What is Quantitative Finance?

Quantitative Finance is an applied science dealing with the application of mathematics and computer science to develop or exploit financial opportunities for return enhancement and risk control. The discipline is also known as financial mathematics, financial engineering and computational finance, depending upon the problems or techniques emphasized. The objective of the Program in Quantitative Finance is to produce practitioners and researchers who can operate at the highest levels within this field.

Quantitative Finance covers such applications as:

• Agent-based modelling
• Anomalies in prices
• Asset-liability modelling
• Behavioural finance
• Bounded rationality
• Corporate finance
• Corporate valuation
• Derivatives pricing and hedging
• Evolutionary game theory
• Experimental finance
• Extreme risks and insurance
• Financial econometrics
• Financial engineering
• Learning adaptation
• Liquidity modelling
• Market dynamics and prediction
• Market microstructure
• Operational risk modelling
• Portfolio management
• Price formation
• Risk management
• Trading systems
• Web-based financial services

Some of the quantitative finance books are given below:

• GENERAL
  1. The Concepts and Practice of Mathematical Finance, by Mark S. Joshi
     Hardcover - (8 December, 2003)
     Cambridge University Pressbook web site
  2. Paul Wilmott on Quantitative Finance, by Paul Wilmott
     Hardcover - 1064 pages 2nd revised edition (27 April, 2000)
     John Wiley and Sons Ltd; ISBN: 0471874388
  3. Options, Futures, and Other Derivatives, by John C. Hull
     5th edition
     Prentice Hall
• FINITE DIFFERENCES
  1. Option Pricing: Mathematical Models and Computation, by P. Wilmott, J.N. Dewynne, S.D. Howison
     Hardcover (September 1993)
     Oxford Financial Press; ISBN: 0952208202
  2. Pricing Financial Instruments: The Finite Difference Method, by Domingo Tavella, Curt Randall
     Hardcover - 237 pages 1st edition (15 April, 2000)
     John Wiley & Sons; ISBN: 0471197602
• MONTE CARLO
  1. Monte Carlo Methods in Finance, by Peter Jäckel
     2002
     John Wiley & Sons
     Errata available at www.jaeckel.org
  2. Monte Carlo, by Bruno Dupire (Editor)
     Paperback - 340 pages (November 1999)
     Risk Books; ISBN: 189933291X
  3. Monte Carlo Methods in Financial Engineering, by Paul Glasserman
     2004
     Springer Verlag
• STOCHASTIC CALCULUS
  • Steven Shreve: Stochastic Calculus and Finance, by Shreve, Chalasani, Jha
    Available as free e-book at http://www.cs.cmu.edu/~chal/Shreve/shreve.html
  • An Introduction to the Mathematics of Financial Derivatives, Second Edition, by Salih Neftci
    Hardcover - 527 pages 2nd Ed (30 June, 2000)
    Academic Press; ISBN: 0125153929
    free solution manual available on-line
• VOLATILITY
  1. Volatility and Correlation, by Riccardo Rebonato
     Hardcover - 360 pages (15 October, 1999)
     John Wiley and Sons Ltd; ISBN: 0471899984
  2. Volatility, by Robert Jarrow (Editor)
     Paperback - 356 pages (June 1998)
     Risk Books; ISBN: 1899332464

MOIL IPO analysis

Registered Office Address MOIL Bhavan, 1-A, Katol Road, Nagpur – 440013, Maharashtra, India

Phone 91-712-2806100/216         Fax 91-712-2591661

Email ipo@moil.nic.in                    Website http://www.moil.nic.in

Issue Open 26-Nov-2010              Issue Close 01-Dec-2010

 Issue Size 3,36,00,000 Equity Shares

Issue Type Book Building

Face Value Rs.10/-

Price Range Rs.340/- to Rs.375/-

Tick Size Re.1/-

Market Lot- 17                  Minimum Order Qty- 17

Listing Stock Exchange NSE, Mumbai

Registrar To The Issue Karvy Computershare Private Ltd.

 Grading 5

Book Running Lead Managers Edelweiss Capital Ltd., IDBI Capital Market Services Ltd., J.P. Morgan India Private Ltd.

