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US economy may shrink by 1.5% in 2009.

Citigroup Inc may book a gain of as much as $10 billion by sel

control of its brokerage to Morgan Stanley.

China now world's third-largest economy. Oil tops $39 on talk of output cuts: OPEC signals it may red

production again at its March meeting. U.S. inventories on tap

European stocks struggle: Shares in London, Paris dip

investors are unable to maintain early momentum, Asia cl

higher.

Yahoo Inc. announced that it had hired veteran technol

executive Carol Bartz as its new CEO.

thJan2

009

lume2

,Issue

20

po Rate-5.5% Reverse Repo 4%

Forex Reserves $255.24 bn

Cash Reserve Ratio - 5.5%

P - 4.6% Inflation Rate - 5.24%

Issue Attractionstional Headlines 1

ernational Headline 1

dents Article 2

mpany Review/zz Words

3

ssword/Quiz 4

estors Check 5-6

umni Contact 7iz/Crosswordwers

8

15 days Movements

When written in Chinese the word "crisis" is composed of two characters - o

represents danger and the other represents opportunity. ~John F. Kennedy

Satyams chairman Ramalinga Raju admits accounting fraud

Rupees 7000 Cr .

Deepak Parekh, Kiran Karnik and C Achutan are appointed

new board members for Satyam.

Government plans Rs 2000 Cr bailout package for Satyam.

Daiichi Sankyo may take $3.9 bn knock in Q3 results. IDFC Projects, BHEL and GSECL join together to set

thermal plant in Sarkhadi, Ahmedabad.

Indian Oil starts operations at petrochemical plant.

Tata completes stake sale in Idea Cellular .

World Bank reveals that it had also barred Wipro Technolog

and Megasoft Consultants from receiving direct contracts fr

the bank under its corporate procurement programme.

International Headlines

National Headlines

CHAANAKYACHAANAKYACHAANAKYACHAANAKYA

Wealth Incorporation

Christ University

Institute of Management

Finance Club Initiative Presents...

1 2 5 6 7 9 12 13 14

Sensex

Sensex

1 2 3 4 5 6 7 8

Rs/$

Rs/$

1 2 5 6 7 9 12 13 14

Gold(per 10 gram)

Gold(per 10 gram)

1 2 5 6 7 9 12 13 14

Oil(per bbl)

Oil(per bbl)

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STUDETS ARTICLE-The Monte Carlo Analysis

Research analysts use multivariate models to forecast investment outcomes to understand thpossibilities surrounding their investment exposures and to better mitigate risks. Monte Carlo analysis one specific multivariate modeling technique that allows researchers to run multiple trials and define a

potential outcomes of an event or investment. Running a Monte Carlo model creates a probabilitdistribution or risk assessment for a given investment or event under review. By comparing resulagainst risk tolerances, managers can decide whether to proceed with certain investments or projects.

Monte Carlo Analysis

Monte Carlo analysis is named after the principality made famous by its casinos. Monte Carlo analysis useful for analysts because many investment and business decisions are made on the basis of onoutcome. In other words, many analysts derive one possible scenario and then compare it to retuhurdles to decide whether to proceed. Most pro forma estimates start with a base case. By inputting thhighest probability assumption for each factor, an analyst can actually derive the highest probabili

outcome. However, making any decisions on the basis of a base case is problematic, and creating forecast with only one outcome is insufficient because it says nothing about any other possible valuethat could occur.

Creating the Model

Once designed, executing a Monte Carlo model requires a tool that will randomly select factor value

that are bound by certain predetermined conditions. By running a number of trials with variableconstrained by their own independent probability of occurrence, an analyst creates a distribution tha

includes all the possible outcomes and the probability that they will occur. There are many randomnumber generators in the marketplace. The two most common tools for designing and executing MonCarlo models are Risk and Crystal Ball. Both of these can be used as add-ins for spreadsheets and allorandom sampling to be incorporated into established spreadsheet models.

