The yield spread is a way of comparing any two financial products. In simple terms, it is an indication of the risk premium for investing in one investment product over another. When spreads widen between bonds with different quality ratings it implies that the market is factoring more risk of default on lower grade bonds.[1] For example, if a risk-free 10-year Treasury note is currently yielding 5% while junk bonds with the same duration are averaging 7%, the spread between Treasuries and junk bonds is 2%. If that spread widens to 4% (increasing the junk bond yield to 9%), the market is forecasting a greater risk of default which implies a slowing economy. A narrowing of spreads (between bonds of different risk ratings) implies that the market is factoring in less risk (due to an expanding economy).There are several measures of yield spread, including Z-spread and option-adjusted spread

A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as a "junior security" or "subordinated loan."In the case of default, creditors with subordinated debt wouldn't get paid out until after the senior debt holders were paid in full. Therefore, subordinated debt is more risky than unsubordinated debt.The difference between the expected price of a trade, and the price the trade actually executes at. Slippage often occurs during periods of higher volatility, when market orders are used, and also when large orders are executed when there may not be enough interest at the desired price level to maintain the expected price of trade. In forex, slippage occurs when a limit order or stop loss occurs at a worse rate than originally set in the order. Slippage often occurs when volatility, perhaps due to news events, makes an order at a specific price impossible to execute. In this situation, most forex dealers will execute the trade at the next best price.Fresh additions to bad loans is slippages Q on Q.Generally a 3-3.5% margin between interest earned and expended by banks.Manipulations in other income and provisions.Cash as a % of NDTL= Cash in hand/ Total Borrowings+ Total DepositsNIM= Net interest income/Average Working fundsWhere average working funds= Earning assets+The top five banks in terms of BPE are: IDBI Bank (Rs 23.87 crore), Corporation Bank (Rs 17.13 crore), Bank of Baroda (Rs 14.66 crore), Oriental Bank of Commerce (Rs 14.62 crore) and Canara Bank (Rs 13.74 crore).The difference between cash flow from operations and free cash flow:Mainly Capex and Net Borrowings. Formulas as follows-FCFF (used to compare firms with different capital structures)= EBIT(1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital Expenditure (tells about what is available to honour both creditors and shareholders) FCFE= Net Income+ depreciation & amortisation- Change in Net Working Capital- Capex.Looking closer at the relationship of these terms, FCFF is the total amount left for both bond and stock holders, but bondholders are paid before stock holders. Once obligations to all other investors are met, and other capital expenses, working capital, and debt are reduced, we arrive at FCFE, which is the final amount left over for distribution among the final recipients; the stockholders.

Read more:http://www.differencebetween.com/difference-between-fcff-and-vs-fcfe/#ixzz3CjZHFXYe

