ScienceGuy

Academicians from the University of Geneva and professionals from UBS aids us to gain an understanding of the theory underlying optimal portfolio construction, the different ways portfolios are actually built in practice and how to measure and manage the risk of portfolios. We start by studying how the imperfect correlation between assets leads to diversified and optimal portfolios as well as the consequences in terms of asset pricing. Then we will learn how to shape an investor's profile and build an adequate portfolio by combining SAA and TAA. Finally, we will look into risks, different facest and appropriate tools and techniques to measure it, manage it and hedge it. Click here  to read my notes 1.Module-1     I. Introduction          - Common mistakes          - Distribution of returns          - Risk-return tradeoff (UBS) 2. Module-2      I.  Modern Portfolio Theory          - Impact of correlation - benefits and diversification           - Reaching an efficient frontier (UBS)

A derivative instrument is a contract which specifies the conditions under which a transaction will take place in the future. The price of the derivative depends on the price of another asset called as the underlying asset. Such assets could be index, stocks, bonds, commodities, exchange rates etc. In another article, we discussed one such derivative called options. Here we discuss forwards and futures, which have relatively simpler structures than options but still wide-prospects. Click here to read

These financial instruments are not just interesting for traders and to deepen pockets but even from economics and research point of view, these instruments are fascinating. These instruments provide a great source of information about the expectations of the market ahead, subsequently of the economy.  Click here to read by compilation about options from different sources.

 As we know, the share price of a firm, at least theoretically, are the discounted values of expected future cash flows. This method to value stock price, as discussed in the article, understanding financial markets, is called the discounted cash flow method. Knowing the future cash flows is a tricky business because it requires us to know about the company and the future prospects, strategies and much more. But there's a good way to know many, if not all, of these details. This can be obtained by reading the financial statements, especially, the company's balance sheet, the income statement and cash flow statement. Understanding what these statements are and what they imply is beneficial for investors. So, this article contains notes from different sources which I read to gain an understanding of these statements and how they can be used for investment purposes. Click here to read

Academicians from the University of Geneva and professionals from UBS dive into the concepts of rationality and irrationality and understand how they impact our investment decisions and what the consequences can be at the market level. We will first look into different biases that we are subjected to when facing investment decisions and how they may impact the outcomes of these decisions. We will also see how emotions and ethical concerns such as honesty and trust influence market participants. When they are considered as a group rather than individually, we will see how rationality and irrationality can drive asset prices to and away from their fair values. We will be presented with different portfolio construction methodologies and investment styles that make up the landscape of today's portfolio management industry.  Click here  to read the notes The course covers: 1. Introduction          - When is it a good time to buy, sell or hold?          - Key things to know to define inv

Academicians from the University of Geneva and professionals from UBS tells what the main financial markets and their characteristics are and how they are linked to the economy. We start by seeing how the price of stocks and bonds are computed and why they move. We see the notion of risk and why it matters when measuring investment's performance. The focus then shifts towards other markets like gold, emerging markets, real estate, hedge funds and private markets. These are analyzed with emphasis on their risks and return opportunities. We also see how we can include them to build an efficient portfolio. We also see policies of central banks and their impact on financial markets along with the link between the economy and the price of financial assets. Click here  to read my notes based on the University of Geneva's course and other sources  What does the course talk about? 1. General Introduction and Key Concepts     a. Fundamentals          - Role of financial markets         

Behavioural finance is the study of the effects of psychological effects on decision making on financial investors, thereby effecting market outcomes. So, basically, it studies the psychology of financial decision making Traditional finance theories had assumed that investors have little difficulty making financial decisions and are well informed, careful and consistent. It holds that investors are rational and not confused by emotions or other factors. Fama's efficient market hypothesis says that at any given time, a highly liquid market, stock prices are efficiently valued to reflect all the available information. However, studies have documented long-term historical phenomenon in securities market contradict the efficient market hypothesis which cannot be captured by models assuming rationality.  The EMH is based on the belief that the market participants see prices based on all current and future intrinsic and external factors. In the behavioural side, the researchers consider

Two theories are prevalent regarding the relationship between corruption and economic growth      a. Grease the wheels' hypothesis: Corruption increases growth because it allows firms to circumvent inefficient regulations     b. Sand the wheels' hypothesis: Corruption decreases growth because it prevents efficient production and innovation Empirical evidence from Mauro-1995 , Mo-2001 , Aidt et al.-2008 , Meon and Sekkat-2005 , Hodge et al-2011 , Swaleheen-2011 , D'Agostino et al-2016 , Huang-2016 , Tsanana et al-2016 , Chang and Hao-2017 , Cieslik and Goczek-2018  support the sand the wheels' hypothesis, especially in countries with low investment levels and lower governance Grundler and Potrafke-2019  found that many empirical studies examining the determinants and economic and political consequences on growth used Transparency International's Corruption Perception Index (CPI). However, those studies failed to consider the fact that before 2012 this index was incom

 Click here to access the file containing my learnings of GFC based on Yale's course.