Analysis

Company Background

• MOIL Ltd. was incorporated in 1962 as Manganese Ore (India) Ltd., following an agreement between the GoI and CPMO (Central Provinces Manganese Ore Company Ltd.) wherein GoI held 51% stake while CPMO held 49% stake. In 1977, CPMO sold its stake to GoI and MOIL became 100% GoI undertaking. In 2008, MOIL was granted “Mini Ratna” status. In 2010, the name of the company was changed to MOIL Ltd.
• MOIL was the largest producer of manganese ore by volume in India in Fiscal 2008 and accounted for approximately 50.0% of India's total production of manganese ore in Fiscal 2008.
• MOIL currently operates seven underground mines and three opencast mines in India.
• As on October 1, 2010, MOIL has access to 21.7 million tonnes of proved and probable reserves and a total of 69.5 million tonnes of measured, indicated and inferred mineral resources of manganese ore. 55.0% of company’s proved and probable manganese ore reserves have average manganese content of 40.0% or higher.
• Company sells manganese ore in Indian markets, primarily to ferro-alloy producers in steel industry. SAIL’s subsidiaries and division Maharashtra Elektrosmelt Ltd. and Bhilai Steel Plant accounted for 22.1% of company’s manganese ore sales revenue in FY 2010. Top ten customers accounted for approximately 51.5% of MOIL sales of manganese ore in FY 2010.
• MOIL operates two wind farms with an aggregate capacity of 20MW.
• Post issue promoters & promoter’s group shareholding will reduce to 80% from existing 100%.

Objects of the issue

• The purpose of the offer is to carry out the divestment of 33,600,000 Equity Shares by the GoI. The company will not receive any proceeds from the Offer and all proceeds shall go to the selling shareholder.

IPO Grading / Rating                                                 

• CARE has assigned an IPO Grade 5 to MOIL’s IPO indicating Strong fundamentals. CARE assigns IPO grading on a scale of 5 to 1, with Grade 5 indicating strong fundamentals.

     Projected Financial statements

·         Income Statement

Particulars	Mar-09	Mar-10	Mar-11E	Mar-12E	Mar-13E	Mar-14E	Mar-15E
Operating Revenue	12,933.4	9,694.0	11,624.9	12,443.2	13,405.6	14,788.9	16,256.3
COGS	2,980.6	3,010.3	3,127.7	3,456.5	3,748.8	4,102.5	4,523.2
Gross Profit	9,952.9	6,683.6	8,497.2	8,986.7	9,656.9	10,686.4	11,733.1
Selling & Admin Exp.	755.7	662.5	737.2	801.2	866.6	952.0	1,048.0
Dep. and Amort.	246.7	253.0	280.9	341.6	424.5	555.4	684.2
Other income	1,117.1	1,299.8	1,214.0	1,394.9	1,511.0	1,645.3	1,818.9
Tax	3,429.6	2,404.5	2,967.8	3,149.1	3,367.5	3,691.0	4,030.0
PAT	6,637.9	4,663.5	5,725.3	6,089.6	6,509.3	7,133.4	7,789.8

·     

Record of warrants in Balance Sheet

Warrants are right options to the share holders.
Premium of share warrants are recorded under unsecured loans in Balance sheet.
Suppose if share price is less than the strike price, then nobody execute the warrants, then the premium amount is converted as cash.
If warrants are executed, then they recorded as equity shares.
I have given one example.please see the below sample balance sheet.

Suppose a company has 1,000,000 equity shares ,each of these has a face value of Rs 10/- each.

Balance shest

Assets                                  Liabilities

cash-10,000,000                     Equity shares 1,000,000 @Rs 10/-            10,000,000

Total assets=10,000,000         Total Liabilities =10,000,000

=====================================================================
If Company share price is Rs 500/-

New issued warrants are 500,000 and premium of  8%  with strike price of Rs 1000/-  and time period is 4 years.

Balance shest after issuing warrants of 8% premium

Assets                                  Liabilities

cash-30,000,000                     Equity shares 1,000,000 @Rs 10/-            10,000,000

                                                Unsecured Loans

                                                            New issued warrants 500,000

                                                            With 8% premium of  Rs 500/-    20,000,000

Total assets=30,000,000         Total Liabilities                                        30,000,000

=====================================================================

If warrants are executed, then the balance sheet is as follows.


Balance sheet -After executing the warrants

Assets                                  Liabilities

                                               Equity share Capital

cash-15,000,000                     Equity shares 1,000,000
                                                add:Warrants 500,000

                                                         Total-1,500,000@Rs 10/-             15,000,000

Total assets=15,000,000         Total Liabilities                                         15,000,000.



Once warrants are executed, these are treated as just equity shares..
So, Number of outstanding shares will increase, in this case it become 1,500,000.
while writing next year balance sheet,just we write as equity shares only.

After 3 years the share price is  Rs 1200/-

After executing the warrants with Rs 1000/-

New share price is

                                10,000,000*1200+500,000*1000   = 1133.33/-

                                                10,000,000+500,000