of load. The proposed DC - DC converter achieves high
efficiency as switching loss is reduced due to soft switching and ZVS operation which severe to
reduce conduction loss. The efficiency is improved about 4% in boost mode (2.5% in buck mode) at
full range of load. To verify the performance of the proposed converter, experimental results
prototype are presented.
This paper presents the design and the implementation of a new microcontroller-based solar
Power inverter. The aim of this paper is to design single phase inverter which can convert DC voltage
to AC voltage at high efficiency and low cost. Solar and wind powered electricity generation are
being favored nowadays as the world increasingly focuses on environmental concerns. Power
inverters, which convert solar-cell DC into domestic-use AC, are one of the key technologies for
delivering efficient AC power The hardware and software design are oriented towards a single-chip
microcontroller-based system, hence minimizing the size and cost. With this new approach the
modularization of the conversion from solar power to electric power at its maximum power point can
be made more compact and more reliable.
This document describes the design of a control system for the takeoff and landing phases of flight for an aircraft. It discusses using MATLAB/Simulink software to model and simulate the aircraft's attitude, altitude, and other parameters during takeoff and landing. The simulation results show that the designed control system performs well for maintaining stability and achieving the desired trajectories. The document aims to advance aircraft control system design from conventional mechanical systems to electrical fly-by-wire systems using low-cost components.
REDUCTION OF HARMONIC DISTORTION IN BLDC DRIVE USING BL-BUCK BOOST CONVERTER ...IAEME Publication
The document summarizes a study comparing the performance of a bridgeless buck-boost converter fed brushless DC motor drive to a conventional boost converter drive. The key findings are:
1. The proposed BL buck-boost converter provides power factor correction, reducing the total harmonic distortion of the supply current to around 4% and improving the power factor to nearly 0.98.
2. In comparison, a conventional BLDC drive using a diode bridge rectifier and boost converter has total harmonic distortion of around 65% and power factor of only 0.8.
3. Simulation results show the proposed drive maintains low total harmonic distortion of around 4% over variations in DC link voltage and supply voltage.
Searching is one of the important operations in computer science. Retrieving information from
huge databases takes a lot of processing time to get the results. The user has to wait till the completion
of processing to find whether search is successful or not. In this research paper, it provides a detailed
study of Binary Search and how the time complexity of Binary Search can be reduced by using Odd
Even Based Binary Search Algorithm, which is an extension of classical binary search strategy. The
worst case time complexity of Binary Search can be reduced from O(log2N) to O(log2(N-M)) where
N is total number of items in the list and M is total number of even numbers if search KEY is ODD
or M is total number of odd numbers if search KEY is EVEN. Whenever the search KEY is given, first
the KEY is determined whether it is odd or even. If given KEY is odd, then only odd numbers from
the list are searched by completely ignoring list of even numbers. If given KEY is even, then only
even numbers from the list are searched by completely ignoring list of odd numbers. The output of
Odd Even Based algorithm is given as an input to Binary Search algorithm. Using Odd Even Based
Binary Search algorithm, the worst case performances in Binary Search algorithm are converted
into best case or average case performance. Therefore, it reduces total number of comparisons, time
complexity and usage of various computer resources.
Hydraulics now a days is a very distinguished area which has lot of major challenges often came in its
progress due to the realistic changes affecting on applicable working fluid viz. Water. Most occasions,
Water can be easily available but in certain times it may be scarce also. The available water vary according
to its properties. It exists in normal conditions as well as salty or hardy due to deposits. Majority of Water
is contaminated with minerals, dust or dirt. Often pure water which may be acidic or alkaline can be used
for making discharges through the Turbines
1) The document summarizes Christopher Whalen's testimony before the Senate regarding regulation of over-the-counter (OTC) derivatives markets.
2) Whalen argues that flaws in the business models of large dealer banks like JPMorgan, Bank of America, and Goldman Sachs have led to the current unregulated structure of the OTC derivatives market.
3) He claims that supra-normal returns in the closed OTC market effectively act as a tax on other market participants and taxpayers who are left paying for periodic failures of OTC derivatives users like AIG and Citigroup.
This document provides an overview of derivatives markets and products. It discusses the origins and growth of derivatives, including the development of futures exchanges. The major types of derivatives are forwards, futures, options, warrants, and swaps. Forwards and futures involve an agreement to buy or sell an asset at a future date, while options provide the right but not obligation to buy or sell an asset. Swaps involve an exchange of cash flows between two counterparties. The document focuses on forwards and futures contracts in more detail, covering key differences, settlement procedures including physical delivery or cash settlement, and features such as customization and counterparty risk.