Recently, while reading about the history of religions, I read that several founders of world religions, like, Christ, Zoroaster, Confucius, Buddha were born and lived in 1st millennium BC. Now to me, this is not a mere coincidence that all these religious leaders lived at the same time as the Greeks, and specifically the time of Socrates, Plato, Aristotle and so on. These names as you must be familiar with are considered as the forefathers of philosophy. So, it can be said to be the time when critical thinking was evolving in society. People were questioning, and trying to understand the world and its ways. This makes me think that can't it be the case that, with all due respect, the religious leaders were nothing else but great philosophers. Religion, when I see its underlying pillars or principles, most of them speak about a way of life. If people like Socrates and Plato were thinking critically about such issues, it might as well be that in different parts of the world such phi

Our Milky Way is a spiralling Galaxy containing 100-400 billion stars, with a stellar disk diameter of approximately 150,000-200,000 light-years and depth of 2000 light-years. There are primary 4 spirals coming out from the centre, with other minor arms. Our sun is around 25,000-28,000 light-years away from the Galactic centre in the inner edge of Orion-Cygnus arm. The Galactic centre is known as Sagittarius A*, a supermassive black-hole. Our sun revolves about the Galactic centre taking around 240 million years to complete one revolution (a galactic year). Like our sun, all the stars and gases in our galaxy revolve around the galactic centre. Interestingly, however, contradicting to the intuition and Kepler’s laws, most objects revolve at approximately the same speed of 220 km/s irrespective of the distance from the galactic centre. Thus, it seems to follow a rigid-body rotation and not the differential rotation as is observed with-in our own solar system. On top, the rate at which it

Evolution of the Universe Around 13.7 Billion years ago, Universe started with the big bang. The laws of physics break at this point, the singularity, and the current physics do not know what there was, what produced the bang or anything before that. But soon after the bang, as a matter of fact, until first 10 -32  to 10 -33 seconds, the universe expanded rapidly, by approximately a factor of 10 26 . The physicists do have a theory, the popular one developed by Alan Guth and his colleagues, about this inflationary period, and so we do know what happened at this time scale in the universe. As per their theory, the universe was set into bang due to a conjectured quantum field called the inflaton. But interestingly, the inflationary period came to an end and after this inflationary period, the universe continued to expand due to dark energy called the Hubble expansion.   When the inflation ended, the universe existed in a plasma state owing to the large temperatures. The temperature was

Soon after the big bang, followed by inflationary epoch, the universe was in a hot plasmonic state containing a mixture of radiation and baryons. The universe being in this fluid state made it possible for the pressure waves to travel. So, the universe had baryons and environment to support acoustic oscillations. In the CMB, we observe the anisotropies (the hot and blue spots). These temperature fluctuations are believed to be tracing the density fluctuations in the early universe. Therefore, there were fluctuations in the density across the universe after the inflationary period. These high-density regions are a mix of dark matter, baryons, photons etc (the plasma). The presence of a higher density of baryons then would attract nearby baryons through gravitational attraction. The dark matter would do the same. Therefore, the matter and radiation would collapse towards the anisotropy peaks, the centre.  However, as baryons collapse, it interacts with the photons. Two counteracting forc

Occasional paintings - done by water colours

What is Dark matter and Why need it? Our Milky Way is a spiralling Galaxy containing 100-400 billion stars, with a stellar disk diameter of approximately 150,000-200,000 light-years and depth of 2000 light-years. There are primary 4 spirals coming out from the centre, with other minor arms. Our sun is around 25,000-28,000 light-years away from the Galactic centre in the inner edge of Orion-Cygnus arm. The Galactic centre is known as Sagittarius A*, a supermassive black-hole. Our sun revolves about the Galactic centre taking around 240 million years to complete one revolution (a galactic year). Like our sun, all the stars and gases in our galaxy revolve around the galactic centre. Interestingly, however, contradicting to the intuition and Kepler’s laws, most objects revolve at approximately the same speed of 220 km/s irrespective of the distance from the galactic centre. Thus, it seems to follow a rigid-body rotation and not the differential rotation as is observed with-in our own sol