Recently in 2012 when the RBI deregulated the savings bank deposit rate, Kapoor was the first to make a move. He saw it as a huge opportunity to garner retail deposits. Within a few hours of the RBI move, Kapoor announced that YES Bank was increasing its savings deposit rate by 200 basis points to 6%. This nimbleness in grasping opportunities is characteristic of the 54-year-old Kapoor, observers say. Take the 2008-2009 period: In the wake of the global crisis, most other banks became more conservative. Kapoor, who did not have legacy issues to deal with, decided to press on the accelerator. He increased the number of branches, invested in the brand, continued with hiring, intensified product management and customer relationship. Most importantly in a money market that was almost frozen, he showed risk appetite.In the first six years of operations YES Bank clocked a compound annual growth rate (CAGR) of 74% and in 2010-2011 it became the fourth-largest private sector bank in the country. YES Bank is a full service commercial bank with corporate, small and medium enterprises (SME) and retail banking, and has a comprehensive product suite comprising financial markets, investment banking, business and transaction banking and wealth management.http://bonds.about.com/od/bonds101/a/What-S-The-Difference-Between-Coupon-And-Yield.htmNPA net and gross are expressed as a percentage of advances.In fundamental Research, we follow the top-down approach. Economy>Industry>Company Analysis.CAGR calculation= [{(Latest Value/Oldest Value)^(1/n)}-1]N = number of cycles or periodsWorking Funds= Total Liabilities- Contra Items (accumulated depreciation, Working Funds are the funds deployed by a bank in its business. The amount of working funds so deployed is usually arrived at by subtracting the aggregate amount of contra items from the total liabilities of the balance sheet. Eg: Prov for accumulated depreciation, provision for discount, reserve for obsolete inventory etc. These are total resources (total liabilities or total assets) of a bank as on a particular date. Total resources include capital, reserves and surplus, deposits, borrowings, other liabilities and provision. A high AWF shows a banks total resources strength. There is a school of theory which maintains that working funds are equal to aggregate deposits plus borrowing. However, more pragmatic view in consonance with capital adequacy calculations is, to include all resources and not just deposits and borrowings.Generally, total assets = total working funds, Also, mostly AVERAGE working funds are used for calculation. FII limit movement HDFC +/- 1%: HDFC Bankwants to raise its own overseas shareholding limit to 67.55 per cent from 49 per cent. But since the parent is considered as being foreign owned, by that logic the overseas investment holding in the bank has already exceeded the 74 per cent limit allowed in the sector. Basel Compliances: Existing RBI norms for banks in India Tier 1 requirement: 6%. Total Capital: 9% of risk weighted assets. Capital requirements: The original Basel III rule from 2010 was supposed to require banks to hold 4.5% of common equity (up from 2% in Basel II) and 6% of Tier I capital (up from 4% in Basel II) of "risk-weighted assets" (RWA).[3] Basel III introduced "additional capital buffers", (i) a "mandatory capital conservation buffer" of 2.5% and (ii) a "discretionary counter-cyclical buffer", which would allow national regulators to require up to another 2.5% of capital during periods of high credit growth.

Leverage ratio: Basel III introduced a minimum "leverage ratio". The leverage ratio was calculated by dividing Tier 1 capital by the bank's average total consolidated assets; The banks were expected to maintain a leverage ratio in excess of 3% under Basel III. In July 2013, the US Federal Reserve Bank announced that the minimum Basel III leverage ratio would be 6% for 8 Systemically important financial institution (SIFI) banks and 5% for their insured bank holding companies.[5]

Liquidity requirements: Basel III introduced two required liquidity ratios.[6] The "Liquidity Coverage Ratio" was supposed to require a bank to hold sufficient high-quality liquid assets to cover its total net cash outflows over 30 days; the Net Stable Funding Ratio was to require the available amount of stable funding to exceed the required amount of stable funding over a one-year period of extended stress.[7] Liquidity Ratio Leverage ratio (Min 3%) Liquidity coverage ratio- US, hold 30 days of net cash outflow. (for banks having assets more than 10 billion In finance, subordinated debt (also known as subordinated loan, subordinated bond, subordinated debenture or junior debt) is debt which ranks after other debts should a company fall into liquidation or bankruptcy. Subordinated debt has a lower priority than other bonds of the issuer in case of liquidation during bankruptcy, and ranks below the liquidator, government tax authorities and senior debt holders in the hierarchy of creditors.For companies with High ROE and ROCE and low debt burden (hence low interest burden) the P/E multiple is generally high.P/E band Yes Bank Ltd, the countrys fourth-largest private sector bank, raised $500 million (`2,942 crore) via a qualified institutional placement (QIP) last week. A QIP is nothing but a securities issue that allows an Indian-listed company to raise capital from the domestic market without submitting any pre-issue filings to market regulators, unlike an initial public offer (IPO) or a follow-on public offer (FPO).

An analyst recommendation meaning a stock is expected to do slightly better than the market return.

Also known as "market outperform", "moderate buy", or "accumulate".Investopedia explains 'Intrinsic Value'

1. For example, value investors that follow fundamental analysis look at both qualitative (business model, governance, target market factors etc.) and quantitative (ratios, financial statement analysis, etc.) aspects of a business to see if the business is currently out of favor with the market and is really worth much more than its current valuation.

