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Monthly New Letter September series 2010
Dear Friends,yesterday,the August series ended and what a volatile series it was.We moved in a band of 4350-4600 but it was really volatile. As for September series,i believe that one who gets right the DOW is more likely to be right.Since Dow has crossed its major resistance of 9500,it should move at least 3-4%more on short covering to 9800-9900 and…
Week starting from 31st August
What a setting for new week to start with nifty closing at record high for 2009 at 4732.Just contrast this to gloom prevailing in previous week when nifty was hanging on to last support of 4350.All this points to short covering being the main trigger for market rise and not any major fundamental change. As i see it,most good news…
Articles Of Incorporation Explained
The Articles of Incorporation (sometimes also referred to as the Certificate of Incorporation or the Corporate Charter) are the primary rules governing the management of a corporation in the United States and Canada, and are filed with a state or other regulatory agency.A set of documents filed with a government body for the purpose of legally documenting the creation of…
What is a Quant Fund?
An investment fund that selects securities based on quantitative analysis. In a quant fund, the managers build computer-based models to determine whether an investment is attractive. In a pure “quant shop” the final decision to buy or sell is made by the model; however, there is a middle ground where the fund manager will use human judgment in addition to…
Mechanical Stock Investing
Mechanical Investing Buying and selling stocks according to a screen based on predetermined criteria, usually with the help of technical indicators such as relative strength or momentum. This method allows traders to enter transactions without emotion and backtest their strategies by using historical data from any time period. For example, one of the most common mechanical investing systems is called…
What is Backtesting?
Backtesting The process of testing a trading strategy on prior time periods. Backtesting (or back-testing) is the process of evaluating a strategy, theory, or model by applying it to historical data. It can be used in situations like studying how a trading method would have performed in past stock markets, or how a model of climate and weather patterns would…
How does Backtesting works ?
Backtesting: Interpreting the Past Backtesting is a key component of effective trading-system development. It is accomplished by reconstructing, with historical data, trades that would have occurred in the past using rules defined by a given strategy. The result offers statistics that can be used to gauge the effectiveness of the strategy. Using this data, traders can optimize and improve their…
What is a Mini-Sized Dow Options?
Mini-Sized Dow Options is a highly leveraged index option on a futures contract in which the underlying index is the Dow Jones Industrial Average. The option has a multiplier of five, meaning that the option allows one to buy (for a call) or sell (for a put) up to five times the value of the DJIA. This allows one to…
Globally Floored Contract
Globally Floored Contract is a guarantee found in structured investment products that provides a minimum payoff at maturity. A globally floored contract will protect the investor or minimize his loss in case the underlying investment loses its value. With principal-protected notes, an investor receives a guarantee providing downside protection on the investment. A cost of this downside protection is that…
Booking the Basis
A table or book of tables showing the yields of bonds at different interest rates and maturities. For example, if one is considering the purchase of a bond, one can take the coupon rate and the maturity and compare them in the basis book to determine the yield. The basis book is good for approximating yields, but financial calculators tend…
Black Scholes Model
The Black–Scholes model is a mathematical description of financial markets and derivative investment instruments. The model develops partial differential equations whose solution, the Black–Scholes formula, is widely used in the pricing of European-style options.A model of price variation over time of financial instruments such as stocks that can, among other things, be used to determine the price of a European…
Binomial Option Pricing Model
The binomial options pricing model (BOPM) provides a generalizable numerical method for the valuation of options. The binomial model was first proposed by Cox, Ross and Rubinstein (1979). Essentially, the model uses a “discrete-time” model of the varying price over time of the underlying financial instrument.An options valuation method developed by Cox, et al, in 1979. The binomial option pricing…
