As a part of my Micro Research paper to IIBF, an online survey has been conducted among Bank employees using Google Forms and the raw results along with questionnaire can be accessed by clicking the link below.

https://docs.google.com/spreadsheets/d/1v-PTad_AUZg7mfWyTuUKrXsz1lK2_G_0Y3jay4CGAqU/edit?usp=sharing

Thank you all respondents for your time.

STATISTICS FOR REAL TIME BANKING

To my knowledge, mathematics and statistics are insignificantly used as a tool in Banking. 

The truth is that just  the effectiveness of credit decision  and  profit generation depends strictly on mathematics.

Even though , there are laid down procedures like ratio analysis, turnover method assessment, MPBF assessment etc, the statistical concepts are rarely used.

I was wondering, when I joined a bank that correlation and regression are not at all used in Banking. I believe that these will be used at back end for risk assessment but this can be brought as a front line operation before granting a loan.

I believe the credit decision and profitability are directly depended on statistics and math respectively.

Statistics may be applied when we create a system, but are mainly used in the study of the system’s results, with vast data at the past statistics can really be a good tool for banking.

I sincerely declare that I am not blaming/ superseding any of the tools and techniques in place, am just putting up my ideas and believing this should be brought into banking.

Presently I found the following concepts/ theorems will contribute to understanding/ making / determining a finance decision. 

1.Optional stopping theorem

2.Martingale representation theorem

3.Monte Carlo method

4.Value at Risk

5.Brownian Motion

To begin with, let us see how OPTIONAL STOPPING THEOREM will help in credit decisions. Before that let us see some or the applications of stopping theorems

 1) Your own (a stopping time): Let τ denote the time that I'm ruined (i.e. when I have no money left). At any time, I know whether I am ruined or not. For instance, I am not ruined right now. I don't know when ruin occurs, or if it will occur at all, but if it does, I will know.

2) Parking (not a stopping time): Suppose I am driving along a very long road, and that I'm looking for the parking spot which is furthest towards the other end of the road (call this "the last parking spot"). I pass by available spots along the way, but at any time, I never know if I have passed the last free parking spot.

3) My birthday this year (a stopping time): This is a deterministic stopping time. At any time, I know whether or not my birthday has occurred this year. In fact, I know exactly when my birthday occurs, which makes this a non-typical stopping time in the sense that it is deterministic.

With this understanding, Optional stopping theorem can be applied to credit for determining when a working capital limit is to be stopped / reduced - given the internal (excess, ad hoc , SMA, etc) and external factors (Industry scenario, demand and supply etc.

I invite the following reference from math.dartmouth.edu where the stopping theorem is explained as follows

A discrete-time version of the theorem is given below:

Let X = (Xt)t∈ℕ0 be a discrete-time martingale and τ a stopping time with values in ℕ0 ∪ {∞}, both with respect to a filtration (Ft)t∈ℕ0. Assume that one of the following three conditions holds:

(a) The stopping time τ is almost surely bounded, i.e., there exists a constant c ∈ ℕ such that τ ≤ c a.s.

(b) The stopping time τ has finite expectation and the conditional expectations of the absolute value of the martingale increments are almost surely bounded, more precisely,  and there exists a constant c such that  almost surely on the event {τ > t} for all t ∈ ℕ0.

(c) There exists a constant c such that |Xt∧τ| ≤ c a.s. for all t ∈ ℕ0 where ∧ denotes the minimum operator.

Then Xτ is an almost surely well defined random variable and 

Similarly, if the stochastic process X is a submartingale or a supermartingale and one of the above conditions holds, then

for a submartingale, and

for a supermartingale.

The thing is given a set of internal and external conditions discussed earlier, this theorem tell us when a process is to be stopped. 

The application part is under construction in form of a spreadsheet and simulation. After collecting a handful of data and checking the correctness of working, that could be published.

Seeking your assistance for construction of a mathematical model. 

MOVING AVG. AND RSI FOR NCC,PVT.LTD

INDUSTRY: CONSTRUCTION AND INDUSTRY

COMPANY  : NCC.LTD

CONTENTS:

1.CANDLE STICK CHART OF NCC FOR 3 MONTHS

2.SMA- 15 DAYS, 125 DAYS

3.WEEKLY RSI FOR 1 YEAR

 

1.CANDLE STICK CHART:

2. MOVING AVERAGE CHART

SMA-15 DAYS; LMA- 125 DAYS

Interpretation:

It is a buy signal i.e a uptrend when the SMA is above the LMA.

But for NCC ltd LMA is above the SMA for most of the time, which indicates the downtrend of the securities over the period.

