Professional Documents
Culture Documents
Certificate
This is to certify that Mr. Sandeep Agrahari of MBA, 2012-14
Batch, of Symbiosis Institute of Business Management at
Bengaluru has done the project entitled Analysis of options
pricing: An Application of BlackScholes Model under my
guidance.
DECLARATION
I hereby declare that the project work submitted by me entitled Analysis
Place: Bangalore
Agrahari
Name : Sandeep
Date: 01/07/2013
PRN : 12020841095
Acknowledgement
I take this opportunity to extend my sincere thanks to Mr. Vipin P.
Varghese, Regional Coordinator, DBFS for offering a unique platform to earn
exposure and garner knowledge in the field of Trading and Market Analysis.
During the entire project, I am able to say with conviction that I have
immensely benefited from auspicious and prestigious association as a summer intern
with Doha Brokerage and Financial Services .
I wish to express my deep gratitude to Prof Dr Bipasha Maity, Faculty
SIBM who helped me in various ways during our project work. I also would like to
thank Professor Ravi Kumar, Faculty Mentor who guided me regarding this
project throughout the project work.
There are many who I may have left out in acknowledgement, but whose cooperation was indispensable in the fulfilment of the project.
Sandeep Agrahari
PRN No 12020841095
SIBM Bangalore 2012-2014
Table of Contents
Table of Contents of graphs/tables:......................................
Industry Analysis................................................................
Key Features of the Industry........................................................................................................
Major Players...............................................................................................................................
Five Years Trend........................................................................................................................
Company Analysis.............................................................11
Mission.......................................................................................................................................
Vision.........................................................................................................................................
Organization Structure...............................................................................................................
HR Details No. of employees..................................................................................................
Product and Services..................................................................................................................
Customers..................................................................................................................................
Competitors................................................................................................................................
Basic financial Analysis.............................................................................................................
Operational Processes................................................................................................................
Annexure:.........................................................................43
Table No.
G-1.1
T-1.1
T-2.1
T-2.2
T-2.3
G-9.1
G-9.2
G-9.3
G-9.4
10
11
12
13
14
15
16
17
18
19
G-9.5
G-9.6
G-9.7
G-9.8
G-9.9
G-9.10
G-9.11
G-9.12
T-9.1
G-9.13
20
21
T-9.2
G-9.14
22
23
T-9.3
G-9.15
Description
Market share of major brokerage firm
Details of major players
Financial Analysis of DBFS
Financial Ratios of DBFS
List of Selected companies
Option Traded quantity of call option of Axis Bank
Option Traded quantity of call option of ICICI Bank
Option Traded quantity of call option of HDFC
Bank
Option Traded quantity of call option of KOTAK
Bank
Option Traded quantity of call option of HCL
Option Traded quantity of call option of Infosys
Option Traded quantity of call option of TCS
Option Traded quantity of call option of Wipro
Option Traded quantity of call option of Dr.Reddy
Option Traded quantity of call option of Cipla
Option Traded quantity of call option of SunPharma
Option Traded quantity of call option of Lupin
Anova table For banks
Movement of difference in calculated and actual
value on different date for each bank comapny
Anova Table for ITs
Movement of difference in calculated and actual
value on different date for each IT company
Anova Table for Pharmaceuticals
Movement of difference in calculated and actual
value on different date for each Pharma company
Page No.
9
9
16
17
18
25
26
27
28
29
30
31
32
33
34
35
36
37
37
38
38
39
39
Industry Analysis
The Indian broking industry has evolved in a rapid speed in the last decade
and has undergone a significant paradigm shift. This industry has shown most of the
negative trapping but now is being considered as a preferred sector for careers
irrespective of disciplines. This industry majorly depends upon the number of
participants in Stock market, traded volume, and the type of fluctuations. Growing
participation by investors spread beyond the traditional geographical pockets,
coupled with professionalization of work cultures and demand for value-added
services like investment advisory and portfolio management, has created a huge
demand for talent at all levels.
From the ancient times, Bank sector has always dominated on Indian
financial services. However, globalization & liberalization of Indian Equity Markets
has led to rapid modernization and the professionalization of the financial sector. In
addition, this led to the emergence of the broking industry, as core and important
part of financial services sector, competing for talent with banks, insurance
companies. The Indian Broking industry is now attracting more of the foreign
investors to hedge and maintain their assets and funds. This industry is not only
attracting the big players to invest but also small players who want to make good
return but with risk.