The art in developing an appropriate Monte Carlo model is to determine the correct constraints for eac

variable and the correct relationship between variables. For example, because portfolio diversification based on the correlation between assets, any model developed to create expected portfolio values muinclude the correlation between investments. In order to choose the correct distribution for a variabl

one must understand each of the possible distributions available. For example, the most common one a normal distribution, also known as a bell curve. In a normal distribution, all the occurrences aequally distributed (symmetrical) around the mean. The mean is the most probable event. Natur

phenomena, people's heights and inflation are some examples of inputs that are normally distributed.

In the Monte Carlo analysis, a random-number generator picks a random value for each variable (with

the constraints set by the model) and produces a probability distribution for all possible outcomes. Thstandard deviation of that probability is a statistic that denotes the likelihood that the actual outcombeing estimated will be something other than the mean or most probable event. Assuming a probabilit

distribution is normally distributed, approximately 68% of the values will fall within one standardeviation of the mean, about 95% of the values will fall within two standard deviations and abou99.7 % will lie within three standard deviations of the mean. This is known as the "68-95-99.7 rule" o

the "empirical rule".

Example:Let us take for example two separate, normally distributed probability distributions derived frorandom-factor analysis or from multiple scenarios of a Monte Carlo model.

Monte Carlo analysis can also help determine whether certain initiatives should be taken on by lookiat the risk and return consequences of taking certain actions. Let us assume we want to place debt o

our original investment.

...Continued on page

Today, there are three kinds of people: the have's, the have-not's, and the have-not-paid-for-what-thhave's. ~Earl Wilson

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ICICI Bank is India's second-largest bank with total assets of Rs. 3,849.70 billion (US$ 82 billion) as on

September 30, 2008 and profit after tax Rs. 17.42 billion for the half year ended September 30,

2008. The Bank has a network of about 1,400 branches and 4,530 ATMs in India and presence in 18

countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail

customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the

areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank

currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore,Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in

United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia.

Financial Position

Careers at ICICI bank

As a rapidly growing organization ICICI looks to induct post-graduate management talent from various

business schools across the country. Enthusiastic and talented youth form the backbone of their banking

operations. What they offer is the grooming needed to be the best. They offer a wide range of careers in all

functions including - Finance, Marketing, Operations, Information Technology and Human Resources.

In their continuous endeavor to improve the selection process for recruitment at all levels in ICICI Bank, they

carry out an in-depth study of the competencies required to succeed in ICICI Bank which are called the ICICI

Bank DNA anchors. As per their research, the DNA anchors which indicated success at the entry level in

ICICI Bank are:

Customer first

Passion

Dynamism

Compliance with conscience

Particulars 2008 (in Rs.

Cr.)

2007 (in Rs.

Cr.)

Total income 39667 29957

Net profit 4157 3110

EPS (Rs.) 37.37 34.59

P/E ratio 36% 23.7%

CAR 14.9% 11.7%NPA 1.6% 1%

Company Review ICICI Bank

Everybody wants to eat at the government's table, but nobody wants to do the dishes. ~Wer

Buzz Word

Hostile Takeover: A takeover attempt that is strongly resisted by the target firm. Hostile takeoversare usually bad news, as the employee morale of the target firm can quickly turn to animosity against

the acquiring firm.

Longevity Risk: The risk to which a pension fund or life insurance company could be exposed as aresult of higher-than-expected payout ratios. Longevity risk exists due to the increasing life

expectancy trends among policy holders and pensioners, and can result in payout levels that are

higher than what a company or fund originally accounts for.

Ponzi Scheme: A fraudulent investing scheme that promises high rates of return at little risk toinvestors. The scheme generates returns for older investors by acquiring new investors. This scam

actually yields the promised returns to earlier investors, as long as there are more new investors. APonzi scheme is similar to a pyramid scheme.

Pyramid Schemes: Pyramid schemes, on the other hand, allow each investor to directly benefit

depending on how many new investors are recruited.

8/6/2019 20_16th January 2009 (160109)

4/8Blessed are the young, for they shall inherit the national debt. ~Herbert Hoover

Down

Across2. Which is the only country having paper currency and have no coins and it

introduced cheque only in 1997?

4. Where is the European Central Bank located?

9. Name the person who introduced the 'Double Entry' book keeping concept

10. What is the exchange rate of one currency for another over a fixed period of time

called?