3.RELATIVE STRENGTH INDEX:

This indicator is to check whether the security is over valued or under valued.

Interpretation

RSI of 50% indicates the securities are correctly priced. But the Ncc.ltd stocks rarely touches the 50%.

The value ranges from 77-23.5 over the period. In the beginning the stocks are over priced or over brought and the trend reversed but now at 73.3% the securities are over bought.

But any value between 25-75 is acceptable, hence the stocks are believed to be correctly priced.

TECHNICAL ANALYSIS USING JSTOCK

https://drive.google.com/file/d/0Bxl-VmTX7TlxbzRhVTEydWdScmM/view?usp=sharing

Hi guys...I have done a technical analysis for the stocks of NCC pvt ltd using the indicators (SMA,EMA,RSI,MFI and CCI) in Jstock, a free stock market software. This is a begineer's attempt in learning the security analysis....pardon me for the mistakes if any.

SATHYAM SCAM

Jumping from Mehta to Raju.....
*the original work is not done by me, just edited so as to make it understandable...
Refer to the following links
http://www.thehindu.com/specials/timelines/satyam-scandal-who-what-and-when/article7084878.ece

http://www.dnaindia.com/money/report-satyam-scam-a-lowdown-as-court-readies-to-announce-its-verdict-2067138

Over six years ago, in January 2009, India Inc has hit by its biggest scam ever -- the Satyam Computers scam. At the centre of it all was the much celebrated entrepreneur who had the perfect rags-to-riches story -- Ramalinga Raju.


The story of a blue-eyed boy's journey to create a blue-chip company that encapsulated the story of new India in the post-liberalisation era had entralled everyone. Maybe that was the reason why no one suspected Raju and his underlings of any wrongdoing.


The case clearly marks a watershed year in Corporate India and exposed the perils of capitalism and the baggage it brings with itself. Free market ideology made Alan Greenspan the celebrated Federal Reserve chief and the subprime crisis was its byproduct. What the Enron scam is to the US, Satyam became to India.


How did Raju manage to achieve a scam of such a large scale in a company which was so closely scrutinised as India's success story, especially in the IT sector?


It all started with Raju's love for land and that unquenchable thirst to own more and more of it.

Ambition and risk ran in cahoots with his goals, mated with Maytas (nothing but Satyam when read from right to left), was an infrastructure company owned by Raju's sons, was a perfect recipe for disaster.


So perfect was the scam that no auditor or analyst could even figure it out till Raju admitted to the massive irregularities in his self-confession. The trigger was obviously the failed attempt to merge Maytas with Satyam.


An IT company buying an infrastructure company was never going to go down well with investors but Raju tried. It was his last bid attempt to hide what he had done. But this just opened the pandora's box.


So high Raju aimed that during pre-crisis era, Raju had set a target for Satyam to achieve $12 billion turnover by 2012. TCS, India's top IT firm had revenues of $13.4 billion in 2014.


Raju was an astute businessman who, unlike Infosys till recently, devolved all important management functions in Satyam to professionals but finance.


Satyam's finances were a black-box with an access card so rare that only Raju and his confidants knew what exactly was going on in the company. “This man does not belong in jail. He belongs in a mental institution,” quipped DA Somayajulyu, adviser to the Andhra government on economic affairs and policy implementation in 2009.


Ganesh Natarajan of Zensar Technologies famously said, “If anybody in the industry is capable of pulling off a scam like this, it would be Ramalinga Raju…the capability, the thinking through,  the planning of such a large operation….only he had the ability to pull it off."




At its peak market capitalisation, Satyam was valued at Rs 36,600 crore in 2008. Just a year later, the scam-hit satyam was snapped up by Tech Mahindra, promoted by Anand Mahindra, for a mere Rs 58 per share -- a market cap of a mere Rs 5600 crore.

The stock that hit its all-time high of Rs 542 in 2008 crashed to an unimaginable Rs 6.3 on the day Raju confessed on January 9, 2009. 



The scam
It took nearly two years and over 100 experts to assess the total damage of the scam perpetrated by Raju. The final figure was a shade under Rs 8,000 crore.

Satyam had tried to buy two infrastructure company run by his sons, including Maytas, in December 2008. The effort failed and in January 2009 Raju confessed to irregularity on his own and was arrested two days later.


He admitted to faking revenues, clients and even profits. CID told the court that Raju even falsified number of employees in the company by 13,000 and pocketed the money spent as salaries for these non-existent employees.