The Indian broking industry is characterized by a huge number of companies
,private or unorganized, now a days. This industry is a fragmented industry with a
large number of participants. The industry thus has monopolistic competition a large
number of firms selling a slightly differentiated product. Although there are more
than 9000 brokers registered with SEBI 80% of the turnover in NSE and BSE is
accounted by about 100 brokers
The total trading volume of the Indian brokerage companies stood at US$
1239.1 billion in the year 2004, which increased to US$ 1492.1 billion in 2005. It is
further expected to reach US$ 6535.7 billion by the year 2015.
Major Players
Below is the list of listed companies in NSE/BSE and their share according
to market cap.
10
Network 18
Edelweiss Fin
India Infoline
Delta Corp
SKS Microfin
Motilal Oswal F
Capital First
Pilani Invest
Kirloskar Broth
Geojit BNP
Others
Sub
Brokers
910
19000
NA
173
NA
1494
No
of No
of
Employees
Branches
4008
350
3910
581
284
NA
NA
605
5873
522
2037
142
Name
Kotak Securities ltd
ShareKhan ltd
Angel Broking ltd
India Infoline ltd
Indiabulls
Reliance Money
Motilal
Oswal
Securities
7923
890
2193
63
Geojit BNP Paribas
627
247
343
314
Karvy Stock Broking
ltd
NA
NA
NA
NA
Bonanza Onlline
NA
NA
NA
NA
HDFC Securities
NA
NA
NA
NA
Anand Rathi Securities
Ltd
1527
320
4566
220
NA:Data not available
Table T- 1.1
Source:(http://www.sharegyaan.com/tips-ideas/top-15-best-most-popular-brokingfirms-in-india/)
11
12
Company Analysis
Mission
We are committed to create and enhance wealth for corporate and retail
customers, by delivering cutting-edge financial solutions which suit their specific
needs.
Vision
We want to remain as the leading, trusted total financial services provider,
wherever we operate, by maintaining superior technological and service standards,
and by keeping trust and transparency as our core values.
Organization Structure
The company operates regionally and below is the regions in which it
operates.
Kerala South
Kerala North
Bangalore
Chennai
Mumbai
Hyderabad.
All above regions have the Regional Manager and the Branch Managers for
each branch within that region. There are more than 300 employees in the
franchisees, but these franchisees are only associated with DBFS. They are not
directly related with the company organization structure. They work like
independent small business associate who registered themselves with DBFS to get
sub brokerage license.
The details of the Organization structure are given on next page.
13
14
15
16
Depository Participant
DBFS Securities Ltd. is a Depository Participant with Central Depository
Services Ltd. (CDSL). CDSL is one of only two depositories in India for electronic
holding of securities. The Company extends depository services to its trading
clients as well as non-trading clients. The custodial services include electronic
holding of securities, Demat, Remat, pledge, unpledge etc. and market and offmarket transfers, transmission, transposition etc.
Portfolio Management
DBFL Ltd. is a SEBI registered Portfolio Manager with an excellent track
record of performance. The group has a highly professional, experienced and resultoriented research team which analyzes the markets and manages the customers
funds accordingly in order to ensure optimum results. DBFS Portfolio Managers
consistently out-performs the bench-mark indices.
Trading in Equities
DBFS has membership in both NSE and BSE, MCX. The group has been
permitted to operate in the cash as well as derivative segments of NSE and BSE.
Online trading in Cash Market and FAO are available at all the branches.
Connectivity is provided at the Branches by way of VPN / Broad Band. The group
services both retail and institutional customers.
Customers
DBFS serves mainly individual customers, HUF (Hindu undivided family).
It also serves many public listed companies and a few private venture firms.
Competitors
DBFS is mainly present in South India and here the main competitors of
DBFS are:
Geojit Securities
JRG Securities
Hedge Equities
Share wealth Securities
Cap stocks India Pvt. Ltd
17
287
224,189,212
Assets
FIXED ASSETS
16,763
(i) TANGIBLE ASSETS
,630
16,006
,162
47,976
(ii) INTANGIBLE ASSETS
,260
43,735
,926
211,614,
CURRENT ASSETS
397
164,447,
124
276,354,
TOTAL
18
287
224,189,
212
II
OTHER INCOME
Amount in Rs.
