Fintelligents - Financial Blog

Small-Cap Stocks

Small-Cap Stocks

Stocks are categorized on the basis of their market capitalization. The market capitalization of a company is a product of its share price and the outstanding number of shares. Small-Cap is a term used to refer to companies that have a relatively smaller market capitalization. Small-cap are those set of companies whose market capitalization is less than 5000 Cr. They are small-sized emerging companies that may like to grow into mid-cap or large-cap. Stock issued by these companies are known as small-cap stocks and they hold a rank above 251. (more…)

Synthetic Cash

Synthetic Cash

An instrument that is tailored to mimic other financial instruments used in investment options is called Synthetic Cash. Customization can be done to suit the requirements and purpose for use of large investors. It allows investors to choose from investment options without investing capital to acquire or sell an asset. (more…)

Non-Callable Bonds

Non-Callable Bonds

Non-callable bonds are also known as non-redeemable. non-callable bonds can only be paid out at maturity. The issuer of a non-callable bond can’t call the bond prior to its date of maturity unless penalties are paid to security holders. It is different from a callable bond. (more…)

Compound Options

Compound Options (Words<500)

A compound option is an option on another option. A split-free or compound option is an option for which an underlying asset is an option. Compound options have two strike prices and two expiry dates and also two premiums if the option is exercised. Compound Option provides the owner with the right to buy or sell another option. The first option is called overlying and the second option is called underlying. Compound options can be of any combination of Calls & Puts. (more…)

Black-Scholes-Merton Model

Black-Scholes-Merton Model

The Black-Scholes-Merton model is a differential equation used to solve for option prices. The Black-Scholes-Merton model won a noble prize in economics. The standard BSM model is only used to price European options as it does not take into account American options because they can be exercised before maturity. (more…)

Effective Duration

Effective Duration (Words <500)

The duration calculation for bonds that have embedded options is known as effective duration. It helps in evaluating the price sensitivity of hybrid security to change the benchmark yield curve. This measure of duration takes into consideration the fact that expected cash flows will fluctuate as interest rate changes and therefore is a measure of risk. (more…)

Risks Faced by Securities Trading Organizations

Risks Faced by Securities Trading Organizations/Stock Broker firms

Risk refers to the uncertainty about the effects or implications of an activity, often focusing on negative, undesirable consequences. Risk management can be defined as the action of identifying and assessing potential risk and developing appropriate strategies to mitigate or minimize the risk to the best possible level. As we know, there is no business that does not possess risk. Though it is not possible to mitigate the risk completely, some risks can be identified, and thus they can be minimized. Like all other businesses, Securities Trading Organization and Stockbroker firms face various risks, which, if not identified, can create a hurdle for organizations. The risks either can be from inside the organization e.g. lower efficiency of management or from outside the organization e.g. risk of intense competition or macro-economic changes. (more…)

Basis Point Value

Basis Point Value

Basis points represent a unit employed to measure interest rates and other financial percentages. A basis point equals 1/100^th of a single percentage point. It can be denoted as 0.01% or 0.0001 in decimal form. (more…)

Simple moving average (SMA)

Simple moving average (SMA)

Moving Average (MA) is a commonly used technical analysis and is a stock indicator. The reason for calculating the moving average of a stock is to help smooth out the price data over a specified period of time by creating a constantly updated average price. There are two types of moving averages. They are simple moving average (SMA) and exponential moving average (EMA). The longer the time period of the moving average the greater is the lag. A 100-day moving average would have a greater lag than a 10 day moving average. (more…)

Chooser Option

Chooser Option

An option contract that allows the holder to decide the nature of the option i.e., whether the option is a call or put before the expiry date is called a Chooser Option. It is an option contract where the holder may choose at some point during the life of the option whether the option is a call or a put. These options have the same strike price and expiry date regardless of it being a call or a put. (more…)