This document provides an overview of modern market making. It discusses the economics and microstructure of market making, the roles played by market makers in providing liquidity. It describes the process of market making, where market makers set bid and ask prices to facilitate trades between buyers and sellers. Recently, there has been a shift to electronic market making, where algorithms and computer programs set prices instead of humans. The document focuses on pricing models used by electronic market makers and compares different models. It examines alternatives to traditional market making and provides a conclusion on the topic.
Derivatives have played a role in several major corporate collapses and financial crises. While derivatives can be used to hedge risks, they must be properly regulated to prevent excessive risk taking. This document provides an overview of derivatives, including the main types of derivative contracts, the underlying assets they are based on, and the exchange-traded and over-the-counter markets in which they are traded. It also discusses some recent credit events where counterparty risk from derivatives contributed to the problems.
This document provides an overview of the structure and key points that will be discussed in a paper on central clearing of derivatives and the benefits of loss mutualization. It discusses the history and operation of clearinghouses, comparing clearing of securities and derivatives. Central clearing of derivatives provides benefits like loss mutualization, where losses from a member default are shared across other members. The document analyzes how loss mutualization functioned in the Panic of 1907 and how its absence contributed to the 2008 crisis. It also discusses Dodd-Frank reforms and debates around segregation of customer collateral.
The Simple Truth Behind Managed Futures & Chaos Cruncher
What is a Futures Contract?
What are Managed Futures?
Growth of Managed Futures?
BTOP50 Under Crisis
Robust Diversification
So Why Do Managers Use Futures?
Managed Futures Reduce Risk
Futures Markets are not a Casino
Hedging A Stock Portfolio
Algorithmic or “Systems” Trading
Why “Quant Trade” Uses Chaos Theory and Fractals in Trading
Efficient verses the Fractal Market Hypothesis
Fractal Attractors
Chaos Cruncher
Portfolio Scalability
The document discusses the Futures & Options Expo 2000 conference which covered regulatory changes in the futures industry, including proposed legislation to modernize regulation. It also discusses the Chicago Mercantile Exchange's new business-to-business initiative and partnerships, as well as issues facing the managed futures sector. The conference showed the ongoing transformation in the futures industry driven by globalization, technology changes, and deregulation.
The document discusses market liquidity in fixed income markets post-financial crisis. Several factors have contributed to reduced liquidity, including decreased broker-dealer trading inventories due to regulations. This has increased execution risk for investors. The document recommends asset managers adapt by evolving trading strategies, portfolio construction, and risk management. It proposes a three-pronged approach: modernizing market structure; enhancing fund tools and regulation; and supporting new products to address liquidity challenges.
The main purpose of this Dissertation is to discuss two fundamental pillars of the new European Market Infrastructure Regulation: the Central Clearing Regime for standardised OTC derivatives contracts, and the Risk Mitigation Techniques that participants must implement when trading non standardised derivatives products.
MSc in Law & Finance Dissertation
Year 2014
This document discusses Harry Markowitz's pioneering work in portfolio theory and the portfolio selection process. It outlines Markowitz's Mean-Variance model, which characterizes risk as the variance of expected returns. The model defines two types of risk: unsystematic (diversifiable) risk and systematic (market) risk. While unsystematic risk can be reduced through diversification, systematic risk cannot be eliminated. Markowitz established that investors should consider the risk of each security in a portfolio, rather than in isolation, and aim to optimize the expected return for a given level of risk through diversification across many asset classes.
The European Market Infrastructure Regulation (EMIR) aims to increase transparency and regulate the over-the-counter (OTC) derivatives market in the European Union. It establishes rules around central clearing, trade reporting, risk mitigation techniques and oversight for OTC derivatives. EMIR requires eligible OTC derivatives to be cleared through central counterparties to reduce risk. It also mandates reporting all derivatives transactions to authorized trade repositories to improve monitoring. The regulation aims to make the financial system more resilient by reducing risks and preventing future crises in the OTC derivatives market.
This document is a project report on derivatives markets submitted by Jasmeet Singh Nagpal, a student of Guru Nanak Khalsa College, to the University of Mumbai in partial fulfillment of a Bachelor of Commerce degree. It includes an introduction to derivatives, their origin and economic functions. It also covers various chapters on futures, forwards, and options contracts - defining each type of derivative, how they work, and their purpose in trading markets. The report is certified by the student's project guide and college administrators.