31st March
2012
101,800,
499
21,724
,151
123,524,
650
122,190,
095
31st March
2011
135,782,
195
21,773
,354
157,555,
549
144,071,
983
1,334
13,483
,566
16
Current Tax
3,630
2,726
,897
7
Deferred Tax
2,565
1,129
,243
98
Short provision of tax of previous year
9,386
PROFIT FOR THE PERIOD FROM
CONTINUING OPERATIONS
8,974
10
9,627
,426
10
9,627
8,974
,426
Basic
0.02
1.67
Diluted
0.02
1.67
Table T-2.1
19
Ratios:
Ratio
Debt-Equity ratio
Current Ratio
Net Profit Margin ratio
Gross Profit Margin ratio
Asset Turnover ratio
Return on Equity
Table 2.2
Value
0.0070
1.2800
0.0012
0.0130
0.3700
0.0017
Operational Processes
Operational process as per the customer point of view that how the whole
transaction gets completed. It is described in below steps:
20
The Customers who are interested in trade, they need to be registered clients
of this company.
In order to become a registered member, client has to fill a KYC form which
is mandatory by (SEBI)
After verification the client will be registered as a client of DBFS
After registration, client will get a client ID that will be a unique ID and client
is now ready to any sort of transaction (i.e. equity, commodity, forex,
derivatives etc.)
Clients can update their DBFS account by providing cheque, DD or they can
do online transfer.
Sector
BANKS
BANKS
BANKS
BANKS
COMPUTERS - SOFTWARE
COMPUTERS - SOFTWARE
COMPUTERS - SOFTWARE
COMPUTERS - SOFTWARE
PHARMACEUTICALS
PHARMACEUTICALS
PHARMACEUTICALS
PHARMACEUTICALS
Table T-2.3
21
Literature Review:
Many of the paper have been already published regarding the pricing of options
using the Black-Scholes formula. The major problem is always considered as volatility of
stock. The stochastic nature of the volatility of most of the financial asset is responsible for
much of the difficulty. The early test of Black-Scholes (1973) option pricing model rely
upon historical prices for volatility estimates and Latane & rendlemans implied volatility
technique has become the standard method of estimation. Later on Beckers (1981) stresses
that it is inconsistent to use the Black-Scholes model with a constant variance to obtain
estimates of ninstationalry variances.
The work conducted by Hull and White (1987) and Johnson and Shanno (1987) has
been directed at solving the problem of pricing European calls on assets with stochastic
volatilities. Hull and White provide a series solution for the case in which the variance and
stock price are uncorrelated, convergence is slow unless the variance of the assets' volatility
is relatively small. For more general cases, both Hull and White and Johnson and Shanno
rely upon Monte Carlo simulations to estimate option prices. The Monte Carlo method tends
to be expensive and is often too time consuming for real-time applications.
Before introduction of spreadsheet programs, Cox and Rubinstein (1985) showed
how to create a simple 2-D table for easy calculation of Blacl-Scholes European call values.
Tom Arnold, Terry and Richard again showed in their paper that option pricing tables
described in Cox and Rubinstein still have tremendous pedagogical value.
In 2008 letter to Berkshire shareholders, Warren Buffett criticized the BlackScholes option pricing model arguing that it can produce "absurd" values for long-dated put
options. Though Mr. Buffett did not explicitiy say so, a careful analysis of his viewpoint
22
reveals that his criticism boils down to the belief that future nominal stock prices are not
well approximated by a lognormal distribution with volatility estimated from historical data.
Instead, Mr. Buffett apparently believes that inflationary policies of governments and central
banks will limit future declines in nominal stock prices compared with those predicted by a
historically estimated lognormal distribution. If Mr. Buffett is correct on this point, the
Black-Scholes model will indeed significantly overvalue long-dated put options.