2. Intrinsic value in options is the in-the-money portion of the option's premium. For example, If a call options strike price is $15 and the underlying stock's market price is at $25, then the intrinsic value of the call option is $10. An option is usually never worth less than what an option holder can receive if the option is exercised.

Carrying Value: Carrying valueis the original cost of an asset, less the accumulated amount of anydepreciationoramortization, less the accumulated amount of any assetimpairments.Also, a business that engages in excellent equipment maintenance practices may find that the market value of its assets are significantly higher than those of a company that does not invest a sufficient amount in asset maintenance.$50,000 Purchase price - $20,000 Depreciation - $12,000 Impairment= $18,000 Carrying valueSodhani CommitteeThe Sodhani Committee had made 33 recommendations and of these, 25 recommendations called for action on the part of the RBI. RBI has accepted and implemented in full or to some degree, 20 out of the 25 recommendations. In the process, the banks have been accorded significant initiative and freedom to participate in the forex market. These include: freedom to fix net overnight position limit and gap limits although RBI is formally approving these limits, replacing the system of across-the board or RBI prescribed limits; freedom to initiate trading position in the overseas markets; freedom to borrow or invest funds in the overseas markets (up to 15 per cent of Tier I Capital unless otherwise approved); freedom to determine the interest rates (subject to a ceiling) and maturity period of Foreign Currency Non-Resident (FCNR) deposits (not exceeding three years); exempting inter-bank borrowings from statutory pre-emptions (subject to minimum statutory requirement of 3 per cent and 25 per cent in respect of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) for the total net liabilities respectively); and freedom to use derivative products for asset-liability management.Corporates also have been accorded noticeable freedom to operate in the forex market. Thus, they are permitted to hedge anticipated exposures though this facility has been temporarily suspended after the Asian crisis. Exchange Earners Foreign Currency (EEFC) account eligibility has been increased and the permissible end-uses widened. They were given freedom to cancel and rebook forward contracts, though currently due to the Asian crisis effect, freedom to rebook cancelled contracts is suspended while rollover is permissible. Banks can, however, offer cross-currency options on back-to-back basis. Corporates can also avail of lower cost option strategies like range forwards and ratio range forwards and others as long as they do not end up as net writers of options. Also available are some degrees of freedom to manage exposures in External Commercial Borrowings without having to approach authorities for hedging permission, and to access swaps with rupee as one of the currencies to hedge longer term exposures.The Committee recognised that improvements in internal controls and market strategies go hand in hand with liberalisation and towards this end, RBI accepted and implemented several suggestions of the Sodhani Committee. These include: revamping internal control guidelines of the RBI to banks and making them available to corporates as well; putting in place appropriate market intervention strategies to deal with market developments; adopting internationally accepted documentation standards; framing comprehensive risk management guidelines for banks; adopting Basle Committee norms for computing foreign exchange position limits and recommending capital backing for open positions; and setting up a foreign exchange market committee to discuss market issues and suggest solutions. Recommendation on publishing critical data on forex transactions, has been implemented, and in fact the standards of disclosure by RBI are considered to be very high now.A few recommendations of the Sodhani Committee which have not been implemented include, inducting Development Financial Institutions (DFIs) as full-fledged Authorised Dealers (ADs), setting up a forex clearing house, legally recognising netting of settlements, permitting corporates to undertake margin trading and setting up of off-shore banking units in Mumbai. Let me briefly dwell on each of these issues. Induction of DFIs as full-fledged ADs is linked to future role of development financial institutions and indeed the approach to universal banking. Till then, their activity in the forex market can only be incidental to what they are permitted to do as a DFI. The position on setting up of a Forex Clearing House and the position on setting up of off-shore banking units will be detailed in the latter part of this address. Margin trading by its very nature is considered to be potentially speculative, and therefore, has not been seriously considered so far for implementation.Tarapore CommitteeTo avoid problem of externalisationTarapore Committee on Capital Account Convertibility, 1997, had recommended a number of measures relating to financial markets, especially forex markets. Some of the measures undertaken in regard to forex may fall short of the indicative quantitative limits given in the Report, but the purpose and the spirit of such measures are in line with the recommendations of the committee. Among such various liberalisation