Watching markets work: ICICI Bank

Last night, the US S&P 500 dropped 8.79%. There have been only two such days in its history: 19 October 1987 (-22.9%) and 26 October 1987 (-8.64%). The VIX rose to 46.72. There have been only three such days in its history: in 1998 and 2002.

I watched the ADR of ICICI Bank with curiosity through this. There was a lot of discussion about ICICI Bank last night so I wondered if this would influence the price of the ADR. And, I wondered whether the sharp negative shock to the S&P 500 would influence the price of the ADR. By and large, it has not. The ADR closed 12.47% down, which just reflects yesterday's price discovery in India. It's interesting to ponder what this means for both the Indian economy and for ICICI Bank.

OTC derivatives and exchange-traded derivatives

Mulling over the global financial turbulence induces a focus on problems such as credit rating agencies and OTC derivatives. I have an article in today's Financial Express on the role of OTC and exchange-traded derivatives. You might like to also see this older material: link, page 152--153 of the Mistry report, link, link, link.

The role of the credit rating agencies

Credit rating agencies were one key element of the global financial crisis of 2007 and 2008. Read Elliot Blair Smith on Bloomberg (part 1, part 2), James Ward in the Financial Times, and Mihir S. Sharma in Financial Express.

Talk on global financial crisis and its implications for us in India

link.

Turning point for options trading

Writing in Mint, Mobis Philipose points out that Nifty options trading appears to have crossed a decisive turning point, and looks at some of the factors at work. Click on the chart above (from his article) to see it more clearly. From Jan 2008 to September 2008, Nifty options activity went up from below 200k contracts/day to roughly a million contracts a day, even overtaking the extremely active Nifty futures. I feel this is only the beginning, for the full impact of SEBI's DMA announcement hasn't yet played out.

The brainpower and systems that are doing this on Nifty will readily do this for the currency, once the ban against exchange-traded currency options is lifted.

You might like to see NSE's monthly publication with facts about derivatives trading.

3rd Research Meeting of the NIPFP-DEA Research Program on Capital Flows and their Consequences

The program is up.

`Ideas exchange' with Percy Mistry in IE & FE

Indian Express has an `ideas exchange' with Percy Mistry and Financial Express has a front page piece related to this.