Preparing for a future of complexity helen lofthouse by-lined article b-wre...Keira Ball
The document discusses how new regulations for OTC derivatives will lead to significant changes in the market structure and increased complexity. Regulations will drive standardization and migration of OTC activity to exchanges and electronic trading platforms. This will fragment liquidity across dozens of potential new venues. It will also increase costs for customized OTC transactions. To prepare, market participants need to focus on accessing advanced technology to find liquidity across venues, optimizing margin and collateral usage, and managing increased operational complexity of the changing market structure. Dealers that can help clients solve these challenges will be well positioned to deliver value in the new environment.
1) Derivatives are financial instruments whose value is derived from an underlying asset such as a commodity, currency, bond or stock. They allow for the transfer of risk from those who wish to avoid it to those who are willing to accept it.
2) Common types of derivatives include forwards, futures, options and swaps. Forwards involve a customized contract between two parties to buy or sell an asset at a future date. Futures are similar to forwards but are exchange-traded and standardized.
3) Derivatives allow businesses and individuals to hedge against risk, providing protection from adverse price movements. They also enable speculation by those seeking profit from price changes in the underlying asset.
This document discusses hedging foreign exchange risk. It begins by defining exchange risk as the exposure individuals and firms face when investing or doing business abroad due to fluctuations in exchange rates, interest rates, and inflation between countries. It then examines various methods of calculating exposure, such as using value-at-risk models. The document also explores hedging techniques like using currency derivatives and forwards to minimize risk. Finally, it notes that while hedging can reduce volatility, it may also limit gains, so firms must decide if hedging aligns with their objectives.
Not Too Big To Fail – Systemic Risk, Regulation, and the Economics of Commodi...Trafigura
In the aftermath of the Great Financial Crisis, regulatory authorities have undertaken a searching review of firms throughout the financial markets to identify those that could pose systemic risks. This review has extended to include firms not typically thought of as part of the financial sector, even broadly construed such as Commodity Trading Firms (CTFs).
Some regulators have questioned whether some of these firms are “too big to fail,” and hence pose a threat to the stability of the financial system, necessitating subjecting them to additional regulation akin to that imposed on banks.
This white paper explains the functions of these firms and evaluates whether they pose systemic risks that would justify subjecting them to regulations (notably capital requirements) similar to those imposed on other entities such as banks which are deemed to be systemically important.
About the author
Craig Pirrong is a professor of finance and the Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business at the University of Houston. His research focuses on the economics of commodity markets. He has published over thirty articles in professional publications and is the author of four books. He has also consulted widely for clients including electric utilities, commodity traders, processors and consumers and commodity exchanges
(Trafigura, March 2015)
Watch the video: Professor Pirrong discusses white paper: “Not Too Big To Fail – Systemic Risk, Regulation, and the Economics of Commodity Trading Firms”
http://www.trafigura.com/research/not-too-big-to-fail-systemic-risk-regulation-and-the-economics-of-commodity-trading-firms/
A derivative is a financial security with a value that is reliant upon or derived from an underlying asset or group of assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its price is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.
Derivatives can either be traded over-the-counter (OTC) or on an exchange. OTC derivatives constitute the greater proportion of derivatives in existence and are unregulated, whereas derivatives traded on exchanges are standardized. OTC derivatives generally have greater risk for the counterparty than do standardized derivatives.
This document summarizes a panel discussion on the impact of regulations on the over-the-counter (OTC) derivatives market. The panelists represented different parts of the OTC transaction value chain, from trade execution to reporting and clearing. Key points discussed included the uncertainty created by various US and European regulations; differences between the Dodd-Frank Act and European regulations; challenges around defining what can and cannot be cleared; and how regulations may change trade execution and post-trade processing. The panelists expected significant changes to systems, business models, and the relationship between buy-side and sell-side firms as a result of new OTC derivatives regulations.
Facing increased regulatory oversight, more banks are opting for an integrated collateral management system that facilitates collateral optimization in coordination with central clearing counterparties (CCPs).
1. 1
A Theory of Market Design: The Split Market Paradigm.
James Kurt Dew1
Tecnológico de Monterrey, Querétaro
Abstract: Before the market events of the early 1970’s, financial markets generally were
split into two parts, price-risky and price-stable. This largely subconscious division served
the financial world well. Price risky portfolios were accounted for on a mark-to-market
basis, and exchange-traded, where liquidity warranted. Price-stable instruments were
accounted for on a deferral basis and rarely traded. The markets performed their function
without incident between World War II and 1970.