measures undertaken are those relating to foreign direct investment, portfolio investment, investment in Joint Ventures/wholly owned subsidiaries abroad, project exports, opening of Indian corporate offices abroad, raising of EEFC entitlement to 50 per cent, forfaiting, allowing acceptance credit for exports, allowing FIIs to cover forward their exposures in debt and part of their exposures in equity market, etc. In respect of the recommendations of the Committee to develop financial markets also, significant progress has been made. In the money market, as part of improving the risk management, recently, guidelines for interest rate swaps and FRAs have been issued to facilitate hedging of interest rate risks and orderly development of the fixed income derivatives market. Measures have also been undertaken to further develop the Government securities market. Permission has also been given to banks fulfilling certain criteria to import gold for domestic sale. As will be explained later in this address, this aspect of gold policy is a major step in bringing off-market forex transactions into forex markets by officialising import of gold. Efforts are also underway to expedite the implementation of the announcement made in October 1997 by RBI to permit SEBI registered Indian fund managers including Mutual Funds to invest in overseas markets subject to SEBI guidelines.Role of FIMMDA FIXED INCOME MONEY MARKET AND DERIVATIVES ASSOCIATION OF INDIA Functions as the principal interface with Regulators (like Reserve Bank of India, Securities Exchange Board of India, Ministry of Finance - Government of India, International Monetary Fund, World Bank) Mandated by the Reserve Bank of India for valuation of Government Bonds, Corporate Bonds and Securitized Papers for valuation of investment portfolios of Banks and Primary Dealers Undertakes developmental activities such as introduction of benchmarks and new products (e.g. Mumbai Inter-bank Offered Rate, Commercial Papers, Securitized Asset, Overnight Indexed Swaps) Suggests Legal and Regulatory framework for the development of new products Training and Development Support to the Debt & Derivatives Market Standardisation of market practicesForeign Exchange Dealer's Association of India(FEDAI) was set up in 1958 as an Association of banks dealing in foreign exchange in India (typically called Authorised Dealers - ADs) as a self regulatory body and is incorporated under Section 25 of The Companies Act, 1956. It's major activities include framing of rules governing the conduct of inter-bank foreign exchange business among banks vis--vis public and liaison with RBI for reforms and development of forex market.Presently some of the functions are as follows: Guidelines and Rules for Forex Business. Training of Bank Personnel in the areas of Foreign Exchange Business. Accreditation of Forex Brokers Advising/Assisting member banks in settling issues/matters in their dealings. Represent member banks on Government/Reserve Bank of India/Other Bodies. Announcement of daily and periodical rates to member banks.Due to continuing integration of the global financial markets and increased pace of de-regulation, the role of self-regulatory organizations like FEDAI has also transformed. In such an environment, FEDAI plays a catalytic role for smooth functioning of the markets through closer co-ordination with the RBI, other organizations like FIMMDA FIXED INCOME MONEY MARKET AND DERIVATIVES ASSOCIATION OF INDIA, the Forex Association of India and various market participants. FEDAI also maximizes the benefits derived from synergies of member banks through innovation in areas like new customized products, bench marking against international standards on accounting, market practices, risk management systems, etc.Definition of Credit Default Swap CDS are a financial instrument for swapping the risk of debt default. Credit default swaps may be used for emerging market bonds, mortgage backed securities, corporate bonds and local government bond The buyer of a credit default swap pays a premium for effectively insuring against a debt default. He receives a lump sum payment if the debt instrument is defaulted. The seller of a credit default swap receives monthly payments from the buyer. If the debt instrument defaults they have to pay the agreed amount to the buyer of the credit default swap.Example of Credit Default Swap An investment trust owns 1 million corporation bond issued by a private housing firm. If there is a risk the private housing firm may default on repayments, the investment trust may buy a CDS from a hedge fund. The CDS is worth 1 million. The investment trust will pay an interest on this credit default swap of say 3%. This could involve payments of 30,000 a year for the duration of the contract. If the private housing firm doesnt default. The hedge fund gains the interest from the investment bank and pays nothing out. It is simple profit. If the private housing firm does default, then the hedge fund has to pay compensation to the investment bank of 1 million the value of the credit default swap. Therefore the hedge fund takes on a larger risk and could end up paying 1millionThe higher the perceived risk of the bond, the higher the interest rate the hedge fund will require.http://www.forexkarma.com/interest-rate-parity.html#.VANp2_mSyAUAn example of in the money and at the money optionshttp://www.macroption.com/in-the-money-vs-at-the-money-options-example/