11.Oldest Stock exchange in the world

Q1. Who devised and used the first electric stock quotation board?

Q2. A strategy that uses financial leverage by shorting poor performing stocks and

purchasing shares that are expected to have high returns.

Q3. Who tried and failed to corner the silver market in the late 1970s?

Q4. A trader who acts independently of others and typically recklessly - usually to

the detriment of both the clients and the institution that employs him or her.

Q5. Which company acquired 90% stake in the German company Schoneweiss in

2007?

Q6. A fund that buys securities in distressed investments, such as high-yield bonds

in or near default, or equities that are in or near bankruptcy.

Q7. A type of option that can only be exercised on predetermined dates, usually

every month.

Q8. A swap with varying combinations of interest rate, currency and equity swap

features, where payments are based on the movement of two different countries'

interest rates.

Quiz

Crosswords

Founded in 187

the Tokyo Sto

exchange (TSE)

t h e o l d e s

f i n a n c i aexchanges

Asia, and th

largest of Japan

f i v e s t o c

exchanges. I

c u r r e n

incarnation w

signed into law

1 9 4 7 , a f t e

S u p r e m

C o m m a n d e

Allied Powe

dissolved th

wartime TS

Now it is

p r i v a t

corporation wi

11 directors

officers and

auditors.

Until 1968, th

British pound w

the currency

Zambia, aft

which the kwach

replaced th

pound at a rate

2 kwacha to

pound. At th

time, the kwach

was equal

US$1.20, b

rampant inflatio

s i n c e t h at i m e h a

s i g n i f i c a n t

devalued th

currency.

Did you Know

1. Which Indian bank is promoted by 20th

century Finance Corporation & Keppel

Tatlee Bank of Singapore?

3. In India where is the paper for currency

manufactured5. What are the Bonds that carry low

ratings with correspondingly higher

yields called?

6. Which was the first bank to introduce

ATM's in India

7. In which country's coins you can found

the following lines imprinted, 'This is

the root of all evils?

8. What is a coin with minting error

called?

8/6/2019 20_16th January 2009 (160109)

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The risk-free rate of return is one of the most basic components of modern finance and many of its most

famous theories. The capital asset pricing model (CAPM), modern portfolio theory (MPT) and the Black-

Scholes model all use the risk-free rate as the primary component from which other valuations arederived. The risk-free asset only applies in theory, but its actual safety rarely comes into question until

events fall far beyond the normal daily volatile markets. Although it's easy to take shots at theories that

have a risk-free asset as their base, there are limited options to use as a proxy.This article looks at the risk-free security in theory and in reality (as a government security), evaluating

how truly risk free it is. The model assumes that investors are risk averse and will expect a certain rate of

return for excess risk extending from the intercept, which is the risk-free rate of return.

The T-Bill Base

The risk-free rate is an important building block for MPT. As referenced in Figure 1, the risk-free rate is

the base of the line where the lowest return can be found with the least amount of risk.

Risk-free assets under MPT, while theoretical, typically are represented by Treasury bills (T-bills), whichhave the following characteristics:

T-bills are assumed to have zero default risk because they represent and are backed by the good faith of

the government.

T-bills are sold at auction in a competitive bidding process and are sold at a discount from par.

They don't pay traditional interest payments like their cousins, the Treasury notes and Treasury bonds.

They're sold in various maturities and denominations.

They can be purchased by individuals directly from the government.

Sources of Risk:The term risk is often taken for granted and used very loosely, especially when it comes to the risk-freerate. At its most basic level, risk is the probability of events or outcomes. When applied to investments,

risk can be broken down a number of ways:

1.Absolute risk as defined by volatility: Absolute risk as defined by volatility can be easily quantified by

common measures like standard deviation. Since risk-free assets typically mature in three months or less,

the volatility measure is very short-term in nature. While daily prices relating to yield can be used to

measure volatility, they are not commonly used.