Raju faked 7561 invoices which raked up fake revenues to the tune of Rs 5117 crore and raked up fake cash worth Rs 3983 crore. He tampered with the invoice management software to give birth to this massive scam which is worth Rs 7900 crore in its totality.




The government swung into action and tried to salvage what was left of the beleaguered IT major. Deepak Parekh, chariman of HDFC was appointed as chairman of Satyam's board. Kiran Karnik of NASSCOM and C Achuthan of SEBI were other members chosen to steer Satyam out of its mess.


A year later, Satyam was auctioned and many companies showed interest in buying it for a price which was nearly one-tenth of its all-time high.


Tech Mahindra emerged as the winner in 2009.


Vineet Nayyar, who was appointed Satyam's chairman then, said that the process of reinstating accounts and finding the magnitude of the irregularities was "torturous".




The case

Accused in the case, including Raju, were charged with cheating, criminal conspiracy, forgery, breach of trust, inflating invoices, profits, faking accounts and violating number of income tax laws.

CBI has filed three charge-sheets in the case which were later clubbed into one massive charge-sheet running over 55,000 pages.

Over 3000 documents and 250 witnesses were parsed over the past 6 years.

As the judge reads his verdict on Monday, it remains to be seen whether the scam that shook India and the private sector for its sheer magnitude and brought to dust the edifice of India Inc will finally get its much deserved closure or not.

DOING SEM IN AMOS- AN AMATEUR ATTEMPT

My first work on AMOS, doing a structural equation modelling for 

PERSONALITY DETERMINANTS OF ONLINE SHOPPING: EXPLAINING ONLINE PURCHASE INTENTIONS USING A HIERARCHICAL APPROACH- journal is available at http://www.ccsenet.org/journal/index.php/ijms/article/viewFile/11259/9054

HOW SEM IS DONE?

1.Questionnaire is made and circulated

2. All possible responses are converted into numerals

3.If 2 or more variables (say 5)measures same construct then the mean of the 5 variables are calculated

4. The mean is kept as dependent variable and the 5 are independent variables, then a regression equation is made in spss (BUT ACTUALLY THE COMPOSITE SCORE i.e. AVERAGE SCORE IS ENOUGH TO DO SEM)

5.The numerals calculated from the equation are the values for each construct

6. These are then tested in amos

  *questionnaire is available at  
https://docs.google.com/forms/d/1hXjYlezMITPwXlBahi9AE4XmTbadjDm13fIGrVEOgTo/viewform?c=0&w=1&usp=mail_form_link

*report available at 
https://drive.google.com/open?id=0Bxl-VmTX7TlxUHUyWXFlNTM3VWc

 

#Episode 2 of Harshad Mehta Scam

Before entering into the details, it is better to know the following terms…

1.The Ready Forward:is in essence a secured short-term (typically 15-day) loan from one bank to another. Bank has some securities deposites at RBI.The borrowing bank actually sells the securities to the lending bank and buys them back at the end of the period of the loan, typically at a slightly higher price,as a pawnbroker lends against jeweller.

2.A Bank Receipt:is a receipt for the money received by the selling bank and pledges to deliver the securities to the buyer. In the meantime, the securities are held in the seller’s trust by the buyer.

Now lets see how Mehta used these instruments?

Armed with these schemes, all Mehta needed now were banks which would readily issue fake BRs, or ones without the guarantee of any government securities. His search ended when he found that the Bank of Karad (BOK), Mumbai and the Metropolitan Co-operative Bank (MCB) two small and little known lenders, were willing to comply. The two banks agreed to issue BRs as and when required. Once they issued the fake BRs, Mehta passed them on to other banks who in turn lent him money, under the false assumption that they were lending against government securities. Mehta used the money thus secured to enhance share prices in the stock market. The shares were then sold for significant profits and the BR retired when it was time to return the money to the bank.

The MAN’ipulation

Mehta continued with his manipulative tactics, triggering a massive rise in the prices of stock and thereby creating a feel-good market trajectory. However, upon the exposure of the scam, several banks found they were holding BRs of no value at all. Mehta had by then swindled the banks of a staggering Rs 4,000 crore. The scam came under scathing criticism in the Indian Parliament, leading to Mehta's eventual imprisonment. The scam’s exposure led to the death of the Chairman of the Vijaya Bank who reportedly committed suicide over the exposure. He was guilty of having issued checks to Mehta and knew the backlash of accusations he would have to face from the public.

A few years later, Mehta made a brief comeback as a stock market expert and started providing investment tips on his website and in a weekly newspaper column. He worked with the owners of a few companies and recommended the shares of those companies only. When he died in 2002, Mehta had been convicted in only one of the 27 cases filed against him.