This split market paradigm was broken by the post-1970 introduction of OTC instruments.
Had the paradigm been preserved and the markets’ split retained, there would have been no
second, man-made, contribution to market risk and perhaps no series of disasters that
culminated in the Financial Crisis of 2007 (hereafter Crisis).
The article describes trading technology that could reinstate the split market paradigm.
The Introduction describes the split market paradigm. Section Two shows the costs of
violating it. The third section describes a means of restoring it. The final section concludes.
“Perhaps science does not develop by the accumulation of individual discoveries and
inventions.”
- Thomas Kuhn.
1. Introduction:
In the early 1970’s, a stable system of trading, clearing, and portfolio management was
fractured by the dramatic increase in market risk resulting from a series of perhaps related
events: the collapse of the Bretton Woods Agreements, the end of Texas Railroad
Commission-dominated oil pricing, and inflation-induced increases in dollar interest rate
volatility, that ultimately ended the Fed’s Regulation Q limits on bank interest rates. Here
these events will be called, collectively, the Collapse.
1
The views expressed are the author’s and do not necessarily reflect the views of Tecnológico de Monterrey.
2. 2
A model of ideal market structure, the “split market paradigm,” refers to any system that
separates accounting, trading, and instruments into a price-stable component and a price-
volatile component. Before the Collapse, investments either originated and remained in
price-stable portfolios, or originated and remained in price-volatile portfolios. Accounting
rules, properties of the instruments, and their trading venues differed, each system efficient
in its own risk environment. This split market system worked without mishap from the end
of World War II until the Collapse.
The split market paradigm is a useful devise for considering what went wrong when OTC
instruments were first introduced after the Collapse. The market phenomenon that the
Collapse created was greater price risk. Enough so that many formerly price-stable
instruments became price-risky. The OTC instruments that were developed after the
Collapse to mitigate the new price risks might have been successful if the importance of
retaining the split between asset types had been understood then.
2. The Muddling of the Two-Market Split.
The OTC financial instruments designed after the Collapse added man-made risks, because
they did not preserve the split market system. Instruments designed to function in a price-
stable environment were allowed to migrate into the price-risky environment without
appropriate modification.
While the risks stemming from the Collapse cannot be altered or changed, only moved; the
need for man-made OTC risk might be beneficially examined. OTC credit risk that
migrated to price-risky portfolios has proven disastrous during the Crisis and unnecessary.
3. 3
OTC instruments were first designed to meet the needs of corporate hedging customers
being savaged by their once price-stable assets and liabilities, and continue to meet these
needs admirably in the price-stable portfolios for which they were designed.
But the importance of maintaining the split market system was not understood. There was
little consideration in new OTC instrument design for performance of the new instruments
in the dealer-to-dealer trades made in the after-market, or for the accounting and risk
performance of dealer portfolios containing the new instruments.
In the OTC securities and derivatives markets this lack of attention, if understandable, has
proven disastrous. OTC instruments produce cosmetically stable income in deferral
accounting environments, but in the process add otherwise undesirable credit risk.
If separate OTC financial instruments and trading practices, adapted to mark-to-market
environments, had been designed at the outset, the split system would have remained intact;
and portfolios safer and simpler.2
To complete the markets and return to the split market
system, price-risky environment analogs to OTC instruments might be beneficial.
Non-negotiability, appropriate in untraded price-stable portfolios, is anathema to efficient
portfolio management in price-volatile environments. It balloons bank balance sheets.
Credit risk is multiplied when the holder of an OTC position wishes to exit. The only
practical way to do so is to assume an equal and opposite position, thereby doubling the
bank’s credit risk in order to reduce price risk.
2
Awrey, D., 2011, “Complexity, Innovation, and the Regulation of Modern Financial Markets,” Harvard
Business Law Review, vol. 2, p. 243. As Awrey points out, “…the vast majority of the complexity—and thus
the information costs and bounded rationality—within modern financial markets does not emanate from
within the relatively transparent (and static) public markets for capital”
4. 4
The old OTC instruments’ undesirable credit risk reduces price-risky portfolio values; their
complexity obfuscates price-risky financial reports. The dealer market has become opaque,
complex, and unnecessarily risky.3
As a result OTC instruments have gone from being the solution to the key problems of
financial management to being the problems themselves.