If inflation continues to soar, you're going to have to work like a dog just to live like one. ~GeorGobel

RISK FREE RETURN

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2.Relative risk: Relative risk when applied to investments is usually represented by the

relation of price fluctuation of an asset to an index or base. One important

differentiation is that relative risk tells very little about absolute risk - it only tells how

risky the asset is compared to a base. Again, since the risk-free asset used in the

theories is so short-term, relative risk does not always apply.

3.Default risk: What risk is assumed when investing in the three-month T-bill? Defaultrisk, which in this case is the risk that the U.S. government would default on its debt

obligations. Credit-risk evaluation measures deployed by securities analysts and

lenders can help define the ultimate risk of default.

Although the U.S. government has never defaulted on any of its debt obligations, the

risk of default has been raised during extreme economic events, when the U.S.

government has stepped in to provide a level of security, which provided a perception

of safety. The U.S. government can spin the ultimate security of its debt in unlimited

ways, but the reality is that the U.S. dollar is no longer backed by gold, so the only true

security for its debt is the government's ability to make the payments from current

balances or tax revenues. This raises many questions of the reality of a risk-free asset.For example, say the economic environment is such that there is a large deficit being

funded by debt, and the current administration plans to reduce taxes and provide tax

incentives to both individuals and companies to spur economic growth. If this plan

were used by a publicly held company, how could the company justify its credit quality

if the plan were to basically decrease revenue and increase spending? That in itself is

the rub: there really is no justification or alternative for the risk-free asset. There have

been attempts to use other options, but the U.S. T-bill remains the best option, because

it is the closest investment in theory and reality to a short-term riskless security.

INVESTORS CHECK . Contd.

The first derivativ

product was ao p t i o n . S o m

historians have foun

references to option

in the Bible. Optionwere actively trade

during the DutcTulip Bulb crazstarting in 164predating the star

up of organized stocexchanges by century. Option

traded informally o

the floor at the NYSin 1817.

The US markeintroduced circubreakers after thcrash of Oct. 198

The circuit breake

halt trading for 3minutes when thDow falls by 35

points or more, anfor 1 hour when thDow falls 550 poin

or more. These cam

into use for the fir

time on Oct. 27, 199when the DJI

tumbled 554, thbiggest points drop history.

The $23 billio

merger between SBand the UBS gavbirth to the large

assets manager

the world.

Ucar Internation

Inc., the nationleading maker graphite electrode

has agreed to pay $110 million fine fo

price fixing, i.e thlargest antitrus

penalty.

Did you Know

The distributions in Figure 2

show the original outcome and

the outcome after modeling the

effects of leverage. Our new

leveraged analysis shows an

increase in the expected value

from 200 to 400, but with

an increased financial risk of

debt. Debt has increased the

expected value by 200 but also

the standard deviation. Before 1

standard deviation was a range

range from 100 to 300. Now with debt, 68% of values (1 standard deviation) fall

between 0 and 400. By using scenario analysis an investor can now

determine whether the additional increase in return equals or outweighs the additionalrisk (variability of potential outcomes) that comes with taking on the new initiative.

THE MONTE CARLO ANALYSIS CONTINUED...

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ALUMNI SPEAK:

NAME: SACHINDRA SHENOYSACHINDRA SHENOYSACHINDRA SHENOYSACHINDRA SHENOY

ORGANIZATION: D E SHAWD E SHAWD E SHAWD E SHAW

WORK PROFILE: SENIOR ANALYSTSENIOR ANALYSTSENIOR ANALYSTSENIOR ANALYST

OFFICIAL MAIL_ID: shenoys@deshaw.com

PERSONAL MAIL_ID: sachindra82@gmail.com

CONTACT NUMBER: 09440144870

BATCH: 2004-2006

CURRENT LOCATION: HYDERABADHYDERABADHYDERABADHYDERABAD

EXPERIENCE IN THE ORGANIZATIONEXPERIENCE IN THE ORGANIZATIONEXPERIENCE IN THE ORGANIZATIONEXPERIENCE IN THE ORGANIZATION: D E Shaw India, part of the D E Shaw Group (an alternati

investment firm), has been a great place to work in mainly because of the culture they have here. I cant belie

that in Mar'09, I will be completing 3 years in this organisation. I actually work in the Financial Resear

department, currently working for the real estate sector. As a department we prepare reports for traders in other

E Shaw offices like private equity, real estate, distressed debt, convertibles among others. Before it used to losort off flashy, now we don't do valuation!! Overall I have been able to learn a lot both in the so called finan

topics and management, mainly people management.

