Indy Telecom & Industrial Media

…EVER!

While normal distributions are nice and wonderful, they aren’t really feasible in the world of finance. This is because the market can be so volatile and fickle that variances become meaningless.

So, enter fat-tailed distributions. These are distributions where events deviate significantly from the mean in comparison to normal distributions. What this means in terms of the stock market is that assets and investments are prone to jumps (in either directions).

On this topic, Paul Kedrosky links to an interesting presentation on Fat Tailed distributions by Northfield, the guys that make analytical and investment software.

It’s quite interesting and talks about some work that’s being done in this area.

On a related note, another area of application for Fat tailed distributions is the CRM arena. Contact-centers and self-service applications (i.e. IVRs) receive millions of calls a day, and there is just as much variation in C-sats, agent performance, AHT and so on.

It would be interesting to apply some of these tools and techniques to call-center analytics and see how well those work.

Sometimes, I just amaze myself — as a follow up to my previous blog post, my Dad just sent me this article that talks about how the RBI has eased the currency outflow norms to contain the rise of the Rupee against the US Dollar.

From the article –

In a bid to neutralise the impact of huge capital inflows and check the sustained rise in the rupee’s value against the dollar, the Reserve Bank of India (RBI) has further liberalised the foreign exchange norms to boost the outflow of funds from India. The RBI has now allowed resident Indians to transfer up to $2 lakh (around Rs 80 lakh) a year abroad without its approval under the Liberalised Remittance Scheme (LRS). The earlier limit was $1 lakh (Rs 40 lakh) a year. Now Indians can transfer $2 lakh to acquire and hold immovable property, make investments in financial instruments or purchase any other asset abroad without any prior approval.

Worried muchly about what FIIs might do, me hearties? And of course, there are those exporters who will be taking a hard hit otherwise, too.

I found this interesting article that talks about how hedge funds in India part-take in currency arbitrage. From the article –

Hedge funds – known for their high-risk, high-return short-term investment plays – are taking bets on the upward and downward movement of the rupee against the dollar under the pretext of investing in equities.

As one of my friends recently commented, this is probably a good time to invest in the USD, since it seems to be at an all-time low. While there are speculations that it may go still lower, you can always rely on the various national reserve banks to peg the dollar before it goes down too low.

Last June and early July, most analysts said the rupee could not continue appreciating and the RBI would intervene to ensure that the rupee corrects a bit. This view was shared by many foreign brokerage houses as well.

The RBI did intervene, but only to stop the rupee from appreciating further. The hedge funds also believed that the rupee would fall against the US dollar.

Of course it did. You know, it just might make everyone’s life easier if RBI allowed free dollar convertibility within India. When will these people learn?