2014年1月7日星期二

Stop Loss

What is Stop Loss?

A stop loss is an order to buy (or sell) a security once the price of the security climbed above (or dropped below) a specified stop price. When the specified stop price is reached, the stop order is entered as a market order (no limit) or a limit order (fixed or pre-determined price).
With a stop order, the trader does not have to actively monitor how a stock is performing. However because the order is triggered automatically when the stop price is reached, the stop price could be activated by a short-term fluctuation in a security's price. Once the stop price is reached, the stop order becomes a market order or a limit order.
In a fast-moving volatile market, the price at which the trade is executed may be much different from the stop price in the case of a market order. Alternatively in the case of a limit order the trade may or may not get executed at all. This happens when there are no buyers or sellers available at the limit price.
Types of Stop Loss order

1) Stop Loss Limit Order
A stop loss limit order is an order to buy a security at no more (or sell at no less) than a specified limit price. This gives the trader some control over the price at which the trade is executed, but may prevent the order from being executed.

A stop loss buy limit order can only be executed by the exchange at the limit price or lower. For example, if an trader is short and wants to protect his short position but doesn't want to pay more than Rs.100 for the stock, the investor can place a stop loss buy limit order to buy the stock at any price up to Rs.100. By entering a limit order rather than a market order, the investor will not be caught buying the stock at Rs.110 if the price rises sharply.

Alternatively a stop loss sell limit order can only be executed at the limit price or higher.

Advantages and disadvantages of the stop loss limit order
The main advantage of a stop loss limit order is that the trader has total control over the price at which the order is executed. The main disadvantage of the stop loss limit order is that in a fast moving volatile market your stop loss order may not get executed if there are no buyers/sellers at the limit price.
2) Stop Loss Market OrderA stop loss market order is an order to buy (or sell) a security once the price of the security climbed above (or dropped below) a specified stop price. When the specified stop price is reached, the stop order is entered as a market order (no limit). In other words a stop loss market order is a order to buy or sell a security at the current market price prevailing at the time the stop order is triggered. This type of stop loss order gives the trader no control over the price at which the trade will be executed.

A sell stop market order is a order to sell at the best available price after the price goes below the stop price. A sell stop price is always below the current market price. For example, if an trader holds a stock currently valued at Rs.100 and is worried that the value may drop, he/she can place a sell stop order at Rs.90. If the share price drops to Rs.90, the exchange will sell the order at the next available price. This can limit the traders losses (if the stop price is at or below the purchase price) or lock in some of the profits.

A buy stop market order is typically used to limit a loss (or to protect an existing profit) on a short sale. A buy stop price is always above the current market price. For example, if an trader sells a stock short hoping the stock price goes down in order to book profits at a lower price, the trader may use a buy stop order to protect himself against losses if the price goes too high.

Advantages and disadvantages of the stop loss market order
The main advantage of a stop loss market order is that the stop loss order will always get executed. The main disadvantage of the stop loss market is that the trader has no control over the price at which the transaction is executed.
Conclusion
Stop loss orders are great insurance policies that cost you nothing and can save you a fortune. Unless you plan to hold a stock forever, you should consider using them to protect yourself.

2014年1月1日星期三

Beginner's Guide To The Bloomberg Terminal

Beginner: http://www.investopedia.com/university/how-to-use-bloomberg-terminal-computer-system/
Advance: http://www.investopedia.com/university/how-to-use-bloomberg-professional-service/#axzz2NXb9HM8u

others:
http://www.ohio.edu/people/prevost/FIN%20443/Bloomberg%20material/bloombergmanuallehighuniversity.pdf

http://www.gsb.stanford.edu/sites/default/files/bloomberg_0.pdf

http://www.imt.edu/Library/PDF/Accessdetails/Education_Userguide.pdf

http://www.insead.edu/library/training/docs/cheatsheet.pdf

http://www.jasonhsu.org/uploads/1/0/0/7/10075125/bloomberg_manual.pdf

http://researchguides.library.brocku.ca/content.php?pid=362283&sid=3441539

Sanctions 制裁

Recently, the news about Ukraine crisis (MH17 Malaysia plane crash in Ukraine), and U.S., EU Ready New Russsian Sanctions as Fighting Rages. How those news affect to hk's bank?