Despite their popularity and wide spread use, the model is built on some nonreal life assumptions about the market. Some assumptions are described as below:
a) Volatility - a measure of how much a stock can be expected to move in the near
term - is a constant over time. Volatility can be relatively constant in very short term
but it is never constant in longer term. Large price changes tend to be followed by large
price changes, and vice versa leading to a property called volatility clustering. Measures
of volatilities are negatively correlated with asset price returns, while trading volumes or
the number of trades are positively correlated, hence volatility cannot be a constant over
time.
b) People cannot consistently predict the direction of the market or an individual
stock. It assumes stocks move in a manner referred to as a random walk. Random walk
means that at any given moment in time, the price of the underlying stock can go up or
down with the same probability. This is usually not true as stock prices are determined
by many economic factors that cannot be assigned the same probability in the way they
will affect the movement of stock prices.
c) Returns of log normally distributed underlying stock prices are normally
distributed. This assumption is reasonable in the real world, though not fitting observed
financial data accurately.
d)
Interest rates are constant and known, just same like with the volatility. It uses the
risk-free rate to represent this constant and known rate. In the real world, there is no
such thing as a risk-free rate, but it is possible to use the Indian Government T-Bills 90day rate since the Indian government is deemed to be credible enough. However, these
treasury rates can change in times of increased volatility.
e) The underlying stock does not pay dividends during the option's life. In the real
world, most companies pay dividends to their shareholders. The basic Black-Scholes
model was later adjusted for dividends, so there is a workaround for this. This
assumption relates to the basic Black- Scholes formula. A common way of adjusting the
23
Hypothesis Development
H0: There is difference between observed and calculated value of option price.
H1: There is difference with Share price and difference between observed and
calculated values i.e. The fluctuation (difference between observed and calculated
values) has same variation within the industry.
Research Methodology:
In this section, information about data, tools used to analyze that data and the
methods to interpret those data is mentioned.
Data:
Data Type:
Almost all the data used in this project is secondary data. The price of shares is taken
from the NSE website. From the same website, prices of call options are also taken
for a specific exercise price and expiry date.
Data Source:
The analysis of this project is done at office of Doha Brokerage Financial Services.
But the data used for analysis is taken from the NSE website.
24
Data Tenure:
For the analysis purpose, last one year data of all 12 companies has been taken from
NSE.
Analysis Tools:
Black-Scholes Formula: The Black-Scholes model is used to calculate the
theoretical price of European put and call options, ignoring any dividends paid
during the option's lifetime. This model has some limitation as follows:
No commissions
The risk-free rate and volatility of the underlying are known and constant
Follows a lognormal distribution; that is, returns on the underlying are
normally distributed.
hypothesis, which states that there is no significant difference between the expected
and observed result.
The formula for calculating chi-square is:
2=(oe )2/e
That is, chi-square is the sum of the squared difference between observed (o) and the
expected (e) data (or the deviation, d), divided by the expected data in all possible
categories.
Step-by-Step Procedure for Testing Your Hypothesis and Calculating Chi-Square
1. State the hypothesis being tested and the predicted results.
2. Determine the expected numbers for each observational class. Remember to use
numbers, not percentages.
3. Calculate 2 using the formula. Complete all calculations to three significant
digits. Round off your answer to two significant digits.
4. Use the chi-square distribution table to determine significance of the value.
5. State your conclusion in terms of your hypothesis.
a) If the p value for the calculated 2 is p > 0.05, accept your hypothesis.
b) If the p value for the calculated 2 is p < 0.05, reject your hypothesis, and
conclude that some factor other than chance is operating for the deviation to
be so great.
ANOVA (ANalysis Of VAriance): This tool performs a simple analysis of variance
on data for two or more samples. The analysis provides a test of the hypothesis that
each sample is drawn from the same underlying probability distribution against the
alternative hypothesis that underlying probability distributions are not the same for
all samples.
Method :
The first task in this project is to apply Black Scholes model to calculate the
price of options for the given strike rate and given date. After calculating the option
price, this price will be compared with actual value of option that was being traded
on that day and at last for an industry, we have to calculate whether the price
variation is similar for all companies within the industry
26
Steps:
a) The standard deviation of the share price of the company will be calculated
in the basis of last year share price fluctuations.
b) The risk free interest rate has been taken from RBI.
c) Exercise price was selected randomly.
d) The call option price was calculated on each day having different spot prices
for the same script with Black Scholes formula.
e) Get traded call option price for the same script, for same exercise price and
of same expiry date from the NSE historical data.
f) Find out the absolute difference between calculated and actual call option
price.
g) Apply Chi square test whether those difference are significant.
h) If there is significant difference then mention the factor behind the
variations.
i) At last apply Anova on taking samples from each company of the same
industry and find that whether variation in call price was similar or not.