The Dodd-Frank mandate to clear through OTC CCPs is a symptomatic treatment of the
OTC credit risk disease.4
But the mandate to form and manage CCPs that clear these
instruments did not include a possible cure – it did not include designing the OTC
instruments themselves to be exchange-compatible or even price-risky portfolio
compatible. An OTC square peg was forced into a futures exchange round hole. The result
is that a CCP is a very large counterparty, not a futures clearing house.
This distinction is made because CCPs have exposure to long term credit risk, the
underlying OTC instruments’ disease, unlike futures exchange clearing houses. There are
many problems introduced by this fact.
The most obvious effect of the excessive risk of CCPs is the negative market valuation
of a CCP’s portfolio. The CCPs have one property in common with stock and futures
exchanges – they have bought and sold only matched pairs of long and short
counterparty positions at the same market price. But the similarity ends there. Unlike
bankrupt participants in futures markets, bankruptcy of a CCP’s counterparty does not
permit the CCP to end its exposure to that counterparty. Thus both sides of every CCP
position, long and short, present credit risk to the CCP.
3
Cohn, G., 2015, “Clearing houses reduce risk, they do not eliminate it,” Financial Times, June 22, 2015.
4
An OTC CCP is a futures exchange-managed central counter-party that steps between each of the parties to
every inter-bank dealer OTC derivative trade of significance.
5. 5
Since the expected payments from both long and short are equal and opposite, credit
risk is the only part of expected payments of a long/short pair that affects CCP net
present value, and the effect is negative for the combined counterparties. In other
words, the total market value of each pair of CCP positions must be negative.
Stock and futures exchanges are a zero sum game; OTC derivative CCPs, a negative
sum game.
Historically prices of exchange-traded securities and futures were determined by the
market, not the exchanges.5
Prices of OTC instruments on CCPs, while based on an
underlying “baseline” market transaction in most instances, are in fact CCP-determined.
There is never a market test, since the instruments cleared are heterogeneous. The CCPs
do not identify a limited number of acceptable instruments, but instead clear the entire
generic instrument class, as required by regulation. The result may be untenable
systemic risk, particularly with less homogeneous, illiquid instruments.
CCPs have, in principle, the same rule of offset as futures, but not in practice.6
While
the offset rule applies within the CCPs, since the CCPs cannot limit the contract terms
of OTC trades, traders rarely actually have identical offsetting positions.7
Left unaddressed by the Dodd-Frank clearing mandate was the relationship between
instrument clearing and instrument liquidity. For the exchanges existing before Dodd-
5
It might be argued with growing veracity that the statement that futures prices are market determined ceased
to be accurate when cash settlement was permitted in the S&P 500 and Eurodollar futures contracts. The
argument made by the Exchange to the CFTC, when both contracts were submitted, that the publicly available
market price of the instrument on the settlement day was a report of actual transaction prices, has been proven
dubious in the case of the S&P and flat wrong in the case of Eurodollars. The issue has been greatly
compounded as new contracts in increasingly illiquid markets with cash settlement rules are now routinely
CFTC-approved. This continues in spite of the disastrous effects of cash settlement in the cash markets for
LIBOR and Foreign Exchange, in the Fixing debacles.
6
The rule of offset is this: if an exchange counterparty has bought and sold an identical commodity, the
counter-party has no position.
7
The CCPs attempt, perhaps dangerously, to reduce the margining of positions based on correlations between
position prices to approximate the benefits of offset.
6. 6
Frank, the issue was economic. Exchange economics, driven by economies of scale,
dictates that only the most liquid instruments are successfully exchange-traded.8
The
argument can be made that if OTC market participants had considered the economics of
trading to be paramount, the issue in OTC trading would also have been decided on the
economics, without a near-fail during the Crisis. But the dealer banks closed that option by
clinging to their joint market monopoly, ultimately forcing the government’s hand.
Cohn4
recommends considering market liquidity when choosing to clear each OTC
derivative instrument. He describes the difference between OTC markets whose risk is
reduced through clearing and those whose risk is increased in liquidity terms as follows:
“Clearing works best in the case of standardised products that trade in deep and
liquid markets — and when clearing houses are backed by strong capital
structures and robust risk-management capabilities. In these conditions,
clearing can lower counterparty risk, reduce interconnectedness among banks
and improve price transparency.