Basically, HKMA will follow United Nations Sanctions Ordinance. such like that: http://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2014/20140704e2.pdf that will circular to HK'S banks.

The impact of sanctions law on financial institutions

Hong Kong

In Hong Kong, UN sanctions are given legislative effect locally via regulations made under the United Nations Sanctions Ordinance (Cap 537). These regulations vary in nature and scope depending on the identity of the sanctioned targets. Most regulations² impose prohibitions against making “available any funds or other financial assets or economic resources to, or for the benefit of, a relevant person or a relevant entity”. However, there can be subtle differences between the provisions. For example, while the regulation in respect of Liberia prohibits the provision of “any technical training or assistance related to the supply, delivery, manufacture, maintenance or use of any prohibited goods”³, other regulations specifically define “other assistance” to include “investment, brokering or other financial services”⁴.

A breach of the Hong Kong regulations may be punishable on conviction by indictment by an unlimited fine and imprisonment for a term not exceeding 7 years⁵. Some of the regulations prescribe that if the person convicted of an offence is a body corporate or firm and it is proved that an officer or partner thereof consented to, connived in, or was guilty of neglect in the commission of the offence, such officer or partner shall be guilty of the same offence⁶.

Whilst it is evident that financial institutions operating in Hong Kong, or operating elsewhere but incorporated under the laws of Hong Kong, have to comply with UN sanctions gazetted by the Hong Kong SAR Government, the applicability of the US Treasury’s OFAC sanctions is less clear-cut if the financial institution in question is not an OFAC-defined “US person”. In practice, however, the HKMA requires all financial institutions under its supervision to screen their transactions against both UN and OFAC sanction lists.

Footnotes

For instance, see section 7(1) of the United Nations Sanctions (Iran) Regulation (Cap 537AF) and section 5(2) of the United Nations Sanctions (Somalia) Regulation (Cap 537AN).
See section 5(2) of the United Nations Sanctions (Liberia) Regulation (Cap 537AM).
See section 4(3) of the United Nations Sanctions (Somalia) Regulation (Cap 537AN).
See section 3(3) of the United Nations Sanctions Ordinance (Cap 537).
See section 26 of the United Nations Sanctions (Somalia) Regulation (Cap 537AN).

News:
1. http://www.bloomberg.com/news/2014-07-29/new-sanctions-readied-by-u-s-eu-as-russia-prepares.html
2. http://law.lexisnexis.com/webcenters/hk/Hong-Kong-Lawyer-/UN-Iran-sanctions-risks-and-implications-for-Hong-Kong-companies
3. Hong Kong banks investigated by HKMA over money laundering breaches => http://www.scmp.com/news/hong-kong/article/1534371/hong-kong-banks-investigated-money-laundering-breaches
4. http://en.wikipedia.org/wiki/Bank_of_Credit_and_Commerce_International
5. http://www.sanctionswiki.org/Older_News_Items

FOR years the BRICS countries have insisted they are more than an acronym. To dispel any lingering doubts, the leaders of Brazil, Russia, India, China and South Africa, who gathered in the Brazilian city of Fortaleza for their sixth annual summit on July 15th, announced the creation of two financial institutions: the New Development Bank (NDB) to finance infrastructure and “sustainable development” projects, with $50 billion in capital to start with, and the $100 billion Contingent Reserve Arrangement (CRA), to tide over members in financial difficulties.
News: http://thediplomat.com/2014/07/3-reasons-the-brics-new-development-bank-matters/
http://www.bbc.com/news/business-28321534

Day count conventions

The day count convention determines how interest accrues over time in a variety of transactions, including bonds, swaps, bills and loans. Interest is usually expressed to accrue at a rate per annum (the reference period). It is often due and payable at shorter intervals, usually a number of months (the interest period).

The day count convention regulates how the parties are to calculate the amount of interest payable at the end of each interest or other period. It is commonly expressed as a fraction. The numerator will be the convention for the number of days in the period - usually actual or a notional 30. The denominator is the convention for the number of days in the reference period - often 360 or 365.