4. The time period of the study was not sufficient for a comprehensive study.
5. The secondary nature of the data has been a constraint for the study.
6. Different people may interpret the same analysis in different ways.
7. The research could confine only to 12 companies from 3 different industries.
27
Analysis of Data:
Calculation of Call Price and Variation:
Sector: Bank
Axis Bank (NSE: AXISBANK):
Date: 23th April
Spot Price: Rs. 1444.80
Exercise Price: Rs. 1400
Intrinsic value: Rs. 44.80
Call Price (Calculated)
Call Price (Actual)
Time value (Calculated)
Time value (Actual)
46.361
7
51.85
1.56170
3
7.05
From the data table of Axis Bank, Call price (at exercise price: 1400) is varying too
much form the expected value in the entire month.
Chi-square Probability = 1.052 % < 5%
accept the Hypothesis H0.
Reason: Investors were also expecting good quarter result and because of that the
demand of call options was high. All the news was in favour of Axis Company
which led to the high rate of call price.
Below table deppicts the no of traded contract in this entire month.
28
No of Contracts
2500
2000
1500
1000
500
0
1-Apr-13
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
Graph 9.1
29
16.20
20.65
4.90
9.35
From the data table of ICICI Bank, Call price (at exercise price: 1150) is varying too
much form the expected value.
Chi-square Probability = 0 % < 5%
accept the Hypothesis H0.
Reason: Investors were also expecting good quarter result and because of that the
demand of call options was high. All the news was in favour of ICICI Company
which led to the high rate of call price.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
5000
4000
3000
2000
1000
0
1-Apr-13
Graph 9.2
30
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
39.30
41.6
0.30
2.6
From the data table of HDFC Bank, Call price (at exercise price: 650) is not varying
too much form the expected value for the entire month period.
Chi-square Probability = 18 % > 5%
Reject the Hypothesis H0. The variation is only by chance not only due to any
factor.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
200
150
100
50
0
1-Apr-13
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
Graph 9.3
31
32.22
31.55
0.32
-0.35
From the data table of KOTAK Bank, Call price (at exercise price: 660) is varying
too much form the expected value.
Chi-square Probability = 91 % > 5%
Reject the Hypothesis H0. The variation is only by chance not only due to any
factor.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
50
40
30
20
10
0
1-Apr-13
Graph 9.4
32
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
Sector: IT
HCL (NSE: HCLTECH):
Date: 16th April
Spot Price: Rs. 762
Exercise Price: Rs. 800
Intrinsic value: Rs. 0
Call Price (Calculated)
Call Price (Actual)
1.66
16.15
1.66
16.15
From the data table of HCL , Call price (at exercise price: 800) is varying too much
form the expected value for few dates.
Chi-square Probability = 0 % < 5%
accept the Hypothesis H0.
Reason: Investors were also expecting good quarter result and because of that the
demand of call options was high. All the news was in favour of HCL Company
which led to the high rate of call price but later on there was reduction in price due
to actual quarter result.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
5000
4000
3000
2000
1000
0
1-Apr-13
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
Graph 9.5
33
57.07
8
116.0
5
57.078
116.05
From the data table of INFOSYS, Call price (at exercise price: 2950) is varying too
much form the expected value for most of dates.
Chi-square Probability = 0 % < 5%
accept the Hypothesis H0.
Reason: The price of infy script was increasing at a very high rate and investors has
lot of faith in this company which led to shoot up the call price.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
8000
6000
4000
2000
0
1-Apr-13
Graph 9.6
34
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
0.49678
8
18.85
0.49678
8
18.85
From the data table of TCS, Call price (at exercise price: 1600) is varying too much
form the expected value for all the dates.
Chi-square Probability = 0 % < 5%
accept the Hypothesis H0.
