Small-Cap Stocks

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…)

Black-Scholes-Merton Model

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…)
reference data in trading

Reference Data in Trading

Reference Data in Trading

Trading, here, refers to the transfer of a stock or security from the seller to the buyer. There is a number of risks involved in trading such as Liquidity Risk, Market Risk, Credit Risk, Interest rate risk, and so on. Along with all the risks mentioned, consideration of Operational Risk is also of so much importance. Operational risk refers to uncertainties and hazards faced in performing day-to-day or routine activities. --- Change it  (more…)
Downside Risk

Downside Risk

Downside Risk

Risk is the uncertainty of losing money invested in a security. To measure the risk or volatility of security we use Standard deviation. Standard deviation measures risk based on returns of security that are positive as well as negative. Therefore Standard deviation measures upside risk as well as downside risk.  As there is a risk and return trade-off, we say an investor should be compensated in terms of returns for the risk that he takes. But why would an investor be paid for the upside deviation, an investor should be worried about the downside deviation(risk)? (more…)
Hedge Ratio

Hedge Ratio

Hedge Ratio

The ratio of exposure to a hedging instrument to the value of the hedged asset is called a hedge ratio. It compares the value of a position protected through the use of a hedge with the size of the entire position itself. It is the comparative value of the open position hedges with the position’s aggregate size itself. A ratio of 1 or 100 indicates that the position is fully hedge and a ratio of 0 indicates that it is not hedged at all. (more…)
Trade Validation

Trade Validation

Trade Validation

 In the financial market, a trade is the conversion of an order placed on the exchange which is said to be completed when the buyer gets the securities and the seller gets the payment for the same. There is a number of steps involved in the successful completion of the trade. All the steps together create a 'Trade Lifecycle'. The Trade lifecycle consists of various trading and operational activities. Once, the trade is captured and enriched, the next step is of validating the trade to reduce the possibility of errors in the process ahead. (more…)
Equity vs Fixed Income

Equity vs Fixed Income

Equity vs Fixed Income

If a person wants to generate income or appreciation in the future he acquires an asset known as investment. An investment is always purchased to generate more in the future than you invest today. But there is always a risk associated with the investment. Investments instead of profits can also generate losses as they can lose value in the future. For example, you invest in a company and that company goes bankrupt. One can invest in these different types of investments such as bonds, stocks, mutual funds, exchange-traded funds, index funds, and options. This article aims to provide an overview of Equity vs Fixed Income. (more…)
Vega in Options Trading

Vega in Options Trading

Vega in Options Trading

Vega is the Greek that measures the sensitivity of an option to implied volatility; denoted by the Greek letters. It is the change in the options price for a one-point change in implied volatility. Traders usually refer to the volatility without the decimal point. Options Vega denotes the option’s price sensitivity to changes in the volatility of the underlying asset. It measures how much the option’s price changes in response to a 1% change in the implied volatility of the underlying asset. This article aims to provide an overview of Vega in Options Trading. (more…)
Stop – Loss Order

Stop – Loss Order

Stop – Loss Order

There are three common types of orders. A market order, limit order, and stop-loss order. Market order – Market order is an order to buy or sell a security immediately. This order will not guarantee the execution price but will definitely guarantee the time of execution. It will generally execute at or near the ask or bid price. Limit order – Buying or selling a security at a specific price or better is known as a limit order. Buy limit order and sell limit orders will only be executed at the limit price or higher and limit price or lower respectively. Stop-loss order – It means an order to buy or sell a stock once the price of the stock reaches the specified price, known as the stop price. A stop order becomes a market order when the stop price is reached. (more…)
Asset-Backed Securities (ABS)

Asset-Backed Securities (ABS)

Asset-Backed Securities (ABS)

A security whose income payments and hence values are derived from and backed by a specified pool of underlying assets are known as Asset-Backed Securities (ABS). An ABS is an investment security consisting of a bond or note that is collateralized by a pool of assets, such as loans, leases, credit card debt, royalties, or receivables. ABS is a pool of loans that are packed and sold to investors as securities through a process known as securitization. This pool is a group of illiquid and small assets that cannot be sold individually. (more…)