Conventions vary depending on the market type, location and the currency in question. For example, euro-denominated bonds are usually calculated on an actual/actual basis, while fixed rate non-euro denominated bonds are often calculated on a 30/360 basis. The London interbank market, on the other hand, operates on the basis of actual/360, except where the currency is sterling, for which the London interbank convention is actual/365.

Official website:

1. http://wiki.treasurers.org/wiki/Day_count_conventions

2. http://developers.opengamma.com/quantitative-research/Interest-Rate-Instruments-and-Market-Conventions.pdf

3. https://www.prometric.com/en-us/clients/ACI/Documents/formulasheetl05.03.09.pdf

4. Coding: http://www.deltaquants.com/day-count-conventions.html

Personal Note:

1. http://quant.stackexchange.com/questions/8345/implied-interest-rate-from-fx-swap

2. http://www.financetrainer.com/fileadmin/inhalte/TOOLS_SKRIPTEN/0201_mmfme.pdf

3. http://www.icap.com/what-we-do/global-broking/~/media/Files/I/Icap-Corp/pdfs/icap-interest-rates.pdf

ACT

The Association of Corporate Treasurers.
Abbreviation for ACTual, in day count conventions.
The former UK Advance Corporation Tax.

Over the Counter

Over-the-counter (OTC) or off-exchange trading is done directly between two parties, without any supervision of an exchange. It is contrasted with exchange trading, which occurs via exchanges. A stock exchange has the benefit of facilitating liquidity, mitigates all credit risk concerning the default of one party in the transaction, provides transparency, and maintains the current market price. In an OTC trade, the price is not necessarily published for the public.

OTC is one of factor of difference between future and forward contract. Basically, Forward contact is OTC (off exchange 交易所)and price is public and fixed.

Payment notes:
CLS (originally Continuous Linked Settlement) is a specialist US financial institution that provides settlement services to its members in the foreign exchange market (FX). Although the forex market is decentralised and has no central exchange or clearing facility, firms that chose to use CLS to settle their FX transactions can mitigate the settlement risk associated with their trades.^[1]

official website:
1. http://www.cls-group.com/Pages/default.aspx
2. https://www.youtube.com/watch?v=__t4_B7OdyM
3. http://www.cls-group.com/MC/Pages/Video.aspx
4. http://www.federalreserve.gov/paymentsystems/cls_protocol.htm
5. Payment @ Hk: http://www.bis.org/publ/cpss105_hk.pdf

Personal Notes:
=>Net settle => hedge counterparty risk

CLS does this through the operation of a Payment-versus-Payment (PvP) settlement service which mitigates settlement risk for the FX transactions of its Settlement Members and their customers (Third Parties).

Payment versus Payment (“PvP”)
A mechanism in a foreign exchange settlement system to ensure that a transfer of one currency occurs only if a transfer of the other currency or currencies also takes place, which will be final and irrevocable. The Cross Currency Payment Matching Processor is a core component linked with Real Time Gross Settlement (“RTGS”) systems of various clearing currencies to ensure that both legs of a foreign exchange transaction are settled simultaneously to eliminate Herstatt risk.

Currently, PvP settlement of US dollar/Hong Kong dollar, US dollar/renminbi, euro/US dollar, euro/Hong Kong dollar, euro/renminbi, renminbi/Hong Kong dollar, US dollar/Malaysian Ringgit and US dollar/Indonesian Rupiah foreign exchange transactions is supported.

Also known as delivery against payment (DAP), delivery against cash (DAC) and cash on delivery.

ISDA Committee

ISDA’s determinations committee was formed in 2009 and makes binding decisions for the market on whether contracts can be triggered. The 15-member group includes representatives from Bank of America Corp., Elliott, Morgan Stanley and JPMorgan Chase & Co.

The International Swaps and Derivatives Association (ISDA) is a trade organization of participants in the market for over-the-counter derivatives. It is headquartered in New York, and has created a standardized contract (the ISDA Master Agreement) to enter into derivatives transactions. In addition to legal and policy activities, ISDA manages FpML (Financial products Markup Language), an XML message standard for the OTC Derivatives industry. ISDA has more than 820 members in 57 countries; its membership consists of derivatives dealers, service providers and end users.^[1]

Official website:
1. http://www2.isda.org/
2. http://www.isda.org/educat/faqs.html

News need to follow up:

2014 ISDA Credit Derivatives Definitions

The 2014 ISDA Credit Derivatives Definitions are an updated and revised version of the 2003 ISDA Credit Derivatives Definitions, a document that contains the basic terms used in the documentation of most credit derivatives transactions. ISDA published the 2014 ISDA Credit Derivatives Definitions in February 2014, and trading using the new Definitions is scheduled to begin on September 22, 2014.