Reason: Few of the news before 16th April, actually led to the higher call price and
people were expecting good result this time, But later on there was drastic
movement in call price and TCS shares fall suddenly which also reflected in call
price.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
5000
4000
3000
2000
1000
0
1-Apr-13
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
Graph 9.7
35
10.0504
4
0.6
10.0504
4
0.6
From the data table of WIPRO, Call price (at exercise price: 450) was not varying
too much but it was deviating more form the expected value for all the dates.
Chi-square Probability = 0 % < 5%
accept the Hypothesis H0.
Reason: Investors were very bearish on this stock and very little trade happen for
this script. There was no demand for this call option so the price fell down.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
50
40
30
20
10
0
1-Apr-13
Graph 9.8
36
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
Sector: Pharmaceuticals
Dr. Reddy (NSE: DRREDDY):
Date: 15th April
Spot Price: Rs. 1852.65
Exercise Price: Rs. 1900
Intrinsic value: Rs. 0
Call Price (Calculated)
Call Price (Actual)
7.14
15.85
7.14
15.85
From the data table of DrREDDY, in 1 st week of April the call price (at exercise
price: 1900) did not deviate from the expected value but after 1 st week there was
much difference between expected and calculated value.
Chi-square Probability = 2 % < 5%
accept the Hypothesis H0.
Reason: Although the quarter 4 result was going to announce in May but investors
were expecting a positive growth in stock of Dr. Reddy.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
250
200
150
100
50
0
1-Apr-13
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
Graph 9.9
37
5.93
5.7
4.78
4.55
From the data table of CIPLA, the call price (at exercise price: 400) did not deviate
from the expected value .
Chi-square Probability = 99 % > 5%
Reject the Hypothesis H0. The little bit variation is only due to chance.
Reason: the Q4 result was suppose to come in May and due to very few news
regarding Cipla, It did not show fluctuation as other script showed.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
600
500
400
300
200
100
0
1-Apr-13
Graph 9.10
38
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
2.92
6.1
2.92
6.1
From the data table of Sun Pharma, in 1st and 2nd week the call price (at exercise
price: 900) deviated much from the expected value .
Chi-square Probability = 2 % < 5%
Accept the Hypothesis H0.
Reason: The Q4 result was about to come in last week of April so some the
investors showed interest in this script but after 2 nd week investors did not show
much interest in this script.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
400
300
200
100
0
1-Apr-13
6-Apr-13
11-Apr-13
16-Apr-13
21-Apr-13
26-Apr-13
Graph 9.11
39
9.020422
3
10.15
9.020422
3
10.15
From the data table of LUPIN, the call price (at exercise price: 660) did not deviate
from the expected value much .
Chi-square Probability = 32 % > 5%
Reject the Hypothesis H0. The little bit variation is only due to chance.
Reason: the Q4 result was supposed to come in May and due to very few news
regarding LUPIN, It did not show fluctuation as other script showed.
Below table depicts the no of traded contracts in the entire month.
No of Contracts
5000
4000
3000
2000
1000
0
27-Mar-13 1-Apr-13 6-Apr-13 11-Apr-13 16-Apr-13 21-Apr-13 26-Apr-13 1-May-13
Graph 9.12
40
Count
AXIS
16
ICICI
16
HDFC
16
KOTAK
16
Sum
37.935
12
22.371
87
33.238
77
15.017
91
SS
df
20.21310
155.1449
7
ANOVA
Source
Variation
Between
Groups
Within
Groups
Averag
e
2.3709
4
1.3982
4
2.0774
2
0.9386
2
Varianc
e
6.4342
8
1.6536
1
0.7916
0
1.4635
0
MS
6.7377
01
2.5857
50
F
2.6057
05
of
Total
Anova: Single
Factor
175.3580
7
60
P-value
0.0599
60
F crit
2.7580
78
63
Table T-9.1
Since F value < F Crit, So Our Hypothesis is correct and we will accept is that there
is relation in between fluctuation in difference of observed & calculated and Share
price of scripts.
41
12
10
AXIS
Linear (AXIS)
ICICI
Linear (ICICI)
HDFC
0
21-Apr-13
-2
1-Apr-13
Linear (HDFC)
KOTAK
Linear (KOTAK)
Date
Graph G-9.13
Sector: IT
Application of One-way Anova to measure the means of each company deviation.