MESSAGE FOR THE STUDENTS:MESSAGE FOR THE STUDENTS:MESSAGE FOR THE STUDENTS:MESSAGE FOR THE STUDENTS: I am not sure if I will be able to give any message as I believe one alwa

remains a student. Though would like to share somethings that I feel is important -

a) One should have strong basic knowledge about various topics and just not limited to finance,

b) Be updated about all happenings around you. Even political events though it might seem it does not add mu

value

c) Have different thoughts and not limited to something, as actually views drive the market.ALL THE BEST!

NAME: REJOICE D JOHNREJOICE D JOHNREJOICE D JOHNREJOICE D JOHN

ORGANIZATION: FUTURES FIRSTFUTURES FIRSTFUTURES FIRSTFUTURES FIRST

WORK PROFILE: DERIVATIVES RESEARCH ANALYSTDERIVATIVES RESEARCH ANALYSTDERIVATIVES RESEARCH ANALYSTDERIVATIVES RESEARCH ANALYST

OFFICIAL MAIL_ID: rejoice.daniel@futuresfirst.in

PERSONAL MAIL_ID: rejoicedaniel@gmail.com

CONTACT NUMBER: 9886105233

BATCH: 2004-2006

CURRENT LOCATION: BANGALOREBANGALOREBANGALOREBANGALORE

EXPERIENCE IN THE ORGANIZATION:EXPERIENCE IN THE ORGANIZATION:EXPERIENCE IN THE ORGANIZATION:EXPERIENCE IN THE ORGANIZATION: Its been two and a half years since I have been working with torganization and its been an awesome experience. Trading has always been my dream job and now I trade internation

derivative futures.

MESSAGE FOR THE STUDENTS:MESSAGE FOR THE STUDENTS:MESSAGE FOR THE STUDENTS:MESSAGE FOR THE STUDENTS: Tough time ahead, but I think people from Christ will make it. Its the right time

plan for your future . Work hard.

ALL THE BEST!

8/6/2019 20_16th January 2009 (160109)

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1.Sutro & Co.in 19

2.130-30 strategy

3.The Hunt brothe

and their associate

4.Rogue trader.5.Mahindra &

Mahindra.

6.Vulture fund.

7.Bermuda Option

8.Quanto swap.

John Bogle w

the first person offer an index futo retail customeBogles flagshVanguard 500 Fubecame the worl

largest mutual fuby assets 2002. His Vanguafunds are renownfor their ultra-lexpense ratios, afor having no load

E u r i b o r ( E uInterbank OfferRate) is tbenchmark rate the large eumoney market th

has emerged sin1 9 9 9 . I t sponsored by tEuropean BankFederation (EBwhich represethe interests s o m e 5 0 0European banks aby the FinancMarkets Associat(ACI).

ROSSWORD ANSWERS

Did you Kno

Quiz AnswersEditing/Compiling Arihant PatawariNews Chetan P.

ShriyaCompany Review Mohammad NimakwalaInvestors Check/Stock Ratnas Sebin EmmanuelStudents Article JerryCoordination Fouzia Tarannum B.

Contributions made by 1st year:

Editing/Compiling Gyanesh ShroffDid you know, Quiz Megha GargQuotes, Book Quotes Maria FernandesGraphs, Buzzwords Paloma LoboIndices PaulomiCrosswords HiteshCommunication Archana

Please mail your valuable feedbacks, reviews at chaanakya.ccim@gmail.com

TEAM

EEDBACK

aanakya has been a pleasant surprise to me theyway it is being produced and managed. I

still wondering, how are you people getting hold of certain distinguished individuals to

ve interviews!! Someday, would love to be interviewed for the column. Meanwhile, didn't

ve much success in the crosswords :( and really salute the creativity that goes into it.)

SACHINDRA SHENOY

D E SHAW INDIA

ALUMNI 2004-2006