Personal Notes: it is focus on the CDS product (credit default swap)

4. What are some of the important changes under the 2014 Definitions?

The 2014 Definitions are a new standard for CDS transactions, with changes throughout.

These FAQs do not attempt to summarize the changes, but identify some of the key areas

of change as detailed below.

The 2014 ISDA Credit Derivatives Definitions introduce several new terms, including:

 Bail-in/financial terms for credit default swap (CDS) contracts on certain financial

reference entities: incorporates a new credit event triggered by a government-initiated

bail-in and a provision for delivery of the proceeds of bailed-in debt or a restructured

reference obligation, and more delineation between senior and subordinated CDS.

 Sovereign CDS asset package delivery for CDS contracts on sovereign reference

entities: introduces the ability to settle a credit event by delivery of assets into which

sovereign debt is converted.

 Standard reference obligation: allows for the adoption of a standardized reference

obligation across all market-standard CDS contracts on the same reference entity and

seniority level.

 In addition to these new terms, the 2014 ISDA Credit Derivatives Definitions contain

several amendments to standard credit derivatives trading terms, including: upgrading

provisions dealing with transfers of debt to successor reference entities; expanding

the scope of guarantees that can be hedged with CDS; rationalizing the treatment of

contingent debt and guarantee obligations; addressing currency redenomination

issues; and adjustments to the restructuring settlement mechanism.

http://www2.isda.org/asset-classes/credit-derivatives/2014-isda-credit-derivatives-definitions/

20. Will novations of 2003 Definitions transactions be affected?

No. Transactions may not be novated from 2003 Definitions to 2014 Definitions during

the course of the novation. Parties may wish to make that amendment subsequent to the

completion of novation.

香港金管局在市場注資

港金管局於紐約交易時段再度承接美元沽盤，向市場注入49.6億港元，為7月以來第18次注資，累計注資627.3億港元。

據騰訊31日報道，資金持續流入香港，香港金管局於紐約交易時段再度承接美元沽盤，向市場注入49.6億港元，為7月以來第18次注資，累計注資627.3億港元。預計明日本港銀行體系結餘，將增加至2,265.97億港元。

香港金管局最近一次的大舉注資還要追溯到2012年10月，此後的三個月內累計28次注入超過100億港元。在當時資金的推動下，香港股市與樓市隨後輪番走高，A股同樣獲益。

據香港現行的聯繫匯率制度，港元兌美元的兌換匯率為7.8港元兌1美元。金管局會在7.75港元兌1美元的匯率水平時，從持牌銀行買入美元;當觸及7.85港元的弱方保證時，會賣出美元，從而讓強弱雙向的兌換保證能以聯繫匯率7.8港元為中心點對稱地運作。

BTC 銀聯集團投資總監夏卓華昨表示，受政策的利好消息刺激，預計熱錢流入的情況將持續，恆指有望在年底錄得高單位數字升幅。

夏卓華昨在投資展望簡布會上表示，對下半年港股及A股展望維持中性看法。他相信政策在短期內有助刺激港股表現，在年底錄得單位數字升幅;但未能預計最終將有多少資金流入內地股市，長遠則視乎內地的股權架構改革成功與否，中小企能否在股票市場融資亦產生一定影響。滬港通只是一個試點，政策成功後或會在上海自貿區作進一步的發展。

夏卓華認為，現時散戶占A股市場的投資者約八成，若滬港通能夠吸引其它海外長線機構投資者參與，將有助減低A股市場的波幅。國外投資者對滬港通亦感興趣，但對內地審計準則存疑，投資者亦需時熟悉A股市場運作。

Basel III

An overview of Basel III—Introduction

Key Basel III components impact three areas: new definitions for capital ratios and minimum targets, additional RWA requirements, and new liquidity standards.