Anova: Single
Factor
SUMMARY
Groups
Count
HCL
16
Infy
16
TCS
16
Wipro
ANOVA
Source
Variation
Between
Groups
Within
Groups
16
-1.4531
11.755
2
Average
df
MS
684.5850
5
108.4267
3
4.6608
14.2001
of
Total
Anova: Single
Factor
42
8.0806
Varianc
e
17.247
6
362.59
79
42.106
3
Sum
74.573
2
227.20
22
129.28
93
23.250
0
SS
2053.755
2
6505.604
0
8559.359
2
3
60
63
F
6.3138
0
Pvalue
0.0008
6
F crit
2.7580
8
Table T-9.2
Since F value > F Crit, So our hypothesis H1 is wrong and we will reject the
hypothesis. So there is no relation in between fluctuation in difference of observed
& calculated and Share price of scripts.
70
60
50
HCL
40
Linear (HCL)
Infy
30
Linear (Infy)
20
TCS
10
Linear (TCS)
0
1-Apr-13
-10
21-Apr-13
Wipro
Linear (Wipro)
Date
Graph G-9.14
Sector: Pharma
Application of One-way Anova to measure the means of each company deviation.
Anova: Single
Factor
SUMMARY
Groups
Count
Dr Reddy
16
Cipla
16
SunpPharma
16
Lupin
16
Sum
61.431
08
10.584
11
30.921
54
17.246
63
SS
df
95.52366
305.8328
3
60
ANOVA
Source
Variation
Between
Groups
Within
Averag
e
3.8394
4
0.6615
1
1.9326
0
1.0779
1
Varianc
e
12.087
00
0.4021
2
2.1265
3
5.7732
1
MS
31.841
22
5.0972
F
6.2467
9
of
P-value
0.0009
2
F crit
2.7580
8
43
Groups
Total
Anova: Single
Factor
401.3566
1
63
Table T-9.3
Since F value > F Crit, So our hypothesis H1 is wrong and we will reject the
hypothesis. So there is no relation in between fluctuation in difference of observed
& calculated and Share price of scripts.
13
11
9
7
5
3
Dr Reddy
Cipla
SunpPharma
Lupin
1
-1
31-Mar-13
5-Apr-13
10-Apr-13
15-Apr-13
20-Apr-13
-3
-5
Graph G-9.15
44
The trends showed that no of contracts traded were highest when they were near
to expiry date.
45
Suggestions
Time Period of Analysis
The time period of analysis should lie in between July to December. This period
is known as stagnant period. During this period RBI is very unlikely to change
the interest rate, the annual result of most of the company also did not fall in to
this period etc. So no macroeconomic factors play any role in fluctuation of
market/ script trend.
Duration of Analysis:
The duration must be at least 4-6 month to get the proper result from the BlackScholes formula.
Volatility measurement
The measures of volatilities are negatively correlated with asset price returns ,
while trading volumes or the number of trades are positively correlated, hence
volatility cannot be a constant over time. Some of the advanced option valuation
models substitute Black-Scholes's constant volatility with stochastic process
generated estimates.
46
Bibliography
www.nseindia.com
www.dbfsindia.com
www.search.ebscohost.com
www.jstor.org
www.sebi.gov.in
www.teachexcel.com
www.indiaonline.in
www.bseindia.com
Arnold, Tom; Nixon, Terry D.; Shockley, Richard L., Jr.; Journal of Applied
Finance, Spring-Summer 2003, v. 13, iss. 1, pp. 46-55.
Cornell, Bradford; Journal of Portfolio Management, Summer 2010, v. 36, iss. 4, pp.
107-11.
Journal of Financial & Quantitative Analysis. Dec89, Vol. 24 Issue 4, p527-532. 6p.
John Adams, Hafiz, Robert and David. Research methods for graduates business and
Social Scinces. Response Publication.
Simon Benninga. Financial Modeling (With CDROM). MIT Press (MA) (2008)
Takada, H.H.; de Oliveira Siqueira, J. In: AIP Conference Proceedings, 2008,
vol.1073, pp. 332-9, Conference Paper in Journal.
Teneng, Dean; International Research Journal of Finance & Economics, 2011.
47
Annexure:
48