Yet in other markets, clearing houses can themselves become centres of
concentrated risk and sources of contagion, amplifying systemic problems
instead of alleviating them. They are particularly unsuited to complex, illiquid
products that are susceptible to sudden and severe price gaps. Forcing central
clearing on such markets can have serious repercussions.”
Once the liquidity test proposed above has been conducted,9
price-risky asset-consistent
trading and clearing methods can be implemented. An efficient system for the trading and
clearing of liquid assets would be designed to trade, clear, and price all markets in each
instrument identified.
8
The principle of offset, in particular, drives clearing business to a single market.
9
In practice, exchanges list everything under the sun. The market ultimately decides the issue of liquidity.
7. 7
3. A Consistent System for Price-Risky Asset Management.
A few changes make it possible to trade liquid OTC derivative instruments of systemic
importance on cash/futures exchanges or alternatively in dark pools, thereby dramatically
reducing systemic risk. These instruments are not only less risky but far simpler, producing
greater ease in risk measurement and management, benefiting both the investor/consumer
of financial institution financial reports and the taxpayer protected by bank regulators.10
Combined with changes to OTC cash and futures instruments,11
they make it possible to
trade every OTC instrument along with its associated futures contract on a single universal
trading and clearing platform.
In other papers we propose designs for cash and futures trading12
and for OTC derivatives
clearing.13
The basic principles upon which the price-risky trading system is based are:
Measures to reduce credit risk through more frequent offset.
a. Eliminate superfluous waiting between determination of payment amount
and payment. Waiting creates unnecessary credit risk and mark-to-market
prices that must be exchange-determined, not market-determined.14
10
Since they are not futures contracts but use the same trading technology, and since the underlying cash
markets are not SEC regulated, they appear to be available for listing by dark pools, perhaps with less red tape
than an exchange would require.
11
These are described in detail in Dew, James Kurt “A Fix for the Unnecessary, Undesirable, Over-the-
Counter (OTC) Dealer Markets.” May 23, 2015, http://ssrn.com/author=511466 , last accessed on July 22,
2015,
12
Dew, J. K., “A Fix for the Unnecessary, Undesirable, Over-the-Counter (OTC) Dealer Markets.” August 2,
2015. Available at SSRN: http://ssrn.com/abstract=2609454
13
Dew, J. K., “FFDs: Futures Friendly Derivatives That Replace OTC Cleared Derivatives.” August 3, 2015.
http://ssrn.com/abstract=2609438. This article shows how an OTC derivative can be replaced with a futures-
style trading instrument. Last accessed on August 3, 2015.
14
An existing OTC instrument, the Forward Rate Agreement, already addresses this problem by paying
present value of payments at the time the payment amount is determined.
8. 8
b. Synchronize payment dates so more instruments related through a single rate
basis such as LIBOR offset each other exactly.
c. Trade cash instruments in constant multiples of $1 million, using a clearing
system to combine and divide odd lot deposits as necessary.
Measures to improve price discovery and secondary market access.
a. Use these cash deposits to settle futures contracts.
Any OTC instrument that makes these adjustments can be exchange-traded as a deposit, a
futures friendly derivative (FFD) or to settle a futures delivery, eliminating the need for
OTC CCPs in liquid markets.
The desirability of listing only the liquid instruments of the market may be a telling
disadvantage to the regulated markets, which are subject to the government mandate to
clear all of the instruments in a given derivative class. This may give unregulated markets
an advantage, since they may list what they choose.
4. Conclusion.
The financial instruments that have been with us for more than a century: untraded (loans
and deposits) and traded (stocks, bonds, and futures) still perform their functions
admirably. It’s the instruments created since 1970 that are inefficient. And they all have the
same inefficiency – their function can be performed with much less credit risk in secondary
markets.
9. 9
The goals we propose of any adjustments to instruments created post-Collapse would be to
create two conditions:
1. All liquid markets are traded on futures or stock exchanges or dark pools, with their
implied risk protection and price discovery.
2. Markets, not committees, decide prices of liquid instruments.
Adjustments needed to foreign currency and Eurodollar markets to achieve these ends may
require consideration of issues with trading technology. Evidence for this position stems
from the performance of the flagging US domestic certificate of deposit (CD) market, and
the defunct CD futures market.
Elsewhere, the author argues that there are problems associated with current market trading
of negotiable deposits that may be reduced by using some of the methods of US Treasury
trading. Much may be done commercially to improve the usefulness of the Eurodollar
deposit market – more than to simply make Eurodollar deposits negotiable.6