Lets say the shares ofCaterpillar(CAT) stock are trading at 70 dollars. This is themarket price of the underlying stock, which is very important fortelling whether an option is in the money or at the money.You have the following options on Caterpillar expiring in a few weeks: Acalloption with strike price of60 dollars, Aputoption with strike price of60 dollars, Acalloption with strike price of70 dollars, Aputoption with strike price of70 dollars, Acalloption with strike price of80 dollars, Aputoption with strike price of80 dollars.Which of these options are in the money and which of them are at the money?At the money optionsAt the money optionsare options which have thestrike price approximately equal to the current market price of the underlying stock. In our portfolio of 6 options, there are 2 at the money options: The call with the 70 dollar strike price and The put with the 70 dollar strike price.Theintrinsic valueof both these options is approximately zero, as you would not get any advantage (= not make any money) by exercising themgiven the current market price of Caterpillar.In the money optionsIn the money options have positive intrinsic value.If you exercise in the money options, you are able to buy (if its a call) or sell (if its a put) the underlying stock (Caterpillar) for better price compared to what you would get in the stock market without using the option. What means better?When you arebuying a stock,lower price is better. Therefore,call options(rights to buy) with strike pricelowerthan the current market price of the underlying stock have positive intrinsic value and they are in the money.When you areselling a stock, youprefer higher price. Therefore,put optionswith strike pricehigherthan the current market price of the underlying are better to own. They have positive intrinsic value and they are in the money.In our Caterpillar example, we have2 in the money options: Thecall optionwith the60 dollar strike price(if you exercise it, you can buy Caterpillar stock for less than 70); Theput optionwith the80 dollar strike(you can sell Caterpillar stock for more than 70).What about the remaining two options?We have not talked about the remaining 2 options: The80 dollar strike calland The60 dollar strike put.With the market price of the underlying stock equal to 70, these options areout of the moneyand theirintrinsic value is zero(it cant be negative because of the optionality you can choose not to exercise).Interest Rate Parity Theory- Page 668 AFM book. http://www.investopedia.com/articles/forex/08/interes-rate-parity.asp

