December 2017 Issue, Volume II, Issue No. 2
As the year 2017 comes to an end, we look back and realize that this year has witnessed some very important events which had the potential to transform many economies around the world.
This issue of TAPMI Journal of Economics and Finance (TJEF) focuses on some of the prominent topics in the field of Finance and Economics. The journal contains papers on below topics:
- SHOULD YOU RIDE THE BITCOIN WAVE? – By Vidhi Jain & Vignesh V
- BASEL III NORMS: JOURNEY SO FAR & THE ROAD AHEAD – By Mohit Jain & Barnava Chatterjee
- BANK RECAPITALISATION: NECESSITY AND IMPACT – By Anandhan P.T. & Lakshmi Ramakrishnan Nair
We hope that the readers of the journal benefit from the insights of the papers published.
Please read the PDF version of the Journal on – TJEF Volume 2 Issue 2
Meaning – A very short-term trading technique that aims to generate small profits while taking on very little risk per trade and repeating this multiple times in a trading session. Guerrilla trades typically have a shorter duration than scalping or day trades and seldom last for more than a few minutes, at the most. Because of its high trading volume and limited return nature, low commissions and tight trading spreads are prerequisites for successful guerrilla trading.
While guerrilla trading can be applied to any financial market, it is particularly well suited for trading foreign exchange. This is because the major currency pairs typically have very tight trading spreads because of their plentiful liquidity that is virtually available around the clock.
But these elevated levels of leverage – which may be as much as 50 times the trader’s capital – represent a high-risk, high-reward scenario that can wipe out an inexperienced guerrilla trader in a few trading sessions.
Meaning – A gypsy swap is a unique method by which a company may raise capital without issuing debt or holding a secondary offering. In many respects, a gypsy swap is similar to a rights offering, except that the restricted party’s equity claim does not elapse and the swap instantly becomes dilutive.
The gypsy swap is broken into two parts:
1. An existing shareholder exchanges freely traded shares for restricted shares (shares restricted by time and/or price constraints) from the issuing company. In economic terms, the existing shareholder neither gains nor loses money from the transaction, although it may have tax consequences.
2. The issuing company then sells the existing shareholder’s freely traded shares to a new investor(s) at a price that may be higher or lower than the current market price. The issuing company now has additional capital and the new investor(s) has equity in the issuing company.
In almost every case, a gypsy swap is a last-ditch financing option because the new investor(s) almost always demands some combination of below-market value price or special consideration from the deal.
Meaning – A call feature of a Collateralized Mortgage Obligation (CMO) designed primarily to reduce the issuer’s reinvestment risk. If the cash flow generated by the underlying collateral is not enough to support the scheduled principal and interest payments, then the issuer is required to retire a portion of the CMO issue. It is also known as a “clean-up call.”
A Calamity Call is only one type of protection used in CMOs. Other types of protection include overcollateralization and pool insurance. In addition to protecting against reinvestment risk, Calamity Calls can be used to protect against default losses. They can be used in CMOs structured from second lien mortgages, where there is more limited protection against default losses. This is in contrast to overcollateralization which may be enough to provide sufficient protection to underlying pools of conventional fixed-rate mortgages.
Meaning – A security whose performance is considered to be an indicator of the performance of its particular sector or industry or the market as a whole. It is also referred to as a bellwether stock.
Barometer stocks are usually large-cap equities or respected blue-chip stocks that signal a bullish market during periods of favorable performance and signal a bearish market during periods of unfavorable performance. Barometer stocks can have a large influence on the economic health of the country. Market analysts sometimes say something to the effect of, “What’s good for [barometer stock] is good for the country.”