American Depository Receipts popularly known as ADRs were introduced in the American market in 1927. ADR is a security issued by a company outside the U.S. which physically remains in the country of issue, usually in the custody of a bank, but is traded on U.S. stock exchanges. In other words, ADR is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. Thus, we can say ADRs are one or more units of a foreign security traded in American market. They are traded just like regular stocks of other corporate but are issued / sponsored in the U.S. by a bank or brokerage. ADRs were introduced with a view to simplify the physical handling and legal technicalities governing foreign securities as a result of the complexities involved in buying shares in foreign countries. Trading in foreign securities is prone to number of difficulties like different prices and in different currency values, which keep in changing almost on daily basis. In view of such problems, U.S. banks found a simple methodology wherein they purchase a bulk lot of shares from foreign company and then bundle these shares into groups, and reissue them and get these quoted on American stock markets. ADRs do not carry voting rights in the foreign co. benefit in terms of simplified dollar transactions only.LBO- The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company. The purpose of leveraged buyouts is to allow companies to make large acquisitions without having to commit a lot of capital.Management Buyout- A transaction where a companys management team purchases the assets and operations of the business they manage. A management buyout (MBO) is appealing to professional managers because of the greater potential rewards from being owners of the business rather than employees. MBOs are favored exit strategies for large corporations who wish to pursue the sale of divisions that are not part of their core business, or by private businesses where the owners wish to retire. The financing required for an MBO is often quite substantial, and is usually a combination of debt and equity that is derived from the buyers, financiers and sometimes the seller.EBO- A restructuring strategy in which employees buy a majority stake in their own firms. This form of buyout is often done by firms looking for an alternative to a leveraged buyout. Companies being sold can be either healthy companies or ones that are in significant financial distress. For small firms, an employee buyout will often focus on the sale of the company's entire assets, while for larger firms, the buyout may be on a subsidiary or division of the company. The official way an employee buyout occurs is through an employee stock ownership plan (ESOP). The buyout is complete when the ESOP owns 51% or more of the company's common shares.BRICS Bank- Together, the four original BRIC countries comprise in 2014 more than 2.8 billion people or 40 percent of the worlds population, cover more than a quarter of the worlds land area over three continents, and account for more than 25 percent of global GDP. It will be headquartered in Shanghai, China.[3] Unlike the World Bank, which assigns votes based on capital share, in the New Development Bank each participant country will be assigned one vote, and no countries will have vThe bank's primary focus of lending will be infrastructure projects [10][11] with authorized lending of up to $34 billion annually.[11] South Africa will be the African Headquarters of the Bank named the "New Development Bank Africa Regional Centre".[12] The bank will have starting capital of $50 billion, with capital increased to $100 billion over time.[13] Brazil, Russia, India, China and South Africa will initially contribute $10 billion each to bring the total to $50 billion.[12][13] Each member cannot increase its share of capital without all other 4 members agreeing. This was a primary requirement of India.[14][15] The bank will allow new members to join but the BRICS capital share cannot fall below 55%.[13]eto power.[4]Now, seventy years on, the IMFs role has become defined by its ability to provide bailouts and act as a lender of last resort to countries in need. Similarly, the World Bank has struggled to promote trade and economic development in some of the worlds poorest countries as the European Union now acts in many respects as a trade bloc placing tariffs and undue regulatory burden on African imports. Not to mention, the BRICS countries, with their own development bank now in hand, may begin to function in many respects as its own trade bloc.With the Chinese yuan now in the process of beginning to float, theres also the question of to what extent to U.S. dollar will remain the worlds reserve currency going forward. The BRICS Bank, along with the proposed BRICS Fuel Reserve Bank, would not be required to keep their assets in U.S. dollars. The SarbanesOxley Act of 2002 (Pub.L. 107204, 116 Stat. 745, enacted July 30, 2002), also known as the 'Public Company Accounting Reform and Investor Protection Act' (in the Senate) and 'Corporate and Auditing Accountability and Responsibility Act' (in the House) and more commonly called SarbanesOxley, Sarbox or SOX, is a United States federal law that set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It was named after sponsors U.S. Senator Paul Sarbanes (D-MD) and U.S. Representative Michael G. Oxley (R-OH). As a result of SOX, top management must individually certify the accuracy of financial information. In addition, penalties for fraudulent financial activity are much more severe. Also, SOX increased the oversight role of boards of directors and the independence of the outside auditors who review the accuracy of corporate financial statements.[1]Basel III has introduced two new liquidity standards, viz., Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) to improve the resilience of banks to liquidity shocks.Of late, industry-wide concerns have been expressed about the potential stresses on the asset quality and consequential impact on the performance / profitability of the banks. This may necessitate some lead time for banks to raise capital within the internationally agreed timeline for full implementation of the Basel III Capital Regulations. Accordingly, the transitional period for full implementation of Basel III Capital Regulations in India is extended upto March 31, 2019, instead of as on March 31, 2018. This will also align full implementation of Basel III in India closer to the internationally agreed date of January 1, 2019. (Notice on March 27,2014)

Risk-weighted assetis a bank'sassetsoroff-balance-sheetexposures, weighted according torisk.[1]This sort of asset calculation is used in determining the capital requirement orCapital Adequacy Ratio(CAR) for a financial institution. In theBasel Iaccord published by theBasel Committee on Banking Supervision, the Committee explains why using a risk-weight approach is the preferred methodology which banks should adopt for capital calculation